Recent successful fund raising by three major bike hailing companies, Gokada, Max.ng and Oride, has put the business in the spotlight as a source of revenue for government.
The three start-up companies that are leveraging technology for transportation cumulatively raised $62.3 million in the last two months to expand their business.
Gokada in May announced that it had raised a $5.3 million Series A round to grow its business. The company said it would use the financing to increase its fleet and ride volume, while developing a network to offer goods and services to its drivers. “We’re going to start a Gokada club in each of the cities with a restaurant where drivers can relax, and we’ll experiment with a Gokada Shop, where drivers can get things they need on a regular basis, such as plantains, yams and rice,” the company’s Founderm Fahim Saleh, said.
OPay, an Africa-focused mobile payments start-up, founded by Norwegian browser company, Opera, also raised $50 million in funding last month. The capital, the company said, would be deployed to grow its commercial network in Nigeria, which includes motorcycle ride-hail app ORide and OFood delivery service.
The third motorcycle transit start-up, MAX.ng, last month, raised a $7 million funding round led by Novastar Ventures, with participation from Japanese manufacturer, Yamaha.
Six million of the investment was in Series A capital followed by $1 million in grants. Aside plans to expand to other cities in West Africa, MAX said it would use its new funding for development of electronic vehicles.
“We’re piloting electric motorcycles in partnership with EV manufacturers and working with grid operators across Nigeria to deploy charging stations,” the company’s CFO Guy-Bertrand Njoya said.
However, influx of funding into the bike hailing business has attracted government’s attention, especially in Lagos where commuters are embracing the innovative platforms to beat traffic.
Against this backdrop, the Lagos State Government is planning to introduce a new licence agreement for start-ups to allow them operate within the state. Reports quoted a source from the government as disclosing that the start-ups would be made to pay a licence fee of N25 million (about $70,000) annually per 1,000 bikes.
A further N30,000 ($83) would be paid for each registered bike rider after the 1,000 mark. The start-ups will also be expected to pay annual taxes on revenue. Gokada, Oride and Max.ng, three of the major start-ups in the space, all have over 1,000 riders signed up to their service.
Stakeholders have, however, expressed worries over government’s move, noting that it is capable of stifling innovation. They noted that introducing such amount of licensing fee for a business that is still in its infancy stage is an attempt to kill the business.
A tech start-up founder, Mr Adetunji Silas, described the move as a wicked proposition directed at these start-ups, and a way of killing innovations in the country.
“Government should let it die as a bad idea. If you can’t help businesses to thrive, don’t kill them,” he said.
Another start-up enthusiast, Charles Okonji, wondered why the state government would be considering licensing fee aside the tax being paid by the operators.
According to him, motorcycles were considered by the government as unsafe for commuting until the start-ups revolutionised it, but it is now being seen as revenue generating opportunity.
He advised that start-ups should henceforth be modest in announcing new funding as initial announcements as government sees such as opportunity to make demands.
Condemning the move through her Twitter handle, a former Minister of Education in the country, Mrs Oby Ezekwesili, said government should have moved beyond seeing every business as source of revenue.
“It’s the classic extraction-mentality of the oil-rent spoilt political class. Every business opportunity is perceived through the lenses of “easy oil revenue.” They have no capacity to nurture —through sound and friendly policies— other sectors of the economy toward lasting growth,” she tweeted.
While the bike hailing start-ups are currently operating in Lagos, they have all announced plans to expand to other parts of the country.
However, the proposed licence agreement is seen as a possible obstacle that may hinder such plans. It is feared that if Lagos succeeds in getting the licence fees, other states would also follow suit once the start-ups expand as planned.
