( Quartz) –Ethiopia’s capital Addis Ababa has many of the hallmarks of a thriving, outward-looking metropolis: the city boasts sub-Saharan Africa’s first metro outside of South Africa, hosts the UN and the African Union, and is in the grip of an endless construction boom. But its taxi system shines a spotlight on the country’s somewhat Janus-faced encounter with twenty-first century globalization.
While multinationals are being ushered into Ethiopia’s vast agricultural sector, provoking local ire, the transport sector—like banking and telecommunications—remains walled off from foreign competition. The ruling Ethiopian People’s Revolutionary Democratic Front (EPRDF) guards the country’s economic sovereignty jealously. This means that while Uber’s African footprint grows ever wider—in June it launched in Dar es Salaam, its 15th city on the continent—Ethiopia remains one of the company’s last major frontiers. This is despite having Africa’s second largest population and, in Addis Ababa at least, swelling ranks of middle class urbanites equipped with the latest smartphones.
Into this gap has stepped three local startups—ETTA, Zayride and RIDE—who are hoping to modernize the capital’s archaic taxi system before the international behemoth opens shop here. All three are developing apps with an eye to local conditions. Zayride’s is designed for slow internet speeds. ETTA is developing one that can do online payment processing—a technology that is still more or less absent in Ethiopia. RIDE, meanwhile, started with SMS—to appeal to the 96% of Ethiopianswithout smartphones—but has since pivoted into app technology. All three have had to rapidly adapt their business models since the government shut down 3G internet as part of a welter of state-of-emergency measures declared last month.
But it has been a struggle. Without internet, tech startups like these are hopelessly hamstrung. They have all been forced to set up traditional call centres, with has drastically inflated costs. And even when 3G is eventually restored, things will remain difficult since another paradox of Ethiopia’s development story is that while the government has made big investments in ICT infrastructure, the country still has one of the lowest rates of internet penetration on the planet. Just 8% of Ethiopians report using the internet, according to the Pew Research Centre. This compares with 40% of Kenyans and 39% of Nigerians. Expanding into cities beyond Addis Ababa will be tricky.
The company founders say the government has been generally supportive. It has permitted duty-free imports of swanky meter taxis in order to expand and upgrade the city’s small, dilapidated stock. But in policy terms “the government is much more interested in big firms that employ lots of labor”, says Kebour Ghenna of the Pan African Chamber of Commerce and Industry. And Ethiopia’s creaking and poorly integrated bureaucracy makes setting up a business Kafkaesque at the best of times. “No one wants to be accountable,” says Habtamu Tadesse, a cofounder of Zayride. He also says that the ministry of information won’t provide toll-free telephone numbers—so he has to charge his customers each time they hail a cab.
Another problem is finance. RIDE has an angel investor, but that’s rare in Ethiopia, where venture capital is almost unheard of. ETTA’s founders are self-funding, whereas Zayride is crowdfunding. Both Ethiopia’s big state-owned and smaller private banks are wary of risky lending, so startups can’t get much help from them either.
Some people think Ethiopia will join the World Trade Organization within the next five years (it started the application process over a decade ago). If it does, the floodgates to more foreign competition will finally open. But it will probably be a while still before Uber arrives in Addis Ababa. If Uber struggles with legal obstacles in countries like France and Germany, Ethiopia’s government is unlikely to be much more welcoming. ETTA, RIDE and Zayride can at least be comforted in the knowledge that, for now, the battle to be Ethiopia’s Uber will be waged without pressure from the ride-hailing giant itself.