E-commerce growth and potential in Africa

by Johan Burger

However, much still needs to be done. Nowhere else in the world is the digital divide so pronounced as in Africa. The Fourth Industrial Revolution can benefit Africa in various ways. There are currently numerous developments in Africa that indicate progress and potential on the continent. This report addresses some of the recent developments in this field.

E-COMMERCE GROWTH AND POTENTIAL IN AFRICA

A report by PayU found that e-commerce penetration was at 37% in Nigeria and South Africa, and at 25% in Kenya. At the same time, South Africa had the highest Internet penetration at 56%, with Nigeria and Kenya at 46% and 31%, respectively. PayU saw this as an indication of the significant e-commerce growth potential in these countries. In terms of the number of shoppers and revenue, PayU found that Nigeria had the largest e-commerce market in Africa, with predicted consumer spend expected to be several times those of South Africa and Kenya combined.

Kenya-based solar energy provider M-Kopa uses M-Pesa to offer funds to help underbanked customers acquire solar lighting, smartphones, TVs, and domestic appliances. It has provided over US$400m in financing and sold over 1 million pay-as-you-go solar systems and 500,000 smartphones to customers in Kenya, Uganda, and Nigeria. It was recently reported that the company has partnered with Airtel and Samsung to enable access to smartphones and broader digital connectivity.

The M-Kopa financing model is branded as a “connected asset financing platform” that offers quick access to everyday products and using micro-payments to build ownership over time. This has enabled consumers at the low end of the market to acquire assets such as nano solar grids and TVs.  M-Kopa plans to also expand into Ghana, Ivory Coast, and Senegal. 

The South African market is set for significant growth, especially for specialist merchants in beauty, cosmetics, and fashion. Online spend in the beauty and cosmetics category in the country grew by 140% between 2019 and 2020. E-commerce spending on digital goods in South Africa was projected to grow by 46% between 2019 and the end of 2021, reaching US$336m. In Nigeria, this sector was expected to grow to US$811m by the end of 2021 and to US$70m in Kenya, a 94% increase in both markets compared to 2019.

Spending on online education In South Africa grew significantly in 2020 as people upskilled themselves while staying at home due to Covid-19 restrictions. PayU reported a year-on-year increase of 67% in 2020 with the average transaction value growing from US$136 to US$404.

The emergence of digitally savvy shoppers with access to increasing disposable income made Kenya, Nigeria, and South Africa attractive target markets for emerging e-commerce leaders.^[1]

POINTS OF INTEREST

• Countries such as South Africa are attractive markets for existing and new e-commerce players. In the rest of Africa, African players such as Jumia have also positioned themselves to be the platform of choice. China’s Alibaba has set out to create a footprint in countries such as Ethiopia and Rwanda, providing access to not only goods (coffee and other agricultural products), but also to services such as tourism. With a population of more than 100 million, Ethiopia also represents a market with immense future potential.
  
  
• The increase in Internet penetration on the continent is also good news for the providers of digital government services, as several countries are expanding e-government services. Singapore’s CrimsonLogic already has a footprint in Botswana and Rwanda. African states fared poorly on the UN’s Electronic Government Development Index 2020. 17 of the 20 lowest ranking countries came from Africa. Mauritius (63), South Africa (78) and Tunisia (91) were the only three African countries that made it to the Top 100. Even Botswana and Rwanda, the two countries widely touted for their governance standards, came 115 and 130 respectively on the e-Development Index.^[2]

A NEW E-COMMERCE PLATFORM IN SOUTH AFRICA

The JD Group has launched a new e-commerce platform in South Africa. EveryShop promises to offer a range of local and international brands across many categories, including electronics and appliances, furniture, fashion, footwear, and DIY.

Everyshop currently has 15 large-scale distribution centres across South Africa, and they are located close to the customers to ensure fast and affordable delivery. It is expected to add more merchandise to its platform.

POINTS OF INTEREST

• Takealot is currently the largest e-commerce player in South Africa with net sales of US$451m followed by Superbalist (US$69m), Woolworths (US$51m), Amazon (US$44m) and Makro (US$41m). The size of the e-commerce market in South Africa is estimated to be US$4bn and it is predicted to grow at a 10% Compounded Annual Growth Rate (CAGR) for the next four years. The fact that it is lower than the year-over-year growth of 24% suggests it is a moderately flooded market.^[3]
  
  
• According to ecommerceDB, fashion is the largest segment in South Africa and accounts for 31% of the e-commerce revenue in the country. The fashion sector is followed by Toys, Hobby & DIY (27%), Electronics & Media (18%), Furniture & Appliances (15%), and Food & Personal Care (8%).
  
  
• With a market set to grow to US$660m over the next 4 years, one can expect an increase in the number of players targeting this sizeable market. Of the current top 5, Woolworths and Makro are not pure e-commerce players. They are traditional retailers who have entered the e-commerce space. Takealot’s dominance is unmatched. Consider this - Superbalist, currently in second place, is a 100% subsidiary of Takealot. That puts Woolworths at a distant third making just 10% of the combined Takealot/Superbalist revenue. Taking on this South African giant would be formidable for any competitor.

RWANDAN E-COMMERCE PLATFORM PUTS WOMEN FIRST

Kasha is an e-commerce platform that allows Rwandan women to buy menstrual care products, contraceptives, pharmaceuticals and a range of beauty and personal care products online. In addition to the website, its customers can also place orders via a mobile app, SMS shortcode or phone call. That means access to the Internet or smartphones is no barrier. The platform, launched in Rwanda in July 2016 entered Kenya three years later.

Kasha raised US$3m in Series A funding in 2020 and has recently secured more funding from Mastercard to scale its operations. It joined the Mastercard’s StartPath programme in 2019 that allowed Kasha to integrate digital payment across its e-commerce platform. The Mastercard investment will help Kasha to expand its current platform offering, reaching more women, communities and small businesses than before. Mastercard sees its investment in Kasha as a means to help drive the “empowerment of women and drive the growth of small businesses in Africa”.^[4]

While Kasha is primarily focused on serving women and girls, it also supplies products for men. To deliver the products Kasha deploys a team of full-time staff riders. It also has partnered pharmacies. Clients can choose when they receive the products they ordered.

POINT OF INTEREST

• Rwanda has a higher percentage of representation of women in government than any country in the world. In 2017, women occupied 49 seats in the lower house of Parliament taking up more than half of its total 80 seats. In the 26-seat upper house of Parliament, they held 10 seats. In the government, 55% of the cabinet is made up of women (16 of 29 ministers). The development of Kasha as an online platform dedicated to female consumers should therefore be no surprise. The challenges facing women as far as access to feminine care products are concerned, are well-known. For every female customer that can access such products through Kasha there several others who do not. Africa, therefore, needs NGOs and other social impact organizations that focus on providing these essential products to women.

AFRICA’S FIRST SOCIAL AND VIDEO COMMERCE PLATFORM

Nigeria is home to Africa’s first social and video commerce platform, Rabawa. Rabawa’s official roll-out occurred on 1 April 2021. This startup allows resellers to use social media for curating, promoting, and selling products. Its clients include housewives, students, youth and aspiring entrepreneurs. With the help of Rabawa they can easily launch their online businesses with no capital investment or inventory. The platform connects resellers to manufacturers and wholesalers across Africa, Asia, the UK, and the USA. Rabawa says its objective is to “empower” at least one million unemployed or underemployed Africans by 2023 with their own businesses. On 5 May 2021, Rabawa announced it has raised US$163,000 from an American VC firm, Aptive Capital.

According to Datareportal,^[5] there were 187.9 million mobile connections in Nigeria in January 2021. That is equivalent to 90% of the country’s population. The number of mobile connections jumped 10% (17 million) in just one year (2020-2021). However, since many have more than one mobile connection, the actual mobile penetration may be lower. Nonetheless, the PayU report is an indicator of the potential in Nigeria.

POINT OF INTEREST

• Rabawa faces stiff competition from established players such as Jumia, Konga, PayPorte, Kara, Printivo Store, JiJi Nigeria, Obiwezy, Ajebomarket, and Kusnap. All these firms have been operating in Nigeria for many years. Rabawa, in comparison, is a young upstart. Yet, despite the competition, Rabawa can succeed in Nigeria, which has a population of 200 million people. With more people staying at home and using e-commerce to get access to products and services, it is possible that new startups such as Rabawa can carve out a niche for themselves. Whether this will happen, remains to be seen. Trust is a major issue, and new startups suffer from a lack of visibility and awareness. The odds are therefore stacked against Rabawa, more so when one considers that the largest e-commerce player in Nigeria- Jumia, is still not profitable despite being in business for so many years.