DropX closes shop due to intense competition 

December 22, 2023
5 min read
Man carrying several boxes

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Victoria from Techpoint Africa here,

Here's what I've got for you today:

  • DropX closes shop due to intense competition
  • Ride-hailing drivers to pay tax in Ghana
  • Cloudline's $6m seed funding

DropX closes shop due to intense competition

Man carrying several boxes
Photo by Maarten van den Heuvel on Unsplash

DropX, a Nigerian on-demand logistics startup, announced its shutdown two days ago due to intense competition.

Praise Alli-Johnson and Oluwatope Liasu founded the company in 2021 to create a local delivery network that connects customers and businesses with freelance couriers.

DropX faced several challenges despite attracting 2,000 customers and hiring 500 drivers, most of whom were car owners.

The company also says it struggled to strike a balance between driver earnings and user-friendly prices, forcing the founders to cover the shortfall to keep orders coming in.

Due to the intense competition in the ride-hailing sector, attempts to implement surge pricing models were met with a backlash from users.

The company integrated bikes alongside cars to diversify its fleet and better serve user needs. Unintentionally upsetting high-value clients, users preferred cheaper bike deliveries due to this move.

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Seeking scalable solutions, the company looked into joint ventures with bike suppliers such as TVS. Sadly, these plans were dashed by government regulations outlawing particular bike models. Other challenges like in-app purchases and user behaviour made DropX's issues worse.

Partnership attempts with the Nigerian Postal Service (NIPOST), the country's courier service, also failed. Due to mounting financial strain, the founders had to use their salaries in the last few months to pay for deliveries. In the end, they made the difficult choice to close the business.

Zoom out: Recently, Jumia Food exited seven African countries: Nigeria, Kenya, Morocco, Ivory Coast, Tunisia, Uganda, and Algeria.

Ride-hailing drivers to pay tax in Ghana

Ghana Revenue Authority

Starting January 1, 2024, e-hailing drivers in Ghana, including Uber, Bolt, and Yango, will pay quarterly income tax. This move could affect the cost of ride-hailing services in Ghana.

All ride-hailing drivers must register their vehicles at the Ghana Revenue Authority (GRA) office to use the shortcode *222# to make Vehicle Income Tax (VIT) payments.

Besides, the GRA directed new and existing drivers to update their digital platforms and provide proof of VIT payments.

The Authority issued a guideline for ride-hailing companies, mandating that they demand a soft copy of the VIT sticker, validate the authenticity of stickers with the GRA, and submit a list of all vehicles on their platform to the authority quarterly.

This development coincides with Section 22 of Regulations 2016, LI 2244, which addresses the calculation of chargeable income.

Penalties for drivers and ride-hailing services may arise from noncompliance with these regulations.

This isn’t the first time Ghana will charge e-hailing drivers. In 2019, the Driver and Vehicle Licencing Authority (DVLA) charged drivers who used ride-hailing services like Uber, Yango, and Bolt an annual fee of GH¢60 ($5).

Zoom out: Last week, Bolt Nigeria announced a fuel subsidy bonus campaign for its drivers in Lagos and Abuja to help them mitigate the impact of the rising fuel price. The country’s ride-hailing platform says the campaign will run for the remaining days of the year.  

Cloudline's $6m seed round

Cloudline in the sky
Image source: TechCrunch

Cloudline, a South African aerospace startup, has raised a $6 million seed round to expand into Namibia and Mozambique.

Several investors, including Schmidt Futures, Raba Partnership, Verod-Kepple Africa Ventures, and 4Di, took part in the round.

Founded in 2017 by Spencer Horne (CEO), Cloudline’s autonomous airships offer a more affordable option to satellites, drones, and helicopters while enabling real-time data collection in the most difficult-to-reach and expensive-to-serve locations.

Per the company, its airships can travel over 400 km (250 miles) with a fully loaded payload of 40 kg (90 lbs) and operate for 10 hours.

Because they are powered by helium gas for lift and maintained by solar power with a battery backup, these carbon-free airship cruise flights emit no emissions and have significantly lower operating costs.

Because of its hardware-centric approach, Cloudline operates in a comparatively uncompetitive market.

Although there may be competition from other drone operators in the autonomous aerial infrastructure space if they decide to enter the airship market, Horne emphasises that Cloudline's early-mover advantage gives the startup a competitive edge.

Horne says the startup obtained all necessary regulatory approvals before beginning commercial operations in South Africa. Before expanding into foreign markets, it wants to expand into Namibia and Mozambique.

Cloudline became the first airship to fly in East Africa when it conducted proof flights earlier in 2023 for Kenyan authorities.

What’s more, the CEO asserts that Cloudline has seen a four-fold increase in revenue in 2023. The startup anticipates significant growth in 2024, driven by multiple multi-million-dollar enterprise contracts.

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Have a joyous celebration!

Victoria Fakiya for Techpoint Africa.

She's autistic and interested in mental health and how technology can help Africans with mental disorders. Find her on Twitter @latoria_ria.
She's autistic and interested in mental health and how technology can help Africans with mental disorders. Find her on Twitter @latoria_ria.
She's autistic and interested in mental health and how technology can help Africans with mental disorders. Find her on Twitter @latoria_ria.

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