E-hailing companies Uber and Bolt have both raised concerns around government’s planned introduction of the Economic Regulation of Transport Bill.
The bill broadly aims to introduce further controls around public transport in the country, including regulations around safety, competition and transformation.
While Uber and Bolt have generally welcomed the draft legislation, both companies have raised red flags around a section of the bill which could be interpreted as introducing pricing controls for e-hailing in South Africa.
The bill states that ‘every regulated entity is subject to price regulation in accordance with a price control determined by the regulator’.
This can include:
- A schedule of tariffs, charges, fees, tolls or other amounts that may be imposed by the regulated entity for the use of, or access to, any transport service or facility offered by that regulated entity;
- A limit on the total amount of revenue it may raise from the facilities and services offered by it;
- A limit on the return it may derive from the assets utilised by it to provide its facilities and services.
In response to the section, Bolt said that any form of pricing control and associated regulatory instruments is inappropriate for e-hailing given the ‘inherent affordability and consumer choice enabled by its platform’.
“Regulated pricing of this nature will detrimentally impact on the provision and access to e-hailing service, thereby stifling innovation in public transport sector more broadly,” it said.
Bolt said that it does not support price regulation, as it:
- Introduces an administrative burden for authorities;
- Is inflexible in addressing changing market dynamics;
- Disincentivises innovation and disadvantages consumers;
- Inhibits South Africa’s still-developing market for the entry of new participants.
“Pricing interventions amount to regulatory price-fixing, undermining competition to the detriment of the consumer,” Bolt said.
It added that price regulation excludes new entrants and constitutes a barrier to entry into the market – thus curtailing competition.
“We recommend and support that the committee acts in the interests of maintaining a competitive market and excludes any provisions pertaining to price intervention, particular for e-hailing services.”
Uber has raised similar concerns, noting that it is still unsure whether it will be considered a ‘regulated entity’ under the new bill.
“The problem with continuing to impose price controls is precisely that prices are unable to respond efficiently to demand surges, resulting in consumers faced with long waiting times and poor service due to supply not responding appropriately to the excess demand,” Uber said in its presentation.
“This in turn means that the industry does not develop into a dense and efficient network, which is reflective of the e-hailing model today.”
Uber said that dynamic pricing is also an efficient way to meet unusual demand surges, with two main functions:
- People who are not in a hurry wait until the price falls or use an alternative form of transport, thus reducing demand;
- Driver-partners who are nearby are incentivised to go to that neighbourhood to get the higher fares, increasing supply.
In this way, dynamic pricing creates a balance between the number of people wanting a ride and the number of available drivers, it said. It also ensures that fares return to standard rates at a much faster pace and riders can reliably get rides.
Uber also said that price controls could be seen as unconstitutional in South Africa as section 22 of the Constitution states that ‘every citizen has the right to choose their trade, occupation or profession freely’.