SafeBoda’s exit from Nigeria and the issues ride-hailing startups face

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SafeBoda, an Ugandan-based bike-hailing startup might be kickstarting its Nigerian operations soon with a tentative second launch in Ibadan.

SafeBoda, the Ugandan bike-hailing startup that set up shop in Ibadan in 2020, said in a statement that it would cease operation in Nigeria, according to a report from TechCabal.

The company, which has been able to grow its business in Uganda before undertaking massive expansion in Kenya and Nigeria, said that it will now draw back and focus squarely on its Ugandan operation.

SafeBoda’s move out of Nigeria comes even though the startup has had a good run, announcing that over three million rides had been completed through its app some months ago.

SafeBoda’s statement says that it’s leaving Nigeria because the bike-hailing economy in Nigeria is not yet “economically viable.” The industry, the statement says, “in its current state is not economically viable and unfortunately requires significant investment at this challenging time in the global economic landscape.”

SafeBoda added that it reached this decision as part of its focus to bring “the company to profitability by deepening its core transportation offering” in Uganda.

SafeBoda pulled out of Kenya in 2020

At the height of the pandemic in 2020, the company called back its Kenya operation, citing the adverse effects of the pandemic.

“While Nairobi is seeing some economic recovery from COVID-19, boda boda transportation has been hit hard,” the company said. “This has meant our business cannot sustainably operate in this environment and unfortunately, the timeline for a full recovery is not certain. This decision is a hard one for SafeBoda to make. We know that this will negatively impact our community of boda boda drivers.”

SafeBoda's exit from Nigeria and the issues ride-hailing startups face

SafeBoda, also barely a year ago, received an undisclosed investment from Google, which it said will be poured into its Nigerian expansion and operation in Uganda.

Speaking on the investment, Ricky Rapa Thomson, one of the co-founders, said at the time that the company “welcomes Google to their community and are excited to continue to drive innovation in informal transportation and payments in the Boda Boda (motorcycle taxi driver in East Africa) or okada (West Africa) industry. As a former Boda driver in Kampala, I know that we are the lifeblood of Africa’s cities and we power economic development. SafeBoda is thrilled that leading global companies such as Google see the importance of backing start-ups working towards these goals.”

The issues ride-hailing services face

Many bike-hailing companies have had to abandon Lagos and take their businesses to neighbouring states like Oyo and Ogun because of the transport regulations in the country’s commercial capital.

This transition means the business leaves a city with a large population of young, digitally savvy Nigerians. In Oyo and Ogun, for instance, they have to concentrate on the state capitals where the trips are generally shorter, thereby resulting in shorter fares. In Lagos, they would have been able to commute from the Mainland to the Island and also deal with the traffic jams, which would have resulted in longer trips for high fares.

So the struggle with profitability that SafeBoda has faced in Kenya and Nigeria is not unique to the company alone. It’s part of a fundamental question that players in the ride-hailing space have fended off answering for years. Since ride-hailing started almost two decades ago, giants in the field, including Uber and Bolt, have struggled with profitability.

This is also partly because ride-hailing companies looking to attract users have integrated regular discounts into their business model. At the end of the year, it leads to huge losses for some of these companies.

In 2017, for instance, according to Forbes, Uber reported a third-quarter loss of nearly $1.5 billion, bringing its 2017 year-to-date red ink to over $3.2 billion.

SafeBoda's exit from Nigeria and the issues ride-hailing startups face

Some ride-hailing companies have started rolling out adverts on the platforms. Uber this year launched an entire advertising division that it said will service global brands worldwide.

As the global tech industry reeks from declining profits this year, founders who would have given these ride-hailing companies in Africa more runway have been cutting back investment, focusing on only more promising startups.

This has led to African founders being more tactical and stringent with spending. Many startups have had to let go of staff, and some shutting down completely. This week, LazerPay, the crypto payment company, had to lay off a part of its workforce.


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