Ecommerce in Africa needs a shake-up: Here’s why
In light of the recent World Economic Forum on Africa, we thought we’d take a look at the Africa E-Commerce Agenda. ShoppingFeeder began in sunny South Africa and we love to hear about the exciting transformation of the ecommerce game that’s looking to create jobs and make a sustainable impact on the continent. We’ve read the WEF and ITC’s agenda (so you don’t have to) and touch on a few key players who embody the same vision.
CALLS TO ACTION
The agenda report is extensive, covering ecommerce’s potential in Africa, as well as aspirations and challenges in eight different areas which we’ve outlined below. You can read the complete report here.
1. Refresh policies
Policies shape the business environment, that much is inarguable. Without conversations between stakeholders, policies necessary for industry growth will be impossible. Associations of these stakeholders need to be put in place to spearhead policy creation and standardize industry practices. Without regulation, there’s far too much uncertainty on issues such as payments, privacy and consumer protection for ecommerce to thrive.
2. Expand connectivity
Despite Africa being the second largest population of internet users after China, internet penetration is significantly lower in African regions than in the rest of the world. There is a need for widely available, affordable internet access to create an inclusive digital economy. The agenda points out that markets aimed at the unconnected, in particular, should be encouraged.
“Only a quarter of Africa’s population regularly uses the internet. Costs are high. On average, 1GB of data is 9% of monthly income”
3. Upgrade logistics
Logistics and delivery services are crucial if we are to access the global market, and both are especially important for cross-border selling within Africa. Creating sustainable logistics models will help e-retailers’ effort to manage returns, handle payments and reduce trace-ability problems.
4. Enable e-payments
The agenda calls for a dialogue among policy-makers to identify challenges and solutions in the payment ecosystem in order to increase security, reduce risk and support global access and transactions in international currencies.
5. Manage data
Merchants need information and support in order to comply with privacy regulations overseas. Again, legislation is key with regards to the protection of personal data.
6. Grow the tech industry
Foreign investment has a huge role to play here. Supporting and financing of start-ups can increase the availability of risk capital and infrastructure gaps can be addressed more efficiently.
7. Coach small business
If Africa wants to compete globally, its industry players will require skills, coaching and market access using all of the calls to action listed above. With the help of incubators, small businesses can attract foreign investment and drive innovation.
8. Join forces
To make all of the above possible, dialogue between African countries to develop best practices is essential. Contributions need to come from every direction- researchers, policy-makers, retailers, logistics services, government officials, industry experts and so on. The WEF report calls for cooperation among all stakeholders.
Here are a few useful infographics on the global digital landscape in 2019:
COMPANIES TO WATCH
The largest ecommerce company in Africa, Jumia operates across 14 different African countries, its largest market being in Nigeria. One of the major challenges Jumia faced with regards to logistics was delivering to areas with incredibly informal addressing systems. This hasn’t put them off, however, as the company is determined to grow the industry sector and make their services widely accessible. Jumia co-founder and CEO Sacha Poignonnec discussed the company’s approach to such challenges in an interview with McKinsey&Company.
“In Africa, there’s no address system in most of the cities. For someone to find a consumer, you need to have a local partner who knows where the consumer is, based on very subjective information. And, for example, if you say in a city in Africa, ‘I live in the third street by the church with the blue door,’ that’s the address. You and I, we would not find this consumer. But if you partner with the right local player, who has the right local knowledge, then they can find those consumers because they understand that. Now the challenge, of course, is that to have a lot of fragmented logistics players is a risk, unless you have what we created, which is a very good set of standard technology tools and processes that we give to the local players so that they can operate their last-mile, cash-on-delivery, door-to-door-delivery businesses according to international standards.”
-Poignonnec, CEO Jumia
Now that’s the kind of long-term thinking the African ecommerce industry needs, and Jumia isn’t just concerned about access. Part of the company’s slogan is “We build a digital Africa” and they certainly seem to be living up to that. JumiaPay is the company’s own payment gateway that provides secure online payments, the first of its kind released in Nigeria in 2016. In March, the company announced a strategic partnership with MasterCard to explore innovations in payment platforms and enhance Africa’s digital infrastructure.
M-Pesa is a banking service that allows users to transfer money via mobile. The service launched under Safaricom, the country’s biggest network provider, in 2007. In 2018, Safaricom teamed up with PayPal and TransferTo (now thunes.com) creating a service that allows funds to be transferred from M-PESA to Paypal accounts, allowing online shoppers in Kenya to purchase goods and services globally. This gives e-retailers the opportunity to expand their reach and participate in the global marketplace. The collaborative effort by these companies has made it cheaper and faster to transfer funds, focusing on alternative payment methods like mobile wallets for the majority of Africa’s population who remain unbanked.
Check out this list of South African incubators for start-up.