The State of the African E-commerce Economy in A Nutshell: A Blog about Africa’s growing e-Commerce Industry.
Trade improves economic efficiency and contributes to poverty reduction (Krueger, 1998; Stiglitz, 1998; Zahonogo, 2017).
The use of ICT by trading firms has boosted productivity and trade in southern countries. Wolf (2001) notes particularly that, in the 1990s, the use of ICT increased the growth of small and medium-sized enterprises (SMEs) in Africa.
In addition to the internet, many of the building blocks required for the growth of e-commerce, including the spread of mobile telephony and mobile money services, increased use of credit cards and increased access to bank accounts, have shown remarkable growth in recent years. Nevertheless, Africa continues to account for a small share of global e-commerce.
The limited development of e-commerce despite improvements in supporting technology and infrastructure underlines the importance of identifying the constraints on e-commerce in Africa.
According to Per data from research consultancy, Briter, B2B e-commerce ventures in Africa secured more than $256 million in disclosed funding in 2021.
Statista Digital Market Outlook said e-commerce penetration rate in Africa will continue to increase, and by 2025 reach around 40%. The overall African market is projected to reach $180 billion by 2025. “E-commerce brands have always staked big on the future of Africa since their first entry about a decade ago.
Africa leads mobile device web traffic generation, with 69% of its total web traffic consisting of mobile internet users as of 2021 and is forecast to be almost exclusively mobile-based market by 2040.
Compared to other regions, as of 2021 the African continent leads mobile internet usage a full 13% above the global average, and almost 5% more mobile usage than Asian region markets. This should indicate a “mobile-first” approach to any business looking to sell online to the various African markets.
To end our very first blog, here are five ways African e-commerce can reach its full potential.
1. Refresh Policies
Policies shape the business environment, affecting everything from payment options to internet prices and IP protection.
2. Expand Connectivity
Only a quarter of Africa’s population regularly use the internet, and costs are high. Governments, business and international organisations should pour energy into the “missed” Sustainable Development Goal 9c — to provide universal and affordable internet access to least developed countries by 2020. Committing to inclusive access across Africa by 2030 would boost domestic e-commerce growth and support entrepreneurship.
3. Upgrade Logistics
African governments and donors can advance implementation of the World Trade Organization (WTO) Trade Facilitation Agreement (TFA) to reduce customs costs that eat into cross-border exchange, while public-private partnerships can deliver solutions for small business needs.
4. Enable e-Payments
Cash on delivery remains popular in Africa, making cross-border e-commerce difficult. Also, policies are often not adapted to complex payment supply chains, meaning Africa’s merchants have fewer options to connect their local e-payments systems with services used by global customers.
5. Grow Technology
Equity funding in African tech start-ups has increased rapidly — reaching $1.16 billion in 2018. Yet, overall foreign direct investment (FDI) flows into Africa are limited, just 3.5% of the global total. Efforts in this area should aim to double FDI flows into Africa’s tech sector by 2030.
