E-commerce Growth in Africa Remains Relatively Low
Africa has the world's fastest-growing population and is the second-largest continent after Asia. E-commerce in Africa, however, remains at a relatively low level of development. Read more
E-commerce is a proven instrument for economic growth and prosperity, but several decades after ambitious targets were set, e-commerce growth in Africa remains relatively low.
The challenges
With over a billion people, Africa makes up just 2 percent of global e-commerce trade. This is down to several reasons. Internet penetration is still at 30 percent across Africa. This figure will have to go above 50 percent for a significant rise in e-commerce. High-speed Internet also needs to reach more people to guarantee a satisfactory online shopping experience.
While smartphones are now readily available, some of them adapted to the prices and needs of the African continent, uptake will need to increase to higher levels to drive up e-commerce. Another area that needs investment is digital infrastructure within countries and across borders.
This has definitely improved with undersea cables going round the continent but will grow further with a mesh network crisscrossing borders within. E-commerce growth is going to need deeper digital penetration, data centers, mobile money withdrawal points, better tracking, and delivery.
Discussion about e-commerce tends to center around digital infrastructure but physical aspects like network towers, roads, public transport, packaging, storage and open borders all contribute to e-commerce growth.
What the winners have done correctly
It would be deceptive to treat the African market as a monolith. The challenges they face vary across countries, regions, and trade blocs. On the issue of connectivity, there’s a direct correlation between Internet access and e-commerce growth in countries like South Africa, Nigeria, Egypt, Tunisia, Morocco, Kenya, and a few others. These countries also have better physical and digital infrastructure which makes e-commerce more secure and accessible.
These are boosted by local and foreign digital marketplaces that have invested in warehouses and delivery. Nigeria for example has established local stores like OLX, Jumia, Konga, Kara, and several others. When it comes to the top e-commerce cities, the same patterns emerge with Lagos, Cairo, Rabat, Nairobi, and Cape Town lead across Africa.
These cities have high Internet connectivity, access to banks and credit cards, better roads, public transport, data centers, are better mapped, and enjoy thriving services infrastructure to facilitate purchase and delivery.
Solution
It’s worth noting that e-commerce is still growing in Africa and is projected to be worth $46 billion by 2025. The challenge is to bring digital tools to more people. This will give them the opportunity to access new markets and capital. Nigeria’s e-commerce sector is at $12 billion and is projected to reach $75 billion by 2025, proof that e-commerce is a driving force in its economy. Its fintech sector is estimated at over half a billion, well primed for expansion and inclusion. With the right investment, African countries can accelerate e-commerce growth.
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