AFRICAN E-COMMERCE: AN ADVENTURE IN UNCERTAIN GROWTH IN THE MIDST OF HUGE POTENTIALS.

Africa, with its diverse 1.4bl population staggered across 54 countries has been described as the next e-commerce frontier. Numerous reports from reputable international research consultancies attest to this.

Global consultancy, Mckinsey is predicting that will gross about $75 billion by the year 2025.

The research firm Statistica, was even more optimistic in its report. It is predicting that African ecommerce, which from its estimates generated $27 billion in 2017, will gross $29 billion by the year 2022.

However, it must be emphasized ecommerce in Africa still has long way to go, if its volume and the profitability of its transaction must match international comparisons.

Research firm Statistica, revealed that the value of African Ecommerce in the year 2017 which stood at an estimated $27billion , is just 1.1% of total global value of ecommerce which stood at $2.3 trillion as at 2017.

It can be safely assumed that Africa is yet to attain its full potentials in ecommerce, especially when its population of 1.6 billion roughly equal to 1.6667 billion customers that generated the global ecommerce sales volume of $2.3 trillion in the year 2017.

In addition to this conversation, not only is the value and volume of ecommerce still low in Africa, ecommerce in Africa is still largely unprofitable. Disrupt Africa, an ecommerce research consultancy in its 2017 report titled “African shopping: exploring the African ecommerce ecosystem” reported that about 75% of Africa’s ecommerce start-ups are unprofitable.

This reinforces the fact the imperativeness of putting in proactive policy initiatives and visionary action plans if Africa is to be able to successfully take its giant leap forward in ecommerce, thereby achieving its full potentials.

I.    Africa’s E-Commerce: The Potential And The Promise Of  Growth

Africa is home to about 1.25 billion people inhabiting 54 countries. The exponential growth in the use of mobile telephony has contributed a great deal to the development ecommerce in Africa. In fact, Africa has been described as a mobile ecommerce market.

Ecommerce in Africa is dominated by three (3) countries namely: Nigeria with a population of 195 million people and an internet penetration of 48%; Kenya with a population of48.5 million and an internet penetration of 75% and South Africa with a population of 55 million and an internet penetration of 54%. The research firm STASTICA estimated that African ecommerce generated an estimated revenue of $16.5 billion in the year 2017. The research firm is predicting that revenue from ecommerce in Africa will reach by the year 2022.

The Individual and Institutional Drivers of Growth

Like every other region of the world, the evolution and the pattern of growth of e-commerce in Africa followed and satisfied these criteria:

  • Convenience
  • Lower Prices
  • Increased Variety of Choices. 

From the institutional perspective, the key drivers of growth are:

  • JUMIA Group; a group founded in 2012 and which has about 3,000 employees from operations in 14 African and Middle East countries.
  • KONGA, a company founded in 2012 and later acquired in March 2018by Zinox Technologies, a Nigerian hardware and financial services firm.
  • Kilimall, a company headquartered in Kenya, and with sales outlets in Nigeria and Uganda.
  • Garden, a company launched in Kenya in 2017. It sells 23000 unique products through more than 3000 sellers.

II.       The 2019 All African E-Commerce Conference: The Issues And The Challenges.

The growth-path or trajectory of Africa’s E- commerce can be likened to growth-path and trajectory of the lily flower. The lily flower has to contend with the harshness and hardness of the soil before it breaks through, and shoots up to maturity. In the same manner, Africa’s e-commerce is beginning to have to contend with the infrastructural, policy, cultural, cultural technological and other operational obstacles standing in its trajectory or growth-path; even as it blossoms and matures to full blossoming and maturity.

Africa’s e- commerce is contending and defying the excruciating and depreciating poverty which is still wasting and reducing the purchasing power of the African middle class. The African development Bank estimated the size of this African middle class to be about 313 million, which represents about 34% other estimated African population.

Africa’s middle class is contending with and defying the absence or the lamentable state of critical internet and e-commerce infrastructure like constant and reliable power supply and accessible and affordable broadband services. Power supply is epileptic in nature; while broadband services where it is available is still quite expensive.

Africa’s e-commerce is contending with and defying the infamous policy somersault, which has come to define the policy making and execution regime of most African governments. This in effect translates to the fact that serious-minded investors and entrepreneurs cannot make long-term plans with certainty.

The African e-commerce is contending with and defying the near absence of local contents or inputs. E-commerce platforms, channels and market are mainly foreign based. Moreover the technology servicing or running the channels or platforms (software included) have little or no African input. In addition, the articles of trade are mostly foreign.

Lastly, Africa’s e-commerce is contending with and defying the corruptive and disruptive influence of cyber or online criminals and fraudsters. The damage done to the integrity of the system by these groups of villains is grave. In Nigeria, it was reported that debit card related fraud has declined by about 98%. This will go a long way to clean up the operating environment and enhance the integrity of the market.

Some of the issues and the challenges which the 2019 All Africa Ecommerce must address and deliberate on are:

  • Lack of access to qualitative internet facilities. Accessibility being defined in terms of affordability, availability and speed.
  • Acute and wide-spread poverty.
  • High level of illiteracy among the various African populaces.
  • Logistical inefficiencies.
  • Fraud and delivery difficulties.
  • Lack of methodical street address system.
  • Large segment of unbanked and informal sector populations.

Therefore, the 2019 All Africa E-commerce conference will focus and deliberate on the following issues:

  • The need for the stakeholders of African E-commerce to begin to vigorously advocate and articulate for the putting in place of policies that will enhance the rate of internet penetration and access in Africa. Out of the 1estimated 7,634,758,428 worldwide internet users as at June 30, 2018, only 1,287,914,329 users representing a dismal 16, 9% of total world users are in Africa. Again when we compare the global average of internet penetration, which stood at 21% as at June 30, 2018, to the African average of 36.1%, it will be seen clearly that there is still need to articulate policies that will enhance internet penetration and access across the African continent.
  • The 2020 Africa’s E-commerce conference will address the issue of lack of critical e-commerce infrastructure such as: power, broadband access, public postal system etc.
  • The proposed conference will need to promote policies that will increase the local contents of Africa’s e-commerce. Local content is defined in terms of availability of tradable goods and services and locally developed software.
  • The conference will address unfolding issues of privacy, security, customers, and transactions authentication protocols; issues which are becoming crucial and critical in any effort to grow e-commerce globally.
  • The conference will advocate he importance for Africa’s e-commerce, the signing, ratification and implementation of all protocols and conventions that promotes free trade; the use of electronic communication in foreign trade and contracts and the protection of intellectual property.
  • The conference will articulate policies that will enable African economies deploy e-commerce as a tool to: drive the growth of the small and medium scale enterprises sector; tackle the disturbing incidence of youth unemployment and for the eradication of poverty in the continent.
  • The 2020 Africa’s e-commerce conference will discuss the imperative of African economies driving commercial and financial inclusion through e-commerce. This becomes urgent and compelling now that globalization is pulling down growth-impeding barriers erected by cultural, political, and social antecedents.

 

BABAKEHINDE A. OWOLABI

MANAGING PARTNER,

VITAL VALUES LIMITED

 

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