The new normal and rise of gig economic platforms in Africa

Would you like to be a taxi driver? You know, using your vehicle to transport people around town and get paid? Many people would say no, preferring to work in full-time employment where career progression is possible. Today, there are thousands of educated Nigerians, including some with regular day jobs, working as on-demand drivers on platforms like Uber and Bolt. Some people have even quipped that driving for these platforms pays better than their day jobs.

Ride-hailing platforms such as Uber and Bolt are the poster child of the gig economy—a catch-all term used to describe online marketplaces that have emerged over the last decade for short-term and freelance work.

These marketplaces typically focus on niche services such as transportation, food delivery, content writing, music production, graphics design or programming. These fully digital marketplaces try to create a market by matching people who need a service/product (the buyer) with service providers/independent workers (the seller) who can provide these services on request; meanwhile, the platform handles everything from payments to ratings for the buyer and seller. A report by Staffing Industry Analysts (SIA) estimates that the global gig was worth $4.5 trillion in 2018, with the US unsurprisingly being the largest market with 53 million gig workers and total gig spending of $1.3 trillion.

Freelancing has become a vital side hustle with clients springing forth from developed countries and willing to pay in FX for professional services

Across Africa, the gig economy platforms take different forms. For example, there are Kobo360 and Lori Systems, two companies that have each raised at least $37 million to connect people with third-party truck drivers on-demand. Lori Systems estimates that the African haulage market is worth $180 billion annually.

There’s also SweepSouth, which has raised $6 million from investors, and Eden Life, which provides on-demand home cleaning services, among many other things, in South Africa and Nigeria, respectively. But there are also other platforms for professional services like accounting, graphics design, programming, content writing, among others. One notable name is Andela, the Mark Zuckerberg-funded company valued at $700 million in 2019. Although it has tweaked its model significantly, Andela connects experienced African developer talent to international companies with salary opportunities above the local market rates. There are other platforms connecting skilled workers to international clients, including Toptal, UpWork, Paydesk and Fiverr, an $8.6 billion company listed on the New York Stock Exchange (NYSE) in 2019.

Buoyed by these platforms, the number of gig workers in Africa has increased over the last few years. For unemployed skilled workers, freelancing is a crucial way to earn a living on the internet. Freelancing has become a vital side hustle with clients springing forth from developed countries and willing to pay in FX for professional services.

However, with the outbreak of the pandemic in early 2020 and COVID-19 control measures, the global economy tumbled. The lockdowns, particularly full lockdowns, grounded mobility and forced many people to isolate themselves at home. Business temporarily shut down physical operations, and employees started working from home. But not every job can be done from home, and that’s definitely the case for many gig workers offering ride-hailing services.

Ride-hailing suffered as ride orders plummeted globally, affecting the earning power of many gig workers. For instance, in the second quarter of 2020, Uber’s gross booking volume declined by 35% compared to the previous year. Other platforms such as Kobo360 and Lori Systems worried about the impact of government lockdowns, with Kobo360 warning that 3,000 of its truck drivers in Nigeria stopped working until they got clarity on the mobility restrictions.

In African countries such as Nigeria, Egypt, South Africa and Kenya, Uber and Bolt swiftly introduced logistics services—which were classified as essential services by the government—to keep these companies and their drivers in the business. But this was not enough. And because gig workers are not employees, they are not eligible for steady salary payments, paid leave, insurance and health benefits. The experience was scary for many, with several news reports early in the pandemic proclaiming the gig economy was dead.

But they were wrong. The gig economy is more alive than ever. While Uber and Bolt suffered declines in the first half of 2020, ride orders soared again in the second half, and Uber could return to pre-pandemic growth levels by the first half of 2021. Logistics services such as Eden Life, OyaNow, Gokada and Jumia Food have recorded impressive growth since March 2020 as the food delivery industry reorganised amid the lockdown and gained traction in the months that followed.

Outside food delivery, the number of independent riders working as logistics providers for other businesses, including Jumia, the pan-African retailer, is reportedly growing. At one point in mid-2020, the Nigerian government threatened to enforce stricter logistics regulations because the number of operators had increased within a short period.

A crucial part of the resilience of the gig economy, particularly platforms and providers of physical services, is they are highly essential. When Kobo360 warned of disruptions to its truck activities, it predicted that supermarkets and major stores could run out of food items, medical supplies and other critical items within seven days. That warning was instructive, and within a few days, the government clarified the exemption for essential service workers to include truck drivers moving in and out of a state. Food delivery and other logistics operators have also benefited from their essential status, which has kept them in business.

For venture builders and investors, the goal now is to identify startups and local platforms that are enabling this on the continent and support them. Because like it or not, Africa is the future. Its young population of digital natives represent an essential chance to leapfrog many of the continent’s challenges using creatively and using technology.

While as a start-up, it is critical to make the right connections with a venture builder that not only provides the needed finance to grow your business but also guarantees a commitment to your success within the African business terrain and beyond.

ADEDEJI OLOWE & OLUWATOYIN ASHIPA

Adedeji Olowe and Oluwatoyin Asipa work for Trium Networks, a venture capital firm with a focus on Africa startups.