Department of Startup Efficiency

Hey, Sheriff here 👋 

Let’s talk about the final boss of startup trouble in Africa today — regulation.

It’s made companies, killed companies, and kept some industries from growing.

Today, we’ll be diving into it.

But first, I have to ask you…

Now, on to this week’s story….

In January 2020, three Nigerian tech startups almost died in one day.

Not because of bankruptcy or bad business moves.

But due to government policy.

The Lagos government, Nigeria’s biggest economic hub, issued a ban on passenger bikes.

For companies like ORide, Gokada, and MAX, it was a death sentence.

Thousands of riders lost their jobs.

The companies had to downsize.

And millions of dollars in funds were burnt.

The worst part — this isn’t even rare.

African tech has been in a long-term toxic relationship with government regulations.

Sometimes, the laws help.

Other times, they kill innovation before it has a chance to grow.

Across Africa, many massive billion-dollar industries have been axed by bad laws.

We’ve gathered a few of them and what they’d look like had they not been hit with the regulatory hammer, starting with…

1 ) Bike-Hailing: Lagos traffic’s mortal enemy

Lagos’s bike-hailing ban may have happened in one day, but there were signs.

In July 2019, Lagos placed a new levy on bike-hailing companies.

For the first 1,000 bikes owned, the companies had to pay ₦25 million ($70,000) per year.

They’d also pay an extra ₦30,000 ($83) per bike once they crossed 1,000 bikes.

These startups — ORide, MAX, and Gokada — were still young and growing.

So this was a big blow.

Gokada, for instance, had just raised $5.3 million and acquired over 1,000 bikes to scale up.

So when that law hit, they had to pay up..big.

But they were playing in a big market though.

Lagos—a city of 20 million people—was notorious for traffic jams.

People spend up to four hours in traffic jams each day.

And for the longest time, bikes were the easiest way to get around.

Here’s the thing though—they were informal, chaotic, and often unsafe.

And to the Lagos State government, there was no place for them in Lagos’s future.

When bike-hailing startups like MAX and Gokada showed up though, they made bikes safer to use.

And in 2019, just before the ban, Gokada had a 0.02% incident rate per ride.

But this didn’t change the government’s position.

In January 2020, the big ban happened, leaving the bike-hailing companies (and actual people) stranded.

Today, those bike-hailing companies have pivoted into last-mile logistics for businesses.

Traffic jams are still a thing, and the average Lagosian is worse off than in 2019.

And fun fact: unsafe, unregulated bikes are back on the road.

On the other side of the world, companies like Gojek in Indonesia and Pathao in Bangladesh were allowed to thrive.

Gojek was last valued at $10 billion.

And Pathao is already profitable.

But in Nigeria, companies with the same potential are now a could-have-been.

2) Logistics: Africa can’t trade with itself

For years, African leaders have hyped up AfCFTA, the African Continental Free Trade Area.

The dream was to create a $3.4 trillion single market, where all 54 African countries could trade with each other with little to no barriers.

The agreement was first signed in 2019, and a continental customs agency was to be created, with tariffs dropping by 97% for most goods.

If done right, it could lift 30 million Africans out of poverty, and make Africa a $29 trillion economy by 2050.

But the reality is a diplomatic (and bureaucratic) nightmare.

It’s been slow, tedious, and covered in complexity.

And while that happens, logistics in Africa remains a headache.

Think about this.

It costs about $2,000 to transport a container from China to Mozambique.

But it costs $5,000 to take the same container 500km inland to Malawi.

And these logistics problems can raise the final price of goods by up to 75%.

It’s no shock that today, only 14% of Africa’s total trade happens within Africa.

Compare that to:

🌍 Europe (64%)

🌏 Asia (58%)

🌎 North America (40%)

For logistics startups across Africa, scaling into cross-border deliveries is incredibly hard.

And for the bigger companies, it’s harder to grow across Africa.

If AfCFTA actually worked:

Logistics startups would thrive, improving trade between African countries.

Expansion will become easier for big businesses.

And the price of goods for the end consumer goes down.

Africa could produce and consume its own goods—instead of relying on expensive imports.

But instead, we remain an economy that can’t serve itself.

3) Crypto: The Revolution That Went Underground

Across Africa, crypto had a moment.

It was solving real problems:

💰 Remittances without the high fees

🚀 Faster, cheaper cross-border payments for businesses

📉 And a hedge against inflation in collapsing economies

Then governments panicked.

And with (what they thought was) good reason.

In 2020, young Nigerians organized the country’s biggest protest (known as EndSARS), in recent times, against police brutality.

And when the government blocked their bank accounts in an attempt to stop them, they turned to crypto.

To the government, crypto was a threat to financial control.

It couldn’t be tracked (to real people), stopped, or audited.

So in 2021, the Central Bank of Nigeria banned banks from transacting crypto.

But they’re not the only African government that finds crypto sketchy:

• Morocco banned crypto despite a surge in use

• And in Egypt, crypto has been outright illegal since 2018 - with the government denouncing it four times.

But bans can’t really kill crypto.

Africans still received $125 billion in stablecoins between 2023 and 2024—mostly via apps like Binance.

And to get it off into their local currencies?

They simply sold their crypto directly for cash to other crypto users on apps like Telegram.

For African crypto startups though, these hits have been big.

• Yellowcard stopped serving the Nigerian market, despite getting its start there

• Buycoins closed up shop

• Paxful struggled for a few months.

And last year, Africa experienced the slowest growth in crypto adoption (at least, officially).

Africa could’ve had a thriving web3 economy.

But thanks to regulation, its biggest crypto markets are seeing no action.

There’s no telling how big all these markets could’ve been with better laws.

But chances are, they’d be massive.

Given the history of laws cutting off the wings of tech in different markets, founders in some markets are taking a new approach.

Dining with the devil regulators

In 2021, 30 people in Nigeria’s tech ecosystem decided to help write a law on tech in the country.

Led by Andela’s co-founder, Iyin Aboyeji, they created the Nigerian Startup Bill.

It listed many provisions like:

• The creation of a government-run fund to seed early-stage companies

• Tax incentives to entice more startups to “start up”

• Laws to protect their intellectual property

• And support with listing on the local exchange

All geared at making it easier for companies to start, grow, and scale locally.

A year later, it was passed into law, and it became the Nigerian Startup Act.

Now, Nigerian startups have a legal framework to operate under, bringing them closer to regulators and potentially shielding them from random policy shifts.

And the best part? Governments across Africa are slowly becoming more open to dialogue

• Kenya is currently calling for the public’s input in creating crypto regulations

• Uganda is partnering up with startups to fight cybercrime

• And last year, Kenya’s government removed tariffs for electric vehicles to help the country go green

These closer links between startups and the government often lead to better, more realistic laws.

And they help the government see how these businesses help people.

If startups don’t shape policy, policy will shape them—and it won’t always be in their favour.

Africa needs more breakout companies, and better laws are one way to make that happen.

Not bans. Not knee-jerk policies.

What other ways have you seen startups work well with regulators and the government?

Reply and let us know.

That’s it for this week. See you on Sunday for a breakdown on This Week in African Tech.

Cheers,

The Tech Safari Team

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