Gokada: a new growth in logistics

Gokada was badly affected when the Lagos state government implemented the ban on passenger motorcycles in February. Unlike other bike hailing companies like MAX and OPay, the ubiquitous Gokada had only one market (Lagos) and offered only one service (bike hailing).

Founded in 2018, Gokada is one of two companies that pioneered the bike hailing innovation in Nigeria. But in February its future looked bleak. A company that had raised $5.3 million barely a year before was on the verge of collapse. It tried one last time to avoid the ban.

Gokada formed a coalition with other bike hailing companies to protest and lobby the government to relax the rules. In a coordinated manner, hundreds of bikers took to the streets with placards en route to the Lagos State House of Assembly. The move failed; the government didn’t yield. The ban kicked in on February 1. Bike hailing services have not transported a single passenger on any of the restricted locations since. Two days after the ban went into effect, Gokada’s CEO, Fahim Saleh laid off roughly 80% of its workforce. The company announced a pivot into delivery services and wanted to conserve enough cash for its runway in the new business. While that decision was rushed, early indications show Gokada’s pivot is paying off. The recipe for this is Saleh’s past experience running a bike hailing service in Bangladesh. Its new growth is thanks, in part, to Saleh’s prior logistics experience in Bangladesh, his home country.

“The [okada] ban basically came out of nowhere,” Saleh said.

For two years, Gokada and other bike hailing services operated in a regulatory grey area. There was always an existential risk. Should the government fully enforce the road transport laws, bike hailing services would face a major challenge.
By June 2019, new trouble started with the transport unions. The unions demanded a daily levy from each biker affiliated with a bike hailing service. The dispute continued for the rest of the year. In late January, the government announced it would ban motorbikes from six of 21 local government areas. These six locations represent Lagos’ commercial capital, housing many of its companies and residential neighbourhoods. Passenger transport in these locations represented the largest part of bike hailing revenue.

“Granted that we had a lot of conversations with the government we thought there would be a significant heads up before something like this would happen,” Saleh said. When Gokada launched in 2017, Saleh ruled out logistics services. “I just assumed that the delivery market was something not worth looking at because it seemed to already have a lot of competition.”

However, the ban prompted a “completely different shift” in mindset. Gokada quickly saw new opportunities in logistics and realised it could compete favourably in this market.
The logistics industry in Lagos has predictable regulations and only allowed the use of bikes with 200cc. Most delivery companies are fragmented and have a relatively small number of 200 bikes. Gokada has 2,000 of them and 800 bikers.

Other bike hailing companies have also entered the logistics space. MAX is a natural in this space. This was its original model before it flagged off its passenger transport operations. ORide, the one-year-old service, recently created OExpress, its logistics arm. There is another twist to the new competition in the logistics space. After originally amassing a high number of 200 motorbikes for passenger transport, ORide is now selling some of them. With these bikes reportedly selling for less than ₦280,000, other logistics operators are snapping them up to shore up their bike fleet, increasing the number of bikes in the space.

But while competition heats up, the government regulators are taking notice. The Lagos government is planning to step up enforce logistics regulations, while national logistics regulators are lurking.

1 thought on “Gokada: a new growth in logistics

Leave a Reply

Your email address will not be published. Required fields are marked *