How Africa can Inspire the Future of the Sharing Economy

Before there was Lyft there was Zimride. Established by Lyft Co Founders John Zimmer and Logan Green in 2007, Zimride was an early and successful foray into the business of ride-sharing. Sold to Enterprise Holdings in July 2013 for an undisclosed sum, it allowed co-workers and students to car pool to the same destination. The company is still in operation today and claims to be the largest closed network web-based ride-matching and carpooling service in North America.

Zimride was not as one might imagine named after John Zimmer, but rather in homage to the country of Zimbabwe where, during a post college trip, Logan Green was inspired by the widespread practice of car sharing to set up a company that would help Americans do the same.

Zimride in turn gave birth to Lyft, a self described transportation company that has in the five years since its establishment emerged as one of the behemoths of the tech industry, carrying a valuation of 15.1 billion, with 1.5 million drivers using its platform. The company is a key part of what is popularly known as the Sharing Economy; an economic movement that the Brookings Institute has estimated will grow in value from 14 billion USD in 2014 to an estimated 335 billion USD by 2025.[1]

The Sharing Economy


Variously referred to as Crowd-Based Capitalism, the Collaborative Economy, or the Gig Economy (for a full list click here) the Shared Economy refers to decentralised, peer-to-peer economic activity that is focused on the sharing of under utilised assets [2] and includes companies like Airbnb, Lending Club, Feastly, and one of the originals of the Sharing Economy, Couchsurfing.

Its emergence has coincided with a breakdown of trust in traditional centralised institutions and an increasing reliance on distributed networks as a means of generating and exchanging value, a shift that has in turn been made possible by the widespread adoption of digital technologies. [3]

In advanced economies it is a change that is in many ways an echo of the past, a return to the days of the commons, of mutual aid societies, of small business, and guilds; to the days before big banks and big corporations and big government became the chief means of organising economic life. As Stern School of Business Professor, Arun Sundararajan Sundararajan, explains in his book, “The Sharing Economy”, before the industrial revolution, “. . . a significant percentage of economic activity was peer-to-peer, embedded in community and intertwined in different ways to social relations.”

Indeed, it is worth reminding ourselves that for all the talk of disruption, “. . . hosting visitors from out of town, sharing food with visitors, giving someone a ride, or borrowing money from a peer are hardly new human activities.” [4]

In reality, these forms of organisation never really went away (couch surfing was happening before couchsurfing.com) but simply shrank to the margins of society and economy. What companies like Lyft and Airbnb have done is take these traditional and deeply intuitive habits of value creation and cooperation and repurposed them for the digital age, moving them from the economic margins to centre stage.

The process of reintroducing sharing has not always been easy. In an interview with Guy Raz, for the NPR podcast How I Built This, John Zimmer described how they had to persuade people to get into a car with strangers, “. . . what is now accepted as normal, getting into someone else’s vehicle was not at all normal at the time, in-fact we had to work to change peoples behaviour.”

African Sharing


That Zimbabweans felt no such reluctance about sharing a ride was not simply a result of poverty, but rather a consequence of culture and habit. The reality is that the marginalisation of the Sharing Economy that has marked economic development in advanced economies never really happened in Africa.

Absent the centralising forces of the industrial revolution, unable to trust their governments, and without access to robust financial institutions, people across the African continent have cultivated and maintained powerful systems of social cooperation. [5] That Africa inspired Lyft’s Logan Green should come as no suprise.

Research conducted by aidx for example, a company that we founded in 2017 to build peer-to-peer mobile technologies to support mutual aid, explored the exceptional levels of cooperation amongst the Somali refugee community in Kenya. [6]

In over a hundred hours of in-depth interviews with dozens of Somalis, we were introduced to an extraordinary world of mutual aid. A highly effective ecosystem of peer-to-peer cooperation that enabled people to survive and thrive.

The people we interviewed were sharing everything: food, accommodation, and in one instance even clothes. One of the most common and sophisticated forms of cooperation was financial pooling, or what is known amongst Somali’s as an Ayuto.

In its essence, the idea is simple enough, people, friends and/or family come together to make regular contributions into a shared pot with an explicit agreement about how the money will be used. Sometimes the goal is simply to encourage one another to save, in other instances, it is to enable group investments or to provide individuals with insurance; often it is a way of raising money for those who are less fortunate.

What is most striking though is the extent to which pooling is practiced and the sheer amount of value that it involves. Virtually everyone we spoke to was engaged in some form of financial pooling, and in this way, Somalis are no exception.

One study estimates that as many as 70% of sub-Saharan Africans are part of a pooling group [6] and virtually every country in Africa has a name for the practice. In Kenya it is called a Chama; in other parts of the continent it goes by Sanduq, Tontine, Motshelo and Ekub. The value held in these pooling groups in Kenya alone is 8 billion USD, across Africa it may be as high as 100 billion USD. [8]

This reliance upon social networks to pool resources goes beyond money. As noted above, pooling groups themselves serve a whole range of purposes. Often people pool not simply for financial reasons but in order to strengthen bonds of family and community. One of the women interviewed for our research was explicit about this, “We don’t really put very much money into our family Chama, the main goal is for us to get together and check on each other.”

It is these bonds that facilitate peer-to-peer cooperation that ranges from the familial to the commercial. For example, in Sudan, weddings and funerals are traditionally organised and paid for by extended family and friends, and in the interviews we did with Somalis we found that it was not unusual for groups of 30 to 60 people to come together rapidly to deal with an individuals misfortune in a sort of non-digital version of crowdfunding.

Similar systems of peer-to-peer cooperation also facilitate trade, often at a transnational level. In his 2017 TedGlobal Talk, The Age Old Sharing Economies of Africa and Why We Should Scale Them, the author Robert Neuwirth explains how the Igbo apprentice system, in Alaba International Market in West Africa, drives growth by providing access to capital through a network of local venture capital investors.

Extended family, clan systems, and tribal networks mean that many Africans are rich in the most valuable commodity of the Sharing Economy: interpersonal trust. Take, for example, the most basic social unit: household size; a typical African household is on average more than twice the size of its European equivalent, and this does not account for the network of extended family, clan, or tribe within which most African households are embedded.

Interestingly, the Sharing Economy is a field of activity where the much maligned African tribal system comes into its own, creating international, decentralised networks of trust that facilitate local and global trade. Perhaps one of the most famous examples of this is the Somali Hawala system, an informal system of money transfer that relies on social networks to move money across borders. It is as if technology has at last caught up with society, with peer-to-peer technologies mirroring African norms of association and organisation far more accurately than standard centralised economic models.

Significant is the fact that African habits of sharing are being exported. The World Bank estimates the African diaspora to stand at over 100 million people. [10] They carry with them the habits of peer-to-peer cooperation, so common in Africa. Increasing numbers of Kenyans, for example, are setting up pooling groups in different parts of the world, and Somalis in the UK regularly organise Ayutos. Many remain connected to the Continent, providing a steady flow of remittances and offering the potential for global Sharing Economy platforms.

The Enabling Role of Technology


The African Sharing Economy is increasingly enabled by technology. There has for example, been a growth in digital tools designed to support peer-to-peer cooperation, and new companies like HumanIQ and Wala are using digital technologies to map existing social networks. Sharing economy giants like Uber and Airbnb have noted the opportunity and have begun to expand their services on the Continent.

These opportunities are being turbo charged by the rapid and widespread adoption of digital technologies and mobile banking. In 2017, there were 444 million unique mobile users representing a penetration rate of 44%, up by 25% since the beginning of the decade. The number of unique mobile users is expected to rise to 634 million by 2025.

Today, Africa is a global leader in mobile money, accounting for almost half of all registered customers around the world. In 2018 mobile money transactions in sub-Saharan Africa reached 19.9 billion USD.

That Africas population is young and increasingly urban also helps. [11] The younger generation are quicker to adopt new technologies and a combination of migration and urban density are driving new forms of cooperation and revitalising old ones. In Nairobi, for example, we found that young Somalis were using digital technologies to enable traditional forms of pooling. Many pooling groups now use Whatsapp as a primary coordinating tool, allowing them to exist across distance, where in the past it was necessary for people to be in the same neighbourhood.

Moreover, younger Africans are absent the legacy habits of previous generations. Raised in a world where mobile technologies are the norm, they are comfortable with the experimentation and innovation that comes with the widespread diffusion of digital infrastructure, indeed in some instances they are leading it.

A culture of aspiration also helps. Africans are amongst the most positive people in the world when it comes to their expectations of the future. It is an outlook grounded in an increasingly hopeful reality. African incomes have increased steadily over the last decade and the middle class has grown by over 100% in less than twenty years, to over 300 million in 2018.

An Eco-System Ripe for Innovation and Growth


Africa’s combination of technology, culture, and youth has created a Sharing Economy ecosystem ripe for innovation and growth. Not only is it possible for existing companies like Lyft and Uber to find opportunities, but for new companies to emerge and for the future of the Sharing Economy to be forged.

As well as products and services that respond to local market demand, there is potential for innovation that could be scaled globally. Why shouldn’t the next large scale sharing platform, inspired by Africa’s sharing culture, actually be African?

Moreover, if regulators and policy makers take the initiative, it will also be possible to avoid some of the excesses and failures of the Sharing Economy that have played out in more advanced economies.

The problems of the Sharing Economy are now well documented. Authors like Tom Slee, for example, have written extensively about the problems of the contract model of employment so popular with Sharing Economy platforms, problems of poor pay and insecurity, and a lack of accountability. There is also an increasing awareness of the need to better protect consumer data, and we are beginning to understand the damage that can be done when sharing is aggressively and indiscriminately monetised and scaled.

Others are exploring potential solutions, including for example, new regulations that affirm the employee and consumer protections that have been undermined by some of the practices of Sharing Economy companies.

Just as Japanese car manufacturers in the 1950’s and 1960’s learnt from, and then improved upon, their American rivals, it may be possible for an African Sharing Economy to leapfrog its counterparts elsewhere in the the world.

The Continent already has a track record of doing this with mobile technologies and mobile banking. Africa famously went from no phones to mobile phones without the in between hassle of laying down phone lines. It is now pioneering mobile banking, where others are still burdened by legacy banking systems.

As Africa’s economy continues to grow and new companies emerge to take advantage of the opportunities that it brings, it is possible to envisage Africa laying the ground work for the next phase of the Sharing Economy. It is down to the current generation of entrepreneurs and policy makers to make it happen. At aidx we are betting that we will.

If you enjoyed this piece you might also like The Amazing World of Mutual Aid

[1] Ravi, Shamika & Yaraghi Niam, The Current and Future State of the Sharing Economy, Brookings India, 2016

[2] https://www.weforum.org/agenda/2017/12/when-is-sharing-not-really-sharing/

[3] Botsman, Rachel, Who Can You Trust, How Technology Brought Us Together and Why it Might Drive Us Apart, Public Affairs 2017

[4] Sundararajan, Arun, The Sharing Economy, the End of Employment and the Rise of Crowd Based Capitalism, MIT Press 2017 p4

[5] The most recent World Bank Global Findex report found that roughly 62 percent of sub-Saharan Africans do not have a bank account.

[6] Hilal, McHugh, Douhaibi, Mangum, The Promise of Mutual Aid How innovative systems of self-help and emerging digital technologies can provide new solutions for refugees, aidx 2018

[7] Anderson, Siwan and Jean-Marie Bazland. 2002. “Economics of Roscas and Intrahousehold Resource Allocation.” The Quarterly Journal of Economics 117 (3): 963–995)

[8]Griffith & Grigg, Chamapesa, The Distributed Table-Banking app for the Last Billion, Whitepaper 2018

[9] http://theconversation.com/why-african-families-are-larger-than-those-of-other-continents-84611

[10] The World Bank, African Diaspora, Frequently Asked Questions, 2012

[11] “Africa has the youngest population in the world, and it’s growing fast. By 2055, the continent’s youth population (aged 15–24), is expected to be more than double the 2015 total of 226 million.” http://www.africa.undp.org/content/rba/en/home/blog/2017/8/7/africa_defining_challenge.html

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