‘Africa can be a huge growth engine for Uber’

Despite concerns about profitability, Uber is continuing to expand in Africa and remains firmly committed to the market. General manager Alon Lits explains the e-hailing firm’s strategy to African Business Magazine’s David Thomas 

As one of the highest-profile and most valuable tech IPOs in years, Uber’s May debut on the New York Stock Exchange was supposed to be the triumphant culmination of years of breakneck expansion and a chance for enthusiastic investors to buy into the future of the disruptive e-hailing firm.

But shortly after the celebratory bell-ringing on 10 May – which made billionaires of the company’s founders – it became clear that optimistic expectations had not been met. By the end of the first day’s trading, the stock was down to $41.57, valuing Uber at just shy of $70bn, some 7.6% below its IPO price. Today, the share price languishes at $34 as analysts openly question the firm’s zeal for endless expansion and ask whether Uber will ever turn a profit amid fierce e-hailing competition and global regulatory pressures.

Yet in Africa, where Uber says it has some 2.7m active monthly riders and just over 59,000 drivers, the firm says its commitment to expansion remains undimmed. Speaking to African Business on the sidelines of the World Economic Forum in Cape Town, Alon Lits, general manager for sub-Saharan Africa, says that renewed scrutiny around the IPO and Uber’s path to profitability has not impacted growth plans.

“From our perspective it’s business as usual. We’re still very committed, we’re looking at expansion opportunities into new countries… If you think about future growth for a company like Uber, Africa can be a huge growth engine and I think our senior leadership team acknowledge that. That hasn’t changed following the listing.”

Consolidation and expansion

Since launching in Johannesburg in August 2013, Uber has expanded into 14 cities in sub-Saharan Africa. It has consolidated in major hubs such as Cape Town, Nairobi and Lagos while moving into secondary cities including Benin City, Nigeria, and Kumasi, Ghana, and broadening its offer beyond the sedan vehicles that dominate in mature markets.

In East Africa, the firm offers UberBoda, a product allowing riders to hail motorcycle taxis, while UberPoa caters for the humble tuk-tuk (auto rickshaw) market. Lits says that meeting the expectations of local consumers informed the introduction of cash payments on a continent where credit card ownership remains low.

“The feedback we had from riders was we need an alternative payment system… It’s almost like going back to traditional ways of paying, but if I had to identify probably the most pivotal moment in the Uber story in Africa it was allowing cash into the ecosystem because cash is ubiquitous. Now it’s available in all countries across the continent.”

Having made inroads in East Africa by appealing to local tastes, Lits says that Uber hopes to broaden consumer choice in Nigeria, where it has set its sights on reshaping the traffic-choked metropolis of Lagos.

The election of Babajide Sanwo-Olu as Lagos state governor has boosted the firm’s hopes of working with a supportive regulatory partner, and in June, Uber’s global chief business officer, Brooks Entwistle, visited for talks.

“Nigeria is a very exciting market for us with the new governor coming into power in Lagos,” says Lits.

“We’ve really seen a change in approach by regulators there and think there are a lot of prospects for growth. A lot is happening in the transit space with things like buses and waterways opening up as potential modes to overcome traffic restrictions and challenges. We’re hoping to launch a boat product so that people can request a ferry on an app.”