Nyce Ayuk writes that e – commerce has the potential to take over the market space in Africa
Globally, e – commerce market share stood at a whopping $2.842 trillion in 2018, a figure that is projected to witness on exponential rise to $3.453 trillion in 2019, and by 2020, a staggering sum of $4. 135trn. In Africa, the e – commerce industry is witnessing a significant boom in activities and is arguably the new wealth frontier in the continent. According to Herman Singh of MTN in his presentation on “Scaling in Africa,” at the recent edition of Africa.com, Africa represents one of the world’s finest untapped markets. He said, “ Africa’s e – and -m commerce opportunity has a potential client base of 400 million internet users, and a rapidly emerging middle class expected to grow by 54% between 2020 and 2030 and decreasing data costs in some countries (43 – 45 %, decrease in the lowest data plan in both Egypt and Nigeria between 2016 and 2017.” The smart device growth rate in Africa is now the fastest in the world and as literary levels increase, the outlook for e – commerce in Africa is good. Estimates byStatista, a research firm show that e- commerce industry in Africa generated $16.5 billion revenue in 2014 and it is predicted that this thriving industry will attract revenues in excess of $30bn by the year 2022.
On the continent, a few trail blazers and market leaders have emerged. The Jumia group founded in 2012 by the Berlin – based company Rocket Internet has become the continent’s best funded e – commerce company with more than 3000 employees with operations in 23 countries on the continent. Often referred to as the “Amazon.com of Africa, Jumia group became the first Africa e – commerce group to surpass a billion dollars in market value as a result of funding from A.X.A insurance company. Its shopping site, Jumia.com which operates in eleven countries is the largest and most important of Jumia group’s ventures. Jumia group’s head office is located in Lagos, Nigeria’s commercial capital. Its presence in Yaba, Lagos has drawn an increasing number of tech incubators and start-ups. The proliferation of these companies has helped to reverse a long pattern of brain drain which had hitherto seen many internet geeks seeking greener pastures abroad. These companies continue to draw talented Nigerians with high paying jobs and enticed others to return to fulfill their ambitions. With a population projected to be in excess of 200 million people, Jumia Group envisions that Nigeria will drive the e – commerce revolution in Africa. In 2015, Jumia raked in $149m in revenue. Although this figure is relatively small when compared with the $400bn that MC Kinsey’s Global Institute estimated that Nigeria’s consumers spent in 2014, the institute predicts that by 2025, Africa could be buying $75bn worth of goods and services online annually.
This optimum is fuelled in part by existing large structural gap between supply and demand. In Nigeria, there are millions of people with growing discretionary income but few formal retail stores per capita. In airports across the globe, Africans can be seen with heavy luggage full of products they cannot easily find back home. In spite of the potential of e – commerce growth in Africa, challenges such as infrastructure issues, high delivery costs, security and mistrust issues, high illiteracy issues, highly fragmented markets, and high broadband costs are among the debilitating and critical factors that hinder growth of the business. The level of illiteracy remains alarming on the continent amidst modest level of internet penetration. A 2015 survey of over 90,000 South African online shoppers discovered that high delivery costs and lengthy delivery times were the likely factors to cause shoppers to abandon their online purchases. To get over these challenges, some African online retailers have been experimenting with different shipping options such as drone delivery and crowd – sourced delivery services. These innovations may have profound impact on the viability, affordability and popularity of e – commerce in Africa.
In spite of these challenges, many discerning market experts believe that these limitations can be overcome. This infectious sense of optimism is fuelled by smart phone proliferation in Africa, decrease in data costs, improvement in usability and the availability of the e – wallet system. Investors believe that the opportunity afforded Africa’s large and growing populations of over one billion outweighs the structural challenges the continent presents. Given its untapped potential, the e – commerce has the potential to take over the market space in Africa. Already Jumia has tapped into the transformative capacity of the thriving industry. Herman Singh attributes the company’s successes to 10 factors: establishment of a community of users, building trust, access to the channel, channels itself; a robust payment and micro – payment partner, fulfillment and logistics, merchandizing, location and maximizing customers’ insights.
As at today, Africa’s internet penetration stands at only 35 per cent. According to the research from Statista, e – commerce generated $16.5bn in 2017 and forecasts revenue of $29bn by 2022. At present, Nigeria, South Africa and Kenya dominate e – commerce sales in Africa.
The impending e – commerce revolution can even be more explosive and enduring if African leaders can summon the political will to implement the African Continental Free Trade Agreement (AFCFTA) which will galvanize trade within the continent. E – commerce in Africa is indeed a sleeping giant waiting to be aroused. With the prospect of this awakening looking a near distant reality, oil the mainstay of many oil producing African nations, will pale into insignificance.