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It’s a summer morning at Uber’s offices in Parktown, Johannesburg, and the open, functional space is a hive of activity. Young urbanites – many toting trendy backpacks, casually dressed in T-shirts and jeans – filter in, others drink coffee in a recessed chill area, but most are hard at work.
Not one, but two high-end coffee machines sit side-by-side near a wooden table where we are seated with Alon Lits, a former Investec man who’s been general manager, Sub-Saharan Africa, for Uber since its local launch a little over two years ago.
The local division has enjoyed massive growth since launching in South Africa in August 2013.
Lits has been a part of this heady ride virtually since day one. “I had my final interview on a Thursday, a day before the first cars were on the road in Johannesburg. My offer came through the next day, so I pretty much started at the beginning,” he says.
The 31-year-old explains that a launch team flew out from Uber’s San Francisco headquarters, and tells us how the team started working from a guest house in Sandton. “Drivers would come in for training, and we’d meet potential partners there,” Lits says with a smile.
Local division shines
The ride-hailing service has grown impressively in this country.
Uber did 1m trips in SA in 2014, but blew this figure out the water by doubling the numbers for the first half of 2015 [to 2m].
Over the first 12 months of operation, the number of trips made in Jozi and the Mother City dramatically outstripped those in many other major cities.
The ride-sharing service – which uses a GPS-based software application to connect drivers and people looking for lifts – originally trialled in San Francisco early in 2011.
Uber followed this by launching in a new US city virtually each month, until it went offshore to Paris (in December 2011) and London (June 2012).
“SA is definitely one of the best-performing territories in the world,” Lits says, but explains that this growth can’t be compared to that in a more populous country like China. “The population size in China is gigantic and Uber is growing there at a crazy rate.”
One could argue that the world is now more familiar with the Uber brand and that this helps drive adoption, but Lits counters by saying that SA doesn’t have an established public transport culture.
“Johannesburg’s very different to London, New York or Tokyo, where there’s an established public transport culture and people readily use taxis, the subway and buses to get round those cities.”
The importance of building trust
“In SA it has been more about creating that culture of using something other than your car to get round the city.
It has been about creating trust,” he adds. Locally, Uber creates trust by piggybacking off of other trusted local brands to inspire confidence in a first trip.
“Locally, people are nervous about putting their credit card information online, or capturing it on a system, so you have to get people back to the trust point. We were lucky in that we were able to secure partnerships with trusted South African brands relatively early on in the lifecycle of Uber in SA,” Lits says, explaining that partnerships with the likes of Investec and Discovery did a lot to buoy the Uber brand locally.
Creating jobs
But the real success of Uber – the important number – is the economic opportunity opened up by the tech brand in a place like Johannesburg. According to Statistics SA, joblessness in SA is over 25%. This translates to 5.4m employable people who are out of work.
Lits gets excited when talking about the employment opportunities that Uber creates. “Knowing that you’re making a difference is exactly why I love Uber – it’s because it’s such a huge platform for increased economic opportunity,” he says, adding: “A lot of these people [Uber drivers] were previously unemployed. Some did come from the transport industry, but were earning a relatively low salary, and are now earning much more and building much bigger businesses.”
Lits emphasises that Uber is a technology company. “We don’t own any cars, we don’t employ any drivers. We have a partnership with drivers on the platform.”
But the company does help entrepreneurs to become empowered through a natural growth process.
“What we saw as the first avenue for access to vehicles was not traditional banks or finance houses. It was investors who come from the transport industry, or entrepreneurs who know a bit about Uber,” explains Lits, adding that these investors would purchase a car, and then employ a driver who would earn enough to pay off the vehicle and still generate an income for both himself and the vehicle owner.
What’s the Uber business model?
Each vehicle owner is, in essence, a small business, and Uber provides the conduit for matching drivers to users, using a smartphone app.
Users download the Uber app onto their smartphone and register their credit card details. No cash exchanges hands.
The drivers have their own app that connects them to the central control room in their city, and informs the system when and where they are available to offer rides.
When a user requests a ride using the app, they are told approximately what the trip will cost, and how soon the driver will be at their location.
The system allocates the closest driver and informs the user of the progress. Everything is done via the app, using data and the GPS technology built into smartphones.
Every trip is monitored centrally, and everything is recorded on the database.
Users can even send a link for the ride to a friend or spouse, who can then monitor the progress of the trip.
Changing lives
For people who are unemployed or need to supplement their income, disruptor businesses like Uber could help improve their situation, whether it’s to send one’s children to a better school, or simply to get out of debt – which is such a major issue in South Africa, with more than 11m credit-active South Africans described by the SA Human Rights Commission as “over-indebted”.
Lits says that since its launch in 2013, Uber has “enabled over 4 000 economic opportunities”.
For Siyabonga Nxumalo of Johannesburg, a failed business venture resulted in personal debt, but Uber gave him a way out.
“Within a year I had paid off all my debt, and can put food on the table for my family. Uber gave me the chance to re-establish myself – it is a life-changer. I am a businessman and I want to get more cars and start to employ other drivers,” he says.
Uber’s local leader describes himself as driven and self-motivated. “I think nothing comes without hard work – you’ve got to put in the hours. You’ve got to remain humble, and you’ve got to be passionate about what you do.”
For Lits, his passion comes from creating happy customers, and generating opportunities for people like Nxumalo in a country where unemployment is rife, and the credit issue is a very real threat to the performance of SA’s economy.
This article originally appeared in the 3 March 2016 edition of finweek. Buy and download the magazine here.
