FROM MAGAZINE: Mobility in Africa

Andrew Fassnidge talks about investment in infrastructure and technology into the mobility space because Africa needs to catch up with the dynamic world.

Africa’s population is estimated to reach almost 2.5 billion by 2050. Within the continent’s many countries, the majority of population are likely to be concentrated within the business-friendly urban cities. As Africa enters a technological revolution, particularly within services, the pace of urbanisation will only increase, and the ever pressing issue of mobility in Africa will increase with it. Increasing population means - more road users and a greater need for speedy and efficient means of transportation. And with them comes consumerism and the need for more fast-moving consumer goods (FMCG), to serve their needs, but getting these products to the cities is just as difficult as navigating around them.

Currently, Africa is estimated to be home for 8 of the 15 fastest-growing economies in the world. However, poor infrastructure is one of the biggest barriers to economic growth, and many of those barriers exist at the basic level of adequate roads and ports. In 2014, only a quarter of the African road network was paved, and in 2020, poor roads, rail and port facilities continue to delay the social and economic transformation of African societies. The urban centres have not enjoyed enough infrastructural upgrades to accommodate the influx of people and their need for goods. Cue the foreign and home-grown tech solutions in the form of ride hailing, car-sharing, and vehicles-on-demand to address these big problems. They are infiltrating the mobility sector, spurring its evolution and addressing the needs that arise as a consequence of rapid urbanisation.

Although, Uber dominates the global ride-hailing market and entered the continent in 2013, the latter half of the previous decade saw the rise of home-grown car-sharing start-ups such as Jekalo and Gozem, making the most of the fact that car ownership and cars per capita in Africa is amongst the lowest in the world. However, it was not long before Estonia-based Bolt (formerly Taxify) took the lead in Africa’s ride-hailing market. Its rebrand in 2019, came as a means of signalling its broader focus on covering transport beyond car-sharing. Bolt quickly pivoted to include bike-hailing as part of their offering, firstly in East Africa — a strategic investment to achieve its goal of dominating the African market by entering an additionally prolific means of transportation. However, they are not the only ones to move beyond cars in the transport sector. Lagos witnessed a two-week trial of UberBOAT in October 2019, and while not much more has been seen on this front, there is no doubt that the competition for ride-hailing in Africa is far from over.

Like Bolt, many companies have chosen to combine long-standing transport solutions with tech, with a rise in start-ups focused on Africa’s ride-sharing on two wheels. Max and Gokada are just two mobility challengers within the bike-hailing market, and there are likely to be more to come. Investors have recognised that having more cars on already poor roads prove a less efficient means of improving transport and have poured funds into navigating city traffic by bike. Yet, regulatory issues have risen at the same pace as these start-ups, affecting the impact of these solutions. Notable examples include the ban on motorcycles in Addis Ababa announced in July 2019 by the city mayor Takele Uma, citing concerns around the involvement of these vehicles in violent crimes. Lagos state government’s ban on the activities of commercial motorcycle, effective from February 1, 2020 which will have a significant impact on these start-ups, their contractors who rely on their vehicles and riders as their primary source of income, and of course, commuters.

Grey areas arise as governments seek to maintain safety standards on roads for commuters, but also seek to support better transport infrastructure. This is a global problem, where mobility providers may find their models challenged by policy makers - Uber’s long-standing licensing battle in London being a case in point. There is no question that there is a need for a greater collaboration between start-ups and state actors. The issuance of licenses to operate in cities, and the close working relations between start-ups, such as that of Yego Moto and the Rwandan government, illustrate a more accommodating future for mobility start-ups among African governments and globally. Working closely with startups allows the creation of regulatory infrastructure, making space for more innovations and solutions that have a substantial impact on communities.

These solutions have also been leveraged to improve logistics and provide urban populations and businesses with the goods and services required to help their economies function and grow. Companies such as Kobo360 and Lori Systems, winners of the Apps Africa Best Enterprise Solution 2018 and the Apps Africa Best Mobility Solution Award 2019, respectively, are providing solutions to inefficient supply chain systems in order for agriculture and e-commerce businesses to scale. Both Lori Systems and Kobo360 have expanded across the continent at breakneck speed, with Lori Systems entering the West African market in October last year, and Kobo360 entering East Africa a few months prior. Speaking with Kagure Wamunyu, CEO, African Region at Kobo360, ahead of the Africa Tech Summit, she said, “Using technology, we are providing an efficient solution for all the key elements in the supply chain, while ensuring reliability, transparency and cost savings.” These are solutions that go far beyond their specific sectors and can be seen as part of the reason why this sector has enjoyed healthy investor attention in the past few years.

In 2019, Kobo360 raised $30 million in a round led by Goldman Sachs, while Egyptian transportation start-up Swvl turned heads when it became one of the best funded startups in the Middle East and North Africa (MENA) region after raising $42 million. Although not an easy market to operate in, Swvl has been making preparations to enter Lagos. Swvl, Kobo360 and Lori Systems collectively raised $102 million in 2019, hardly an insignificant number, even if it is not fintech. And with the news of East African logistics company Sendy raising $20 million, 2020 will undoubtedly be another big year for logistics. Where people are looking to inject speed in congested cities, and efficiency into supply chains that are disjointed and opaque, start-ups are providing solutions that help businesses beyond themselves. Progress in the mobility sector will not only improve transport, but access to goods, services, education, employment, and overall economic growth. We can expect to see more investment in terms of infrastructure and technology, into the mobility space, because Africa and Africans need to move.

Addressing logistical inefficiencies, while taking advantage of the slow but steady rise in internet access and smartphone ownership, will aid the rise of e-commerce in Africa. According to McKinsey, the future of e-commerce is huge with the market predicted to be worth $75 billion by 2025. These predictions are contingent on a number of other supporting factors, one being improvements in mobility and delivery infrastructure, resulting in a blurring of boundaries between logistics, mobility and e-commerce. Putting their recent troubles aside, e-commerce giant Jumia employed a network of over 500 motorbikes and trucks to address transport issues and as a marketing tactic, seeking to inspire trust in the future of e-commerce by offering a cash on delivery option in 2018.

Additionally, an increasing number of African small and medium-sized enterprises (SMEs) are embracing the convenience of courier services such as South Africa’s Rush, a comparative platform that allows customers to view delivery services and rates from a number of couriers in real time, putting more power in the hands of the customer. The industries become more interlinked as the growth in mobile e-commerce boosts demand for effective delivery systems, both on a corporate and retail basis. It would not be far reaching to expect more visible partnerships between logistics, mobility and e-commerce startups, with colourful bikes and cars transforming from simply carrying goods, to becoming moving adverts for them.

With the implementation of the African Continental Free Trade Area (AfCFTA) and the lowering of many customs barriers in Africa on the horizon, we can also expect more demand within the mobility sector. This almost guarantees that there will be more challengers arriving on the tech scene, while many of the current players expand into new cities and countries. These solutions are not only more efficient but greener, safer and more sustainable, and governments will have to take more action in providing the physical and legal infrastructures to support and regulate these innovators.

Andrew Fassnidge is the founder of Africa Tech Summit, which connects Africa’s corporates, startups and leading investors in the African tech ecosystem.

This feature was originally published in January - February 2020 issue of Logistics Update Africa.