Currently, at least 40% of Africa's population lives in urban areas. But, this figure is projected to rise to 58 per cent over the next three and a half decades. That is according to the UN‐Habitat.
Yet, with the rise in the number of urban dwellers comes other challenges - one of them being the traffic jam. The problem has become so severe that major African cities are losing a huge chunk of their GDP due to it.
The World Bank, in a 2012 report, indicated that Cairo loses an estimated $8 billion annually to traffic congestion.
Another recent study by the bank pointed out that traffic jams are costing Uganda over US$800m in lost Gross Domestic Product (GDP). While, according to the Kenyan government, the time wasted in Nairobi traffic jams represents a cost of $578,000 a day in lost productivity.
This holds true for all other African major cities. Lagos, Nigeria’s commercial capital, is home to some of the worse traffic congestions experienced in West Africa.
Against this backdrop, entrepreneurs are proposing solutions that can tackle the problem. Among these is the use of bikes, boda-bodas or Okadas - depending on which region of the continent you're from. So far, the two-wheelers have proved a magical silver bullet to solve the traffic problem.
And, investors have also taken notice. One of such investors is Johannesburg-based CRE Ventures. The VC firm has responded by backing both Lagos-based Gokada and Kampala-based SafeBoda.
Founded last year by Deji Oduntan, Gokada launched with the aim of "solving the transportation and logistics challenges facing millions of Nigerians in metropolitan Lagos".
"The startup uses 200 cc motorbikes that are allowed to move on major roads in Lagos. Unlike the conventional 100 cc motorbikes driven by the regular ‘Okada’ drivers that are banned from moving on major roads in Lagos State"
Early this year, Gokada raised $337,333 in funding, per their SEC filing. Though there are no details about the investors, New York-based Adventure Capital participated in the round. It is easy to connect the dots here given that Gokada is among the VC firm's portfolio companies. Additionally, Fahim Saleh - Adventure Capital's co-founder - is the person whose names appear on the SEC form D.
For CRE Ventures, there are no details to show that they participated in the round. Other than the fact that they state the startup among their portfolio.
The VC fund also lists SafeBoda amongst its investees on its portfolio page. Though there hasn't been a public statement from either of the company, it is likely that CRE Ventures participated in a funding round that SafeBoda raised early this year.
According to a trusted source, SafeBoda closed a $1.1 million round at the beginning of 2018. We suspect that is the round that CRE Ventures participated in.
By making an investment in both SafeBoda and Gokada, the firm could be positioning itself for a kingmaker position in the industry. With time, they could decide to merge their investments for a potential exit to some of the big players in the market like Uber or Taxify.
Or, it could be a moat they can build to ensure their portfolio companies run away with the market. Something SoftBank did with US's Uber, China's Didi Chuxing and Southeast Asia's Grab.
Since SoftBank has its hand in each of the above, they strategically pull cards to ensure they don't compete. Rather, become leaders in their respective markets by leveraging the shared connection. For example, Uber sold its Chinese business to Didi and its Southeast Asia business to Grab. CRE Ventures could decide to do the same.
Over the past few years, CRE Ventures has turned itself into one of the leading VC funds across Africa. Founded in 2014, the fund has participated in at least 29 funding rounds. But, their highlight came last year when they led Andela's $40 million Series C.
Though, they had also before participated in the startup's $24 million Series B which led by the Chan Zuckerberg Initiative.
Among CRE Ventures' other notable investees include Asoko Insights, Flutterwave, Rensource Energy, Lynk, Yoco and Sweepsouth.