Africa presents vast opportunities in e-commerce. Probably unknown to many, Kenya and Uganda were the first countries to introduce mobile payments in the mid-2000s. And it is the continent’s early history with mobile payments that is paving the way for it to become a frontrunner in e-commerce, with the market estimated to double in size to USD75 billion by 2025.1
Demand and supply side dynamics
On the demand side, consumers are shifting to online commerce as mobile connectivity increases.2 Covid-19 has accelerated that trend and increased interest in contactless transactions.
More than 30 per cent of consumers surveyed in Nigeria and Kenya said they are shopping online more frequently amid the pandemic.3 In South Africa, where e-commerce sales were forecast to more than double in 2020,4 64 per cent of consumers made their first online grocery purchase and 53 percent bought goods from an online pharmacy for the first time.5 Meanwhile, online marketplace Jumia, which operates in several African countries, reported a 22.8 per cent on-year increase in active consumers in the nine months to September 2020.6
This has laid fertile ground for a proliferation of e-commerce tools and platforms in the B2C space. A McKinsey survey of key African economies during the pandemic found that more than 30 per cent of businesses were increasing the use of online and mobile banking tools, such as those from Kenyan mobile money service M-Pesa and payments provider Interswitch.
On the supply side, we are seeing the emergence of technologically enabled business ecosystems—linked through digitally based platforms that make it easier for them to collaborate dynamically with other enterprises and remove much of the friction involved in joint ventures and other cross-boundary collaboration. In November, the Economic Commission for Africa introduced the African Trade Exchange in November—a B2B e-commerce platform that promises to strengthen the region’s supply chains.7
In Kenya, Twiga Foods widened its reach through a partnership with Jumia, enabling shoppers to buy fresh produce and processed foods ad lower prices through Jumia’s online platform.8 This along with other partnerships saw Jumia post a fourfold increase in grocery sales last year.9 Pan-African payments provider Flutterwave, meanwhile, launched an e-commerce portal enabling offline retailers to set up online shops.10, 11
A wave of innovation
Sokowatch, which has a network of over 16,000 shops and kiosks across nine cities in East Africa,12 reported a surge in new shop partners after they offered tech-enabled same-day deliveries.13 In Nigeria, agritech company FarmCrowdy launched an e-commerce platform that enables users to buy fresh foods directly from farmers.14 The platform processed 3,000 orders in the first 90 days.15
Across the continent, there is considerable innovation taking place at the private and public level. In Senegal, a public-private partnership16 formed during the pandemic to facilitate delivery of essential goods and services through e-commerce. In Uganda, platforms have been launched to link informal operators with established marketplaces and to help remote communities access market vendors using local transport.
Some central banks, such as the Central Bank of West African States, have implemented measures to cut the transaction costs of electronic payments, while the adoption of the pan-African payment and settlement system as part of the African Continental Free Trade Area (AfCFTA) is a major step towards the integration of digital financial services.
Bridging the gap
While e-commerce thrives in some markets, others remain underserved. Both B2C and B2B businesses have to battle basic infrastructure gaps and inefficient logistics in many areas, while informal home-address conventions make deliveries complicated. This, coupled with persistent doubts about the reliability and security of e-payment systems, has left a lingering absence of trust in e-commerce.
At the regulatory level, much needs to be done. Currently, only 20 of 54 African nations have enacted online consumer protection and data management laws,17 while there is also an urgent need for policies to enable cross-border commerce. Some nations are discussing taxation of mobile money users, which could limit their growth.
Problems like these account for the fact that e-commerce sales still represent just 1 per cent of all sales in Africa, compared with almost a quarter in China. While the pandemic triggered social changes that favour e-commerce, businesses still require much higher levels of mainstream consumer adoption and retention to build viable businesses.
Emergence of central ecosystem leaders
Financial institutions have the infrastructure, network and capabilities to emerge as central ecosystem leaders. Standard Chartered has been working across the continent to help businesses overcome these challenges.
“We were one of the first banks to partner with M-Pesa,” said Mahesh Narayan, Global Product Lead – Mobile Money & E-Commerce at Standard Chartered. “We forged strategic partnerships with major mobile wallet providers across Africa to support businesses with cashless disbursements and collections through mobile wallets of unbanked or underbanked individuals. We introduced an innovative solution to enable simpler, safer and easier access to financial services for our corporate clients and the community, driving financial inclusion through digitisation across the continent. Additionally, with the growing importance of e-commerce in Africa, we are introducing “Straight2Bank Pay” our omni-channel global digital collections gateway, enabling businesses to accept a variety of digital payment options from their customers.”
Meanwhile, Standard Chartered has partnered with telecom giant Airtel Africa to launch a service – initially in Kenya, Uganda, Zambia and Tanzania – enabling Airtel customers to make real-time bank account deposits and withdrawals, receive international transfers and access savings products direct to their mobile wallets. Corporate clients can use the service to make bulk disbursements such as salary or supplier payments direct to Airtel wallets, cutting out the risk many people in Africa face of travelling long distances with cash.
In Nigeria, Standard Chartered has collaborated with Visa to run a campaign to provide secure cashless QR payments through the Bank’s digital banking mobile app and the Standard Chartered Visa debit card, to promote the adoption of e-commerce solutions.
“Across Africa, the pieces of a well-developed e-commerce ecosystem are falling into place, but like in many other emerging markets, financial inclusion is a challenge. A cashless future is important for e-commerce because both B2B and B2C businesses may be missing out on a growing segment of customers who lack traditional banking resources,” said Syed Khurrum Zaeem, Head of Trade & Transaction Banking, Africa & Middle East at Standard Chartered. “Standard Chartered is already developing solutions to overcome these obstacles and also has a well-established network across sub-Saharan Africa. By partnering with us, businesses in Africa can immediately start serving underbanked individuals and businesses, in an efficient manner.”
2 Africa has the world’s fastest rate of new broadband connections, while mobile data traffic was forecast to grow sevenfold between 2017 and 2022. As a result of this growing connectivity, coupled with the world’s lowest ratio of banks to people, Sub-Saharan Africa alone is already responsible for more than 45 per cent of the globe’s mobile money payments. About 50 million people in Sub-Saharan Africa created new mobile money accounts in 2019, and total user numbers are expected to reach 500 million in 2020.