A cabs and couriers conundrum

 

🥡 Hungry and fancying takeaway?

Back in 2017, Friday nights in Malta could have gone one of two ways.  

The first is a night out at Paceville, moving from one sweaty bar to another downing cheap alcohol all night. As the night draws to a close, you walk down the road from The White Palace, just pass that kebab joint, until you find an older man in a white shirt shouting “eCabs please!” on repeat. You talk to the lady at the reception desk inside the cab office, book a van for you and your friends, and take a seat as you wait for your ride. 

Alternatively, maybe you were sitting on your sofa at home after a long week at work and decided that you weren’t going to cook tonight. You turn on the television and a Maltese influencer named Sarah Zerafa appears during the commercial break asking if you’re hungry and fancying takeaway (you are, indeed, hungry and fancying takeaway). You pull out your laptop and head to the Time to Eat website to order whatever greasy food you can get on the cheap. Within minutes, you’ve settled on a food joint and placed your order in the system. 

 

 

Whichever way your Friday night looked, you were probably using the technology of pioneering companies in a sector that was relatively new at the time. Time to Eat was the first online platform to connect restaurants and customers through its own delivery system. Meanwhile, eCabs was the first cab company in Malta to introduce its own booking app. Only one of the two survived in an industry that, over the years, has transformed itself entirely, and disrupted Maltese regulators completely.  

🥧 A piece of the pie 

Time to Eat held a monopoly position in the food delivery business for several years. It was not until January 2020 that its first major competitor emerged on the scene – Bolt Food. And it only took a couple of months afterwards for Wolt, a Finnish delivery app, to launch on the islands as well. From the three companies, only Bolt and Wolt are still offering food delivery services after Time to Eat went dark in January 2022.  

Meanwhile in the taxi industry, eCabs was far from the only taxi company in the market, but it enjoyed a hugely dominant position regardless. It wasn’t until Taxify came onto the scene in 2017, later rebranding to Bolt, that eCabs met its match. Other ride-hailing companies tried to shake up the market over the years, but they left the sector quicker than they entered it. Uber eventually found its way to Malta in 2022, with its global dominance giving them a competitive edge and helping them find roots in the market.  

There seems to have been a brief overlap in ownership between Bolt Food and Time to Eat. Before Bolt pursued independent operations in Malta, it was working in partnership with TXF Tech. Parallel to the setting-up of TXF Tech, the company behind the Time to Eat brand, Food Solutions Limited, underwent a change in ownership that saw most of its shares transferred to Wugang Limited and Maya Global Holdings Limited. Wugang Limited is owned by a Cypriot holding company further owned by the same Klas Martin Johansson at TXF Tech. Meanwhile, Jacob Frank Appel, who was also one of the founders of Time to Eat, appears as a director of Maya Global Holdings Limited.

🥘 Recipes for success 

Food delivery and taxi services are two unique sectors, but both are underpinned by mobility and gig work. New technologies have allowed companies in these sectors to develop digital platforms that serve as an algorithm-driven ‘marketplace’, connecting drivers with customers, or couriers to restaurants and consumers. Meanwhile, the gig work model of employment allowed the same companies to take a hands-off approach to the way drivers and couriers want to schedule their work hours. ‘ 

If a digital platform and a gig work model are the ingredients for mobility success, then what does the recipe call for? Whether it’s in Malta or abroad, these mobility companies penetrate the market in a similar way.  

First, you stun local regulators. When you have the newest technology and can exploit any loopholes in the transport regulatory framework, you’re likely to go unnoticed at first.  

Second, you start enticing self-employed drivers and couriers with attractive commission rates and a “be your own boss” attitude. 

Third, you focus on the consumer market. You’ve already got the manpower you need to run your business, and now you need to attract the customers by pouring money into promotions, referrals, and free rides. 

This can only be made possible financially by exploiting loopholes, naturally-occurring when a new technology goes mainstream, in the fiscal or employment rules so that you can avoid paying VAT, social security contributions or corporate tax. Running a mobility company has all sorts of expenses, so you need to shave off as many costs as possible to retain a competitive advantage.  

If all goes well, your company can establish itself as a dominant market player, and eventually push prices and commission rates up to generate a healthy profit.  

🍏 Bad apples 

When you’re operating a mobility platform, you need to ensure that you always have enough manpower on hand to reach consumer demand. However, if you’re opting for a gig work model, you might not always have enough drivers or couriers on hand, especially during peak months.  This is where recruitment companies, or fleet operators, come in handy.  

Back in 2021, MaltaToday revealed that Malta’s leading food delivery platforms were relying on recruitment agencies to supply couriers. In turn, these agencies were withholding 50% of couriers’ pay, and often charging recruitment fees in the thousands to third-country nationals looking for a job in Europe. If a Maltese courier with Bolt or Wolt would rake in €5.35 for a single delivery, a courier employed through a recruitment agency would make just €2.70 for the same order. 

These recruitment agencies helped solve the foreign labour issue for platform companies. In Malta, a third-country national cannot register as a self-employed worker with a company. Instead, recruitment agencies serve as the ‘middle-man’, offering a legal pathway into Malta to eventually work, de-facto, as a self-employed driver. Everyone becomes a winner – the foreign national gets a job in Malta, the recruitment agency gets a generous cut from their salary, and the platform company doesn’t have to worry about its labour supply.  

🍋 A lemon to a knife fight 

Recruitment agencies were not a new phenomenon at the time, but the laws regulating them were outdated and unenforced. Suddenly, regulators across several government agencies had to come to terms with the new practices in the market, what was legal and less so, and introduce a clearer set of procedures to standardise the conditions of employment agencies. 

This process was far from quick. After MaltaToday’s 2021 report on recruitment agencies, Prime Minister Robert Abela said that his government will act against these illegal work practices. It took 21 months for the government to introduce regulations on platform work, and another year after that to regulate recruitment agencies specifically.  

Under the new platform work rules, a company making use of an agency to secure a supply of workers must provide that agency will all the necessary information for salaries to be paid out accurately. These rules also enshrined the rights of platform workers to a minimum wage, overtime rates and vacation leave, among other statutory benefits.  

Meanwhile, the regulations on employment agencies introduced new license conditions, which meant that an agency caught charging or demanding payments from applicants in exchange of employment would be considered guilty of an offence. This, in turn, would lead to the refusal or revocation of the agency’s licence.  

There was a whole other kettle of fish that had to be dealt with in the taxi industry specifically. At the time, non-EU nationals coming to Malta did not need a local driving license to receive a taxi driver’s tag. Rather, they would qualify for the tag immediately, but be given a one-year period to obtain an EU driving licence. 

This changes in July 2023, when the Transport Ministry announced that foreigners applying to work as cab drivers in Malta will not be allowed to do so if they do not have an EU driving licence. Cab operators were also slapped with new regulations on garages. Suddenly, after years of lax enforcement, they had to present a site plan, confirmed by an architect, of the garage where they leave their unattended vehicles. 

Crafty cab operators found clever ways to circumvent this rule. Instead, they decided to illegally park their vehicles overnight in a variety of public-private locations, from fields to supermarket parking areas. In fact, it took the Transport Ministry less than a year to announce that it will be revising these rules to ensure a fairer system for commuters and drivers.  

🍌 Going bananas 

The plight of couriers and cab drivers are rarely out of the spotlight, and over the years many of them have either gone on strike or taken to the streets to protest their working conditions.  

Despite having no union, no fixed workplace, and vulnerable working conditions, around 500 Bolt couriers went on strike in the summer of 2022. They were demanding an increase in their bonus payments, which had been on the decline for years on the app. At first, Bolt Food promised to optimise its pricing mechanism in reaction to the strike. Eventually, it said that it will not change its earnings formula, including its bonus mechanisms.  

The heat turned up a notch this year, especially in the taxi industry. Last February, cab drivers took to the streets in a slow-moving carcade to protest predatory pricing in the sector. Workers drove their cars through Malta’s arterial roads, waving flags and honking their horns, urging cab platforms to reevaluate their current pricing strategies. A second protest was slated for May, but this was averted after the Transport Ministry reached an agreement with the Light Passenger Operators Association, the protest’s organisers. The two parties agreed to regulating the demographic supply in the industry, introducing geo-fencing, and reviewing the special licence requirements for taxi drivers. 

Last month, two years since the first Bolt Food strike, courtiers again switched off their apps and refused to work after the company removed their weekend bonus. This strike prompted Employment Minister Byron Camilleri to publicly state that he will ensure the case is investigated. Junior minister Andy Ellul also urged workers to report any abuse or unfair treatment to the Department for Industrial and Employment Relations. 

🍎 Upsetting the apple cart 

Two weeks later, a man was hauled into court and charged with human trafficking and making false declarations to authorities. His arrest was the result of joint investigations by Jobsplus and Identità, after officials from the two entities received reports of an excessive amount of workers employed in the man’s company. Jobsplus conducted an inspection on the company’s premises and found that one of the three restaurant’s under the company’s ownership was in the process of closing down, while another restaurant was not in operation yet, and a third was just a kitchen set up for online deliveries only. This company, and the three alleged restaurants, employed hundreds of workers. 

The man pleaded guilty on his arraignment, and the court handed him a two-year prison sentence sinece he had cooperated with the police and admitted to the charges at the earliest possible stage of the proceedings.  

Parallel to this, hundreds of third-country nationals who applied to work as cab drivers and food couriers were suddenly having their work permit applications refused. Identità was suddenly refusing non-EU applicants applying to work in these jobs, upon the recommendation of Jobsplus. 

Indeed, it was Jobsplus that determined that the labour market for cab drivers and food couriers has reached saturation. As a result, any third-country nationals who are still abroad and applying to work in these roles will now have their applications refused.  

Workers in these sectors who want to change employer but remain in the sector will also have their applications refused. Government sources told MaltaToday that this decision was taken to avoid a recruitment agency bringing TCNs to Malta on a false pretence as, say, waiters and cleaners, only to change the workplace to Bolt or Wolt when the worker arrives in Malta.   

🥔 A hot potato 

Market penetration in the mobility sector follows the same blueprint: stun the local regulator, capture the driver supply market and attract consumers, all by exploiting fiscal and employment loopholes to keep company costs low.  

While this was the recipe for success for most mobility companies, the sustainability of this model is being called into question. So far, consumers have benefited from cheap prices; but is it a matter of time before prices and commission go up? If companies are no longer able to keep labour costs low, and any fiscal or employment loopholes can no longer be exploited, will promo codes and referrals be enough to keep customers happy? 

Bolt has recently acknowledged that a recent unbalance between increasing demand and a lower supply of cabs has resulted in longer periods of surge prices and longer waiting times. Whether this is a direct result of the government’s labour market crackdown is not quite certain.  

Meanwhile, Jobsplus has raided the offices of three other recruitment agencies: WT Global, Ferrugia Fleet and Mela Cleaning. MaltaToday is informed that investigations are underway at Jobsplus and at the Malta Police Force.  

It’s unclear which way the sector will go from here. Regulators eventually caught up with the market, but we’re yet to see whether the market will get its house in order or continue to exploit loopholes and enforcement oversights