ARE INFORMAL MODES OF TRANSPORT THE KEY TO MOBILITY FOR THE MASSES IN THE GLOBAL SOUTH?
- andrewgasnolar
- Jun 15, 2021
- 4 min read
Informal modes of transport may often be framed within a narrow lens, riddled with more bad than good. However, these informal transport service providers move 3.2 billion people across the globe. They play a fundamental role in how our cities and communities move into the future and whether our cities can meet the needs of their citizens and residents in the growing pressures created by climate change, migration, and mass urbanisation, writes Andrew Ihsaan Gasnolar.
The rise of venture capital efforts continues to play a transformative role in Africa’s future, and particularly the role such funding has in shaping our cities, communities and landscape. The underlying ethos is that venture capital can be an engine for growth and support both invention and innovation.
Across the continent, venture capitalists continue to build partnerships and scope out business cases that meet their individual needs. This past month, the role venture capitalists can play in our market’s mobility and data segment was highlighted. The recent round of funding saw the commitment of $14.5-million in the London-based WhereIsMyTransport (Cape Town-founded) led by early-stage investment vehicle Naspers Foundry, Cathay AfricInvest Innovation Fund, and SBI Investment.
The Harvard Business Review highlights important nuances and perspectives on venture capital’s role in an African context.
“Contrary to popular perception, venture capital plays only a minor role in funding basic innovation. Venture capitalists invested more than $10 billion in 1997, but only 6%, or $600 million, went to startups. Moreover, we estimate that less than $1 billion of the total venture-capital pool went to R&D. The majority of that capital went to follow-on funding for projects originally developed through the far greater expenditures of governments ($63 billion) and corporations ($133 billion).
Where venture money plays an important role is in the next stage of the innovation life cycle—the period in a company’s life when it begins to commercialise its innovation. We estimate that more than 80% of the money invested by venture capitalists goes into building the infrastructure required to grow the business—in expense investments (manufacturing, marketing, and sales) and the balance sheet (providing fixed assets and working capital).
Venture money is not long-term money. The idea is to invest in a company’s balance sheet and infrastructure until it reaches a sufficient size and credibility so that it can be sold to a corporation or so that the institutional public-equity markets can step in and provide liquidity. In essence, the venture capitalist buys a stake in an entrepreneur’s idea, nurtures it for a short period of time, and then exits with the help of an investment banker.”
Public transport operators in the Global South will play a fundamental role in how our cities and communities move into the future and whether our cities can meet the needs of their citizens and residents in the growing pressures created by climate change, migration, and mass urbanisation. Informal modes of transport may often be framed within a narrow lens, riddled with more bad than good. However, these informal transport service providers move 3.2 billion people across the globe, accounting for 85% of all commuters and passengers transported by informal modes of transport. In all of its flavour, the minibus taxi is a ubiquitous transport not just in the Global South but across cities in the world, and public policy must begin to consider how best to maximise its efficiency and role within a broader transport system.
To address the scale of this crisis, we must match the unique opportunity of forging partnerships rooted in collaboration, leveraging the role of technology and knowledge with the ability to embrace lessons learnt from across the globe seamlessly. It will enable us to find meaningful solutions and model improvement to benefit more than 3.2 billion people.
We cannot discount this monumental public policy intervention as it has the unique benefit of using mobility as a catalyst for billions of people across the world. More importantly, it will help us forge solutions that, as Naspers CEO, Phuti Mahanyele-Dabengwa remarked recently, will “provide solutions to local challenges that can improve the lives of ordinary people in South Africa and abroad”.
A key consideration currently underway across the Global South is the implementation of appropriate law enforcement, road regulation and subsidy policy interventions that can give the green light to integrating informal modes of transport within formal transport systems. These include Zola Budds in South Africa, tros in Ghana, danfo in Nigeria, peseros in Mexico City, matatu in Nairobi, and Jakarta’s ojek. It will provide choice, standardised quality of service and the ability for integration.
Our future’s focus is not merely about replacing the informal with heavily public subsidisation for integrated bus services or rail services. It should include a fair mix of public transport investment that enables the deployment of large peak demand-supply through the use of mass-transit bus services, light rail, commuter rail, and other rail-based services. It should also allow for the deployment of e-hailing services within an agreed regulatory framework and bring the informal into the system’s confines.
The staggering scale of the informal sector may seem impossible, with that sector transporting more than 14 million South Africans each day alone, and the rippling and ongoing impact of COVID-19 must not curtail our imagination but rather spur it onward. The Global South has a unique opportunity to create appropriate regulatory muscle and public policy certainty. It will enable our cities to function more effectively and for billions to access opportunity, amenity, educational opportunity and service with greater ease and also “finally be cooking with gas”.
“Never let a good crisis go to waste” goes a popular policymaking maxim that has been effectively used as a public policy tool before. We merely need to look to the 2008 financial crisis in which governments worldwide adopted a public policy (and indeed monetary mechanism) tool of injecting over $3 trillion into the financial system.
The venture capitalist has spotted the gap in our market and backed it with an investment in those businesses that will enable access to valuable data to understand how millions move across our cities and for what purpose.
The benefit of mapping the unknown will provide enhanced insights into our cities. These insights will provide a deeper understanding of how we invest public funding, leverage private-public partnerships meaningfully, confront climate change and water scarcity more responsively and retrofit our cities and communities to be smarter, more resilient, and integrated.
- Andrew Ihsaan Gasnolar
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