Web of Permits: Inside the Licensing Regime of Gig Platforms in Ethiopia

On October 9th, a collective of creative minds, innovators, researchers, regulators, and entrepreneurs gathered at the Radisson Blu Hotel in Addis Ababa for the Mesirat Knowledge Series on Digital ID, Taxation, and Gig Workers’ Employment Classification. The event marked the inaugural knowledge series of the Mesirat Entrepreneurship Program, designed to spearhead Ethiopia’s gig economy. The gathering highlighted the complexities and uncertainties surrounding the licensing of gig platforms in Ethiopia and its subsequent implication.

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Facilitated by the growth of mobile devices, internet penetration, urbanization, and high youth unemployment rates, the gig economy in Ethiopia has been gaining traction in recent years. Several platforms have emerged over the years, connecting workers to various gigs. These range from ride-hailing services such as Yango to delivery and creative gig platforms like Findall.

According to Mesirat’s recent policy digest on gig platforms published in September 2023, the surge extends beyond the capital to Gonder, Pawi, Metema, Adama, Bure, Nekemet, Jima, Mizan, and Wolaita, marking major regional expansions in the last two years. Despite this significant milestone in the Ethiopian gig economy, the ease of doing business for gig startups remains a challenge. 

This same study, titled Gig Platforms and Gig Workers Classification and Taxation in Ethiopia by Laurendeau & Associates, has found that more than half of gig businesses in Ethiopia have encountered difficulties in determining the appropriate classification and obtaining the necessary license.

Gig businesses are required to obtain licenses tailored to the specific sectors they work in, while some are even required to get multiple licenses to provide a single business. These findings were reported earlier in another study by Cepheus Growth Capital in 2020. But the problem still persists. 

The L&A study states, “There is a gig platform that was initially registered as a software development company. As it began offering job matching services for gig workers in the HomeServices sector, it was required that it obtains a license for labor recruitment and linkage. The company was again required to obtain a construction and finishing license to link plumbers and painters with customers.”

To understand how gig platforms are navigating the existing legislation and lack of appropriate classification, we spoke with startups, from recent entrants like Yango and Findall to established ones such as GoodayOn, Mogzit, and Freelance Ethiopia. We also further explored the reality on the ground by taking the issue to policy experts and stakeholders.

Spotlight on Gig Platforms

“Findall came to life following a conversation with my partner Beki (Co-founder and COO), where we recognized a shortage of stock images and design assets that truly capture the essence of the Ethiopian identity.’’ Markos Awraris, the CEO and co-founder of Findall, told Shega.

The platform emerged from a shared passion for empowering creatives by providing a platform that enables them to showcase their work and connects them to clients. “We envisioned a space that brings together diverse talents, fosters collaboration, and enables success. And our journey began with a desire to bridge the gap between creatives and opportunities, ultimately leading to the creation of Findall”, underscores Berket Getnet, co-founder and COO.

Ethiopia’s growing economy presents immense opportunities for a creative gig-work platform like Findall. As the country embraces digital transformation, there’s a rising demand for diverse creative services. The platform aims to tap into this demand and contribute to the creative economy.

The platform is currently operating under the umbrella of BerberaMarket.com and intends to become an autonomous entity.

“Yet there are no specific categories available for us, and the exact trajectory of the subsequent process remains unknown,” Bereket added.

Bigger Implications

“Securing foreign investment for Ethiopian-based startups is an uphill battle. Even after successfully obtaining investment, transferring funds to Ethiopia is a formidable challenge. This stems from the lack of proper licensing procedures and efficient coordination between city and federal government offices,” remarks Alem Abreha, co-founder and CEO of GoodayOn. GoodayOn, a pioneering digital gig marketplace in Ethiopia, facilitates connections between skilled service providers such as domestic help and home repair professionals with clients, emphasizing convenience, affordability, and quality through technology-driven high-precision matching.

Since its inception in 2020 by Alem and Tigist Afework during the COVID-19 pandemic, GoodayOn has emerged as one of Ethiopia’s leading digital gig marketplaces. It boasts over 150,000 app downloads, more than 40,000 gig workers, around 290,000 gig worker searches, and over 80,000 successful gig matches.

Nevertheless, the absence of standardized licensing for gig platforms poses continuous obstacles for GoodayOn, affecting funding and investment operations. Initially operating under a digital marketing license, GoodayOn transitioned to a software development license due to the barriers faced in securing an investment permit for foreign direct investment. Despite these adjustments, challenges remain prevalent.

“We secured funding from a Japanese Venture Capital (VC) firm based in the US for our Delaware-incorporated holding entity in late May. However, despite having a software development license, now we are in the fifth month since we started the process towards an investment license and we are still in a bureaucratic shuffle between the investment commission and the Ministry of Trade and Regional Integration  offices,” Alem states.

Like GoodayOn, Mogizt In-Home Care, a sector-specific digital gig platform that connects caregivers with care seekers, shares the sentiment that the lack of appropriate license categories poses. The co-founder and CEO of Mogzit looks back and shares the story behind the creation of her tech startup.

“The inspiration behind Mogzit came from an article I read, stating that millions of women worldwide are forced to quit their jobs due to a lack of childcare services, resulting in over $800 billion in revenue loss. This issue resonated with me, as it is also true in Ethiopia. For working parents, especially ambitious women, the absence of a reliable childcare system has been a significant obstacle. Concurrently, the unemployment rate in the country has been on the rise.”

Mogizt, which started operations with 20 registered nannies two years ago, now has 1000 registered caregivers on their platform, and they call themselves “the Uber of nannies.”

Although the Mogizt business model operates as a marketplace, the legal registration process in Ethiopia required them to select a related sector since the marketplace sector was not available at the time.

“We registered as a software development company. As a software development company, we had to obtain professional competence from the Ministry of Innovation and Technology (MInT), followed by business registration and obtaining a business license.” Samrawit told Shega.

For Samrawit, the most challenging aspect was determining the sector that aligns with her business model. Apparently, Mogzit isn’t the only business entity facing the same challenge.

Related- The Uber for Nannies: Mogzit’s Innovative Soluti