Nine years ago, the likes of Airbnb and Uber were unheard of. Today however, such organisations are transforming the way we do everything, from booking holiday accommodation to sourcing a plumber to fix a leaky pipe.
These companies form part of what is known as the “sharing economy” – the accessing, sharing and lending of goods and services via an online marketplace. Accounting firm PricewaterhouseCoopers (PwC) estimates global revenues generated by the sharing economy will be worth $335bn by 2025.
Part of this surging growth is credited to the expansion of sharing economy services in emerging markets. One such expansion region is Kenya, where business is booming.
As in much of the region, there is a large and growing population of potential consumers. Statistics from the World Bank put Kenya’s population at 46m, with that number rising to around 85m by 2050.
According to Kenya’s National Bureau of Statistics, about 45% of the population fall into the middle class category, 54.8% have access to the internet and there is a wealth of relatively well educated but underutilised young people. All of this makes Kenya stand out as an attractive region to international investors and entrepreneurs.
The big players move in
Given its viability as a strong market for sharing economy businesses, Kenya has now been targeted by big global players who are reaping the benefits of the fertile marketplace. Airbnb, for example, now offers more than 4,000 homes for rent across the country, which is more than double the number in 2015. The number of guests choosing to stay at an Airbnb in Kenya has also more than tripled in the same period. Nicola D’Elia, managing director for the Middle East and Africa at Airbnb, attributes the company’s success in Kenya to the opportunity the organisation is offering users.
“What makes the sharing economy so powerful is the opportunity to monetise assets or skills you already have. Airbnb is a technology platform that’s generating wealth for millions of people around the world […] Now anyone can have a way to earn a little extra money,” he says.
Not so new
Yet the notion of the sharing economy is not really new to Kenya, according to former bank manager and blogger Limo Taboi. “Kenyans have always had a second job, or rented out a spare room, or shared their cars, making bargains here and there. What is new is that companies like Uber and Airbnb have formalised the sector,” he explains.
A number of smaller businesses have also emerged in the last couple of years, hoping to share a piece of the profits. One such is Little Cabs, an app-based ride sharing service that was launched by telecommunications company Safaricom in July 2016. In just five months the company, which has become a key competitor for Uber, has acquired 2,500 drivers with cars, and 90,000 active accounts. Part of this rapid growth has come from making the service meet the requirements of low-income users.
“People here were used to taking matatus [minibuses that tout for passengers] because cabs weren’t affordable. But when it rains the price shoots up. Little Cabs is providing a better option for a better price, by encouraging a group of friends to share the cost and take a cab instead,” says Maureen Chege, head of marketing and sales at Little Cabs.
“While on a [Little Cabs] trip you can buy airtime for your phone at a discounted price and the driver gets a merchant fee, like commission. We’re also taking less commission than our competitors at 15% of each trip, while others are taking up to 25%,” she continues. Many drivers, it seems, are relishing the opportunity to work in the sharing economy for companies like Little Cabs and Uber, and flexibility is a key attraction.
But according to Adam Grunewald, chief executive and co-founder of Lynk, a sharing platform that connects customers in Kenya to service providers across 150 categories – be it a plumber, a painter or a DJ – uptake in Kenya may be driven more by necessity. “The concept of the sharing economy came from US and Europe where most people work in formal employment but are looking for more flexibility. [In Kenya], however, there is not enough work, so people must work in the informal sector,” says Grunewald.
“For these informal workers, who often don’t have a contract or social benefits, more formalised platforms through which to acquire various types of work can be empowering. Perhaps one way to solve unemployment is that people have multiple jobs, which are puzzled together [to create a full income],” he says.
But how far do these organisations benefit the ordinary man or woman? The answer perhaps lies with a solution that the Lynk team have created. Grunewald and his team charge the consumer rather than the service provider. This is a differentiation that they feel makes the company fairer, and helps those at the “bottom of the pyramid” benefit more than at other organisations.
There are still challenges, however. For smaller start-ups, simple things like getting payments can prove to be a burden, as not all Kenyans have credit cards. Monster organisations such as Airbnb face issues over the legality of their products and services, and Uber has faced a backlash over the high commission rates it charges its drivers.
So what of the future of Kenya’s sharing economy? Joseph Huxley, regional co-ordinator at FSD Africa, an organisation that aims to reduce poverty through financial sector development, sees a number of exciting opportunities. One example of this is crowdfunding – raising capital for a venture by asking a large number of people each to contribute a little money.
“Access to finance is a commonly cited constraint to SME growth in Kenya. Because crowdfunding has the potential to finance growing Kenyan companies, it also has the potential to indirectly create jobs,” says Huxley. Kenya’s M-Changa is already making strides with this model. Since its September 2012 launch it has raised $900,000 through 46,000 donations to 6,129 fundraisers.