HOW TO INVEST IN MATATU BUSINESS IN KENYA

The matatu business in Kenya has an origin that dates back to 1934. During those days, the entire country only had a fleet of 13 buses, which operated on 12 routes. The buses were owned by Overseas Transport Company (OTC), a company based in London. The buses were later called the Kenya Bus Services (KBS), and as their fleet grew so did their popularity. OTC enjoyed a monopoly in the Kenyan transport industry until 1970.

The matatu business in Kenya started enjoying profitability a year after locals formed the Country Bus Owners Association and Matatu Owners Association. With the surge in rural-urban migration requiring a sturdy vehicle due to poor terrain, the buses from KBS enjoyed a steady run, but the market kept growing. The government tried to introduce the Nyayo Bus in 1986 to help split the rising demand to no avail.

It was not until the liberalization of commuter services in 1991 that the matatu business flourished in Kenya. With KBS no longer the only mode of public transport, mini-buses and 14-seaters hit the market and made it hard for the once dominant company to enjoy its monopoly. The company was renamed Kenya Bus Services Limited, and the original owners sold 95% of its shares to local investors.

The fall of KBS made it possible to run matatu business in Kenya in a time where minivans were the preferred mode of transport. However, the unregulated nature of the matatu industry coupled with gangs and cartels who extorted matatu owners and made it hard for most people to survive in the industry. Not to mention, these new vehicles did not observe traffic laws and often caused tragic road accidents.

However, theft, accidents, and even physical abuse have significantly reduced. Government or independently registered transport companies, as well as SACCO’s, have also helped in hiring vetted professionals to the industry.

You can earn a good amount of money on a daily basis with a white 14-seater operating on a particular route, but with a few modifications, that amount can be doubled.

After president Uhuru Kenyatta allowed the use of graphic design on matatus, nganyas took to the center stage. The creative aspect of these vehicles makes them a tourist attraction and a favorite for many youths across the country. Despite their exorbitant fees at times, they are considered more useful than most of their counterparts in the matatu business. However, for any of them to earn you more than a regular matatu, you have to spend more on its customization.

Very soon, the government is going to do away with all 14-seaters in the transport industry. Buses and minibusses will be the only vehicles allowed to operate on most Kenyan roads legally. Not to mention, public transport also has competition from the standard gauge railway.

The Matatu business in Nairobi is exceptionally competitive considering the capital city is always up-to-date with the latest trends. The competitive nature of matatus along Nairobi roads can be attributed to the desire to impress and thus lure the most customers. When starting, you can either spend big and expect greater rewards or start small and grow

*How to start a matatu business in Kenya*

*1. Buy the right vehicle*

Beginning a matatu business in Kenya is capital-intensive, but with the right decisions, you are guaranteed to reap the benefits. For starters, the minimum capital for acquiring a pre-owned public service vehicle is around Ksh.500,000. Such a vehicle has been on the road for six to eight years.

A 33-seater bus will cost you around Ksh.2.7 million. However, be sure to replace the engine (around Ksh.300,000) to ensure the vehicle’s durability.

It is always advisable to purchase a new vehicle as opposed to its second-hand counterpart to avoid an early kick out from the matatu business. The make of the vehicle you choose to purchase can also make or break your business. Nissan, Toyota, and Isuzu are the best brands for Kenya seeing new spare parts are readily available. These three brands are also almost custom-made for Kenyan roads. For the 14-seater, a Toyota Shark is the best bet for guaranteed profits in the Matatu business in Kenya.

*2. Body Branding*

After acquiring your vehicle, make sure that all the paperwork is correctly done after which you can start your hunt for a driver and conductor. For most people, a new vehicle with no additions is enough. However, the matatu industry is growing more competitive by the day, and only the best vehicles are taking home the lions share. Body branding is a significant factor to consider when trying to determine the profitability of the matatu business industry.

The seats have to be replaced with custom designs to ensure comfort, and your vehicle could also attract more passengers with additions such as charging systems. Most designers know the specifications required to make a bus stand out and will guide you through the entire process.

*3. Music*

One thing all the fancy matatus have in common is loud music. However, while nganyas have the best and loudest sound systems, there are other vehicles with excellent sound quality as well. A good music system will cost you an upwards of Ksh.150,000. Loud music is also used as a tactic by touts and drivers to attract passengers in boarding areas. Not to mention, it is an excellent way to keep your cents entertained on their voyage.

You can get body branding and sound system installation services from the likes of Choda Fabricators, Moha Graffics, and Lithium to mention a few. They also offer services such as strengthening your chassis to make the vehicle roadworthy while installing state-of-the-art entertainment features such as plasma TVs to entertain the customers. Depending on how flamboyant your vehicle is, you can earn as much as Ksh.19,000 profit per day on routes such as Ongata Rongai.

*6. Sacco*

Joining a Savings and Credit Cooperative Organization is mandatory for any success when investing in matatu businesses. Sacco’s are an efficient way of ensuring that your matatu business gets off the ground with minimal expenditure on your end. However, if the loan option does not appeal to you, purchasing the vehicle alone can also work. However, you are required to come up with ten percent as the deposit.

You can also pay the rest cash, but the best option is taking advantage of negotiated interest rate loans for effortless vehicle acquisition. Banks such as NIC Bank and KCB can cover the remaining 90% and even improve your credit score if your payment is consistent. Other loan facilities also help but be sure to check the interest rates and the authenticity of the company offering the loans.

Sacco’s also helped add security to the public transport industry in Kenya. They allow passengers to report some of the issues that are affecting them when traveling especially if the driver and tout are involved. Crew members are now professional, and while some matatus still have rogue attendants, most of them have better money management skills. Sacco’s deduct a portion of their salary for savings.

*7. Licensing, Insurance, and Regulations*

Nowadays, the National Transport and Safety Authority (NTSA) is in charge of inspecting and delivering a verdict on the roadworthy nature of your vehicle. It is also responsible for checking if a public service vehicle is equipped with the right equipment such as fire extinguishers, seatbelts, and speed governors. NTSA also validates your PSV insurance, the driver and tout’s documentation, and Sacco membership.

All drivers should have valid drivers and PSV licenses as well as a certificate of good conduct issued by the Directorate of Criminal Investigations. Remember to make an insurance for your vehicle as well as your crew through a reputable PSV Insurance company. Your vehicle also requires a variety of licenses to be deemed operational. The application process can be lengthy considering the thorough background checks conducted lately, but once the process is complete your vehicle will be ready for the road.

A permit from the county government to operate your matatu along a specified route should be the first license on your mind. The license costs about Ksh.35,000 annually depending on the capacity of passengers your vehicle can hold. Other permits include TLB, advance tax, music copyright, and vehicle inspection which roughly cost Ksh.50,000.

*8. Daily Fees*

As earlier mentioned, the matatu industry is filled with cartels who control it and demand a certain fee on a daily basis depending on the route. As such, be sure to conduct some research regarding the route you wish your new cash cow to traverse. Corruption is also a problem in Kenya, and most matatus are often wrongfully extorted by police officers.

*9. Maintenance and other expenses*

A matatu business plan is needed if you are to have any success in the matatu business in Kenya. To learn how to manage matatu business in Kenya, you have to write down all the expenses incurred since the matatu was acquired as well as daily costs. Do not be surprised if your driver and tout introduce you to new words such as kanjo, karao, crackdown, wire, operation, kamjesh, mungiki, and brake failure to mention a few. While these terms indicate extra expenses, some of them are excuses by fraudulent drivers to siphon money from your business.

Wear and tear is guaranteed on Kenyan roads prompting regular visits to the mechanic for your vehicle. However, with the right vehicle model and a careful driver, chances are your vehicle will outlast new matatus on your route even after being in the game for a while. The best way to ensure your vehicle is always in top condition is by finding an experienced and reliable mechanic for regular maintenance and repair.

Set apart a minimum of Ksh.10,000 for repairs, but always keep in mind that some maintenance jobs will require more money. Not to mention, make sure that the spare parts you use for your vehicle are the recommended version considering they guarantee longevity. Some mechanics conduct faulty maintenance jobs when unsupervised so if you do not know them yet, ensure your presence is felt during repairs.

*10. Matatu business in Kenya profit margins*

One of the most significant discouragements for most people when it comes to the matatu business in Kenya is the high chance of theft from your driver and conductor. The matatu business has a lot of cash handling making its profitability very risky. However, with a trusted crew, you can make a killing in this business. If the matatu you purchased is a bus or minibus, you should expect an upward of Ksh.7,000 every day.

This figure should be arrived at after the crew has been paid and the vehicle fueled for the next day. However, you can make more or less than this figure depending on the route and capacity of your vehicle. The best way to ensure the profit margin does not fluctuate too much is tasking the crew a certain target every day. Goals to work towards a fixed amount every day motivates them considering they want to finish as early as possible and hopefully make some extra buck.

Sound management is vital for success in this business, and any chances of profits are dependent on a hands-on approach. A lot of money is lost throughout the day, some legitimately, the rest in unappealing ways. In the matatu industry, every tout or driver is their brother’s keeper. As such, if a colleague helps load your matatu at the stage, you are obligated to give them at least Ksh.50 as the conductor.

If somewhere along the way you pick say five passengers for a fare of Ksh.30 to their destination, you should pay Ksh.30 to the tout who helped you find those passengers. Around Ksh.6,000 is always set apart for refueling while Ksh.1,500 is reserved as stage fee for the respective Sacco where the matatu is registered. You can also boost your profits by cutting down on manageable costs. To avoid hefty fees paid due to the unroadworthy nature of a vehicle, make sure your vehicle has the following.

*Good working brake system

*Good suspension, which ensures the stability of the vehicle

*Well treaded tires/not worn-out

*Functioning speed regulator/governor

*Recommended seats, windows, and mirrors

*Properly insured.

*Challenges of matatu business in Kenya*

*1. Cop harassment*

The matatu business has many advantages such as high profitability and the ability to enlarge your company to unprecedented heights if the vehicles are appropriately managed. However, once the vehicle is on the road, drivers are always on the lookout for police. There have been numerous cases regarding corruption in the Kenyan transport industry, but people have seen it for so long it is almost the norm.

Harassment from police is almost guaranteed even when your vehicle meets all the rules.

*2. Trust-related business*

The success of your matatu business is almost wholly dependent on the driver and tout you choose. For your business to last longer, you need trustworthy personnel. It is sad that most matatu owners take home less than half of the total profits made every day due to conniving employees. If you cannot get people you trust to operate your vehicle, just register it to a long-distance Sacco; drivers do not pick and drop off passengers on the way.

*3. Wear and tear*

Competition from matatus for the fastest is partly to blame for the wear and tear seen in Kenyan matatus. A matatu can be introduced on a particular route and look old before two years are over. Two years is the time set apart for recouping the money used in purchasing the matatu and making it roadworthy. Most drivers do not own the vehicles, which they drive with little care and leave in bad condition.

Before you know it, your vehicle is in the garage, and it has not even made enough money to ensure its repair is seamless. The roads are also partly to blame for the quick wear and tear experienced on public service vehicles. As such, ensure the route you pick for your matatu is not only profitable but also vehicle-friendly. A careful driver also comes in handy.

*4. Sophistication*

One of the biggest challenges any matatu owner faces is the sophisticated nature of the matatu industry. An office job might seem stressful enough, but it is nothing compared to constant calls from your crew regarding the welfare of your vehicle. One minute the vehicle is under lockup the next you lose an exorbitant amount of money to prevent your matatu from being impounded. Accidents will also give the faint-hearted matatu owner sleepless nights.

Carjacking in the matatu industry is not as common as it was a few years ago. While vehicles are still lost through carjacking, technology has made it easier to track your matatu everywhere it goes. Such features not only help you add some security to your investment but also enable you to track the routes taken by your driver.

*5. Gangs*

The matatu business in Nairobi is yet to reach its full potential due to the gangs that control various boarding stations within the city. The same can be said of other parts of the country, but Nairobi is worst hit. Each stage is owned by a tribal gang, which protects the interests of all matatus operating on that route. The Kikuyu, Gusii, and Luo are some of the communities that have the most significant share in the matatu industry.

The figure collected from every matatu is commensurate to the fare the vehicle charges to its destination. These cartels are also responsible for determining the bus fare especially during peak hours and acting as the eye out on matatus aiming to earn money from routes they are not meant to operate on. They also help eliminate unfair competition and maintain order. Jogoo Road, Thika Road, and Mombasa Road are examples of where matatus cannot simply drop off and pick passengers without paying a toll.

*6. Unpredictability*

One week your crew might present you with a constant flow of money only to disappoint you in the next. In some instances, it might be the weather or even public holidays or issues with a certain Sacco. If the Sacco demands all vehicles cancel work for a few days, everyone is supposed to oblige. A Sacco might be the least of your worries if it is your first six months in the matatu industry.

For your first vehicle, make sure that another reliable source of income is present for at least a year. More vehicles do not guarantee profits and sunny days. Anything can happen in the transports sector. As such, until you are familiar with every loophole, ensure securities are in place before going all out on your matatu business in Kenya.

By Justine Nyachieo
Business Man & Mentor

Post Author