Growth on the horizon for African e-commerce and logistics in 2022
Africa must overcome challenges around infrastructure, logistics, and financial inclusion to realize the potential.
Countries across Africa present huge opportunities in e-commerce but businesses must quickly overcome challenges around infrastructure, logistics, and financial inclusion to fully realize the potential.
Since 2020, we have witnessed African markets embracing the e-commerce revolution. Thanks to rising disposable incomes, growing internet penetration, and emerging cross-border e-commerce markets, the continent is poised to become the world's next big online retail destination. To realize this ambition, e-commerce platforms must now focus on building this momentum in the wake of increased economic and logistical pressure.
With more and more international attention on Africa's economic potential, I am seeing increased investment from global brands and the creation of numerous new payment platforms in nations where opportunities have been long overlooked. What is most important now is ensuring that we –e-commerce platforms – ride this wave and continue to provide the best possible support for consumers and businesses alike.
A report from 2021 conducted by global fintech business, PayU, revealed the massive potential for digital businesses across the continent, with South Africa, Nigeria and Kenya experiencing a major increase in internet and e-commerce penetration (37 percent in both Nigeria and SA, and 25 percent in Kenya).
The growth potential for these countries is overwhelming, but it is not only these economic centers that are experiencing a new digital dawn. According to analysts at Statista.com, e-commerce in Rwanda was projected to reach USD 79 million in 2021, with an annual growth of around 12.5 percent year-on-year until 2025. In only six months of operating in Rwanda, DUBUY.com has received over 500,000 website visits from sellers and buyers and has built a community of more than 4,000 active merchants on the platform.
With an additional five million users expected to begin using e-commerce services in Rwanda alone by 2025, it is up to the logistics sector to keep up with growing demand across the entire continent.
As we look further into 2022, the team at DUBUY.com has noticed a series of trends that we believe will define the way in which the e-commerce sector will evolve in Africa.
"Payment security is paramount regardless of the size of a business and the ability to secure a reputable sales base through these platforms is a unique draw for African businesses."
Continued investment in digital (and physical) infrastructure
The Asian Infrastructure Investment Bank (AIIB) has rightly noted that e-commerce has, in the past, been largely concentrated in developed markets. Yet its ability to offset pandemic-related job losses and create new business opportunities makes it an important sector across the globe.
The key to enabling these markets at a faster rate will be investing in digital communications infrastructure, meaning internet access becoming more prevalent. The Infrastructure Outlook estimates that USD 6.5 trillion will have to be invested in digital infrastructure between 2020 and 2040 to grant full access across the globe.
But physical infrastructure will also have to keep up, as e-commerce's continued growth cannot be feasible if logistics cannot support the increased movement of goods. Supply chain optimization is crucial, as poorly timed deliveries can lead to major monetary loss. Improving delivery routes, identifying the stumbling blocks in the supply chain, and optimizing shipping processes is not only cost-effective but also creates a good customer experience and grows loyalty among consumers. Investing in physical and digital infrastructure is a must for all online platforms that want to succeed.
Balancing consumer needs and business-to-business (B2B) relationships
Whilst a wide consumer base is vital to success, it is equally important to ensure B2B partners are also satisfied. In 2020, the global B2B e-commerce market size was valued at USD 14.9 trillion and B2B brands are looking for new ways to increase their sales. This can start with growing their online presence, but also means embracing omnichannel strategies, meaning moving between brick-and-mortar shops to websites, social media, online newsletters, chatbots and beyond. This strategy of unifying data and putting customers first has been the B2C focus for years, but it's likely the future of B2B as well.
Because of this, we should be engaging even more with our B2B partners to ensure their needs are met.
An important factor appears to be providing them with access to easy-to-use, diverse payment options across numerous markets. By partnering with payment gateway service providers, e-commerce platforms are letting businesses (and individual entrepreneurs) make secure online payments at a much wider scale. Payment security is paramount regardless of the size of a business and the ability to secure a reputable sales base through these platforms is a unique draw for African businesses. According to the World Trade Organisation, transaction security is a major concern for African e-commerce participants, and it is the countries and platforms that focus on cyber security that are seeing a boom in the sector.
Implementing the safest processes to encourage smaller businesses to start trading online
Keeping customers can be tricky, especially when many of them may simply turn to other platforms if their first ordering experience is shaky. For many smaller businesses that use DUBUY.com as a wholesale e-commerce platform, they need us to provide them with the most secure processes possible to ensure they keep their own customers happy. Data security on the web is essential, as is the on-time delivery of merchandise. Blockchain technology allows data to be securely held in a single place – creating synergies with the shipping companies and suppliers that work with us –allowing us to precisely track the entire e-trading process.
Micro, small and medium-sized enterprises across Africa are keen to take advantage of digital markets for the inherent increase in reach and profitability, which is why their safety and security should be our priority if they decide to use our platforms. By providing safe digital infrastructure, we hope to encourage these kinds of businesses to take the leap into e-commerce, improving their reach and ultimately strengthening and boosting local economies.
New legislation, resources and government support will be vital to growing African e-commerce
While the private sector has a significant role to play in the growth of e-commerce on the continent, considerable public sector support can hasten this substantially.
For example, the Kenya Revenue Authority, which tracks payment of taxes and transit goods, has concentrated its efforts in putting in place protective mechanisms for the courier industry – which is, of course, responsible for the delivery of items purchased online. Through this government support, e-commerce guidelines for couriers are in place to ensure professionalism, safety for the couriers themselves and security for consumers.
In Rwanda, the local government has begun promoting e-commerce and set up its first e-commerce Service Centre in Kigali – helping local businesses enter the sphere with minimal investment and risk.
While we've seen similar projects in other African countries such as the E-commerce Forum of South Africa– and they are a phenomenal first step – it will be government legislation and societal encouragement of trade that will truly facilitate the growth of e-commerce. Governments need to realise that supporting initiatives (and following their recommendations) such as the African Union's Digital Transformation Strategy for Africa will transform lives, heighten digital economies and close the gaps of the developing world. For consumers, new emerging markets mean more product varieties and more opportunities to invest in the countries we want to succeed. Access to a world of trade should not be a privilege – which is why DUBUY.com believes in diversifying opportunities and attracting investment to the continent from across the world.
This feature was originally published in the March - April 2022 issue of Logistics Update Africa.