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The growing pains of e-commerce business in Africa
Takeaways
- Poor internet connectivity and the high cost of data inhibit faster and broader adoption of mobile browsing and conversion to sale on e-commerce sites.
- Payment methods such as mobile money and cash on delivery broaden access to platforms and attracts more buyers, however, also raise issues of trust deficit and security concerns.
- An underdeveloped logistics infrastructure in Africa (road, rail, port), unreliable postal service, and the high cost of transport and duties are all challenges to e-commerce profitability in Africa.
- COVID-19 accelerated the adoption of online shopping around the world, but even more so in Africa, given it was still in the early phases of gaining traction.
E-Commerce has long been touted as Africa’s next high-growth market. Several reasons are cited for the optimism, among them the continent’s large, relatively young, and tech-savvy population, increasing mobile internet penetration, a fast-growing middle-class and rising disposable income.
The burgeoning industry has seen the birth of homegrown e-commerce platforms such as Jumia (Nigeria), Takealot (South Africa) and Kilimall (Kenya), and the market’s potential has not gone unnoticed by bigger international players like Amazon, Alibaba, Shein and even Facebook, all of whom are positioning themselves for a piece of the e-commerce pie.
Africa, however, is a truly unique operating environment and presents its own challenges, from logistical constraints, underdeveloped infrastructure and limited payment gateways to security, access to capital and a customer trust deficit. The playing field, which is becoming increasingly crowded and putting pressure on margins and profitability, is ripe for both consolidation and disruption.
Of the continent’s e-commerce markets, South Africa, Nigeria, and Kenya are among the most advanced and offer valuable lessons to potential entrants and upstarts about how to overcome Africa’s idiosyncrasies, and what happens when you don’t.
Ronak Gopaldas is a CAS research fellow and political economist. His work focuses on the intersection of politics, economics, and business in Africa. He is currently a Director at Signal Risk, a fellow at GIBS and the co-founder of Mindflux Training. He was previously the Head of Country Risk at Rand Merchant Bank.
A prominent voice in print, radio and television in both the local and international media, Ronak has made frequent appearances on CNN, BBC, Al Jazeera and CNBC Africa, and publishes regular opinion and analysis pieces.
Ronak is a 2019 Archbishop Desmond Tutu Leadership Fellow, an alumnus of the Asian Forum on Global Governance, as well as the young African Leadership Initiative. He also serves in a number of advisory roles, most notably the Institute of Security Studies’ ENACT programme, which builds knowledge and skills to enhance Africa’s response to transnational organised crime.
Ronak holds a BCom degree in Philosophy, Politics and Economics (PPE) with Business French as well as a BCom (Hons) in Financial Analysis and Portfolio Management from the University of Cape Town (UCT). He also has an MSc in Finance (Economic Policy) through the School of Oriental and African Studies (SOAS) in London.
This report was first published on the NTU-SBF Centre for African Studies (CAS) website: