When Uber drivers don't own cars: Developing world tests 'sharing economy'

The be-your-own-boss appeal of gig-economy jobs like Uber is especially strong in countries with low formal employment – and often high inequality. But in places where car ownership itself is a significant hurdle, middlemen become key.

Marvin used to have a job. A real job. The kind that came with health insurance and paid days off and lunch breaks. He earned about $250 a week – a small fortune in South Africa, where more than 50 percent of the population lives on less than $80 per person per month and two-thirds of young people are unemployed.

But when his contract with a Johannesburg logistics company ended last year, he couldn’t find anything to replace it – until a friend told him about the ride-sharing app Uber.

“It seemed like the easiest thing for me. You don’t need a degree, you don’t need a CV, you just sign up and go,” he says.

Stop there, and Marvin is practically the application’s poster-child, creating a job for himself in an economy that seemed determined to lock him out.

But there is a crucial difference between Marvin and most Uber drivers in the West.

He doesn’t own a car, or have any means to buy one.

Instead, like many of the app’s drivers across the developing world, he pays to drive someone else’s – and occasionally ends the week owing the car’s owner money. (Marvin asked that his full name not be used, because the car’s owner didn’t authorize him to speak.) In a month, he says, he usually clears about $300. “With Uber, I live hand-to-mouth.”

It’s far from the be-your-own-boss image extolled by fans of the so-called sharing economy (or the related “gig economy”), in which anything from rides across town to handyman chores can be arranged peer-to-peer via big-data apps: cutting out middlemen, expenses, and much of a “traditional” job.

Critics have voiced doubts about the benefits of such an “Uberized” world from the beginning. But the company’s rapid rise in parts of Africa, Latin America, and Asia has given rise to particularly urgent questions about whether the phenomenon can flourish in highly unequal societies with low formal employment – and who it actually serves there.

“Uber has made this ‘empowerment, freedom, and flexible hours’ narrative a key part of its appeal,” says Juvaria Jafri, a doctoral researcher at City University of London who has studied the rise of these taxi-like “Uber businesses” in Pakistan. “But the whole narrative of uplifting and empowering gets very dented when you look at the vulnerability of some of the people it’s actually looking to empower and uplift.”

Car: optional

Marvin’s set-up looks, in many ways, very similar to the cab companies of old – with drivers forking over a cut of their earnings to a wealthier middleman – exactly what Uber has always said it is not. (“Uber is not a taxi nor is it a taxi or transportation company. We are not Uber Cab or Uber Taxi,” wrote Uber South Africa in an email to the Monitor.)

That arrangement might not be appealing to many drivers in the United States or Europe, but in countries where formal employment levels are low, it has particularly strong “better-than-nothing” appeal. (In South Africa, for instance, formal unemployment hovers above 25 percent.)

“This isn’t a career, but it’s a way to make money to live,” says Ignacio, a Mexican Uber driver who says that at his age – 61 – it would be nearly impossible to find a formal job.

The quiet creep of professional middlemen into the sharing economy is nothing new. Accommodation website Airbnb, for instance, has been widely criticized for becoming in many parts of the world little more than a professional apartment-renting service.

“In reality, this isn’t the sharing economy anymore,” says Carlos, a Mexican transport economist and owner of three Uber cars, which he hires out to drivers in Mexico City. (He asked that his real name not be used because he occasionally writes about Uber.) “I’m not sharing my good  with someone else when I’m not using it. I’m participating in a taxi service associated with an app. That’s it.”

Middlemen and women allow Uber drivers across the developing world to bypass their single biggest hurdle to driving for the company – getting a car. In the US, more than 90 percent of American households own a car, according to census data, and many of them would like to turn a bit of profit from that investment. But in countries like Mexico, most people simply don’t have the necessary income or access to credit for car ownership. Nearly 60 percent of Mexican adults, for instance, don’t even have a bank account, according to a 2016 report.

In some countries, including South Africa, Uber has set up special arrangements with banks to help drivers buy a car. But many complain the terms of the loans are extortionate, while many others say they still aren’t eligible.

“Often I wish my guys could own their own cars – for their sake,” says Mike Dirkett, who owns and rents 18 Ubers in South Africa. “But to get that finance you need to show history of a proper job and consistent pay slips, and most of them just don’t have that, so we work together.” In his case, he charges his drivers about $230 per week. Anything over that is theirs to keep, and he estimates that most of his drivers make between $100 and $200 a week. Meanwhile, “I’m making money in my sleep,” he says.

Sustainable system?

That doesn’t just happen behind Uber’s back. Indeed, in many countries – including South Africa and Mexico – the company’s app even includes a feature connecting would-be drivers to owners looking to rent out their vehicles.

But it also means profit margins can be excessively slim for drivers, who often earn only a fraction of each ride. And Uber rides cost much less outside of the US and Europe, further driving down earnings. In Boston, for instance, a 2.5 mile Uber ride would cost about $10. In Johannesburg, a trip of the same distance would be around $4, and in Mexico City $2.50.

“Prices are designed to encourage more riders on the road, to help increase trips for drivers, but equally, you want to make sure the basic economics of drivers are sustainable,” Uber South Africa wrote in a statement. “We’re committed to making Uber the most affordable option to move around and our experience shows us we can make that happen while making Uber the best possible platform for driver-partners to earn a living.”

(Uber Mexico did not respond to multiple interview requests for this story, made in person, via email, and on Twitter).

But many Uber drivers in both Africa and Latin America have taken issue with Uber’s low prices in the region. In Nigeria, for instance, drivers deserted the app en masse for an Estonian competitor, Taxify, after Uber slashed prices 40 percent last May. And last year a group of South African Uber drivers took their case to a labor tribunal – arguing that they should be considered Uber’s employees, and thus be entitled to workers’ legal protections. (They won the initial case, but this week the decision was overturned.)

Indeed, no drivers interviewed for this story wanted to give their full name out of concern for their job security. Hector, a Mexico City Uber driver in an electric-green hatch-back, says he feels like the owner of the car he drives is taking advantage of him. He has to pay a set amount of about $130 to the owner once a week, which sometimes means driving 12-hour-or-more shifts each day in order to have any income left over for himself.

“The car is his, but sometimes I feel like he thinks that I belong to him, too,” he says.

Uber itself also seems to question whether its rapid global expansion is really working. Last week, after the Japanese tech company SoftBank announced that it had become the company’s largest shareholder, its board director Rajeev Misra told the Financial Times he hoped the company would double-down on its core markets in the US, Europe, Latin America, and Australia. (Mr. Misra is expected to join Uber’s board).

“The idea of Uber initially was that you drive your own car. I have the sense that the model just doesn’t work if you try to bring in third parties,” says Austine Gasnier, who used to hire a driver in Mexico City to operate her second car as an Uber when it wasn’t being used by her family. But after a few months, a robbery, and many headaches with the process, she dropped out.

“We realized that it wasn’t profitable for him [the driver] or for us. Only Uber won.”