The risks of being an Uber-entrepreneur in South Africa

Being an “Uber-entrepreneur” – renting out your vehicle for use by Uber drivers – is an attractive way to earn a second income for many South Africans.

These drivers pay the vehicle owner a weekly cut of their earnings in exchange for use of the vehicle, and both parties are left happy.

This practice has become so common that the majority of Uber vehicles in major South African cities are not owned by their drivers, but only rented.

It is not as easy as it seems to make money in this manner, however, as while it may be very lucrative, it comes with a lot of risks.

ABT Logistics Operations Manager Michelle Bell told MyBroadband that these owners are mostly exposed to risk from non-payments.

Non-payments and management

ABT Logistics provides a service where, for a weekly fee, it manages driver recruitment, payment collection, vehicle tracking, and more for Uber owners.

Managing a driver’s activity, ensuring that the vehicle remains in good condition, and monitoring usage outside of Uber rides are all measures which owners should take to reduce risks.

However, some drivers simply do not pay the full amount required by the vehicle owner, resulting in shortfalls and the need to collect payment.

“In the end, it is all down to the driver to pay,” Bell said. “The big problem for payment is the cash component, as this can be obscured from the vehicle owner.”

To mitigate these risks, Bell said ABT Logistics has various systems in place to aid in the recovery of lost payments and to ensure proper handling of incidents and driver recruitment.

“We have procedures lined up,” Bell said. “When it comes to recruiting drivers, we require that they have had their drivers licence for at least two years.”

She noted that the industry is made up of many drivers for whom Uber was their sole income, and for this reason, the avoidance of cash trips and the collection of payments is very important.

Blindsided

Bell warned potential Uber-entrepreneurs against attempting to rent out their vehicles to drivers privately, stating instead that they should use a fleet management service.

“Newcomers to this space will be blindsided by the risks involved, and opportunists could take them for a ride,” Bell said.

“We are one of the biggest Uber partners in Cape Town and we have been around for a while, we know how the industry works.”

She added that ABT Logistics manages to recover roughly 60% of shortfall payments, which is impressive considering the difficulty in tracking down drivers who have the resources to pay the money back.

If an owner tries to find a driver privately, they would also not have access to the same stringent vetting processes used by ABT Logistics.

For example, the driver they hire may opt to accept cash trips and conceal their earnings while paying less per week, without the owner ever knowing.

“This is a potentially lucrative business model, but there is a lot of risk involved,” Bell said.

Now read: Uber South Africa in breach of WASPA rules – Industry expert

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The risks of being an Uber-entrepreneur in South Africa