The eCommerce industry has been growing steadily over the last few years throughout the world. In the African continent, there have been three countries leading in the eCommerce industry: South Africa, Kenya and Nigeria.
The eCommerce industry has blown up rapidly due to more countries entering this industry. Some innovations have been introduced into Africa, such as e-payment and added technical security, which will continue to influence the growth in e-commerce for these countries. In a report that was conducted in 2018 by UNCTAD, the findings stated that Kenya, Nigeria and South Africa account for more than 50% of online shoppers in 2017 for Africa.
The value of e-commerce in Africa is expected to reach $29 billion by 2022. This looks pretty optimistic, but there are some challenges that affect this continent that need to be addressed. These challenges of e-commerce in Africa include:
- Lack of trust in online shopping: Africans are not too trusting of sharing their payment details with online stores. Mistrust comes from the fact that they lack knowledge about online payment methods and the security measures that are in place.
- Fragmented markets: Africa is a diverse continent with many different economies, cultures, and politics. These differences become an issue for e-commerce businesses as they restrict cross border payments, legal requirements that each country; making it difficult to operate in countries other than their own. High tariffs and taxes are also an issue that arises plenty times.
- Internet connectivity: The Internet is not only expensive in Africa, but it isn’t easily accessible as less than a third of the population do not have access to it. This makes it difficult to shop online, which makes it tough for e-commerce businesses to thrive.
- People wanting to pay with cash: Digital payments are relatively new to Africans, and they prefer making payments using cash. Though there is the option to pay cash on delivery, it is an expensive option, and it poses some risks, such as drivers becoming victims of theft.
- Lack of a national street address system: A big challenge for e-commerce and delivery businesses is that most African countries do not have street addresses. This makes deliveries difficult as the drivers responsible and the customer need to be in contact throughout delivery.
Addressing Challenges for eCommerce
The African continent can reach success in the eCommerce industry, but it needs to address the challenges mentioned above for this to occur.
When it comes to mistrust about online shopping, there needs to be more that is done to establish trust in e-commerce businesses. To begin addressing this issue, the eCommerce Forum South Africa (EFSA) was launched as the continent’s first eCommerce Trustmark that would ensure that eCommerce platforms were compliant with EFSA’s South African Code of Conduct. EFSA aims to ease customer worries about the safety of online businesses and will have proof that they passed security and privacy tests carried out by the organisation.
Another online credit product that is used to promote safe online shopping is Mobicred. Mobicred allows a centralised account that shoppers can use for many merchants. The platform has several payment options that will enable users to buy now and make payment later. These options are suitable for users who might not have money at the moment, those who fear cyber fraud, or those who don’t own a credit card.
To address the issue of fragmented markets and to assist different merchants in reaching customers in other countries, there needs to be ways to receive cross-border payments. These merchants can use a PSP such as Direct Pay Online, which accommodates cross-border payments, while still offering different payment options to adjust the business’ other customer preferences.
Another method that can be used to overcome fragmented markets is through the implementation of free trade zones. Free trade zones would be able to eliminate taxes and tariffs that come up in cross-border transactions, which hinder e-commerce businesses’ success.
The infrastructure in Africa needs to be developed to provide internet access to more people. By developing solutions such as fibre optic networks, more people will have access to the internet which will play a significant role in reducing the cost of connecting to the internet. If more people have access to the internet, more eCommerce businesses will reach more customers.
Drivers of eCommerce in Africa
The three countries that dominate the e-commerce industry regarding sales are Nigeria, South Africa and Kenya. Nigeria has the hugest population rate in Africa, consisting of 195 million people. It also has the largest economy, GDP and eCommerce sites. Though 48% of the population has internet connectivity, their eCommerce businesses are thriving as 40% of Africa’s eCommerce businesses are in Nigeria.
Kenya, another country with a thriving eCommerce industry, has a population of over 48.5 million, and 79% of that population has access to the internet. The high rate of internet penetration has undoubtedly played a role in its e-commerce market’s success; but another contributing factor is that the country is home to M-Pesa. M-Pesa is a mobile wallet provider that was established by Safaricom which is a mobile telecommunications provider in partnership with PayPal. The purpose of M-Pesa was to create a payment system that was safe and secure while encouraging online buying and ensuring that more people embraced internet use. M-Pesa also makes it easier for Kenyan entrepreneurs and their businesses to participate.
South Africa might not have the highest internet penetration rate as 54% of the population of 55.5 million has internet connectivity. However, success can be attributed to a significant high middle class. The country also has the best cross-border potential, which will help grow its eCommerce market.
Africa might be showing growth potential, but there are still some issues and challenges that need to be addressed. Countries like Kenya, Nigeria, and South Africa are examples of the success that eCommerce businesses can achieve in the African continent.