Venture

Africa’s ride-hail markets are hot spots for startups and VC

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MAX Nigeria Ride hail Africa motorcycle taxi

When it comes to VC, vehicles, and startups, Africa’s ride-hail markets are becoming a multi-wheeled and global affair.

The big players such as Uber and Bolt are competing in Kampala and Nairobi—where in addition to car-service—they offer rickshaw taxis. On-demand motorcycle startups are multiplying and piloting EVs with funds from international partners. And many ride-hail companies in Africa are adapting unique product solutions to local transit needs.

In this analysis, I take a look at the leading startups in the mobility space and how the future of transportation on the continent will increasingly come from new entrants.

Africa’s in the midst of digital innovation boom

Africa’s in the midst of digital innovation boom, the components of which are intersecting rapidly across its 54 countries and 1.2 billion people.

Diving deep into Africa’s blossoming tech scene

Smartphone penetration is improving and in 2017, the continent saw the largest global increase in internet users—20 percent.

By Partech data, the continent surpassed the $1 billion VC mark in 2018. And greater connectivity and venture funding are fueling thousands of startups in every imaginable sector, including digital-transit.

While reliable markets stats for the size and potential of Africa’s ride-hail markets are sparse, there are some indicators of the sector’s potential.

Car ownership and cars per capita in Africa is among the lowest in the world. Parallel to that, any eyes and ears survey of the continent’s big cities reveals that shared transport by buses, cars, or motorcycles is big business that’s already ingrained in consumer culture. Millions of people daily pay fares to pack onto East and West Africa’s Mutatu and Danfo minibuses and Okada and Boda Boda motorbike taxis.

As Africa continues to urbanize, converts to smartphones, and discretionary consumer spending continues to rise—it all adds up to suggest strong potential for conversion to on-demand mobility services.

Unsurprisingly, the most active markets for ride-hail startups and investment in Africa align with the continent’s top spots for VC and tech activity: primarily Nigeria, Kenya, and South Africa.

The world’s largest transit app, Uber, is in each of those countries (I’ve used it in all three) and operates in 14 cities across 7 African nations: South Africa, Kenya, Uganda, Tanzania, Ghana, and Nigeria.

A big difference between Uber in cities, such as Lagos, and much of the rest of the world is the ability to choose cash payment, over card—something the company’s offered to adapt to local market preferences. 

Uber has been in Africa for six years and has more than 2,279,000 active riders and 59,000 active drivers in Sub-Saharan Africa, according to an Uber Africa spokesperson. 

Uber competitor Bolt (previously known as Taxify) also operates in Africa, offering on-demand taxi service in 30 cities across six countries: South Africa, Nigeria, Kenya, Ghana, Uganda, and Tanzania. Of Bolt’s 25 million passengers and over 500,00 drivers globally, half of the startups business is in Africa now, a company spokesperson told TechCrunch.

Another global entrant, New York-based InDriver went live with its name-your-fair ride-hail product in Kenya in June and Uganda this month, in addition to South Africa and Tanzania.

InDriver launches ride-hail app in fourth African country, Uganda

Homegrown startups have also stepped up to enter Africa’s ride-hail markets. Funding data provided by Digest Africa provides a snapshot of the continent’s local on-demand transit companies by country and funding status.

DIGEST AFRICA LOAL RIDE HAIL FUNDING II

On four wheel-transit, Egypt bus-based passenger company Swvl raised $42 million in funding this year, and announced plans to expand into Lagos, Nigeria.

In East Africa, Kenyan telco Safaricom—known for its M-Pesa mobile money product—has backed local on-demand taxi venture Little. The Nairobi based company has gone head to head with Uber on pricing and offering more competitive driver-terms. Little is now available in Kenya, Uganda, Zambia, and Tanzania. 

Ethiopiaa budding tech hub with Africa’s second-largest population (after Nigeria)has two leading taxi ride-hail startups, Ride and ZayRide. ZayRide recently announced it will expand to West Africa this year.

Africa’s motorcycle ride-hail market — worth an estimated $4 billion — has also seen a flurry of investment and expansion.

Uber and Bolt got into the motorcycle taxi business in 2018. Uber offers the UberBoda branded service on its app in Kenya, Uganda, and Tanzania.

Bolt offers motorcycle taxi service in Kenya and Uganda. Norwegian (and Chinese backed) browser service Opera’s recent $50 million backed West Africa product expansion included linking its new payment app to ORide, a motorcycle ride-hail venture it launched in Nigeria.

There’s been an upsurge in formation, investment, and expansion around locally founded two-wheel taxi startups in Africa. Six of the entities that received investment on Digest Africa’s list of local ride-hail startupsMax, Halan, Gokada, Safeboda, Gozem, Teliman, Cango— are motorcycle transit companies. 

Nigerian startup MAX.ng raised the most in the moto space so far in 2019,  a $7 million Series A funding with participation from Yamaha. The company is using the funding to pilot e-motorcycles in Africa powered by renewable energy.

MAX.ng raises $7M round backed by Yamaha and pilots EVs in Nigeria

Another local moto-taxi ventureUganda’s SafeBoda—received outside capital a Series B round, co-led by the venture arms of Germany’s Allianz and Indonesia’s Go-Jek

Local motorcycle ride-hail taxis are also traveling outside their home markets. Safeboda moved into Kenya in 2018 and Nigeria in 2019. Nigeria’s Gokada, that raised $5.3 million in 2019, announced it would expand into East Africa this year. The startup is also expanding its platform to create more revenue from commercial services offered to its driver networks, therefore being able to offer lower fares and higher compensation.

It may not be all smooth rolling for e-motorcycle startups in key markets, such as Nigeria, however. The country’s attempts to regulate boda bodas have included temporary bans on motorcycle taxis altogether.

TechCabal reported this week that Lagos State plans to introduce some fairly expensive licensing fees such as a charge of 25 million Naira (about $70,000) annually per 1,000 bikes—that could impact startups such as MAX, ORide, and Gokada.

In addition to regulatory hurdles, a local startup investor (who spoke to TechCrunch on background) also expressed concern that the on-demand motor-taxi economy in Nigeria is a bit over-heated.

“Nigerians use motorcycles for transport but not on the same level as seen in Asian countries, such as Indonesia, where motorcycle use and motorcycle taxis are much more embedded in consumer and transit culture.” the investor told TechCrunch.

“The total addressable market in Lagos alone, much less the of the rest of Nigeria, does not suggest this is a big scale opportunity.”

Spin-off opportunities

Startup development in Africa’s ride-hail markets is connecting to other sectors and producing spin-off opportunities.

Uber has leveraged its logistics network in Africa to add UberEats in several countries and MAX uses its platform and motorcycle fleet to offer personal and business delivery services.

On-demand models have been adapted to connect the continent’s truckers and businesses with freight-haul through startups such as Kobo360 and East Africa’s Lori Systems.

Nigerian logistics startup Kobo360 raises $6M, expands in Africa

In South Africa, a former Uber alumn, Tinashe Ruzane, co-founded Flexclub— a startup that matches investors to cars and drivers to help ride-hail employees finance their vehicles. Flexclub raised a $1.2 million seed round in 2019.

And Kenyan internet connectivity startup BRCK—a venture working to improve net affordability in Africa with a service that uses commercial advertising to subsidizes it—is partnering with Swvl to install its WiFi routers for consumer use on Swvl ride-share buses. 

What to watch for

Africa’s ride-hail markets offer unique challenges and capabilities that make the continent a new testing ground for the transformation of global mobility. There’s strong potential for startups adapting to local needs to produce technology and product models that could have global application.

Uber Africa has experimented with image-based direction apps—where drivers can locate passengers in areas without formal street grids through photos sent via SMS.

Uber Africa has also added skateboards and roller-blades as delivery mediums for its UberEats drivers in Nairobi. Uber and Bolt have moved into the three-wheeled tuk tuk taxis Africa. And Uber and MAX will add on-demand boat taxi services soon in cities like Lagos, which have an abundance of waterways.

FlexJob plans to expand its investor finance platform to other emerging markets and to move beyond cars, to financing other gig-economy asset classes. The startup expanded operations to Mexico this year.

Africa’s motorcycle ride-hail markets could likely see some fails due to attribution. But the sector, and R&D completed on burn rate, could also pioneer tech for emerging markets with big two-wheel transit use. Creating a model for viable on-demand e-moto services would be one possibility.

In addition to MAX piloting renewable energy EV programs in Nigeria, a startup in RwandaAmpersand—is creating e-motos for ride-hail drivers in Kigali.  

So whether by two wheels or four, Africa’s on-demand transit market is moving rapidly. The collective startup activity is making the continent home to a number of fresh use-cases in the conversion of global mobility.

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