The internet and the rise of e-commerce has changed the face of the world as we know it. Countries that were previously marginalized now have, for the first time ever, the tools they need to truly drive their development.
We have seen this in countries like China, where the rise of the BATs — Baidu, Alibaba, and Tencent — has elevated the nation and empowered it to become a global e-commerce leader in its own right.
Nations such as India, Brazil, and parts of Southeast Asia are commonly cited as the next hotbeds of e-commerce. While there is certainly potential there, there is also an argument to be made that the African continent is primed to become the next star in e-commerce.
E-commerce in Africa was valued at $16.5 billion in 2017 — projected to increase to $75 billion by 2025.
—According to a recent report by Statista, e-commerce in Africa was valued at $16.5 billion in 2017. Another report by McKinsey has forecast this value will increase to at least $75 billion by 2025.
There are a number of reasons that can explain this promising forecast, starting with the fact that the African continent has all the right fundamentals in place for e-commerce growth.
Firstly, it is home to over 1.3 billion people, of which 725 million own mobile devices across the continent – and this number is growing rapidly. Complementing this, approximately 50% of the population is under 20 years old. This represents a very high percentage of the population in the age group that is proven to adapt to technology more rapidly.
Apart from having the right demographics to boost e-commerce growth, as a relatively late arrival to the internet economy, Africa is well-positioned to deal with the latest trends in digital – where everything is software-as-a-service, in the cloud and on mobile — while other regions still cope with moving on from massive investments in legacy technologies such as data centers, on-premise software, and desktop computers. Because of this, technology and e-commerce firms operate in an environment where they can leapfrog the infrastructure requirements of pre-internet supply chains.
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Africa’s telco giants have obviously caught on to the potential and are leading the charge in driving internet adoption and fintech across the continent. Countries such as Kenya, South Africa, and Nigeria find themselves among the most advanced here. With the help of telecommunication companies, greater access to mobile banking is becoming available for middle and lower-income populations, connecting rural and urban areas.
Companies such as M-Pesa have played a key role in increasing both internet access as well as the number of digital wallets. This has essentially allowed Africans to use technology to circumvent the traditional structures and limitations of banking.
As e-commerce continues to develop around the continent, it’s great to see more African companies joining the fray. Perhaps the most well-known example here is Naspers.
Founded more than 100 years ago in the Stellenbosch winelands of South Africa, the company has transformed itself from a newspaper publisher into a $100 billion empire, partly thanks to its one-third stake in China-based internet titan Tencent. Naspers has interestingly chosen to list its business in Euronext Amsterdam. When that happens, it will become the largest consumer internet company listed in Europe.
Despite all the promising signs, there are still challenges that must be overcome before Africa’s e-commerce space can truly flourish.
Even with the explosion in internet access, there needs to be more trust built into the system through stronger regulations, as every new technology brings with it a new form of crimes that prey on the vulnerable. Regulators and law enforcement need to keep up with evolving technologies to prevent phishing scams and improve the security of online transactions.
This ties into another challenge which involves some African nations still preferring cash payments over mobile payments. This is not so much a challenge in Kenya, where approximately 73% of the population have a mobile payment account, but it does affect the Nigeria market, where despite high mobile penetration, only 6% of the population uses phones to make financial transaction.
New African players emerging onto the scene will also certainly face fierce competition from established players like eBay and Amazon who are also targeting consumers in Africa with growing disposable incomes.
But despite the various challenges, the future looks promising. On one hand, African leaders have committed to strive for universal and affordable internet their countries by 2020, as per the U.N. Sustainable Development Goals. The business community is also playing its part, with more and more local players emerging onto the e-commerce scene.
The challenges are immense, but the potential for a remarkable and long-lasting e-commerce growth is within Africa’s grasp. It’s no pipe dream to think that soon we will be seeing more African tech “unicorns” emerging on the global market.
