Farzeen Wilson EE Final Supervisor FK

Aga Khan Academy Mombasa, Kenya

Essay Title: Tuk-tuk Transport Sector In Mombasa

Subject: Economics

Candidate Name: Farzeen .C. Wilson

Candidate Number: 002352-010-065

Research Question: To what extent can the tuk-tuk transport sector in Mombasa Island be considered a form of perfect competition?

Session: May 2013

Word Count: 3, 994

School Code: 002352

Farzeen .C. Wilson Extended Essay Advisor: Mr. Francis Kariuki

Table of Contents

Abstract.................................................................................................................................................3

Introduction...........................................................................................................................................4

Information relating to Market Structures............................................................................................6

Literature Review..................................................................................................................................8

Research Methodology........................................................................................................................11

Findings...............................................................................................................................................11

Evaluation............................................................................................................................................17

Conclusion...........................................................................................................................................18

Bibliography.........................................................................................................................................19

Appendix A: Interview with tuk-tuk owner: Fatma Nashir Kassam (owner of 2 tuk-tuks)...................20

Appendix B: Interview with tuk-tuk owner: Patrick Wambua (owner of 1 tuk-tuk)............................23

Appendix C: Interview with tuk-tuk supplier: Mary Mutuku (Sales Co-ordinator at Car and General) 24

Appendix D: Interview with tuk-tuk supplier: Caroline Musao (Employee at Auto-Selection (K) Limited)...............................................................................................................................................26

Table of figures:

Figure 1 to show perfect competition equilibrium for the industry and individual firms ……5

Figure 2 to show the different brands of tuk-tuks sold from 2008 to 2012 ...………………………8

Figure 3 to show cost curves for tuk-tuks operating in Mombasa for one week …………………9

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Abstract

The aim of the research is to investigate market structure of tuk-tuks on Mombasa Island.

Tuk-tuks are growing sights on Mombasa roads since they were first introduced in 2007. The

exponential growth of this industry in the past few years coupled with matatu phase-out has

brought up issues of the future of public transportation in Kenya including Mombasa.

However, very little is known of the tuk-tuk industry in Mombasa even though the market is

open, similar to perfect competition markets. The research question for the investigation is,

“To what extent can the tuk-tuk transport sector in Mombasa Island be considered a form

of perfect competition?”

To investigate this, I conducted a series of interviews with tuk-tuk owners and suppliers,

which were taken to form the basis of the data and carefully examine characteristics of the

current market as well as personal opinions on what is likely to happen. Interviews given to

tuk-tuk owners focused on costs, profits and ownership issues while interviews with

suppliers focused on the causes and consequences of growth in the industry.

Each and every characteristic of perfect competition market theory was analyzed to come

up with the conclusion. There is no market that is ‘completely’ perfectly competitive in the

world however, the Mombasa tuk-tuk industry comes very close and shows many

characteristics of perfect competition market. On the other hand, there are questions which

arise from the research. The validity of the data and the assumptions made in the essay are

because the industry is barely five years old and is not able to provide all the information for

long term implications. Apart from that, tuk-tuks will continue to live on Mombasa roads

and bring about their own set of challenges.

Word Count: 285

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Introduction

Tuk-tuks are a considerably new form of public transport in Kenya which is why they occupy

a smaller market share compared to matatus, which dominates the sector. Tuk-tuks largely

cater for middle and upper class in Mombasa. However, due to Kenya’s commitment to

Vision 2030, matatus, the hub for Mombasa’s public transport, are in the process of being

phased out, leaving tuk-tuks and other modes of transport to carry the transport burden.

The phase-out will provide the opportunity for tuk-tuk industry to expand and possibly

reach out to the working class. The demand for the tuk-tuk service is increasing daily which

is seen from the numbers of tuk-tuks on Mombasa roads. As a frequent tuk-tuk user, I have

observed this trend first-handedly. Having used both matatus and tuk-tuks, both are

somewhat similar in the way they operate but there remains an ambiguity about the tuk-tuk

industry due to its exponential growth, which led me to investigate how tuk-tuk transport

sector works. The tuk-tuk market seems open due to the large influx of tuk-tuks on the

Mombasa roads. I believe that the market form is similar to a perfect competition market. In

a bid to investigate this, my research question is “To what extent can the tuk-tuk transport

sector in Mombasa Island be considered a form of perfect competition?”

Tuk-tuks will possibly be the primary mode of transportation in Mombasa apart from

government buses, and that is why it’s important to know how they operate. When the

phase-out takes place, it needs to be known whether tuk-tuks can be considered as a viable

alternative. If the market is perfectly competitive, it allows assessment of implications such

as improved pricing and efficiency as well as improvement in the service due to competition

as well as advantages and disadvantages. Its effect on people is important as well because it

may provide employment opportunities causing improvement in the state of economy. Due

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to this, it is important to understand the market structure. For my research I investigated

the characteristics of the current market of tuk-tuks. This included: existing barriers to

entry; types of profits earned in short and long run; number of tuk-tuks sold and their

appeal compared to other forms of transport. Short run is the period of time where at least

one factor of production (FOP) is fixed and all production occurs. (Dorton & Blink, 2007)

While, long run is the period of time where all FOPs are variable except for state of

technology and all planning occurs. (Dorton & Blink, 2007)

For this to be investigated, I carried out interviews with tuk-tuk owners to inspect

characteristics the market demonstrates and interviewed Mombasa tuk-tuk suppliers to find

out tuk-tuks sold in the past including any trends. The research will try to explain the way

the tuk-tuk sector operates and give direction to possible behaviors of Mombasa industry.

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Information relating to Market Structures

In order to investigate the market form of perfect competition, the characteristics of the

perfect competition market need to be understood. These are:

The industry is made up of a large number of firms.

Each firm is small, compared to the size of the entire industry and one firm is

incapable of changing output of the whole industry by altering its own output. This

means that the firm has to sell at whatever price is set by the demand and supply of

the industry as a whole.

Firms produce the exact same good (homogenous) meaning it is not possible to

distinguish one firms good from another firms good.

Firms are completely free to enter or leave the industry meaning that there are no

barriers to entry or exit.

All producers and consumers have perfect knowledge of markets.

Abnormal profits (total revenue (TR) is greater than all the total costs (TC) incurred,

including opportunity cost) and losses (TR<TC) may occur in the short run but in the

long run, only normal profit (TR=TC) is earned. (Dorton & Blink, 2007)

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Figure 1 to show perfect competition equilibrium for the industry and individual firms (Dorton & Blink, 2007)

However, the perfect competition market is said to be completely theoretical because there

are no markets around the world that possess all the characteristics mentioned, yet some

industries are very close to being perfectly competitive. Another market form which is very

close to perfect competition is monopolistic competition and some of its characteristics

include:

The industry is made up of a large number of firms.

The firms are small compared to the size of the industry as a whole. This means that

the actions of one firm won’t have a great effect on their competitors. Thus, the

firms assume that they are able to act independently of each other meaning they can

be price- setters.

Firms produce slightly differentiated goods meaning a consumer is able to tell the

difference between products of different firms.

Firms are completely free to enter or leave the industry meaning that there are no

barriers to entry or exit.

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Pric

e (K

shs)

D=Average Revenue=Marginal Revenue

Pric

e (K

shs)

Quantity

D

S

Quantity

Pric

e (K

shs)

Pric

e (K

shs)

The Industry

The Firm


Abnormal profits and losses may occur in the short run but in the long run, only

normal profit is earned. (Dorton & Blink, 2007)

Literature Review

Tuk-tuks were in business long before they started running in Mombasa and in a sense

originated from India and Thailand. The tuk-tuk industry is only about five years old and

there has not been any investigation of tuk-tuks in Kenya which is why India and Thailand

act as case studies in context to Mombasa because they have existed for a longer time. Tuk-

tuks are a big part of the Thai and Indian transport sector but operate differently. In India,

tuk-tuks (also called auto-rickshaws) are used by people of all classes and are considered the

back-bone of the transport sector (Mumbai, 2000) while in Thailand, they mostly cater for

tourists which shows they don’t make up a large market share. The way tuk-tuks operate in

these countries has many similarities to the local context. In the case of India, there are

many tuk-tuks and they operate in a market very close to perfect competition however, in

Thailand, tuk-tuk industry is not dominant and is similar in terms of the demography

targeted as well as price setting ability.

The Indian tuk-tuk sector is largely an informal sector meaning minimal government control.

The market of tuk-tuks in India is quite large so much so that it is rare for a passenger to

meet the same driver twice. (Keniston, 2011) The actual number of tuk-tuks in India is not

quite known but for Mumbai, one of India’s fastest growing cities, they were about 250,000

tuk-tuks in 2008(Mumbai Traffic Stats, 2009). All the tuk-tuks have exact paint jobs bringing

out the sense that the service is the same (homogenous). There are number of different

companies which supply tuk-tuks including: Bajaj Auto, Kumar Motors, Kerala Auto Limited,

Force Motors, Mahindra & Mahindra, Piaggio Ape and TVS Motors. (Auto Rickshaw) Due to

Page 8 of 27


this, the purchasing costs of tuk-tuks are lower because of competition existing in the

supplier’s market which is why one of reasons why they are so many tuk-tuks.

Tuk-tuk fares are considerably lower than taxi charges and it appeals to locals who do not

prefer taking the buses which are usually congested. Pollution caused by the tuk-tuk has

been a big concern for policy makers who have tried to clean up the mess with the

implementation of rules to keep the tuk-tuks off busy city roads. Currently, environmentally

friendly tuk-tuks are being manufactured which will allow tuk-tuks to continue without

causing any further environmental problems. Nonetheless, this will cause tuk-tuk owners

problems, as the new models are likely to be inefficient as well costlier.(Bajaj & Gottipati,

2012) The fare rates of tuk-tuks are controlled by government. (Riding a Tuk-Tuk, 2012)This

piece of information shows that individual firms are theoretically price-takers but in truth

the use of meters as a means to charge customers is being left behind and replaced by price

negotiating between drivers and customers. Daily profit margins of tuk-tuks in India are

often less than 1000 rupees with no strict barriers to entry for individuals. (Floyd, 2011) In

truth, the Indian tuk-tuk sector is very much perfectly competitive.

The Thailand tuk-tuk market is different because the fares are higher than other forms of

public transportation. Thai tuk-tuks are decorated and target foreigners who are willing to

pay higher fares for tuk-tuks because of the open air ride experience compared to taxis

(who also charge similar prices). Tuk-tuk drivers also partner with other businesses, as they

aim to persuade foreigners to buy various products which allow the tuk-tuk owners receive

to a commission when the good is bought. (Tuk Tuks Thailand)

In Thailand, the fares are not necessarily controlled by any group but they are certain set

price laws known by the locals. The charges are determined by the price set when

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customers and drivers come to an agreement much like what happens in India. In Thailand

the tuk-tuk ‘firms’ have greater price setting ability but individual firms cannot alter the

price dynamics already in place. One of the main reasons why this happens is because tuk-

tuks don’t dominate the transport sector resulting in less competition, which allows

individual firms to make higher abnormal profits relative to their Indian counterparts.

Thailand’s tuk-tuk market is very similar to monopolistic competition because the price-

setting ability of the firms, firms are distinguishable (heterogeneous) and abnormal profits

earned.

When comparing the two markets to the one in place in Mombasa, there are many

similarities. The Indian market has very many tuk-tuks and because it has existed for so long,

it is very close to being perfectly competitive which is what I believe the tuk-tuk industry is

going to look like in the future. While the Thai industry does not cater for lower classes and

which is similar to the Mombasa industry. The fact that both countries’ industries have

some price setting ability and firms make abnormal profits in the long run shows that

Mombasa tuk-tuk firms will also make abnormal profits but while Mombasa’s tuk-tuk

industry is still new, the Indian industry which is quite old points to what is in store for the

Mombasa industry.

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Research Methodology

Interviews were undertaken for primary research since they are detailed and allow room for

further probing into issues compared to questionnaires. The interviewees included two tuk-

tuk owners and Mombasa’s two main tuk-tuk suppliers. The owners were different in terms

of the way as one of them rented their tuk-tuk out while the other personally drove it. The

owners were interviewed for their costs, profits, price laws they may abide by and price

setting ability.

Employees from main tuk-tuk suppliers in Mombasa Island were interviewed. These firms

(Car and General and Auto Selection (K) Limited) were among the first to supply tuk-tuks in

Mombasa and are currently the sole distributors of Piaggio and Atul tuk-tuks respectively

and so are in the best position to gauge the characteristics of the industry as they have been

there since the start. The suppliers were interviewed for tuk-tuks sold, costs, firms achieving

economics of scale and view of market structure.

Findings

The number of firms in the industry is the first characteristic being addressed. The

information given by both tuk-tuk suppliers shows that there are a large number of firms

present in Mombasa. The total number of tuk-tuks sold in Mombasa over the past 4 years is

a staggering amount of 3591. The number of tuk-tuks has been slowly increasing for the

Piaggio brand (the first tuk-tuk brand introduced in Mombasa) and this can be seen from

Figure 2. However, the Bajaj brand was no longer being sold by the Auto Selection Limited

after 2008, and began selling the Atul brand. The overall number of tuk-tuks has also been

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increasing barring the year 2009. This was caused by a number of factors including the

impact that was left by the post-election violence on the economy as a whole.

2008 2009 2012 2011 2012 (Till June)0

100

200

300

400

500

600

700

800

900

1000

Figure 2 to show the different brands of tuk-tuks sold between the years 2008 to 2012 (till

June)

PiaggioBajajAtulTotal

Time Period

Num

ber o

f Tuk

-tuk

s sol

d

The reason why there are so many tuk-tuks in the city is accordance to barriers in place in

the tuk-tuk industry. The owners of the tuk-tuks both mentioned the fact that there are only

two main conditions that need to be addressed when entering the tuk-tuk industry in

Mombasa and they are: the required permit and drivers possessing a valid license. The

permit is the sticker which allows tuk-tuks to participate as public transport vehicles for that

month and is worth a meager Kshs. 600. While the license is given after driving lessons with

additional costs incurred but is still a small price considering, the owner will either cover it if

they intend to drive it themselves or hire or rent it out to individuals possessing the license.

The other factor which needs to be considered is the actual purchase of the tuk-tuk which is

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the highest. The average cost of purchasing according to Mary Mutuku, Sales Co-ordinator

at Car and General is about Kshs. 400,000.

There are several means through which an individual may acquire the money needed and

they include taking out small loans from banks, forming a “Sacco”, in which a group of

people come together and out in a certain amount of money for a certain period of time

and then after all the money is collected, the tuk-tuks of for each member of the circle are

purchased. It is not necessary a person to purchase their own tuk-tuk as they are able to

rent a tuk-tuk for a certain fee per day. The charges for renting a tuk-tuk depend on the

model and older tuk-tuks cost between Kshs. 1,000 and Kshs. 1,500. This information stands

to show that barriers in place don’t affect those who have the basic means to enter the

industry and should be overcome with minimal tension. Due to the fact that the barriers are

so undemanding, they cannot be considered as realistic barriers for firms who want to enter

the industry. This would mean that these characteristics show that the market is perfectly

competitive at this point.

Each tuk-tuk owner operates differently; some choose to rent their tuk-tuk out to drivers

who receive a set daily income while others choose to drive their own as seen from the

interviewed personnel. Apart from this, a majority of tuk-tuk owners own more than one

tuk-tuk, according to the tuk-tuk suppliers which shows that there will be fewer owners

than the number of tuk-tuks sold. Thus the costs and revenue of a tuk-tuk firm will vary on

the number of tuk-tuks they own.

Due to the barriers being so undemanding, theoretically, it would mean that because firms

are entering the market to earn abnormal profits, firms will not be able to earn long term

abnormal profits. In the short run however, as seen from the figure 3, firms earn abnormal

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profits in the period of one week. If this is magnified to the given timescale of 5 years while

factoring in accidents and other costs, the firms will still be making abnormal profits. This

means that it does not abide to the perfect competition theory. Nonetheless, the predicted

abnormal profit does not take into account any new firms entering the market which will

have a significant impact on the industry as it would reduce abnormal profits. This shows

the limitation of the time the tuk-tuk industry has been set up in Mombasa.

Figure 3 to show cost curves for tuk-tuks operating in Mombasa for one week

Figure 3, has the value Q1 as any number of passengers of tuk-tuks sat in the tuk-tuk in any

given day. The Average revenue per day is about Kshs. 1,000 which over week is Kshs. 7,000.

The point at which MC=AC is assumed as the cost given by the tuk-tuk owners which is as

follows: Fuel (1,000), Sticker for municipal council (600 divided by 4 weeks) and servicing

costs (1,200 every 2 weeks which is 600 per week) along with average insurance costs

(24,000 divided by 52 weeks). This totals up to about Kshs. 2,212. Thus, abnormal profits of

about Kshs. 4, 788 are possibly being earned. This brings the abnormal profit to about Kshs.

248, 456 per year without taking into consideration any other costs like the purchasing of

spare parts or any other repairs. In the case of any accident or other repairs needed, the

Page 14 of 27

D= AR =MR

Number of passengers

Pric

e (K

shs)

7000

Marginal Costs (MC)

Average Costs (AC)

Abnormal Profits

Q1

2212

0


owner is able to pay about Kshs. 200,000 and the firm still earns abnormal profits. In fact

with the amount of Kshs. 248, 456, an owner is able to recover the money spent on

purchasing a tuk-tuk worth Kshs. 400,000 in less than two years. This shows that there is a

big profit margin in the current industry but is only considering an owner of a tuk-tuk rather

than who rents it out as the person renting it out will incur less costs as they will not have to

cover spare parts but may also receive less revenue. And as seen from the influx of tuk-tuks

over the years in Figure 2, tuk-tuks will continue to enter the industry causing average

revenue to reduce resulting in abnormal profits not being earned by firms. The implication

of this added competition in the long run would that consumers receive lower costs as tuk-

tuk drivers will be less inclined to hike prices to continue earning profits which is

advantageous to the consumer but will lead in falling abnormal profits for producers.

In accordance to costs, an aspect of the costs to tuk-tuk owners investigated was whether

they achieved economies of scale (EOS). The suppliers of tuk-tuks highlighted that there are

discounts given to tuk-tuk owners on single tuk-tuks purchased and also when an individual

purchases more than one tuk-tuk but the discount is dependent on the manager of the

suppliers. The tuk-tuk owners do however receive incentives from the suppliers which

include free services, free labour when servicing of their vehicles and fuel worth Kshs.

10,000 among other incentives. These incentives are however only of use in the short term.

There was no specific mention of long term cost reduction measures for tuk-tuk owners

apart from what one can suspect loyalty benefits which the company may offer to clients

who have purchased many tuk-tuks from one supplier. The loyalty benefits were employed

at Car and General. Due to the information, it is not clear whether the firms achieve EOS

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because discounts are not substantial enough to have change costs to tuk-tuk owners

significantly, meaning firms do not have unfair advantages over one another.

The ability to set prices is an important indicator in determining whether the firms are

perfectly competitive or not. During the research, one of the assumptions of the perfect

competition market theory was strongly brought out by most of the interviewees, which

was that usually the customers and the drivers have good knowledge of the pricing and

there seems to be set price laws. However, tuk-tuks drivers still have some ability to set

prices but if there are issues, customers are able to negotiate for a better price. The owners

who were interviewed mentioned that those who are in charge of the vehicles abide by

some rough price laws which mean that they do not always necessarily set the prices. The

general rule of thumb according to the owners was that a journey around Mombasa Island

is usually between Kshs. 50 and Kshs. 100 and depends on the distance travelled which is

where the driver has the price setting ability. The price is dependent on what the customer

and the driver agree on which is usually around Kshs. 50 and Kshs. 100.

Usually, though the customer will agree with the price that the tuk-tuk driver sets and these

are the bases of the surplus earned by both the consumer and the producer. This would

mean that there is price discrimination to a small extent because of the price-setting ability

of the driver. Due to the fact that there is some flexibility in setting the prices, shows that

firms have some price setting ability however because the tuk-tuk do operate along a set

price “chart”, firms don’t always exercise this price setting ability because of they may lose

potential customers who will look for another tuk-tuk offering lower prices. All the tuk-tuks

provide the same service of getting passengers and at times goods, from one place to

another. In essence this shows that the service is the same so it can be considered a

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homogenous service. Coupled with the fact that the firm doesn’t have a very large say price

setting and ability to alter market price, it shows a characteristic similar to perfect

competition market as it is more of price-taker than a price-setter.

Evaluation

The assumptions that were taken from the interviews were that there was good knowledge

of the sector, which is one that is contentious because personally, I was not aware of

specific price laws in play. Apart from this, another assumption was that the numbers of tuk-

tuks sold in Mombasa were all firms in Mombasa which may be misleading because some

may be operating in South Coast, Nyali, Bamburi and other areas. This may have caused

factual inaccuracies but from the observation and the data, it can be seen that there still is

increasing demand for tuk-tuks.

There were limitations to the research process. Time will be limited and as my way of

gathering information is mostly relying on the knowledge of the owners and statistics given

by the suppliers of tuk-tuks it will mean that there may be inaccuracies in the interpretation

of certain data. Another significant limitation is that the industry is only about five years old

which means that the interviewees and the provided data will not able to completely gauge

the long term impacts. Stake holders affected include local people, as they will have lower

costs as well as increased employment. Government will have increased revenue which will

improve overall quality of living.

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Conclusion

The findings show that the tuk-tuk market in Mombasa Island has many characteristics

which make it perfectly competitive. The answer to the question posed, “To what extent

can the tuk-tuk transport sector in Mombasa Island be considered a form of perfect

competition?” has to be that it is a form of perfect competition to a large extent however,

due to the limitation of the age of the industry long term implications may not necessarily

be evaluated accurately. The only characteristic which is not entirely shown is that

consumers and producers cannot have perfect knowledge of the industry however; there

are only a few markets where consumers and producers have prefect knowledge because

markets are dynamic. Theoretically, this knowledge would consist of all consumers knowing

the ‘price laws’ while for suppliers would be the cost per journey which is every changing.

Even in the age of technology, it is very hard for producers and consumers to have perfect

knowledge of the industry, which to a large extent still shows that the tuk-tuk industry is

largely perfectly competitive.

The research shows exponential increase in tuk-tuks which is likely to continue. This will

most likely cause abnormal profits in the long run to reduce if the theory of perfect

competition is considered. There are several implications of the findings and they include

possible reduction in prices, which will likely cause increased demand for tuk-tuks in

Mombasa due to increased competition. If this is the case, then it is highly possible, that

costs of purchasing tuk-tuks will also reduce as suppliers will want to earn higher profits.

More competition will mean less price-setting ability causing improved knowledge of

industry. This means that there will be increased employment in this sector which will

contribute to the economy’s growth and possibly improvement of road infrastructure.

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Whether jobs created by an expanding tuk-tuk industry will be able to carry the

unemployment caused by the matatu phase-out. Due to the large numbers of tuk-tuks,

there will be significant other problems arising such as traffic congestion, pollution and

increased probability of accidents which begs the question whether the tuk-tuk industry is

actually helpful to the Mombasa economy? One thing is for certain and that is the tuk-tuk

industry is not leaving Mombasa in the near future.

Bibliography

Mumbai. (2000). Retrieved 7 20, 2012, from Junior Worldmark Encyclopedia of World Cities: http://www.encyclopedia.com/doc/1G2-3426000057.html

Mumbai Traffic Stats. (2009). Retrieved August 1, 2012, from Mumbai Environmental Social Network Website: http://www.mesn.org/mumbai%20traffic%20stats.html#5

Riding a Tuk-Tuk. (2012, June 5). Retrieved August 1, 2012, from Youtube Website: http://www.youtube.com/watch?v=mZWqhjykLcQ

Auto Rickshaw. (n.d.). Retrieved August 1, 2012, from New Delhi India Hotel: http://www.newdelhi-indiahotels.com/travel-guides/Transportations/Auto_Rickshaw.htm

Bajaj, V., & Gottipati, S. (2012, January 3). Another People’s Car for India, but for Rickshaw Drivers. Retrieved October 16, 2012, from The New York Times: http://travel.nytimes.com/2012/01/04/business/global/another-peoples-car-for-india-but-for-rickshaw-drivers.html?_r=0

Dorton, I., & Blink, J. (2007). IB Ecoomics Course Companion. Oxford: Oxford University Press.

Floyd, T. (2011, September 11). Exposé: India’s Rickshaw Drivers Tell All. Retrieved August 1, 2012, from FOGG Odyssey : http://foggodyssey.com/2011/09/05/rickshaw-jodhpur-india-transport-interview-confession/

Keniston, D. (2011). Bargaining and Welfare : A Dynamic Structural Analysis of the Autorickshaw Market. Yale University.

Tuk Tuks Thailand. (n.d.). Retrieved July 30, 2012, from Shopping in Bangkok: http://www.thebangkokshoppingguide.com/tuktuks_bangkok

Wahome, M. (2012). Why flip-flop on PSV is recipe for chaos. Daily Nation, 36-37.

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Appendix A: Interview with tuk-tuk owner: Fatma Nashir Kassam (owner of 2 tuk-tuks)

1. How do you operate the tuk-tuk, do you rent it out or employ someone?

a. I rent it out to two drivers who are the same for all the days of the week but

Sunday because we feel that the tuk-tuk needs a rest. The timings are from

6:00 am- 7:30 pm.

2. On an average day, how much do you earn?

a. We have fixed earnings from Monday to Friday as we charge the rent at Kshs.

1,200 but on Saturdays, because we know that there are less people, we

charge Kshs. 1,000.

3. What are some of the costs you incur on a daily basis?

a. Small maintenance costs and like the tyre wearing out. Because the tuk-tuks

we have are new we decided to have premium insurance so we have full

coverage. The cost of this is Kshs. 23,000 per year. Many other owners either

have third-party or other kinds of insurance. Also because they are new, we

have to service them every two weeks and the cost of this is Kshs. 1,200 per

tuk-tuk. This means we pay Kshs. 2,400 per month for each vehicle for

servicing.

4. Are there any special licenses that you have to pay when registering your tuk-tuk?

a. No, not really but the driver of the tuk-tuk needs to have an ‘F and G’ on their

license. This is to show that they are licensed to drive motorbikes and

vehicles like tuk-tuks. There is a sticker, which we need to pay for, from the

Municipal Council which allows us to run our tuk-tuks on the road and the

sticker is for Kshs. 600 and needs to be bought every month for each tuk-tuk.

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5. Why do you think people choose tuk-tuks over any other form of transport in

Mombasa?

a. Tuk-tuks manage to go through traffic

b. People can share costs as people pay per trip and not individually

c. Overall travel experience better than matatus

6. Do the firms in the industry abide to some pre-existing law of the market?

a. The drivers communicate with other people and so you can say there is some

price range. They have the same pricing, which they usually charge.

7. To what extent is there price discrimination in the industry? Which kind of

discrimination is most prevalent:

a. Time= Not present

b. Age= Not present

c. Gender= Not present

d. Geographical = Present

i. Travelling around town usually costs Kshs. 100

ii. In Nyali it’s much higher and is about twice the price, so about Kshs.

200

iii. While in South Coast the prices are even higher because there are less

tuk-tuks.

People usually know how much it costs to get from place to place so there are

sometimes negotiations for the price to be changed.

8. What degree of price discrimination is practiced most? 1st degree(negotiating), 2nd

degree (travel distances) or 3rd degree (type of consumer)

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a. 1st Degree (negotiating) prices and 2nd degree (distance travelled) but there is

some 3rd degree for example with tourists.

9. What type of market do you think tuk-tuks follow?

a. You see, I think there are about 3-4 thousand tuk-tuks in Mombasa. Anybody

can decide to buy a tuk-tuks and began running it on their own, the licenses

are not very high so anyone who can afford it, can participate. It is a very

open market and there are no memberships like what we see in the ‘matatu

industry’.

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Appendix B: Interview with tuk-tuk owner: Patrick Wambua (owner of 1 tuk-tuk)

1. Do you own the tuk-tuk yourself or have you rented it?

a. I own the tuk-tuk and bought it.

2. What is the average income you will earn in a day?

a. It ranges between Kshs. 1,800 to 2,600 on a good day.

3. What is the average amount of money you will spend on the tuk-tuk?

a. About Kshs. 1,000 for just the fuel because most of the times I don’t need to

change anything only for servicing every two weeks which is about Kshs.

1,200.

4. How do you set the prices?

a. Well, generally people know the prices that they will be charged. It is one of

the things that they just know but again it depends on the distance like

around town would be Kshs. 100.

5. Do you know that costs of renting a tuk-tuk?

a. Yes, usually the ones with the ‘KTWA’ number plate are between Kshs. 1,000

to 1.200. While the newest models are for Kshs. 1,300 and the ‘KBN’ plates

are for Kshs. 1000.

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Appendix C: Interview with tuk-tuk supplier: Mary Mutuku (Sales Co-

ordinator at Car and General)

1. How many tuk-tuks have been sold in the past few years?

i. 2008= 372

ii. 2009= 396

iii. 2010= 639

iv. 2011= 737

v. 2012 (till June)= 281

2. In general are the tuk-tuks sold to multiple owners or the same owner?

a. Normally, individuals come and buy one tuk-tuk and slowly begin buying

more. There are some who own fleets, defined as a number of tuk-tuks

owned by a single individual. Most of the owners have purchased more than

one tuk-tuk from us.

3. Is there are reduction in price if an individual buys a certain number of tuk-tuks? If

so, how much is the change?

a. There are discounts but that is entirely dependent on the customer, market

price and manager. The incentives are that if one individual owns three tuk-

tuks, they will have free total service (servicing of the tuk-tuks without

charging for the labour).While, repeat customers (customers who have

bought more than one tuk-tuk from the supplier) given labour free services

for first three services.

4. How open do you think the market is for an individual to enter the tuk-tuk market in

Mombasa?

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a. Well, firstly tuk-tuks aren’t very costly because on average their price is about

Kshs. 400, 000 and most if not all of them are profit making. Any single

individual can get up and decide to own a tuk-tuk because it is easy to attain

the necessary documentation and run your tuk-tuk. There are no cartels per

say so it is a very open market.

5. Why did Car and General begin selling tuk-tuks in Mombasa?

a. See, the owners are Indian so they decided to try it out in 2007/2006. They

thought it might work and took the risk and it paid off and it’s been selling it

ever since. Car and General were among the first if not the first to sell tuk-

tuks in Mombasa. Due to the success, we have also appointed agents who

also sell the tuk-tuks on our behalf. We are the sole distributor of Piaggio tuk-

tuks.

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Appendix D: Interview with tuk-tuk supplier: Caroline Musao (Employee at Auto-Selection (K) Limited)

1. What kinds of tuk-tuks are specifically sold by Auto-Selection?

a. The company started of selling the brand ‘Bajaj’ but it didn’t do so well

because of the market perception as the body was small and it was a bit

expensive and as of 2009 we majorly sell ‘Atul’ tuk-tuks.

2. When did the company begin selling tuk-tuks? Why?

a. We began selling ‘Bajaj’ tuk-tuks in 2007 because we had seen that Car and

General, who can be considered as the pioneers in Mombasa, has been

making good strides in the market and figured we could give them some

competition.

3. Who does Auto-Selection sell the tuk-tuks to? In general are the tuk-tuks sold to

multiple owners or the same owner?

a. We sell to individuals, Saccos and dealers. ‘Saccos’ in this context is saving

scheme for individuals who pitch in and able to own tuk-tuks after the

collection of funds so each individuals is able to buy a tuk-tuk quicker. It is

aimed at helping the financing for tuk-tuks. Most individuals buy more than

one tuk-tuks. Some have purchased even and up to 10 tuk-tuks. While the

circles usually purchase about 5 in total.

4. Is there are reduction in price if an individual buys a certain number of tuk-tuks? If

so, how much is the change?

a. There are different packages that help in reducing costs of purchasing for

example the current package is if an individual buys any tuk-tuk they receive

3 free services (only labour costs are free) and Kshs. 3,000 in fuel.

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5. How open do you think the market is for an individual to enter the tuk-tuk market in

Mombasa?

a. The market is very open and everyone and anyone have the opportunity to

own a tuk-tuk business.

6. How many tuk-tuks have been sold in the past few years?

i. 2007= 214 (Bajaj)

ii. 2008= 400 (Bajaj)

iii. 2009= 310 (Atul)

iv. 2010= 267 (Atul)

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Documents

Farzeen Wilson EE Final Supervisor FK