The Future Of E-commerce In Africa: A Mere Illusion?

By Nicolas Goldstein, Cofounder of Talenteum.Africa

It is undeniable that the growth of e-commerce is still going strong around the world. The African continent has also been seduced by online sales and electronic transaction. However, if we want to see the interesting predictions about e-commerce in Africa come true, it is imperative that the African continent as a whole sees that the ongoing impediments to its progress are addressed.

When one takes a look at the statistics ; it is obvious that Africa is coveting e-commerce. Even if the African countries are not the first in the global ranking, the online buying itch is spreading steadily on the continent. According to a report by Statista, e-commerce in Africa was valued at 16.5 billion dollars in 2017. Another report by the consulting firm McKinsey, states that this value could well go up to 75 billion dollars by 2025.

These predictions are optimistic and alluring, but, we should not simply rely solely on them. E-commerce in Africa is far from being able to get to the anticipated values. There are a number of problems that demand resolutions first and foremost to ensure that Africa can reach said predictions.

A simple look at the global ranking made by UNCTAD (United Nations Conference on Trade and Development) helps to understand the actual situation. This ranking is based on the average of four indicators: the percentage of the population with an access to internet, the percentage of the population with an access to a bank account, the score given to the security of the web servers and the score given to the reliability of postal services. According to the value of these indicators and the index of each country, African countries simply are not doing well at the moment. For example, while Mauritius, Nigeria and South Africa are the best scoring African countries, they are still at the bottom of the ranking.

So what are the problems? There are numerous obstacles that prevent the adoption and thus progression of e-commerce in Africa. These impediments can be found at various stages of the buying process. Of course, it all starts with the internet access. According to a study by Deloitte in 2016, only 20 % of the African continent has an internet access. This coverage, though increasing gradually and surely, still needs to be further improved with cheaper costs for the customers, but also with faster bandwidth to cater to more demanding  (bandwidth-wise) websites and platforms.

However, even with an internet access, there is little trust towards online businesses in Africa. This lack of trust can be traced back to various scams (e-mail phishing or advance-fee scam) and the uncertainty of ever seeing whatever is ordered online. This last point is closely linked to another issue : logistics and infrastructure. It is important to realize that mail addressing in Africa tends to be approximate the further one goes from big cities. Moreover, postal services are not always reliable. In addition, there is also the problem of added costs to cross-border connections, which further delay the transportation of goods.

If all these weren’t enough, there is the big issue about payment. At the moment, payment by cash on delivery is the most common payment method on the African market ; 90 % of online purchases are paid by cash. This predominant method reassure the customers that they will one day receive their orders. Africans have little or no access to banks, with only 10 to 15 % of the population having access to a bank account. That situation does not help the progress of e-commerce, considering that most online retail stores and services require a bank account or a payment service that is linked to one.

What’s interesting though, is that these difficulties have also encouraged innovative solutions to either overcome or work around these problems. During the last couple of years, smartphones have become more affordable for example. Some tech giants, like Google and Facebook, with their own interest vested in the African online presence, have come up with lighter applications or even methods to make internet pages lighter and thus cheaper to use where bandwidth saving is an issue.

Nipost, the Nigerian Post Service, has remedied the approximation of mailing addresses by using What3words. It is a GPS service that divides the world in squares of 3m x 3m and that attributes 3 words to each square. Nipost is consequently better prepared for mail and parcel deliveries.

And when it comes to online payment, while waiting for the percentage of the African population with an access to a bank account to increase, more and more e-commerce (mostly African ones) platforms have turned to mobile payment as a payment method during the checkout process. Like Marc Wabi (Deloitte Côte d’Ivoire) said, it was inevitable that mobile money would empower the growth of e-commerce in Africa.

The development of infrastructures, like internet and network coverage or even logistics, like the mail addressing and the postal services reliability are important points that must be remedied quickly. However, we should not forget that laws that protect the data and the rights of consumers should be enabled and enforced ! This is not up for discussion and should not be sacrificed to the growth of e-commerce.

Moreover, there is another topic that should not be overlooked. Obviously, more means and the purchasing power that can be expressed through goods and services bought online is a wonderful indicator of a countries growth. However, we should not forget that encouraging and developing African online platforms that aim to export internationally is also very important in the e-commerce endeavor.

Yes, the potential for a remarkable and long lasting e-commerce growth is within Africa’s grasps. Now, it is the responsibility of everyone involved in this market to do everything in their power, so that African countries can truly enjoy and benefit from e-commerce.

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