- E-commerce is a key component of the fourth industrial revolution and Africa is poised to become the world’s next big online retail frontier
- Significant players like Konga, Jumia and Takealot are putting the continent on the global map, attracting pools of investors,
- Statistics indicate that there are about 264 e-commerce start-ups that are operational across the continent, active in at least 23 countries; with a potential to create an estimated 3 million jobs by 2025
The rapid mushrooming and proliferation of E-Commerce Startups in Africa is a distinct bellwether that the industry is steadily flourishing like a green bay tree; making for a powerful development driver in the African economy.
E-commerce is a key component of the fourth industrial revolution and Africa is poised to become the world’s next big online retail frontier; with markets swiftly moving to embrace this revolution in full throttle, looking to build on the momentum and diversify opportunities to further appeal to global brands to pour in more investments.
Micro, Small and Medium-Sized Enterprises across Africa have been keen to take advantage of digital markets and milk the opportunities therein, to widen their reach and consumer base, thereby growing profits. Internet business in Africa is projected to contribute US$180B to the continent’s GDP by 2025.
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Moreover, the industry is set to soar even higher if the economic playing field is levelled for women, by narrowing the long-standing gender gaps that have been impeding the economic empowerment of women. According to a recent report by the International Finance Corporation (IFC), closing gender gaps in this arena could add nearly US$15 B to the value of Africa’s e-commerce industry, between 2025 and 2030 alone, putting billions in the hands of women entrepreneurs.
Statistics indicate that there are about 264 e-commerce start-ups that are operational across the continent, active in at least 23 countries; with a potential to create an estimated 3 million jobs by 2025. Significant players like Konga, Jumia and Takealot are putting the continent on the global map, attracting pools of investors, such as the recent US$300 million injected into Nigeria’s Omni channel e-commerce group Konga, which has additionally been hailed by Forbes, as the first African e-commerce player to hit profitability, with projections to attract over US$2B valuations when it eventually decides to go public.
The recent report by UN Conference on Trade and Development (UNCTAD), indicates that global e-commerce sales reached US$26.7 trillion in 2019, with at least 1.5 billion people consuming products and services through e-commerce platforms.
According to estimates by Statista, the e-commerce revenue in Africa will keep increasing between 2021 and 2025; in the latter, the whole sector in Africa might reach a value of over US$46.1. Furthermore, in 2020 the African e-commerce market was estimated to be worth US$20B; with the revenue generated by online shopping in Africa, being around US$27.97B an increase by 6B since 2019. Between 2014 and 2018, the number of online shoppers on the continent increased annually, at an average growth rate of 18 per cent, higher than the global average of 12 per cent.
Emerging cross-border e-commerce markets have been defining the way Africa’s sector is evolving; with the sector proving crucial in opening markets to otherwise isolated rural communities, and servicing Africa’s fast-growing consumer class.
Again, emerging retail markets in Africa have the potential to leapfrog brick-and-mortar stores, as poor transport infrastructure and high levels of crime in many African cities may make it easier and safer for customers to purchase products from their homes (Media24 2014).
State of e-commerce penetration in Africa
Africa’s e-commerce landscape has been on an upward growth trajectory, especially in key competitive markets like Nigeria, Egypt, Kenya, South Africa and Morocco.
This has been largely facilitated by the spread of telecommunication technologies and internet penetration; which has paved way for digital payments and mobile e-commerce. The latter is currently dominating the online shopping scene due to its convenience, such as Kenya’s M-Pesa, which is the most successful mobile-phone-based financial service in the region according to the WTO.
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The market boom has been attributed to several leading companies such as Konga and Jumia headquartered in Nigeria. Jumia is also operational in Kenya and so is Kilimall. Takealot in South Africa and Souq in Egypt; an Amazon company with the largest platform in Arab-speaking countries are also key players in the continent.
In terms of consumer preferences on what African digital shoppers prefer to buy online; a survey by Statista of the markets in Kenya, Egypt, South Africa, Morocco and Nigeria; revealed that most buyers purchase clothing, shoes and consumer electronics. By the same token, recent data indicate that the share of digital buyers is around 58 per cent in South Africa whilst in Egypt, at least 57 per cent of internet users have purchased something online. According to the London-based market research firm, Euromonitor, South Africa’s e-commerce retail sales accounted for US$1.2B in 2019.
E-commerce in Rwanda was projected to reach US$79M in 2021, with an annual growth of around 12.5 per cent until 2025, according to Statista. In only a span of six months, Rwanda’s DUBUY.com has received 500,000 website visits from sellers and buyers and has already built a community of more than 4,000 active merchants on the platform. By 2025, Rwanda projects to add five million users to utilize e-commerce services
Gender inclusion: Opportunities for women in e-commerce
‘Breaking the Bias’ was the theme for the recently celebrated 2022 International Women’s Day, to raise awareness against bias, celebrate women’s achievement and take action for equality.
A report by IFC and Jumia indicates that women account for half of all active e-commerce sellers in Africa; with 51 per cent of sellers in Kenya and Nigeria, which are key markets for Jumia. In addition, women own between one-third in Cote d’Ivoire and just over half in both Kenya and Nigeria of companies on Jumia. During the height of the pandemic in 2020, women’s sales fell by 7 per cent whilst in parallel men’s rose at the same rate.
E-commerce has proven to be a force for sustainable development, driving the inclusion of women in economic activities; and a game-changer for women entrepreneurs who have previously been locked out of the normal workforce, due to family duties and societal norms. However, they can now harness myriad e-business opportunities. E-commerce has been empowering women pertinently in the SME sector, with many of them leveraging online platforms to grow their businesses.
According to research by the UN Informal Sector Development, women are the principal labour force in the informal economy, particularly in textiles, agriculture, retail, food and beverages and cross-border trade.
For instance, in Nigeria, there are over 41 million SMEs with 40 per cent of them being female-owned. During the recent international women’s day, Juliet Anammah, Jumia’s Chairperson and Chief Sustainability Officer, highlighted that e-commerce has been a pivotal tool in empowering women in Nigeria and Africa as a whole; with its platforms well positioned to provide training to women-owned businesses.
Recent research by IFC highlights key opportunities for action, to ensure the digital economy is an inclusive economy; this is by targeting women with fintech platforms, recruiting from social commerce and adequate training on digital skills. Women entrepreneurs can spearhead the future of Africa’s digital economy, if well supported.
Roadblocks thwarting Africa’s e-commerce progression
The budding lucrative African E-Commerce industry has encountered several headwinds, crippling its full growth and development such as internet penetration, payments, weak delivery logistics, cybercrime, inadequate consumer protection, weak legal and regulatory frameworks, together with poor digital infrastructure and low consumer digital trust.
Internet penetration has especially been a primary hurdle, GSMA estimates that mobile internet users in Africa will increase to 475m by 2025, however for this to materialize high smartphone costs and tariffs need to be capped. In 2020, only a paltry 28 per cent of African households in urban areas had access to the internet, which was ascribed to the high cost of internet data in some countries coupled with the cost of smartphones.
“For penetration rates to reach their potential, high smartphone costs need to be addressed. Ensuring there are no tariffs on smartphones, especially on more affordable models, will help individuals in villages afford the technology. This will encourage more people to migrate from traditional mobiles to smartphones, thus increasing internet access and penetration” says Juliet Anammah. The perception and fear thereof, of losing money via online channels to cyber attackers, has been an existential barrier as a lot of consumers still prefer tangible cash.
An underbanked populace, coupled with insufficient payment gateways also poses a major challenge; by 2019, 57 per cent of Africa’s adult population was underbanked. Dysfunctional transport networks and poor naming and numbering of streets, coupled with the lack of official postal addresses hampers efficient last-mile delivery and causes shipping errors.
For instance, a report on Kenya’s digital economy revealed that 40 per cent of e-commerce users face challenges in receiving deliveries.
Eradicating Africa’s existential e-commerce hurdles
Despite the plethora of challenges plaguing the e-commerce industry in Africa, there is indeed hope on the horizon, to ensure the nascent sector thrives and becomes sustainable. First, policies and regulations are critical, as they shape any business environment; in Africa, they need to be effectively implemented in the e-commerce industry, as they have a ripple effect on everything from internet prices to payments and IP protection.
Policies in the continent are lagging behind, with only a few countries possessing rules for online consumer protection, only 20 out of 54 nations.
Government and public sector support are vital in growing Africa’s e-commerce industry, coupled with new legislation and resources. Policymakers additionally need to improve local and global interoperability. Concerted efforts between the public and private sectors are critical to enhancing mobile-driven digital trade on the continent. African governments need to support initiatives such as the AU’s Digital Transformation Strategy for Africa, which is not only aimed at deepening digital economies but ultimately transforming lives.
Efforts to grow the technology sector need to be amplified, by investing and ramping up the support of African tech start-ups, which will serve as the conduit for realizing the full potential of e-commerce in the continent. The provision of safe digital infrastructure will encourage businesses to take a leap into e-commerce, improving their reach and ultimately strengthening and boosting local economies.
Expansion of internet penetration and connectivity needs to be enhanced, only a quarter of Africa’s population regularly use the internet due to high costs. Commitments need to be made and fulfilled, to allow for inclusive internet access across the continent.
E-payments need a major boost in a continent where cash on delivery is preferred to the nascent cashless transition. Fintech companies need to provide safe and convenient payment solutions, to cater to the needs of consumers and simultaneously, increase their adoption. In addition, consumers need to be educated about the safety and transparency of digital payments, to bolster competitive positioning. Countries need to additionally increase digital skills uptake.
Data protection and consumer protection laws should be affected because consumer confidence can only spring from transacting safely. Data should also be properly governed and managed; first by ratifying the AU Convention on Cyber Security and Personal Data Protection, as set in the Malabo Convention.
In addition, according to WTO transaction security is a major concern for African e-commerce participants. Consequently, its only platforms keen on cybersecurity will record a boom in the business.
African governments need to avail improved and upgraded logistics services. To alleviate mounting logistical pressure, crowdsourced delivery or drone delivery could be the solution to navigating poor infrastructure in many African nations. Delivery and shipping processes need to be optimized and made seamless, to create a good customer experience and grow loyalty among consumers.
Existential loopholes in the supply chain also need to be identified and nipped at the bud.
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