Nairametrics| Japanese investment giant SoftBank has called for a merger between homegrown Ola and US firm Uber’s India unit as part of its planned consolidation in Asia’s fast-growing ride-hailing app market. The talks, facilitated by SoftBank, which is the largest investor in both companies, have been going on for nearly a year, according to sources close to the development. However, in the past few days, this call for a merger between Uber and Ola has gathered steam.
Softbank’s push for consolidation in India’s ride-hailing market comes days after Uber announced its exit from Southeast Asia after selling its local unit to rival Grab. Post the completion of that deal, Uber will control 27.5% stake in the combined entity.
If the deal goes through and Ola acquires Uber’s India unit, it will mark the US firm’s fourth large retreat globally. The company has so far sold its China unit to rival Didi, Russian unit to local player Yandex and earlier this week it also announced the sale of its Southeast Asia unit to Grab.
The Global Ride Sharing Portfolio
According to a recent report, Didi (China) Uber (US), Grab (SE Asia) and Ola (India) control the largest block for global ride-hailing/sharing business with 25m, 15m, 3.5m and 1.5m daily rides respectively.
SoftBank, appear to have an incestuous relationship with these major global players owning significant stakes all of them, while Uber and Ola are also shareholders in each other. It is some complex corporate structure, but I will not bore you with all of those
Maybe Softbank will be the biggest beneficiary of how these shapes up because of its strategic investments in Uber and Didi especially. Through its investment in Did, Softbank becomes a secondary investor in all of the companies that Didi had invested in including Careem, Lyft, 99, and Taxify. This leads me to the African angle to this consolidation story.
Is Nigeria and Africa Overrated?
In all of these lopsided strategic acquisitions, mergers, strategic investments, and retreats, we have not seen any African startup participating in these rounds. African startups in this context mean – founded in Africa by Africans. Absolutely none.
The only explanation I have for this is that the African market is not as important as we make it appear. Uber’s abysmal performance in Nigeria, Kenya, Ghana, Egypt and South Africa gives credence to this. Like I said in the opening paragraph, Softbank might be leading the merger conversations between Uber and Ola, however, the same Softbank has not hidden its contempt for the African market, telling Uber to Exit Africa at all cost. This implies that Africa is more likely a cost centre to the business, with no significant long-term prospects.
Don’t forget, India is a single country, well, with a population of almost the size of Africa, but then, it is still a country. I wonder why the issue of free trade within Africa is still a concern but will leave that politicians and economists to discern.
The summary of this section is that Africa is insignificant in the scheme of things. But then, Uber will have to wind down its operations in Africa somehow. The options I believe is available include;
⦁ Selling to a local rival (Like it has always done in previous markets), but the challenge with that is – Who is this local rival?
⦁ Just close shop and relocate
So the question is, who wins in Africa?
So, Who wins in Africa?
The largest and most sophisticated markets in Africa are (In no particular order);
⦁ South Africa
We can however safely assume that North African countries – Egypt, Morocco and Tunisia might not be considered as Africa because of their links and close ties with the Middle East and Europe respectively. In fact, Sub Saharan Africa is measured separately from MENA – Middle East & North Africa.
This tie can be further explained by the ride-hailing competitive landscape. The most prominent local alternative to Uber is the Dubai based ride-hailing app – Careem. As prominent as Careem is in the MENA region, it has no presence in SSA. This further shows the difference between the 2 regions, though they are both in Africa.
Now that we have excluded Careem from the equation, who is left? Francophone Africa appears to be excluded from these ride-hailing business. This might be because of sophistication issues, language or significantly smaller markets compared to its anglophone counterparts.
Now that Francophone Africa is gone, let’s look at the biggest Anglophone African countries South Africa, Nigeria, Kenya, and Ghana. Of all of these countries, none has a significant local rival to Uber. I am sad as I write this, but, that is the truth.
Instead of the South African entrepreneurs to create another Uber, their legacy taxi drivers are busy vandalizing Uber cabs. In Nigeria, the local variation – GoMyWay died last year. EasyTaxi did not catch on, OgaTaxi is barely making a dent in the space.
In Ghana, Uber all the way. In Kenya, Safaricom introduced its own ride-hailing business called Little. Little was expected to launch in Nigeria sometimes last year, but we have not seen them until today. This might suggest the state of play in that region.
However, one name that keeps on ringing when it comes to putting a fight on Uber is Taxify! Yes, Taxify, the European ride-hailing startup, with a strong focus on Africa. Taxify has kept Uber on its toes, fighting dirty in every market.
Taxify understands that keeping its Drivers happy will trickle down to its customers. They also know that letting the driver have a greater percentage of the trip proceeds is a major contributor to driver satisfaction.
What about OgaTaxi?
As much as I want Ogataxi to be the eventual beneficiary of the potential and looming sale of Uber’s Africa business, I think Taxify will be the eventual buyer, thus ending the controversy within the African continent.
Taxify is the most prepared, it has the widest spread as well as the greatest backing especially from Didi.
This battle for Africa is drawing to a close and Taxify appear to be the winner that takes all.
Role of Government – Protecting your Own
As much as we like to advocate for an open market, China has set the example of consciously protecting its own companies from external (Western) aggression. From Ebay vs Alibaba, Apple vs Xiaomi, Google vs Baidoo, Whatsapp vs WeChat to name a few. Maybe I expect African governments to do the same. However, I reckon that each individual country is too small to make a dent in global trade wars, that’s why the Africa Free Trade Area is important.
I am sincerely sad that I can’t find any African ride-hailing startup to potentially benefit from the Uber firesale, but then, what doeth we?