Understanding e-commerce in Africa: Launch of the Africa marketplace explorer

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E-commerce business in Africa is projected to grow to about US$22 billion by 2022. But data and analysis on local marketplaces is hard to come by or highly incomplete. Given its potential to provide jobs and fuel small and medium-sized enterprises (SMEs) and manufacturing, expectations are running high in Africa that e-commerce can be a source of accelerated economic growth. It can offer opportunities to both small and large firms, and promote greater integration between markets. 

E-commerce and COVID-19

It is expected that African economies will suffer a great deal because of the COVID-19 pandemic; this means their economies will weaken, lose capacity, and fail to support SMEs to stay afloat. Dr Jesse Weltevreden (Amsterdam University of Applied Sciences) said that the pandemic will certainly have a huge effect, especially for transactional marketplaces such as online shopping malls and the SMEs that depend on them.

However, it is thought that post COVID-19, e-commerce is the one industry that will benefit. With travel restrictions, the online marketplace will boom. E-commerce itself supports at least eight of the sustainable development goals (SDG) and can go beyond being just a sector, to actually being a tool to create jobs and eradicate poverty.

To date, e-commerce in Africa has been driven by private capital enterprises. SMEs need to undergo a shift in mentality and look at cross-border sales and beyond their regions. 

Mr Chris Folayan (Founder and CEO, Mall for Africa) reinforced the need to work closely with SMEs and use this time to prepare them for e-commerce. It is essential that people from all over the world know exactly where to go when they want to buy products from Africa. Like eBay and Amazon have done, Africa needs to create a platform where people from all over the world can go for quality African made products, ‘and by doing this, we will engage ourselves internally and pull in resources from the continent itself, thus reducing dependency on other international partners’, said Folayan.

But businesses cannot do this alone. Government support plays a big role in the success of e-commerce in a country, and this is essential for African countries too, especially to supply the right infrastructure, training, etc.

First, access to power supply and the Internet are crucial for e-commerce to take place. Therefore,  there is scope for solar energy to grow. Second, making sure that even low-end smartphones are able to download the necessary apps. Businesses and governments need to work together towards policies to facilitate this, if they want e-commerce in Africa to grow. 

Having a cost effective postal system is essential for e-commerce to leverage an effective and operational system. If shipping across the country is cheap and easy, it is an instant boost. 

A study by the International Chamber of Commerce (ICC) shows that SMEs that sell online are five times more likely to excel. Selling online enables them to learn from international practices, the shipping standardisation helps them in exports, increase sales etc. Ms Juliet Anammah (Chairwoman, Jumia Nigeria and Head Institutional Affairs, Jumia Group) shared how contactless payments are becoming a major trend, especially with COVID-19. SMEs will need to adapt and learn about e-commerce and its rapidly changing rules. There is a lot of attention on evolving digital payments, but there are a lot of countries where they do not exist, so there needs to be a facilitation of this infrastructure, Anammah added.

Moreover, fiscal policies that enhance payments, the role of fintech etc., and friendlier tax policies are important. Zero VAT or reduced VAT creates an additional layer for start-ups to thrive. While using blockchain for payments is not yet prevalent, China has been investing heavily in African countries and is also leading the charge in blockchain technology, which could be part of China’s future investment plans in Africa, added Weltevreden.

Establishing trust

Trust and consumer confidence are integral to successful e-commerce markets, and governments in Africa are keen to increase it. Some markets are considering and taking steps towards consumer trust-increasing tools like trustmarks. It is necessary to find a proper body to certify and award trust certification/badges.

Folayan also supports the idea of universal certification for sellers and marketplaces to protect consumers and to maintain quality. Rating systems also help with marketplace sellers. 

Right now, as with most e-commerce markets, African governments are still trying to get a handle on how fast the market is growing and the innovation coming from the private sector. Governments are slower than technology, so many are still creating online consumer protection laws.

The challenge is ensuring consumer protection, privacy and security are a high priority, but at the same, not to create too many barriers (mainly cost related) for MSMEs and SMEs who cannot achieve those high standards and thus fail to operate.

Preparing future generations

Collaboration is key in developing e-commerce platforms. As online marketplaces are the new norm, this trend needs to be accentuated to future generations, sustainably. Mr Demilade Oluwasina (E-commerce and Digital Economy Programmes Lead, African Leadership University) said that ‘leaders need to be able to harness the current opportunities and the young entrepreneurs … especially digital natives, who can embrace this trend. We need to think of how to develop African talent to propel the growth of e-commerce.’

Education and training needs to be centred around this and he said that his University has partnered with marketplaces where students/youth can intern and learn the ropes of the trade. This is better than their learning in class about the same concepts. E-commerce clubs at universities and colleges can bring in fresh perspectives. It can happen via a business degree, club, or the curriculum, but it will be valuable if the training is targeted at ‘how to be in e-commerce’.

Collaboration between academics and business on the ground will foster a slurry of young people in this sector and prepare the next generation for the marketplace revolution.

By Mili Semlani