E-commerce growth in Africa

Paypal, in the 4th Annual Crossborder E-commerce report, found that South Africans will spend more than R45 billion in 2018 on online shopping.

German startup investor Rocket Internet is preparing its IPO for African platform Jumia, which runs e-commerce operations in 14 African countries.

Alibaba founder Jack Ma earlier this year set aside a $10 million fund for African entrepreneurs. While we are yet to see how African entrepreneurs are developed in the space, the eCommerce genius Ma was critical of tax and regulatory environments across Africa.

South Africa’s Woolworths has launched in app shopping through its integrated lifestyle app.

 

 

 

These latest developments in the eCommerce space on the African continent demonstrate the powerful growth of the online shopping and mobile payment ecosystems. Continued growth in the critical mass of connected users means an increase in the e-commerce domestic market.

Over the last two years, this sector has been hugely popular with investors and entrepreneurs, galvanised by the current and expected dynamism of the e-commerce market in Africa, which could represent 75 billion dollars in 2025. This is according to a McKinsey Global Institute. Lions go digital: The Internet’s transformative potential in Africa report.

Findings from a Deloitte African Powers of Retailing report shows that the African E-commerce market is worth $50 billion dollars this year compared to $8 billion in 2013.

E-commerce shows itself to be a dynamic sector in Africa. A recent report entitled Afrishopping identified 264 companies engaging in e-commerce activities in 23 African markets, in various subsectors of online sales, including capital goods, clothing, taxi services, and travel.[6] The report also identified a high concentration in a few national markets such as Kenya, Nigeria, and South Africa. Within the sector, there is a wide variety of players, both in terms of size – with the presence of small start-ups as well as large multinational groups – and of industrial trajectory.

 

 

Material Constraints and consumption patterns

 

E-commerce platforms seeking to play in the African space can’t rely on models that exist elsewhere. They require an approach of understanding the African environment of material constraints and consumption patterns.

How do we understand this? It is in investment in offline activity and the human resources needed to build the business in the area, as well as create trust with consumers.

As an example: Look at the physical layout and infrastructure of a typical African country or town for trade. With lack of street names, a competitive advantage that a company can have is securing the services of drivers who know every nook and cranny of space that is not easily identifiable on the map.

Another example of breaking into a market despite it’s constraints is Jumia with their representatives called ‘JForce’ who go to regions and neighborhoods that are poorly connected. These agents have tablets and show the Jumia platform to people in the street and show them how to order products. Multilingual mobile applications are also being developed to meet the consumers exactly where they are.

 

Mobile payment technologies

 

A crucial element in the e-commerce model is the payment gateway. Payment gateways that work well within the infrastructure of the trilogy of devices, connectivity and fintech regulatory guidelines, will lead in the market.

In Kenya, banks are pursuing regulatory approval to use distributed ledger technologies (DLTs) to facilitate payments and create credit scoring models. In Nigeria, Microsoft and First Bank are linking up to bring financial services to consumers there.

And still in Kenya, payments company Paystack received investment to the tune of $8 million from payment firms like Stripe, Visa and other players.

SWIFT, the global provider of financial messaging services reported that African usage of the US dollar dropped from 50% in 2013 to 45.1% in 2017; the attributing factors points to increased usage of mobile payments and local currencies.

 

 

 

And in August 2018, the United Nations Economic Commission for Africa (UNECA) announced a collaboration with the International Financial Corporation (IFC) and an affiliate of the Alibaba Group, Ant Financial — formerly known as Alipay.

The collaboration, according to UNECA is to enhance financial inclusion on the continent through investment and technical capacity building.

The African continent is only getting started. Increased inclusion of all sectors of society into the digital economy, a push for better regulatory practises that help rather than hinder, innovative solutions that address everyday challenges and work with the existing infrastructure; all the elements of a growth of 75 billions dollars by 2025.

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