How to Start A Matatu Business in Kenya
Budget: Sh. 3M or more
Investing in a Matatu business can be profitable. However, the risks associated with the business are enough to discourage any investor. Matatu business is one of the most profitable transport investments but its reputation has suffered due to all manner of negative news and publicity. Stories of police crackdowns, operational accidents, bribes etc have not helped either.
With all these negative news and publicity, matatu business still remains profitable. What you need to appreciate is that it is a very expensive business and requires massive capital to properly set up and operate. Due to fact that it directly involves risks to human life, it is also heavily regulated and requires several strict checks and balances.
The risks involved in operating a matatu business are as high as the gains, just as you would expect. Therefore it is important to know and learn about the risks involved even as you set to get into this business. Another point to note is that the previously popular 14 seater matatus are soon getting obsolete. Only the bigger capacity buses such as 29 seaters, 33 seaters etc will be allowed to legally operate.
The Bus
To set up and fully operate your matatu business, you will need a bus or minibus. There are several types and capacities to choose from in the market. Depending on the type, capacity, and seller of the bus, you may spend between Sh1M to Sh2M to acquire the bus. It is advisable to buy a new bus or import one in a good condition. You could also opt to secure a used one though this should be one which is in really good condition. You shouldn’t end up with regular breakdowns in the early stages of your matatu business. This can kick you out of business very early, permanently.
Bodybuilding and Branding
When you buy your bus, in most cases it may not be ready for operation. There are modifications and additions you will need to make it ready for the road. You will need to build the body at about Sh150,000 which will include branding, seats and other attachments. There are specifications for bodybuilding that you should adhere to. Most reputable autoworks know these specifications and will guide you accordingly. A certified speed governor is a requirement for all Passenger Service Vehicles so you will also install one in your vehicle.
Music System
If you choose to install a music system, you will part with an additional Sh100,000 to Sh200,000 inclusive of installation depending on the model (capacity) and accessories such as speakers, amplifiers, subwoofers, tweeters, etc. In most cases, a powerful music system will be a plus since it will attract more passengers and enable you to fill it faster.
Sacco
When your matatu/bus is ready with the body and everything else installed, you will have to identify a number of profitable routes where can take your vehicle. The government requires that all PSVs must belong to a Sacco in order to be licensed to operate. Therefore you need to select a Sacco to join in that particular route and pay a fee of about Sh20,000 — Sh50,000 depending on the capacity of your vehicle and the Sacco.
Licensing Requirements
For you to operate a matatu/bus in Kenya, there are several licenses/permits that you have to apply for. The requirements are quite strict and sometimes lengthy and rigorous. The drivers and conductors also need licenses to be able to operate and work in the PSVs.
You will need a permit from the county government to operate a matatu business in the particular route that you select. This will cost you up to Sh35,000 annually and depends also on the capacity of your vehicle.
Other requirements are TLB, vehicle inspection, advance tax, Music Copyright Society will cost you about another Sh50,000.
Insurance
You must insure your vehicle before it is allowed to operate on the road. Ensure you get a genuine PSV insurance from a reliable and reputable insurance company. Your crew should also be insured against accidents.
Operation
Once you have all the requirements, get a reliable driver and conductor who will operate your vehicle. These are the most important people in your business, therefore, make sure you vet and select carefully. It is said that there is no good or honest matatu driver or tout but you can at least get those who you can work with.
They will report to the Sacco with your vehicle and start operation on the route. Your crew will start work as early as 5 am until as late as 10.00pm or 11.00 pm. The operation will be the key part of your business. This is where you matatu business can make or break.
It is during the operation phase of your matatu business that you and your crew will encounter police, crafty mechanics, county askaris, MCSK officials, NTSA officials and a host of other self-declared gangs along the route. All these people have the capacity to render your business inoperational if not well handled. Some drivers even joke that traffic police can arrest them for anything including bad breath.
Income Potential
As stated earlier, matatu business can be very profitable but is also very risky. This business is operated mostly on cash and there is a lot of cash handling. The risk of theft by your crew is very high. However, they will still leave something reasonable for you.
In one day, you should expect to get between Sh6,000 — Sh10,000 after fueling for next day and paying your crew, depending on bus capacity and the route selected, but you can set a target for the crew per day. This will motivate them and assure you of a fixed amount every day. Drivers and touts earn about Sh1,000 and Sh1,500 each per day.
Matatu business is rough, risky and challenging but can generate good income with sound management and reliable crew.
Maintenance
Due to wear and tear, your vehicle will need regular maintenance. This is very important and should be strictly undertaken when due. The best is to identify a reliable and experienced mechanic to carry out regular maintenance and repair on your vehicle.
Allocate about Sh7,000 — Sh13,000 monthly for maintenance and repair. A poorly maintained vehicle will not generate the required income. Make sure you do not compromise the quality of the maintenance by using only recommended spares for your vehicle. They may cost more but they will eventually pay off.
Unscrupulous mechanics can ground your business if not well supervised. This is why you need to be very careful with who you select to repair and maintain your vehicle.
Pros
• Very lucrative and can generate good cash flow every day.
Cons
• Needs high capital expenditure to set up.
• Very challenging to operate.
• Strict and rigorous requirements to operate.
• Police and county officials harassment is common.
• Fines imposed for offenses are very high.
• Theft/hijack of the vehicle can wind up your business.
You should realize that no matter how much corruption is illegal and bad, the nature of this business forces and encourages corruption. Even when your matatu does not have anything against the law, some officers will look for an obscure offense and place it on you and you will pay with an arm and a leg.
Customer relation is also very important in this business. Your crew should be courteous and talk well to the passengers. They should be consistent with the fare charged and stick to the standard charge. Some operators hike fares depending on fuel price changes, weather changes, availability of another matatu, or the size of the crowd desperate to travel. This can give your vehicle a bad name and make passengers shun it especially during off-peak when they have many alternatives. The crew should ensure the passengers are dropped at their desired stages, without leaving them far off.
Do not forget that in this business, anything can happen. It could be rouge cartels out to fleece you or rival operators unhappy with your success or competition. This business requires very close monitoring and communication with your crew and Sacco. Some of the challenges involved in this business such as stress, anxiety, surprises, disappointments, rivalry and police crackdowns should be taken as part of the business but can be bad for your health and can lead to health problems such as depression, shock, and cardiac complications if not well managed.
If you are convinced that matatu business is for you, go ahead, start a matatu business.
Originally published at PesaConsult.
