Can E-Commerce be Africa’s Economic Goldmine?

Digital economy in Africa is snowballing, and in the process it’s creating new jobs and opportunities for digital entrepreneurs to explore a larger web market. Though e-commerce represents only 0.6% of all the transactions done in Africa, as compared to 12% in the USA and 20% in China; the budding nature of the industry does rightfully make one muse on the possibility, that e-commerce is indeed Africa’s economic goldmine.

Facilitation of Cross Border E-Trade

The global market has shrunk to a large scale, and is now enabling billions of people to sell and purchase products across borders. This has been made possible by technological innovations that have birthed online marketplaces that enable e-trade between businesses (B2B), between consumers (C2C) and between businesses and consumers (B2C).

The opportunities presented by e-commerce are numerous. Africa is a massive market with a growing population of 1.28 billion people, a network of over 15 million SMEs and merchants, and a rising internet connection of 453 million users. Jumia, the leading pan-African e-commerce platform has been on the forefront of Africa’s cross border e-trade revolution. The marketplace is enabling about 81,000 active merchants across Africa, who sometimes source products from international markets, to capitalize on a huge €1.4 trillion consumer market opportunity in Africa.

While the milestone has been remarkable, Nicolas Martin, EVP – Marketplace & Logistics for Jumia, noted, at the 2019 UNCTAD’s Africa E-commerce Week, that “more needed to be done to tailor bespoke regulatory solutions for Africa to attract international investment and create a conducive environment”. Good payment services are critical in curbing online fraud facing sellers. African governments also need to implement friendlier online taxation policies, to avoid locking out potential entrepreneurs and investors from exploring the e-commerce markets.

Besides, while some marketplaces are creating sustainable logistics systems, the consistent success of cross border commerce will require further and deeper cooperation among stakeholders, both in the private and public sectors. “The power of the marketplace is huge, and the coordinated effort of millions will bring about the change we need in Africa,” added Nicolas Martin.

Powering Employment in Africa

The World Bank reports an alarming rate of unemployed youths in Africa, accounting for about 60% of the unemployed workforce. Bearing in mind that the average age in Africa is 20 years, we need to rethink ways in which to power employment in a continent whose population is estimated to grow to 2.5 billion people by 2050.

Some policymakers are already hitting the nail on the head with the unemployment menace. Not long ago, the Boston Consulting Group (BCG) released a mind-joggling report on how online marketplaces could create 3 million new jobs in Africa by 2025. According to the report, these e-commerce platforms, which match buyers and providers of goods and services, could also boost inclusive economic growth with minimal disruption to existing businesses and workforce norms.

For instance, Jumia, one of the case studies in the report, is already creating 5,000 direct jobs across the 14 African countries in which it operates. This is besides indirect jobs created with sellers, logistic partners, commercial agents, and marketing partners. Other positive economic impacts of online marketplaces in Africa include, increasing vendors’ income through surging demand for goods and services in locations currently beyond the reach of conventional retail networks. Furthermore, they are bringing more women and youth – who in some countries have been marginalized from the labor market – into the formal workforce.

Customers’ Access to Product Choice

Choice, convenience and affordability are some of the top benefits customers get from e-commerce. From electronics, to fashion, cosmetics, FMCGs, travel and accommodation, online food delivery and payment options, customers are looking for variety and ease of access to their preferred products and services from a one-stop-shop. E-commerce platforms provide customers with a pool of diverse sellers, that they would otherwise have no access to through offline channels. Notably, there exists low retail penetration rate in Africa, with 1 shop for every 67,000 people as compared to 1 shop for every 1,000 people in the USA.

Conclusion

E-commerce potential to boost Africa’s economy is undeniable. Yet, it’s effectiveness will require the development of the right skills across the various pillars of the industry, among them engineering, marketing, logistics and management. There needs to be an existing conducive environment for doing business at the countries’ level and in the continent at large. This will give both domestic and foreign investors more confidence and encourage budding entrepreneurs to test the e-commerce waters in the continent. The ripple effect being, stronger economic growth!