Formalising the Matatu Industry in Kenya:Policy Twists and Turns

OverviewPublic transport in Kenya has attractedmany policy debates which remainunresolved. One debate whichcontinues to engage policy makers,practitioners and the general public ishow to handle the matatus, a form ofpublic transport which has remainedresilient to almost all policy responses.The industry plays a crucial role inmobility and economics of the countryalthough it is often in the limelight forinability to comply with public transportregulations and attracting personnelwho are careless and resistant to rulesand regulations. This notwithstanding,the sector requires supportive policiesto enable organizing and integrationinto the public transport system, asdiscussed in this policy brief.

Brief History of theSectorThe matatus evolved from a quick andeasy response to unmet travel demandduring the 1950s to a dominant modeof transport. The industry operatedillegally in the city until 1973 whenPresident Jomo Kenyatta issued adecree officially recognizing matatusas a legal mode of public transport,without any form of licensing. This wasaimed at improving public transportand creating more jobs in the informal

By Winnie V. Mitullah & Stephen Siro Onsate

sector. There was also the populistnotion by President Kenyatta that theindustry was useful to the commonman and that the owners, who wereat that, time largely owner drivers,were examples of hard-workingAfrican entrepreneurs dedicated tocontributing to the development ofKenya. This conceptualization of theindustry partly contributed to theineffective governance of the sector,which eventually attracted informalgovernance systems, including criminalgangs manag'ing routes and termini.

Over the years, indiscipline emergedin the industry, overshadowingthe services' offered. In turn, mostpolicy interventions on the sectorconcentrated on indiscipline and lackof organization, hardly acknowledgingthe public transport gap the sector wasfilling.

Sessional Paper on Integrated NationalTransport policy notes the lack of urbantransport policy to address seriouspublic transport problems facing majorurban areas and cities in Kenya. Thereis no policy direction on which modesof transport and facilities the urbanareas should encourage or provide'.Consequently, urban public transporthas continued to deteriorate despite asteady increase in population requiringpublic transport. Considering theimportant role matatus play in filling apublic transport gap, the sub sections1 Government of Kenya (GOK). 2010.Sessional Paper on Integrated National TransportPolicy. Nairobi: Ministry of Transport

below discuss some of the key policyresponses and turning points in thesector in order to inform the on-goingpolicy debates.

Matatu PolicyResponses andTurning PointsThe matatu industry is part of theKenya private sector economy.Unfortunately, the sector has largelyoperated with minimal regulations.Regulation is important for any sectorsince uncontrolled market placecannot produce behaviour or results inaccordance with the public interest".

The industry has had five key turningpoints: the 1973 Presidential Decree,Michuki 8ules, Central Business District(CBO) Decongestion, SACCO companyrequirement, and announcementof 14-seater requirement. Whileit is acknowledged that the rapidincrease of matatus is linked to the1973 Presidential decree, which wasthe first turning point, a major policyquestion is why the decree was neverfollowed by adequate policy responsewhich recognizes their unique modeof operation. Instead, our researchinto the operation of the sector revealspolicy twists and turns whose basis2 Baldwin, R; Cave, M & Lodge M. 2012. Under-standing Regulation: Theory, Strategy, and Practice.Second Edition. Oxford, Oxford University Press,

remains unclear. A sector with informalorigins requires understanding beforeany policy intervention can be made.

Michuki PolicyResponseThe second turning point was the LegalNotice No. 161 of October 2003, oftenreferred to as Michuki rules in referenceto the then Minister of Transport. InOctober 2003, the Minister tried toaddress the issue of road safety byintroducing the Legal Notice thatamended the Traffic Act Cap 403 of theLaws of Kenya. The Legal Notice wasgazetted in January 2004, and waslargely viewed as a positive move bycommuters and other stakeholders.

While policy makers claimed thatthese rules and regulations weremeant to address problems within theindustry, the PSV owners, drivers andconductors viewed them as a move bythe government to lock the industry outof business. The legal notice was wellimplemented for only six months. Thepolicy seemed to have been rushedwithout diagnosing the root causes ofcarelessness, road crashes and trafficcongestion within cities. A study byAsingo and Mitullah" concluded that'while it is increasingly becoming evidentthat human behaviour and attitudesignificantly contribute to road carnage,neither past road safety measures northe prescriptions of the legal noticeof 2003 adequately addressed thebehaviour and attitude of road usersand regulators'.

Michuki Rules - Blessing orCurse?In theory, the Michuki rules andregulations are still in use as per therequirement of the defunct TransportLicensing Board (TLB). All vehiclesand their crew are still expected tocomply before being licensed and itremains criminal to flout the rules. Theimplementation of rules raises policydebate on policy formulation andimplementation, which partly explainswhy the industry continues to havepolicy twists and turns. After the ruleswere implemented in February 2004,there was immediate sanity in matatuoperations and reduction in roadaccidents. Kenyans were convinced anew era of road safety was in place.

However, the reduction in roadaccidents and sanity on roads wasmerely cosmetic. The rules failednot only because they could not besustainably enforced but also becausethe tough measures were driven byfactors beyond road safety. The rulesreduced the number of vehicles on theroad, the number of passengers in eachvehicle and improved safety. On theother hand; fares doubled as a result,forcing people to cut down on travellingand use alternative means, includingNon Motorised Transport (NMT) forshort distances".

The legal requirements attracted anew group of entrepreneurs withability to invest in larger vehicles,what the Minister called "healthycompetition". There was a rapidincrease in the numbers of new public

Provisions of Legal Notice No. 161The provisions of the legal notice include: fitting approved seat belts, speed governors with speed limitof 80 kmlhr, painting a continuous yellow band of 150 millimeters width clearly visible from a distanceof at least 275 metres on both sides and on the rear of matatus. In addition, PSV owners are required towrite their name and address on the front right hand door of the vehicle, and to indicate their registeredroute, licensed passenger carrying capacity and tare weight.PSV drivers and conductors must wear uniforms and have special identification badges issued by theRegistrar of Motor Vehicles after obtaining a certificate of good conduct from the Criminal InvestigationDepartment CCID). The drivers are expected to display their photographs and also undergo testing afterevery two years to be certified both medically and professionally fit to drive. The PSV owners are furtherrequired to employ drivers and conductors on permanent basis and pay monthly salaries.

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30pCit. 4 Mitullah, wv. and Asingo, P.O. Op Cit

transport vehicles, to the extent thatthe government ran out of registrationplates. Competition intensified andoperators reduced their fares in orderto cope. By 2006, public transportfares were down to pre-2004 levels,attracting back some clients who hadstopped using rnatatus". Consumerswere happy with the outcome.

Not all stakeholders saw Michuki Rulesas a blessing. Many pessimists arguedthat the measures were intended tobring down established operatorsand replace them with monopolyestablishments whose ownershipwas linked to powerful figures withinthe government. At least 20 nationalcompanies collapsed within two yearsof implementation of Michuki rules. Asthe rules implementation began, thefinancial strain of the arbitrary decreewas more than any business couldbear. Companies that were servicingloans were forced to divert hundredsof millions of shillings into seat beltsand speed governors.

The matatu operators argued thatthe rules were discriminatory as theytargeted public service vehicles only.Some of the rules and regulationsshould have been applied to all vehiclesin order to create a national road safetypolicy that applies to all road users.These provisions were expensiveto investors as one had to meet anestimated cost of about Ksh. 50,000-100,000 per vehicle to fit seat belts,speed governor, refurbish the vehicleand take the vehicle for inspection. Aresearch" focusing on non complianceto rules and regulations showed thatnon compliance cuts across all typesof vehicles, with vehicles owned byschools and colleges being morecompliant, at 90.3 per cent level. Thecompliance rate of matatus owned byindividuals and private cars was thesame at 63.6 per cent compliant level.Matatus owned by cooperatives hadhigher compliance level at 77.6 percent.

I5 Mitullah, WV. and Asingo, P.O Op.Cit6 Mitullah, Wv. and Asingo, P.O. 2009. 'RoadSafety Policies in Kenya: On Search of Explanationfor Non Compliance. University of Nairobi, IDS

Working Paper.

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Decongesting theCentral BusinessDistrictThe failure to effectively implementthe 2003 legal notice provisions hasnot stopped the government frompolicy engagement with the industry,including decongesting the CBO byrestricting PSVs which enter it. It isestimated that in Nairobi alone, over 6million people commute to and throughthe CBO monthly, making access to theCBO one of the most lucrative areas ofmatatu operations in the Ksh 11 billionannual road transport sector? Nairobihas over three million inhabitant'swho mostly rely on matatus. Initially,the By-laws of the City Council ofNairobi (CCN) prohibited matatusfrom entering the CBO to preventexcessive traffic congestion. Later theystarted allowing vehicles by chargingparking fees, without designating andallocating appropriate parking spaces.This resulted in congestion.

To address the issue, the governmentin collaboration with the city authoritiesidentified termini away from the CBOand allocated areas such as Muthurwa,City Bus Station, Hakati, Globe CinemaRound About and Khoja Mosque astermini for matatus. These allocationswere not supported by any researchrelevant for understanding mobilitydemands of travellers or reflection ontransfer points for those going beyondthe CBO. This resulted in a situationwhere travellers have to alight far awayfrom their destinations, as car owners'drive through the city without anyrestriction. This clearly displayed theelite thinking behind policy responsesince there is no rationale of divertingvehicles carrying over 14 passengersaway from the centre, while private carowners access the CBO without anyrestriction.

The decongestion policy responsehas not achieved the goal of effectiveferrying of passengers to theirdestinations. Passengers must alightbefore reaching their destinations,7 Government of Kenya. 2009. Ministry of Roadsand Public Works

forcing them to either walk or boardother means. This causes time loss,thereby reducing productivity, and alsoconsumes resources for the urbanpoor who mostly walk or use publictransport.

assignment of modes and routes.There is hype across Africa on RapidBus Transport (BRT) and Rail Transport(RT) without thorough reflection ofhow these two systems, which inmost cases are still to be planned andimplemented, will work. Irrespective ofthe planning approach adopted, thereis need for other modes of transportto feed into the BRT and RT. The twomodes on their own will not be ableto effectively servE?the entire country,urban and metropolitan regions.

Phasing out 14-seaterMatatu

Phasing out 14-seater matatus isanother policy response aimed atdecongesting CBOs and re-organisingthe public transport sector. Thedecision was arrived at by the Ministryof Transport in consultation withstakeholders, although a number ofsmall scale entrepreneurs claim theywere not consulted. The plan was partof a broad road transport master planto decongest urban roads, in particularCBO. According to the Notice issued,the TLB was no longer going to license14-seater matatus beginning fromJanuary, 2011. This policy was goingto drastically affect public transportwithin the country since a highpercentage of matatus belong to thiscategory of carriers. The Notice furtherstated that 14-seater matatus that arealready licensed will, however, continueto operate until they are phased outthrough natural attrition. It was arguedthat the move from low capacity publictransport vehicles to high capacitypublic transport vehicles would notonly decongest the CBO but also earnthe operators a higher income.

The standoff between matatuoperators and the government onthis issue required informed policyresponse, which this policy briefcontributes to. Although most Africancities are initiating public transportprojects to replace paratransit modessuch as matatus, research hasshown that African cities are better offembracing hybrid systems" of publictransport which accommodates allservice providers. What is importantin this model is to have an adequateunderstanding of transport demand,followed by proper planning and

8 Pablo, S.F; Behrens, R; and Wilkinson, P. 2011. Hy-brid Urban Transport Systems in Developing Coun-tries: Portents and Prospects. Durban: InternationalConference on Competition and Ownership in LandPassenger Transport, 11 - 15 September, 2011

Getting the IndustryOrganised throughSACCOs

Savings and Credit CooperativeSocieties (SACCOs) are selfhelp schemes acknowledged fororganising individuals and sectors andassisting members to pool resourcesand expand their businesses fordevelopment. The SACCOs have beenoperational in many sectors of theeconomy, including partial operationwithin the transport sector. Notingthe ineffectiveness of SACCOSs inorganising matatus on some inter-cityroutes, the TLB required matatus to bemembers of SACCO or alternativelypart of management companies.However, in October 201 0, the Ministerof Transport directed that by January2011, operators had to belong toa SACCO to ensure self regulation;efficient operation as per the requirementof the legal notice of 2003; cushionindividual matatu owners from cartels,and eventually eliminate the cartels fromthe sector.

To prevent cartels from penetrating theSACCOs, the TLB directed that onlySACCOs formed by genuine vehicleowners would be registered. Therequirement for registration includedsubmitting a list of SACCO membersand officials, certificate of registration, listof vehicles owned by the SACCO andcopies of vehicle logbooks.

While the idea of SACCOs has been goodand has potential of organising the sector,the initial implementation of the policyfaced a number of challenges. People

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without vehicles, largely cartels, continuedcharging illegal fees to operators whowished to join the SACCOs and lockingout others. In some cases cartels merelybranded vehicles by colouring andnaming without embracing the goodpractices expected of cooperatives.Thus, the same criminal gangs andcartels who had been controllingmatatu routes devised crafty schemesto legalize their operations in order tobeat the policy of forming SACCOs.

IDS Policy Brief. IDS Policy Brief is a publication of TheInstitute for Development Studies(IDS), University of Nairobi. Theobjective of the IDS Policy Briefs isto disseminate key outputs of theInstitute's research findings. The IDSPolicy Briefs is aimed at informingand influencing policy formulationprocesses, serving policy consumersand development practitioners.

Editor: Otuma Ongalo

Institute forDevelopment StudiesThe Institute for Development Studies(IDS), University of Nairobi, is theoldest out of 20 such institutes inthe world. Established in 1965, it isthe premier multi-disciplinary and amulti-purpose development researchinstitute in the Eastern and SouthernAfrica region. IDS carries out fulltime research on high priority areasof social-economic development inKenya, Africa and the world in general.Its research findings have informednational and worldwide governmentpolicies, fed academic discourse andenlightened students for more than ageneration.

The Institute for DevelopmentStudiesUniversity of NairobiP.O. Box 30197-00100Nairobi, Kenya.Tel: 254 -020 -2314306Fax:254-020-2245566E-mail: director-ids@uonbi.ac.keURL: www.uonbi.ac.ke/faculities/ids

Most SACCOs were formed in a hurrywithout education on management ofcooperatives, management structuresand without change of attitude, whichmakes the institutions quite fragile.Some SACCOs are also too small,with some routes having more thanone SACCO which creates a seriousmanagement problem",

and holistic consultation with relevantstakeholders. These factors areimportant for sourcing knowledge andinputs into policy formulation, planningand enforcement of regulations.

In spite of the challenges faced inorganising the sector and ensuringsafety, the government has continuedto focus on the sector with an ultimateaim of bringing sanity to the industryand ensuring that all stakeholders,especially matatu owners andoperators, comply with the laid downrules. Frequent police crackdownson defective vehicles and errantcrew continue although with poorresults. Many PSVs operators havefake documents, which they accessthrough shoddy brokers.

To curb the increasing number offake documentation and streamlinethe industry, KRA and the Ministryof Transport have put a trackingmechanism to access all informationabout the vehicle, its routes and thedriver. However, the success of thissystem is yet to be evaluated. TheNational Transport and Safety Authority(NTSA) is also determined to ensurethat the roads are safe by enforcingthe regulations and carrying out publicawareness education.

Input into PolicyResponsesReflections on the various policyresponses aimed at improving theoperations of the matatu sector,shows mixed outcomes. However, itis clear that both the government andstakeholders are yet to come up withapproaches that adequately addressthe challenges facing the industry. Thiscan partly be attributed to the ad-hocnature of policy responses, which areinadequately informed by knowledge9 The Standard, Article by Michael Oriedo. 2012

As discussed in this policy brief, all thepolicy responses geared at the industryare facing challenges. The Michukirules were only effectively enforcedfor a few months, the programme fordecongesting the CBD is not facilitatingmovement of people and goods, whilethe plan to ban 14-seater vehicles isfacing an uphill task and seems tohave been suspended due pressurefrom operators. Matatus serve a hugepopulation in Kenya and a pullout bythe industry has potential of creatingan economic crisis. It seems not muchreflection was given to the policyresponses. The 14-seater vehiclesare serving a market and cannot beremoved without adequate analysisof the sector, including the populationthey serve and investment involved. Aproactive informed approach shouldembrace a hybrid system of publictransport which accommodatesmatatu mode of transport. This shouldentail adequate route and modeplanning. Matatus, irrespective of theseating capacity, should be assignedspecific routes to feed into the maincorridors which can be servicedby other formal modes with highercapacity depending on demand.

Overall, there is need for regulationsto correct market failures and protectvulnerable groups. However, some ofthe existing policies and regulationsare good but have been poorlyimplemented; while some elementsof present regulations - such as seatbelts, standing passengers in buses,and speed governors - are expensiveand unnecessary. The 14-seater phaseout does not make sense. Addressingthese issues requires exposure torelevant knowledge, including policyrelevant research.

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