For Africa’s burgeoning ride-hailing industry, the road is hardly smooth, not that operators elsewhere have it easy. SafeBoda, one of the best-known motorcycle-hailing firms in the continent, has [temporarily] ceased its operations in Kenya.
The Uganda-based startup cited the many bites of the coronavirus pandemic as the cause of the exit. Although Nairobi shows signs of a strong comeback from the raging COVID-19 storm, the timeline for SafeBoda’s full recovery in the capital is uncertain.
Kenya is the second-largest two-wheeler market in East Africa and the fourth-most-concentrated in Africa—a holistic market projected to grow at a CAGR of 12 percent until 2025. Also, per a TechSci Research report, the two-wheeler market in the continent will grow to USD 9 Bn by 2021.
Though the effects of the pandemic justify SafeBoda’s Kenyan exit, it adds to the rising count of ride-hailing firms that have had a hard time operating in the East African country.
Roughly a year ago, the move to digitally disrupt Nairobi’s transport system hit a snag when two bus-hailing entities were blocked from operating in the city for a reason related to running on the wrong license.
Safaricom-backed Little and Cairo-based Swvl were the firms on the chopping block, reportedly operating under tours licenses rather than commuter service authorization. It wouldn’t be farfetched to assert that Kenya’s obsession with licenses and excessive regulations is slowing down the digitization of its transport system.
In the country, motorcycle riders have to battle with tight regulations in an industry perceived to have rogued its way into growth. The challenges faced in the market and the implications of following rafts of recommendations is likely to increase the costs of doing business in the ride-hailing market.
Though Swvl has since resumed operations and Little is adjusting to expand to Tanzania and Ghana once a USD 50 Mn raise is certain, the current harsh regulatory environment for ride-hailing in Kenya has resulted in a series of back and forths.
SafeBoda, which entered Kenya in 2018, will nevertheless continue its business in Uganda, as well as Nigeria, IbadanCa market into which it launched in May 2020, ignoring Lagos, Africa’s largest city.
What’s more, the novel coronavirus infection is not an isolated problem. A rash set of new rules may be making it difficult for SafeBoda to continue operating in Kenya. Still, there’s a big message in the startup however faring reasonably well in Uganda.
Kenya’s handling of the virus may be different from that of Uganda, and perhaps Egypt—a market expected to continue accounting for the largest share in Africa two-wheeler market despite a coronavirus induced decline of about 30 percent.
For a country whose National Transport Authority (NTSA) impounded Swvl’s vehicles and arrested the company’s drivers in a February 2020 controversial clampdown, there is much to deduce from how tight regulations plus the pinch of COVID-19 is a combo too deadly for a startup barely 6 years old and operating in two other markets.
In Uganda, an all-female taxi-hailing firm launched last month to create employment for women that were hit the hardest by the economic ramifications of the pandemic.
That serves as a vivid snapshot of the degree of push in the country’s ride-hailing sector, as opposed to that of the regulation-hit Kenyan market.
Though SafeBoda has intentions to return to Kenya when the pandemic’s effects subside, it won’t be surprising if the startup decides to sever ties permanently should they playing by the rules could significantly add to their current struggles.
Nevertheless, the situation in Nairobi isn’t as pronounced as that of Lagos, Nigeria, where regulations have successfully put ride-hailing companies like ORide out of business and sent players like GoKada into the logistics sector.
Help us build a narrative on African Business, Startups, Tech and Economy
Join us today to empower great story telling, one story at a time
Get Access to 20+ well researched and insightful African business stories monthly & unlimited access to Free-reads.
If you are a Corporate or a Student, please reach out to us for subscription at [email protected]