local e-hailing start-up In what is referred to as a market in South Africa “dominated by anti-competitive tactics,” NextNow has become the most recent ride-hailing business to shut down. After just over a year since its May 2016 debut, NextNow quietly closed its doors. The revelation was confirmed to the media by the company’s public relations representative.
NextNow’s head of operations, Mlungisi Ntombela, recently told reporters that the company, which began testing its service in Johannesburg, was striving to firmly establish South Africa as a leader in ride-sharing, with intentions to expand nationwide and eventually to other African nations.
He continued by saying that this would be achieved by providing competitive prices that would attract a large number of clients. But it turned out that this would not be the case. The collapse of NextNow comes just a few months after the unexpected closure of the South African operations of the Chinese-based global ride-hailing giant DiDi Chuxing, which made its local debut in April.
One of the causes of NextNow’s demise, according to local industry experts, was the severe rivalry that favored established international e-hailing giants Uber and Bolt over newer smaller competitors.
“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 analyze 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.”
Mnguni contends that the market is not competitive enough for new start-ups with limited funding to penetrate and succeed. Furthermore, he continues, the players in the e-hailing market get overlooked when there is a lot of capital in South Africa going to tech start-ups.
“This is mainly due to the lack of regulation that has led to the big international players colluding and monopolizing 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 the government. As activists, we have done everything to awaken the government to the challenges in the industry since 2016, but our cry falls on deaf ears.”
In a media interview, Vhatuka Mbelengwa, national e-hailing spokesperson for the Private Public Transport Association of SA, points out that the smaller e-hailing firms have no chance of succeeding if DiDi, which is touted as the second-biggest ride-hailing firm in the world, could shut down despite entering the market with a multimillion-dollar budget.
“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 cites three local start-ups that offer e-hailing services but are losing money, warning them against further price cuts because their employees wouldn’t be paid. He continues by saying that because the larger players have access to larger marketing resources, buyers tend to trust them more than their smaller counterparts.
Regulation, in Mbelengwa’s opinion, would help reevaluate the business model of ride-hailing services, which is predicated on the idea of not hiring driver partners.