The Rise of the Gig Economy in Ethiopia: A Pathway to Employment and Innovation

In Ethiopia, obtaining reliable estimates of the size of the local gig economy is challenging. But with Ethiopia’s youthful population quickly reaching 120 million, it is evident there are millions of informal gig workers.

The term gig economy refers to a type of employment that is flexible, temporary, or freelance as opposed to traditional full-time employment.

This category includes a wide range of individuals, from housemaids and daily laborers to web developers, research consultants, and graphic designers, whose work is short-term and does not require their presence in a permanent workspace. All these individuals are classified as independent contractors.

Recently, the gig economy has gained momentum in Ethiopia, and there has been a growing list of private sector actors providing services directly or indirectly related to freelancing and gigs, primarily through digital means.

Ride-hailing platforms, such as RIDE, are often considered the pioneers of internet-based gig work in Ethiopia, introducing this flexible employment model to a broad audience. These platforms, which allow drivers to offer their services at their discretion, not only mirror Uber’s model in the West but also reflect Uber’s role in popularizing the gig economy.

Following the success of ride-hailing platforms, e-commerce and delivery services emerged, utilizing fleets of motorcycle drivers working on an ad-hoc basis.

Today, it is common to find gig workers such as ride-hailing drivers, delivery personnel, or tutors within one’s social circle. In the professional world, too, many individuals are opting for freelancing over traditional full-time jobs, while others with full-time employment pursue side gigs for additional income.

Further, a growing number of young Ethiopian developers are also earning a living by working on global platforms like Upwork, a marketplace that connects businesses with independent talent around the globe, showcasing their talents and skills to a worldwide market.

Some of the factors propelling the gig economy in Ethiopia include technological advancements, the growing role of mobile technology and internet penetration, urbanization, high youth unemployment rates, and the influence of global trends.

Outside of ride-hailing platforms, which provide livelihoods for estimated thousands of drivers, the main generic gig platforms in Ethiopia include GoodayOn, and Taskmoby, among others.

The more successful of them, GoodayOn, was also able to launch a premium subscription service. GoodayOn, which has over 100,000 downloads, connects service providers such as domestic help, tutors, nannies, maids, painters, and electricians with service requestors.

GoodayOn decided to monetize some of its services after more than two years of operation and receiving over 250,000 service requests.

Meanwhile, sector-specific platforms like Haleta Tutors, which connects parents with tutors, and Mogzit, which offers flexible and convenient nanny services, have also emerged.

Most of these gig platforms in Ethiopia are accessible through mobile apps on both Android and iOS, as well as through call centers, which play a crucial role in reaching clients without smartphones. Additionally, these platforms utilize geolocation technology to help users locate gig workers within close proximity.

This mushrooming economy also recently received a significant boost. In early March 2023, Gebeya Inc., a prominent Ethiopian startup and SaaS-enabled marketplace, and the Mastercard Foundation introduced an impactful initiative known as Mesirat.

Mesirat is a five-year program aimed at equipping 100 Ethiopian entrepreneurs with their own multi-sided gig marketplaces.

Powered by $48 million, the program will co-create and replicate Gebeya’s model, which has successfully connected freelancers to clients, in sectors such as tourism and hospitality, agriculture, education, construction, healthcare, commerce, manufacturing, IT, professional services, transport, Fast-Moving Consumer Goods (FMCG), and entertainment.

The project aims to empower two million young people with market-facing skills and enable one million of them, including 70% women and 10% youth and disadvantaged groups, to find dignified and fulfilling Gig work.

To ensure the success of this program, Mesirat is being executed by a collective of consortium partners which includes ACE Advisors, American College of Technology (ACT), Shega Media & Technology, The Urban Center, Center for Accelerated Women’s Economic Empowerment (CAWEE), and Laurendeau & Associates. 

However, despite these promising efforts, Ethiopia’s gig economy is still in its infancy compared to global statistics. A 2019 Mastercard Inc. survey shows that the gig economy generated $204 billion in gross volume. Additionally, the gross volume is expected to grow to $455 billion by 2023.

Neighboring Kenya, with a population of a bit over 50 million, had five million gig workers, according to another assessment issued by Mastercard Inc. in 2020. Furthermore, the report revealed that 60% of these workers expressed a preference for online gigs over offline ones.

Meanwhile in Ethiopia, a 2020 report titled Ethiopia’s Digital Economy by private equity investment firm, Cepheus Growth Capital Partners, has found that gig platforms face challenges in regulatory requirements, a lack of reliable/consistent service providers, and the predominance of informal matchmaking alternatives.

Current labor laws and policies in Ethiopia do not adequately address the unique needs of gig workers, leading to potential taxation and compliance issues for both workers and platforms.

Furthermore, job stability and social protection are concerns due to the temporary nature of gig work, which often results in income insecurity and a lack of benefits such as pensions. The digital divide and unequal access to resources between urban and rural areas exacerbate these challenges.

In 2020, the formerly Jobs Creation Commission and the now Ministry of Labor & Skills, recognizing the impact of the gig economy, established the Freelancing, Outsourcing, and Gigs (FROG) Taskforce. The aim was to place FROG at the core of Ethiopia’s service sector transformation. The Taskforce was given the responsibility of identifying linkages between freelancing, outsourcing, and gig business models as well as sharing best practices and information.

If Ethiopia can accelerate its progress, strengthen its current efforts, and overcome sector challenges, the emergence of the gig economy presents a multitude of opportunities and advantages. Ethiopia is a nation grappling with a high unemployment rate. Annually, two to three million people join the workforce, contributing to the urban unemployment rate of 17.9 pc, as reported by the Ethiopian Statistics Service in 2021.

In this context, the gig economy offers a partial solution. And as it continues to expand in Ethiopia, it brings with it a host of other benefits, such as increased flexibility, improved work-life balance, opportunities for entrepreneurship, fostering of innovation, enhanced financial inclusion, and the promotion of skill development.

Therefore, to ensure the sustainable growth of the gig economy, policymakers should consider revising laws and regulations to better accommodate the needs of gig workers and platforms. This would include provisions for worker protections, taxation, and compliance that are tailored to the unique characteristics of gig work. Additionally, efforts should be made to bridge the digital divide and provide equal access to resources for all, while prioritizing developing reliable and consistent services across various sectors.

Collaboration between the government, private sector, and international partners, such as the Mastercard Foundation, is also crucial in harnessing the full potential of Ethiopia’s gig economy. By leveraging the opportunities presented by this new employment paradigm, Ethiopia can create an inclusive, flexible, and diverse labor market that empowers its citizens and propels the nation toward a prosperous future.

As the gig economy in Ethiopia evolves, it has the potential to become an engine for innovation and progress, enabling millions of Ethiopians to build a better tomorrow. Embracing the opportunities, it presents while addressing the challenges it poses will be essential to unlocking its full potential and securing a brighter future for Ethiopia and its people.