In June, Visa reported that the top market contributors for e-commerce in Sub-Saharan Africa (SSA) over the last three years were South Africa, Nigeria, and Kenya with Ghana also showing growth having replaced Kenya in the top three contributors in 2020.
“The three leading markets in SSA are starting to mature, providing the region with an established foundation and when twinned with the growing penetration of e-commerce, offers players in the payment space an opportunity to capitalize while helping accelerate the expansion of e-commerce in the region,” said Lineshree Moodley, Head of Visa Consulting and Analytics, SSA.
The Adoption is Slow but Steady
Merchant categories driving e-commerce for Kenya indicate a strong service-based presence in the professional services sector, education, government, and B2B with key enablers being the ability to access financial services, digital payments, and digital infrastructure.
Currently, cash is king, particularly in Nigeria but there are signs that this will eventually change, while in Kenya mobile money has become popular.
The use of cards has increased across the continent with the highest uptick in Kenya with a strong vote of confidence for contactless payments such as e-wallet services to avoid cash as a conduit for the virus.
Ecommerce platforms must therefore be designed with end-to-end mobility in mind with online payments offering secure and seamless omnichannel user experiences for both local and cross-border transactions.
Spurred by success stories such as Jumia, Kilimall, Konga, and Takealot – e-commerce is prospering in Africa. From 2014 to 2018, the number of online shoppers increased on the continent on average by 18% annually, against a global average of 12%, according to the United Nations Conference on Trade and Development.
With an increase of 66%, the Kenyan e-commerce market contributed to the worldwide growth rate of 26% in 2020 and is projected to reach $1.5-billion in 2021 with a current base of some 526-million Internet users.
As many as 264 e-commerce start-ups were operating across Africa in 2017 and while e-commerce is on the rise, familiar challenges exist around ICT, logistical infrastructure, customer reluctance due to cyber-crime, low Internet penetration, and problems with digital literacy.
E-Commerce Legislation in Africa
Furthermore, e-commerce legislation in Africa has failed to meet digital advances as currently, only 33 of 54 nations have regulations for electronic transactions and only 25 have online consumer protection laws. That said, Kenya’s e-commerce ecosystem is seen by the experts as a region where its own model will be developed based on the country’s unique characteristics and as market demand dictates.
Patrick Ndegwa, Business Sales Lead at SEACOM East Africa, explained that e-commerce companies are focusing on improving their digital infrastructure with transaction-management capabilities as a top priority.
Giving customers personalised, omnichannel options to use their preferred payment platform is no longer simply advantageous – but expected. Supply chain constraints, delivery, and transport expenses plus difficulties in meeting customer shipping requirements are a challenge for these online platforms forcing customers to opt to shop on marketplaces, rather than individual e-commerce stores.
Shoppable video ads on TikTok and Instagram are also creating a shift in the industry with businesses targeting younger audiences having much to gain as they can influence buying decisions through direct engagement with a tech-savvy generation.
The African digital economy is set to continue its exponential growth trend but the question remains as to the sustainability thereof. Survey results published in a UNCTAD report in March this year found that more than 40% of customers in four large African countries were planning to reduce their supermarket shopping in the future by purchasing food, clothing, and electronics online.
E-commerce in the region certainly saw significant successes in 2020, suggesting sustainability going forward. The African Continental Free Trade Area which became operational in January of this year also looks set to boost e-commerce in the region.
Barriers to E-Commerce Adoption in Africa
Common barriers will need to be overcome including the high cost of broadband, little government support, limited digital training, and the traditional preference for cash. As seven of the ten fastest-growing Internet populations in the world are in Africa, largely due to the increase in mobile usage, the common belief is that challenges will be overcome in time.
For African e-commerce to rise in a world-class marketplace, an article published on Further Afield suggests that more Africans need to be offered fast and reliable connectivity and education to thrive in digital environments.
Making it clear, from Kenya to Nigeria that the more they connect and trade with the rest of the world, the more the world will begin to see what Africa truly has to offer.