Is E-Commerce poised to take off in Africa?

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The Challenges Facing E-Commerce Start-ups in Africa.

Online sales on the continent have been at a very low in recent years, representing only 2% of the e-commerce world market with a turnover of USD 8 billion in 2013. However, now the new economic conditions seem to allow the sector to grow exponentially; so much so that some believe it could experience a surge peaking at USD 50 billion by 2018. The rapid breakthrough of mobile is the main source of growth: with 350 million mobile phones in the continent by 2017, the mobile services market is booming indeed. To date, nearly 12% of consumers in Francophone Africa only have already made purchases via their mobile device. On top of that, 20% of Africans are now connected to the Internet which contribute to the e-commerce growth on the continent.

What payment methods for Africa?

The e-commerce future in Africa is linked to the telecom sector. Take into account that over 60% of African villages are now connected to the telecom network, while bank branches cover only large urban centers. This limited access to banking facilities offered a land of opportunities to telecom companies: the mobile has become the de facto preferred payment method in Africa to pay for transactions and wire money. With more than 700 million mobile subscribers in Africa, the future of e-commerce is bright.
Among telecom players who now compete with the banks, Orange is the most successful company with "Orange Money”, a mobile payment solution that replaces traditional bank accounts for already 14 million Africans.

The future of E-Commerce depends on infrastructure development.

This raises the issue of key infrastructure development that Africa requires in order for the e-commerce sector to make a leap forward. First of all, logistics infrastructure such as roads, street addressing and relay points must be improved. The African Development Bank estimates that 60% of the population live more than two kilometers away from an asphalt track, meaning that just as many potential customers are unreachable through standard shipping channels. Some companies have already dealt with these deficiencies though, and provided solutions: Jumia for instance has used a fleet of couriers on motorcycles and offers cash on delivery payment, a payment mode adopted in Morocco in 2/3 of sales.

However, offered Internet hosting solutions and coverage are insufficient. But the situation is improving gradually with the development of 3G and optical fiber networks. Finally, businesses must adapt to the emergence of these consumption patterns and make the necessary investment. The conditions to ensure the future of e-commerce in Africa are at reach. But one of the major challenges to address remains the difference in economy maturity of african countries. For instance, the difference in term of economic growth are already palpable between Côte d'Ivoire with its booming economy, and Algeria that remains entangled in economic and constitutional difficulties.

1 Comment

  • Although a number of players have emerged all over Africa, like TakeALot and Jumia currently operating in 13 countries, Internet penetration is at 9.8%. With only one in ten people online, compared to nine in ten (90.2%) in developed countries, I don't see how ecommerce can growth in Africa any time soon!

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