Catapulting Growth of Trade in Africa!

Africa’s tech habitude is on the rise. Internet usage has risen significantly on the continent. On top of that, the advent of the coronavirus pandemic accelerated the prospect of growth in the digital sphere. E-commerce is one such opportunity that affords businesses access to broader market opportunities in every arena. According to McKinsey, a worldwide consulting firm, the e-commerce industry in Africa is expected to grow to a $75 billion industry by 2025.

E-commerce is growing. It is accelerated by a growing and youthful population that is increasingly exposed and has an appetite for greater efficiency and improvement of business to first-world standards. The African diaspora has also contributed to this growing demand as people have become more exposed to what is going on around the world. Technology itself dissolves existing borders and opens up trade regionally and internationally.

A growing middle class on the continent has also created an expanded marketplace for e-commerce as consumers maintain demand and appetite for products that are delivered quickly, efficiently, and conveniently. This is what e-commerce offers. The advent of the African Continental Free Trade Area will serve to accelerate this growing demand further and open up the one billion-wide population for businesses to access. 

The fastest and easiest way for retail businesses to achieve this access is through interconnectedness via e-commerce platforms. As such, there is much scope for existing and growing media within the e-commerce sector.

Consumers on the continent continue to seek easier, better, and faster ways of getting high-quality goods at reasonable prices. Technology has also created a situation where consumers no longer want to waste time, as would be the case with traditional brick and mortar businesses.

Already e-commerce platforms such as Jumia have grown significantly since inception as demand continues to grow. There are several other smaller and developing market places that have emerged as well as technologies designed to allow small businesses the same access to e-commerce transacting.

Challenges to e-commerce 

One of the biggest challenges to e-commerce transactions comes in the form of logistical and transport-related obstacles. Because of poor infrastructure such as road networks, dilapidated rail infrastructure, and inadequate air transport getting goods from point A to point B remains a challenge. Further, living conditions, including poor urban planning, make it challenging to navigate in some cities. 

Many city dwellers live in rented premises and tend to move around a lot within these rented dwellings. This can be attributed to high unemployment levels and several other challenges that make it difficult for young people to own land and property. According to the Stocktaking of the Housing Sector in Sub-Saharan Africa Report by the World Bank, several households can’t afford basic formal housing and many don’t have access to mortgages. In addition, formal regulatory processes inhibit property ownership. As such, it makes it difficult to provide services such as door-to-door delivery of goods.

Also, there are simply no addresses in some areas. This may be attributable to a lack of town planning. In several countries, there are no street names or house numbers. Additionally, haphazard construction of houses makes it difficult to allocate a proper addressing system. This makes it extremely challenging to navigate streets with deliveries, using landmarks like big hotels or shops. What happens when the big blue pharmacy repaints? 

In some African countries, even where there is a proper address system, navigating is extremely difficult, and places are hard to find.  This creates the challenges of providing door-to-door delivery to consumers. One would need to engage with local third parties to complete the final part of the delivery. This increases cost and multiplies risk because most of these middlemen may not be appropriately registered businesses but, in effect, are people looking to make a quick buck.

Can E-commerce growth be sustained?

While indeed the e-commerce industry has growth potential, there are still impediments to the industry’s sustained growth. A lot remains to be done to address these challenges.

Internet connectivity

While internet connectivity is growing, there remains limited access across the continent. Coverage is limited, and the cost is very high in many countries. On top of that, a lack of access to electricity for a large part of the population hinders access to the internet. Not only that, but the speed of existing internet connections in some countries does not support buying goods on-line.

Lack of security

Because of internet accessibility issues, information and knowledge about internet security are still very limited among the majority of the population. As a result, there is a lack of trust for e-commerce products and services. The threat of scammers is also another challenge. African nations must do more to increase cybersecurity and awareness in order to facilitate increased trust and purchaser confidence in e-commerce transactions.

Address system

Locating and identifying customer addresses is an integral part of the e-commerce process. Apart from increasing trust, it facilitates easier delivery. However, this remains a significant challenge for e-commerce businesses in Africa. Because of the setup of most urban areas in Africa, improving the address system is a challenge. As you move from the main urban areas, it becomes even more difficult to have clear address systems. Through technology, some of these issues can be addressed; for example, GPS-based address systems to better identify addresses and locations.

Payment systems

About 60% of the population is unbanked or underbanked. The majority lack access to most internet-based payment systems. With the exception of some of Africa’s biggest economies like South Africa, payment systems pose a challenge to the fruition of e-commerce. 

While mobile money has taken space and grown significantly, the issue of payment systems still remains a challenge. As such, the development of fin-tech based systems that allow for more manageable payment on e-commerce platforms must continue to be accelerated. 

Fin-tech startups continue to garner investor interest, and more software programs and payment systems that aid economies are being developed. What is left is for regulation to match the level of innovation to create an environment that promotes and catapults the growth of e-commerce on the continent.

Final Word

The e-commerce industry is a critical growth industry on the continent, set to improve trade and expand on international and export trade opportunities. However, several challenges have to be addressed to bring the system up to par to reap the fruits of e-commerce in Africa.

Read also: Digital payments to drive African economies