What the sharing economy brings to the African market

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By Antony Mutunga

We currently living in a digital era that has completely changed the way we perceive things. Unlike in the past where for example, owning a car was perceived as moving up in the world, things have now changed. Emerging technologies and social media have completely taken the world by storm not only changing our perception but also reshaping our industries and economy, as we know them.

Some companies have taken the opportunity to integrate these innovative technologies in their operations, which in turn has led to a change in industries in a disruptive way. Airbnb, for instance has completely transformed the hospitality industry, giving birth to a new system that has been termed the sharing economy.

The sharing economy can be described as an economic system based on the sharing of underused assets, such as space or skills, directly between individuals or organizations through an online platform. Even though sharing is not something new to the world, the sharing economy has brought about something different to the world. This in addition to the financial crisis that saw many make major losses has seen people, especially millennials, start valuing access to products more than ownership.

Unlike in the past where people focussed much on possessing now especially the millennial group, are starting to focus more on experiencing these products. As a result, this has seen the concept of sharing economy become a global phenomenon as it has captured several markets around the world especially in Europe, Asia and North America. According to a report by PricewaterhouseCoopers, five key sharing sectors (travel, car-sharing, finance, staffing and music/video streaming) have what it takes to increase global revenues of the sharing economy from $15billion in 2014 to an estimated $335billion by 2025.

Recently, the model has also found its way into Africa and thanks to the already existing good sharing culture between some African countries the concept has been able to gain good momentum on the continent within a short time. Thanks to a vast population and a growing middle class, some markets on the African continent offer an enormous growth potential to companies that operate using the sharing economy model. However, this will not only be advantageous to the companies but also the continent as well which is in need of new ways to help it develop further.

For instance, with the population of Africa expected to increase by 2.2 billion by the year 2050 and the number of those unemployed already at high levels, a large number of the population is expected to end up living in poverty as they lack employment. However, with the penetration of the sharing economy model into the continent this is fast changing, some people are now able to rent out any products they don’t normally use in order to make some cash.

As an example, a person in possession of farming equipment may now be able to rent out the equipment to a farmer. This not only helps the owner to make some money through renting but it also ends up helping the farmer to produce better yields. As a result, this causes those who are unemployed or underemployed to go into self-employment and thus they are able to make money, improving their living standards .

Apart from helping those that are unemployed, it is also able to help those in the informal sector. It helps channelize a work and provides a formalized platform, which helps them to market their products. As a result, this helps their products to reach a bigger audience as most use online platforms where a large number of the population is able to view them.

Even though Africa is said to have an abundance of natural resources it seems to have been hit hard by the paradox of plenty thus explaining the limited growth. Due to the continent’s rapid population growth, the resources have started becoming limited which in turn has caused problems for Africans as this slowly increases the number of those living in poverty. However, thanks to the sharing economy concept, Africans now have the opportunity to reduce the gap brought about by limited resources and inadequate infrastructure.

The tourism sector, for instance, has been on an upward trend especially in countries like Kenya, which saw the number of tourist arrivals from Europe and the U.S increase by 17% and 11% respectively in 2017 according to data from the ministry of tourism.

However, despite the increasing tourist numbers the country has limited high-end and mid-tier hotels or resorts. It is in such situations that companies like Airbnb, which use the sharing economy model, have come in handy, as they have filled the demand-supply gap. In addition to this, it also gives people an income stream in terms of rent.

The sharing economy model has helped the continent’s economy to develop further in the short time it has been around, however, it would be pretentious to assume that all it has brought to Africa is good tidings. Despite there being many winners in the sharing economy, there are losers as well.

The issue of trust has been one of the major problems facing the companies that have integrated the sharing economy model. Consumers who have been hesitant in trying out the model. Airbnb for example say some users are afraid of using their services as they do not have any trust in the host whose home they have to stay in.

With more and more companies coming up in the industry, the issue of lack of trust is creating a scenario where the companies are themselves posing a threat to the industry. As the cases against these companies keep increasing over the media, the more consumers get a negative aspect towards them. Therefore, in the case one company was involved in a bad situation it might end up causing a knock on effect on the entire industry. An example would be the case of Uber, which had a number of cases that had caused people to avoid it and other companies in the sector for a period of time.

The other problem has been the effect the share economy has on capital intensive businesses. Ever since companies like Airbnb and Uber came up, the rest of the companies in the respectful industries have been working with a disadvantage. For example, in the case of Uber, the taxi hailing company does not have to maintain drivers and a fleet of cars unlike other cab companies. This gives them the advantage of charging a smaller price, which sees them attract more customers as compared to other taxi firms.

The case is the same for Airbnb, unlike hotels and resorts who have maintenance costs and charges to pay, those who are renting their homes are free from these charges thus they are able to reduce their prices which ends up hurting the other players in the sector. This in turn ends up causing job losses and collapse of businesses as the other players are not able to keep up in the cutthroat competition.

Since the tax regime is yet to fully develop and bring into the fold this model, it also denies government the much needed revenue.

The sharing economy indeed has a lot to offer the continent, if properly managed it is able to help Africa grow faster. Even though the model is now concentrated more in the transport and hospitality industry, it is important to see further than these sectors as it is able to be integrated in other sectors so its effect are felt far and wide.

There is also a need for regulators to ensure that the new companies that are integrating the model are not discouraged rather they are encouraged. On the other hand, there is a need for regulations to ensure that other businesses do not feel biased. In Africa, the sharing economy might just be in its starting stages however, its potential is already visible and it is clear it has a crucial part to play in taking the continent to the next stage.