The Dark Side of Ride-Hailing in Africa: A Recipe for Disaster

The recent announcements by Uber to exit several African markets have sent shockwaves through the tech industry. Beneath this surface lies a more complex tale of economic pressures and driver dissatisfaction. Uber’s decision to leave Nigeria and Uganda is not just a blow to its own business operations but also a reflection of the difficulties ride-hailing platforms face in navigating the intricacies of African markets.

In these markets, companies are struggling to balance fares that are affordable for passengers with commissions that can sustain their services. Drivers are increasingly squeezed by operating costs. In Nigeria, the situation is particularly dire. The removal of fuel subsidies and changes to the exchange-rate regime have made it difficult for ride-hailing drivers to make a profit.

President Bola Tinubu’s economic reforms aimed at reviving the country’s economy seem to have had an unintended consequence – driving up costs for drivers. According to Ayoade Ibrahim, co-founder and general secretary of the Amalgamated Union of App-Based Transporters of Nigeria (AUATON), drivers are being forced to bear the brunt of Uber’s commission fees, fuel prices, maintenance costs, insurance premiums, and fines.

This leaves them with barely enough to cover their living expenses, let alone save for repairs. The same struggles exist in Uganda, where drivers have protested against what they see as exploitative practices by ride-hailing companies. In 2019, the Smart Online Drivers Association petitioned parliament over Uber’s high commission fees and low fares.

The rise of local players like Bolt, inDrive, Rida, and LagRide has made it harder for ride-hailing platforms to navigate the market and maintain their pricing power. These alternative platforms offer drivers a chance to switch between services or leave them altogether if commissions become unattractive. As a result, Uber is focusing its investment on markets where it can provide earning opportunities for drivers at scale.

This raises questions about Uber’s commitment to sub-Saharan Africa. While the company claims it remains committed to the region, its actions speak louder than words. Kenya provides an example of how ride-hailing platforms can adapt to changing market conditions. In 2022, the Kenyan government introduced regulations capping commission fees at 18 percent.

Uber responded by cutting its own commission from 25 percent to 18 percent, effectively resolving the dispute with drivers without abandoning the market. This experience suggests that Uber’s calculation of profitability varies from market to market. Where it sees enough long-term value, it can adjust its pricing or commission rates to stay competitive.

But where the economics no longer justify investment, leaving becomes an option. The ride-hailing industry in Africa is at a crossroads. If platforms cannot find a way to balance fares, commissions, and driver earnings, they risk losing market share to competitors who offer more favorable terms. Companies like Uber must innovate and adapt to changing market conditions rather than relying on their brand name or sheer size.

The future of ride-hailing in Africa depends on finding a sustainable business model that works for all stakeholders – passengers, drivers, and platforms alike.