Home-grown e-hailing start-up NextNow has become the latest ride-hailing company to close shop in what is labelled a market “dominated by anti-competitive practices” in South Africa.
This week, ITWeb learned that NextNow, which launched in May last year, quietly shut its doors just over one year since its debut. The company’s public relations representative confirmed the news to ITWeb; however, she was not willing to comment further.
Mlungisi Ntombela, NextNow head of operations, previously told ITWeb that the company, which started piloting its service in Johannesburg, was working towards firmly putting SA on the ride-sharing map, with plans to expand nationally and eventually to African countries.
This would be accomplished through offering competitive prices that would win over scores of customers, he added. But as it later turned out, this was not to be.
The closure of NextNow comes a few months after Chinese-based multinational ride-hailing company DiDi Chuxing also unexpectedly shut down its South African operations in April, exactly one year since its local debut.
Local industry pundits say the fierce competition, which favours the dominant international e-hailing companies Uber and Bolt over new smaller entrants, is one of the reasons behind the downfall of NextNow.
“I believe NextNow failed to make a significant breakthrough in the market due to the monopoly by Uber and Bolt,” says Melithemba Mnguni, provincial secretary of the Gauteng E-hailing Partners Council.
“If you analyse the findings of the 2021 Land Based Public Passenger Transport Inquiry conducted by the Competition Commission, there are many other smaller e-hailing companies that were forced to close shop, due to price predation and indirect sabotage by Uber and Bolt.”
According to Mnguni, the playing field is not level enough to enable financially-constrained new start-ups to penetrate and make a dent in the market. Furthermore, while there is much funding channelled towards tech start-ups in SA, the e-hailing industry players fall through the cracks, he adds.
“This is mainly due to the lack of regulation that has led to the big international players colluding and monopolising the sector. They are able to increase and decrease the prices as they wish, which we see as anti-competitive. Through regulation, the prices and other things like driver commissions would be determined and monitored by government.
“As activists, we have done everything to awaken government to the challenges in the industry since 2016, but our cry falls on deaf ears.”
Not a hope in hell
In an interview with ITWeb, Vhatuka Mbelengwa, national e-hailing spokesperson for the Private Public Transport Association of SA, points out that if DiDi, which is billed as the second-biggest ride-hailing firm in the world, could shut down − despite entering the market with a multimillion-dollar budget − this means the smaller e-hailing firms have zero chance of making it.
“At this current point we must acknowledge that government is as good as being an accomplice in ensuring the ongoing failure of local e-hailing participants. The demise of NextNow is the same destiny suffered by several local apps that have tried to enter the market and failed – only a few months later,” states Mbelengwa.
He points to three local e-hailing start-ups that are operating at a loss, noting that if they reduce their prices any further, their drivers would not be able to get their wages. He adds that customers trust the bigger players more than their smaller counterparts – as a result of the big marketing budgets channelled towards their brand activations and campaigns.
Mbelengwa believes regulation would assist in re-evaluating the ride-hailing services’ business model, which is premised on a principle of not employing driver partners but rather allowing them to use the technology, in exchange for a commission.
“The biggest contradiction is that government continually speaks of empowering local solutions and supporting local business, but this is not felt in the e-hailing industry. Currently, R15 billion funding has been made available for local entrepreneurs, but this will not land in the hands of many e-hailing operators − a sad reality that will result in these entrepreneurs’ long-term dreams never being realised.”
Discussing the matter with ITWeb at a recent Uber event, Ofentse Hlulani Mokwena, strategic projects lead at Uber Sub-Saharan Africa, refuted claims the US-headquartered e-hailing firm is monopolising the local e-hailing market in any way.
“We have always been open and welcomed competition, because it’s very healthy for the market. When more companies enter the market, this helps businesses to improve, while teaching them a lot about their customers.
“In terms of customer access, if the online platform offered to customers is of a high quality and is safe – any company bringing in users at scale can compete in the South African market. All platforms in the ride-hailing space are competing for two things: riders and drivers. This explains why we see drivers and riders using the various e-hailing apps interchangeably,” he explained.