In 2019, Africa reportedly had at least six-hundred and thirty-one business-to-consumer online marketplaces for physical goods, and those marketplaces had 1,902 websites in fifty-eight countries and territories. However, for a continent of more than 1.4 billion people and MSMEs (Micro, Small, and Medium Enterprises) that represent about 90% of Africa’s businesses, online marketplace activities are relatively low compared to economies with similar populations.
And although most African countries’ economies comprise different aspects of e-commerce, only a handful can boast reliable and efficient online marketplaces. Moreover, only two countries on the continent—South Africa and Morocco—have more than 100 adequate online marketplaces.
Regrettably, e-commerce on the African continent was valued at only $16.5 billion as of 2017, placing it far behind the rest of the world. However, projections from McKinsey consulting firm concluded that Africa’s e-commerce could value at $75 billion by 2025, provided African countries address critical problems hindering their e-commerce markets.
All evidence indicates that this estimated value would have exponentially increased had most African countries invested in adequate e-commerce infrastructure before the coronavirus pandemic, as the global economy primarily functions online since the implementations of lockdown measures and restrictions.
Notwithstanding, Africa still can establish a booming e-commerce market because internet users and online shoppers across the continent are on the rise, and the demands for online marketplaces continue to soar. To meet the demands for online marketplaces in this era of globalized economy, private and public entities in Africa must adapt and implement the various aspects of e-commerce markets within their own context.
E-commerce
E-commerce is a platform that allows the sales or purchase of goods or services over the Internet through a medium designed for receiving or placing orders. Electronic communications with regards to e-commerce are in three categories: business to government (B2G), business to business (B2B), and business to consumers (B2C), which is principally needed to revitalize Africa’s eCommerce sector.
A business-to-consumer online transaction is the type of eCommerce transaction that allows a seller to sell products or services directly to consumers. African countries are lagging in e-commerce because of limited access to the Internet in rural areas. Also, online payment services which require trust often hinder consumers from buying goods and services online.
Considering this, African entrepreneurs should divert their resources to enhance their enterprises through e-commerce because it can create new opportunities for small businesses. However, to reap Africa’s full eCommerce potential, the following difficulties need attention.
Unstable internet connection
Africa has the lowest number of Internet connections—only 22 percent of the continent has access. Data reveals that it takes approximately 734 minutes to download a 5GB movie in the Republic of Congo, 850 minutes in Ethiopia, and 1,342 minutes in Equatorial Guinea. In contrast, it would take a country such as Singapore 11 minutes and 8 seconds to download a 5GB high-definition movie.
Unreliable Internet connections result in a high cost of Internet connectivity, which have increased the transaction cost of online business for most African countries. For example, in Equatorial Guinea, the average price for 1GB data is $34.25 USD compared to developed nations such as Georgia, where the same 1GB data is $1.82 USD.
Lack of technical skills
Lack of technological know-how hinders MSMEs from enjoying the full potentials of e-commerce. Without technical skills, most entrepreneurs lack the skills to use various specialized tools like computers, smartphones, and internet facilities. Small enterprises often do not understand basic web terminologies and procedures, which has disrupted their interest in eCommerce.
Similarly, language barriers make many MSMEs lose interest in online trade and further contribute to technical issues that hinder entrepreneurs from engaging online effectively. An entrepreneur who cannot read and write will not want to tap into eCommerce due to the obvious difficulties. For instance, in Niger, the literacy rate of people 15 years and older is 26.65 percent, and in Burkina Faso, it is 32.6 percent. Low literacy rate is common and there is a need to foster formal education.
Lack of trust in e-commerce
Trust in e-commerce is crucial for online transactions to gain ground. Most consumers in Africa are worried that their payments online are unsafe. Amanda Long, international director of United Nations Conference on Trade and Development (UNCTAD), refers to lack of trust due to payment fraud, shopping scams, and unfair procedures. Ms. Long noted that “online retailers can and do fake reviews that encourage consumers to buy goods and services.” Gaining consumers’ trust is necessary for the online environment in African countries because reputation also depends on opinion and perception.
Legal and regulatory barrier
A solid and reliable legal framework for e-commerce is needed to enhance online transactions. For example, apart from Algeria, no African country has laws to accept electronic signatures. A few countries, Côte d’Ivoire, Ethiopia, Morocco, Senegal, and Tunisia, have established a legal framework for eCommerce, while others still lag. The absence of a legally recognized regulatory organization that consumers can report any case of fraud, inferior products, or misuse of their data hinders eCommerce growth. This barrier has resulted in the high cost of licenses and lack of clarity on tax and regulatory requirements in Africa.
Substandard Postal Addresses
Unfortunately, the postal system in Africa is not functioning adequately. Street names and signs in most African countries are not descriptive enough to direct dispatch men to the consumers’ location. Substandard street names and signs often lead to confusion that delays deliveries, canceled orders, and subsequent loss of revenue for businesses.
The ineffectiveness of some national postal operators has led to higher prices for e-commerce deliveries by alternative carriers that have no effective competition. For example, some African countries like Namibia do not have postal codes, while postal codes in other African countries are not effective enough for smooth delivery.
With no surprise, in an era when eCommerce is thriving globally, online marketplaces in Africa are experiencing fall in activity. Consumer traffic on online marketplaces in Africa slipped by 5% in 2017–2019. The difficulties mentioned above stifle the untapped potential of African eCommerce. Online marketplaces can enhance opportunities for MSMEs and stimulate trade across Africa. One way to achieve eCommerce success in Africa is to mitigate obstacles confronting sellers, buyers, and companies. For small businesses to benefit from ecommerce, the following steps should be taken to support and promote e-commerce trade in Africa.
Addressing Africa’s e-commerce issues
With support from the World Bank Group, the African Union “Digital Transformation Strategy for Africa” initiative aims to ensure that every individual, business, and government be digitally enabled by 2030. For this goal to be feasible, governments should give the following measures priority: improved Internet connectivity, training of entrepreneurs on e-commerce, enhanced delivery infrastructure, provision of cybersecurity, and strengthening the legal framework.
Improved Internet connectivity:
Since most African homes do not have access to the Internet, the continent needs affordable Internet facilities, like community Internet centers, that will enable small businesses to access the web routinely and reliably. When the Internet is unstable, online shopping becomes difficult. Unreliable internet connections discourage buyers and sellers and eventually disrupt the prospects of e-commerce.
Training of entrepreneurs on e-commerce
Lack of technical skills has frustrated several MSMEs in Africa from realizing their full e-commerce potential. The International Trade Centre (ITC) is developing more online content for entrepreneurs and small business owners to boost MSMEs’ productivity. The aim is to give business owners worldwide the opportunity to create quality e-commerce content through their ITC SME Trade Academy platform. Providing entrepreneurs training on e-commerce and the Internet will enable them take advantage of the benefits being online offers.
Enhanced infrastructure
Developed roads can aid e-commerce advancement. As is, transportation logistics are incredibly challenging. Bad roads, overcrowded cities, and traffic jams often delay the delivery of goods and services. Many African roads are rough or damaged, and the streets are often challenging to navigate. In Kenya, for example, alternative forms of transportation have been created in some markets. For e-commerce companies to improve their deliveries efficiency, they adopted the use of motorcycles locally known as ‘Bodabodas’ in Kenya and ‘Okada’ in Nigeria, for example. While these motorcycles’ delivery help, better infrastructures can improve eCommerce operations and make it easy for MSMEs to participate in online business.
Provision of Cyber Security
For the future of African e-commerce to be promising, there must be some level of trust between entrepreneurs and consumers. Currently, consumers are often reluctant to provide online information about their credit cards because they do not trust the platform to be private and secure. Therefore, online marketplaces should provide trust tools like online customer testimonials, digital signatures, and security certificates to assist buyers and sellers. Also, new consumer protection laws at the national level are necessary. E-signature and e-contract laws are needed to facilitate the establishment of online businesses.
E-commerce provides an opportunity for Micro, Small, and Medium Enterprises to grow their businesses by accessing new markets. However, it does not come easily, and there are challenges to overcome for e-commerce to be used effectively by MSMEs. Additionally, e-commerce has an ecosystem with several stakeholders that help make the system work efficiently. Good digital infrastructures, including cybersecurity, enhanced delivery infrastructure, training of entrepreneurs on e-commerce, and improved Internet connectivity, are essential parts of the ecosystem. For this reason, governments should concentrate on making e-commerce more accessible and affordable for MSMEs to enhance their productivity.
