Urban Transportation in Addis Ababa and Dar Es Salam
What are our favorite three to five ideas for the decade ahead regarding the potential for private finance and delivery of public infrastructure in our sector in these cities? Why? (If your ideas are different for Ethiopia than for Tanzania, please explain).
Addis Ababa
Scooter Share Program: Our first suggestion for Addis Ababa is to partner with a private company to implement a scooter share program (much like Citi Bike in NYC, but with motorized scooters). In Addis, it is common for single riders to drive their own car during rush hour, decreasing the capacity for the already stretched roads. This is especially important because Addis has only 18% road cover, versus 40% for a typical urban city (per our content expert, Tilahun Sarka). Assuming most cars hold one commuter, scooters occupy less space per person increasing road capacity. Additionally, we found that many commuters have more than two “segments” to their commute. For instance, our guide told us that he walks >15 minutes to a mini-bus stop, rides two mini-buses, and then walks or taxis to his work. This can take upwards of an hour and a half to two hours, decreasing his productivity. A scooter share program would alleviate this, with just a short walk on both sides of the scooter ride while skipping any transfers and making the trip more direct and shorter by bypassing traffic. Lastly, we found that many commuters take mini-buses for trips that are as short as one kilometer, taxing an already overcrowded system. Scooters could act as the preferred short-distance commute options, freeing up capacity for mini-bus trips that are longer.
To set-up a scooter share program, we would install pods in strategically located areas to serve neighborhoods where typical commuters live and the business districts where they typically work. A commuter would reserve online and prepay or pay at the pod, unlock a bike, and return it to another pod nearest to his or her workplace. Pricing would be above mini-buses but substantially below the price of a taxi.
P2P ride-sharing: The next idea that we believe has enormous potential for Addis in the coming years is the establishment of a peer-to-peer ride sharing network. Peer-to-peer ride sharing (that is, transportation offered to the public by private individuals rather than licensed taxi drivers) is currently banned. Significant tariffs are imposed on all vehicles imported into the country, including taxis, which has led to a shortage in taxis on the road. The consequence is that individuals’ mobility needs are underserved city-wide. At the same time, congestion is a common occurrence on Addis’ roads.
One way to, at the same time, address both congestion and the availability of transport is to allow for P2P ride-sharing. The tremendous advantage of P2P ride-sharing is that it need not add any additional vehicles to the road – it simply utilizes those vehicles more effectively, by having multiple people transported in any given vehicle, rather than just one.
Though telecoms / connectivity infrastructure in Addis is underdeveloped, this need not be a deal-breaker. Indeed, mobile-based ride-hailing functionality has already been developed – e.g., SMS-based hailing and call centers. These adaptations could be applied in the P2P context to enable such a transportation network.
To make this possible, the government would have to be convinced to lift regulations against P2P ride-sharing, and in order for this to happen, the government would need to be convinced that it would be in their interest to do so. There are a few ways that a private actor could “sell” this to regulators. First, tax receipts to the government will increase if this becomes big business. Next, P2P ride-sharing will open up the potential to collect massive amounts of previously non-existent data about commuter demand by location, time of day, route, etc. This data could be shared with the government to improve public services.
Data-driven public transport (buses): Addis Ababa is a classic example of misallocation of public transport capacity. On the one side, every day tens of thousands of people wait in long lines on main streets to get a bus seat on the way to work/home. Such waits can often take 30 minutes or more per each direction. On the other side, we have seen multiple busses run empty or half-empty, even during rush hour. Capacity is clearly not optimally matched with demand. The city has recently taken steps to increase bus capacity by granting operating licences to two private bus operators. But with no regulation around route/zone allocation – both these companies choose to serve the same areas of the city – finding themselves in intense competition, while leaving other areas with under capacity of public transport, and with long lines of passengers waiting in the sun…
However, Addis will soon be able to change all that. The government’s investment in cellular infrastructure, and the expected penetration of the 3G network – will soon present a big opportunity to completely transform the bus system by leveraging real-time data.
Similar to US based transportation startups such as Chariot, Bridj and Via, we propose a PPP where a private entity can help equip every bus or mini bus with a GPS chip that would track the vehicle’s movement in real time. People wishing to ride the public transport system could then access a live, dynamic map from their mobile device, allowing them to (a) get real time data of the bus’ expected time of arrival; (b) indicate their location and ‘order’ the bus to their area. Effectively, an algorithm would match the individual’s location and their desired destination with the closest bus that is already making a similar route. Over time, the city will be collecting data on the different demands from all parts of the city – and will be able to better allocate routes – reducing traffic congestion, increasing bus utilization, and eliminating those long lines of people waiting for a ride.
One way to enable this PPP is through the introduction of tier pricing: passengers who wish to use the ‘smart’ system, and hence enjoy the benefit of a shorter wait time, could be charged a higher fare than the current fares that are being kept low due to political reasons.
Tanzania
Commercialization of BRT hubs (integrated transport and office/retail space): Given the success of Phase 1 of the BRT system, we see potential to build commercial space and integrated transportation options at the outer nodes of each BRT line.
First, regarding transportation, as Dar Es Salam continues to sprawl outward, citizens will have to commute further and further to reach even the outer nodes of the BRT system. Currently, these commuters use inefficient and dangerous dola dolas to reach BRT stations. At these new integrated nodes, we envision a coordinated transfer from dola dolas now, eventually transitioning to standardized feeder buses operated by private companies or the city government. Additionally, a park and ride, bike racks, and specific loading and unloading areas for taxis would be included.
Secondly, these nodes would provide space for commercial use. We found that many people commuted into the city center to pick up groceries or run errands. By providing commercial space for grocery stores, butchers, and other consumer service businesses at the outer nodes of the BRT system, it will alleviate some of the strain of the massive commute that happens in Dar. Even better than retail space, we would like to include office space at the outer nodes to prevent commutes into the city center in the first place.
The biggest problem we for see with commercializing BRT hubs is the lack of coordination between government agencies themselves and with the private sector, making this solution most feasible in the medium to long term.
Autonomous vehicles: Though a long-term play, we believe that autonomous vehicles (AVs) hold immense potential for Dar and we think it is a worthwhile strategy for the city to position itself as the “go-to” destination for companies looking to establish an AV presence on the African continent. The societal benefits of AVs have been well-documented: increased safety, decreased congestion, increased free time and productivity, and environment benefits.
While rolling out AVs in Dar may sound unrealistic, the hurdles are in fact not insurmountable. On the technology side, the tech will be developed and deployed elsewhere first – it need not be developed organically in Tanzania, but rather can be imported by major global players. The major determinants of how soon AVs arrive in Dar, therefore, will be the regulatory and business climate.
We believe that becoming the “beachhead” for AV deployment throughout the African continent would yield significant economic and social benefits to the city of Dar. Therefore, we think it is worthwhile for stakeholders in the city to adapt these regulatory and business parameters accordingly to attract AV companies to set up shop here as a first stop in Africa – rather than, say, Nairobi, Lagos, or Johannesburg.
There are a few key steps that public and private actors can in tandem take to this end: tax incentives, amenable regulations (e.g., making the testing and deployment of AVs on public roads legal), government / private sector co-investment, and infrastructure improvements.
Why the difference? Based on our research and the multiple conversations with industry experts in both countries, our understanding is that the underlying cause for urban transport inefficiencies in both cities is very different. And different causes sprout different solutions.
Addis, to begin with, suffers from under capacity of public transportation, and misallocation of existing capacity (or – supply) with demand. The low public transport fares, as determined by the government, do not provide a sound basis for private investments in capacity, such as buses (high CAPEX but low return). At the same time, roads are congested with private cars carrying, for the most part, only the driver herself. Hence, we believe that the most straightforward solutions are those around better utilization of existing capacity – such as ride sharing and data-driven public transport. Scooter sharing similarly presents an opportunity to make better use of capacity, where the upfront cost is relatively low (relative to a car or a bus, that is) and where riders can cut through traffic and get from place to place faster, without waiting in long lines to get a bus seat.
Dar, on the other hand, does not suffer from a problem of public transport under-capacity. To the contrary: in recent years the city has made major investments in the BRT systems, and during rush hours buses pass every minute (!), making wait time for passengers minimal. However, the city regularly suffers from heavy traffic congestion, mostly around its center. At least part of the reason seems to lie in the lack of synthesis between transport planners and city planners; that is – the city’s transport problems are not often considered when city planners decide on zoning and expansion plans. As a result – hundreds of thousands of residents all commute to and back from work in the same direction – to the city center every morning, and out of the city in the evening.
Building commercial centers around the BRT’s hub, and separately – the introduction of self-driving cars, have the potential to largely alleviate this congestion problem. Commercial areas around major public transport hubs can help spread the traffic in the city away from the main center – and into its new various commercial areas. They will also help the city capitalize on an opportunity to profit more from the BRT, and re-invest the proceeds in the development of better transport solutions for city dwellers. Similarly, autonomous vehicles – undoubtedly a longer term play – can help reduce congestion by eliminating accidents and human error on the road. Both solutions have the potential, then, to free up congested roads and help city dwellers move faster from place to place.
What are the key things that private investors and operators need to do to make these ideas into reality?
For any of the ideas proposed above to pass into the implementation phase, the most important prerequisite is endorsement by and cooperation with government actors. In both Addis and Dar, private investors must make their plans palatable to public administrators so that regulations allow for implementation. In Dar, given the dispersed authority among various government agencies and actors, private investors face an additional step of navigating through the many stakeholders who cooperate to form the city’s ‘master plan’.
In Addis, P2P ride-sharing has been prohibited and scooter-sharing, while not outright banned, has not yet been considered and would likely require similar government coaxing. And while the reduction in the city’s congestion that would be achieved by these proposals should be compelling to government administrators, the private investors will likely need to sweeten the deal to induce government support by sharing data and profits (through taxes).
Private investors also have an interest in improvements in the reliability of the mobile telecom infrastructure in Addis; however, even with telecom in its current state, workarounds allow the proposals to still be feasible (SMS/ voice calls for P2P ride-sharing, GPS for bus-route optimization). With improved telecom infrastructure, mobile data would be consistent and smartphone penetration would deepen, increasing the usage of mobile apps and the value of ideas such as P2P ride-sharing.
Foreign private investors who seek to operate in Addis face a more difficult challenge in that each foreign entrant is reviewed by the Ministry of Trade and Industry and entry is fairly limited. This, however, creates an immense opportunity for local entrepreneurs. We learned from RIDE founder Samrawit Fikru that RIDE has gained a valuable ‘moat’ due to the fact that Uber can’t enter the market.
In Dar, private investors should push for a coordinated ‘master plan’, as well as a powerful administrative authority to oversee its creation. Without such oversight, development and investment is much riskier. We learned that there are over 50 stakeholders (across all sectors) weighing in on Dar’s development, and many stakeholders are clamoring to own and develop land (even if land ownership is outside of their scope) because real estate price appreciation equates to funds for the agency. Funds to the government agencies are not funneling in through the conventional path (taxes collected by central government and distributed to agencies based on budgeting) due to likely corruption, so agencies seek to be more self-sufficient. Yet with each agency independently attempting to generate returns instead of focusing on its specific area of expertise, a ‘master plan’ is difficult to coordinate and execute.
While reduced corruption is the ideal solution, with agencies acting as they are given current conditions, private investors may need to share their revenue with each associated agency in order to move quickly. To commercialize the BRT hubs, for example, private investors need to work with UDA (the PPP that operates the BRT) in a mutually beneficial manner. They may need to offer a revenue share to incentivize the UDA to support land development adjacent to, on top of, or with easy connection to the BRT stations. A/V’s require even more collective action given that Dar must send a coherent message to the tech community to induce selection of Dar as the site of A/V development in Africa, through appealing regulations, safety measures, improved roads, and commitment to partnership with such private technology investors.