The transport sector in Africa has experienced unprecedented growth in recent years, with startups revolutionizing how people move around in cities. For one, ride-hailing companies like Bolt and Uber leverage technology to deliver comfort and value to Africans. Conversely, the regulatory environment on the continent is riddled with uncertainties and rather stifling policies and regulations, which sometimes include forms of fees and taxes.
Last month, Ghana’s Driver and Vehicle Licensing Authority (DVLA) introduced updated Digital Transport Guidelines [pdf]. The guidelines, among other things, impose a new levy of one Ghanaian cedi on every ride-hailing trip. The regulation noted that the fee, which will be reviewed periodically, would cover a one-time driver license verification (30 cedis), digital transport licensed vehicle permit that is renewable every year (33 cedis), and information search for digital transport system operators (22 cedis).
This means that Ghanaians, who already grapple with economic turmoil, will have to pay extra every time they use any of their favourite ride-hailing apps. Additionally, ride-hailing companies will be forced to share certain data about trips taken on their platforms. These include passenger information, driver name, departure, arrival time stamps, departure and arrival GPS coordinates, trip distance, transaction date, license number of the driver, vehicle registration number, and driver, vehicle, and passenger ratings.
Interestingly, this isn’t the DVLA’s first controversial attempt to regulate digital transport companies in the country. In 2019, the vehicle licensing agency imposed an annual fee of 60 cedis on drivers who use ride-hailing platforms in Ghana.
The controversial new tax, which reportedly came into effect on April 1, 2023, expectedly met with criticisms from both ride-hailing users and drivers. Technext earlier reported that Uber and Bolt drivers in Ghana are largely displeased with the development, blaming the latest tax on the bid by some driver’s unions to seek regulation for the industry on the heels of a long-standing disagreement between union leaders and the drivers themselves. The backlash has since forced the DVLA to make a U-turn and pause the collection of digital transport fees.
From Ghana to Lagos: a tale of regulatory woes
Taxes on ride-hailing services are a contentious issue in Africa. With the increasing popularity of apps like Uber, Bolt, and others, many governments are looking to cash in on the trend by levying taxes on these platforms. Oftentimes, these taxes are to ensure that the ride-hailing services contribute their fair share of taxes to the government. However, the taxes usually face pushback from the public, who argue that they may discourage people from using the services.
In countries like Kenya, Nigeria, and South Africa, ride-hailing services have become important to the economy, providing employment opportunities and affordable transportation for millions of people. Uber, the American ride-hailing agent, announced last year that it had completed 1 billion rides in Africa. As such, the taxes on these services can significantly impact the livelihoods of drivers and the cost of transportation for consumers.
In Kenya, for example, the government introduced a 16% value-added tax (VAT) on ride-hailing services in 2018. This move was criticised by drivers and passengers who argued that the tax would make the services more expensive and lead to a decline in demand. Last year, Uber dragged the Kenyan government to court over its decision to cap the commission charged per ride at 18%. Like Ghana’s, the controversial regulations also required ride-hailing platforms to share drivers’ and riders’ data upon the request of the authorities.
In Nigeria, the Lagos State Government introduced a 10% tax on all ride-hailing services in 2020. This tax was met with backlash from ride-hailing companies who argued that it would make their services less affordable and further hurt their business, considering that earlier that year, the government rolled out a new law that prohibits commercial motorcycles, including bike-hailing startups, from operating in some specified local areas of the state.
Africa must rethink ride-hailing regulations
If anything, Ghana’s controversial digital transport tax brings to the fore a wider issue of regulatory challenges facing ride-hailing apps and other digital transport companies in Africa. While the tax is intended to raise revenue, many argue that it creates unnecessary burdens for digital transport companies and stifles innovation and growth in the industry. For context, 50% of Africa’s mostly young population will be urban dwellers by 2030, further creating room for digital taxi services to thrive. But a stifling regulatory landscape poses a serious threat to this.
More than ever, policymakers in Africa need to work with stakeholders to develop more supportive regulatory frameworks that balance the needs of passengers, drivers, and companies while also fostering innovation and economic growth.
As Festival Godwin Boateng, Samuelson Appau & Kingsley Tetteh Baako argues in this paper, the emergence of ride-hailing in Africa presents an opportunity for the continent to leverage technology to address its twin problems of inefficient urban transport and rising youth unemployment.
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