A recent report by Boston Consulting Group (BCG) shows that marketplaces such as Jumia, Souq, Uber, and Travelstart could create around 3 million new jobs by 2025 across Africa. These digital platforms, which match buyers and providers of goods and services, could also raise incomes and boost inclusive economic growth with minimal disruption to existing businesses and workforce norms. These are among the findings of a new report, titled How Online Marketplaces Can Power Employment in Africa.
Generating employment is an urgent priority across the continent. The African Development Bank estimates that one-third of the 420 million Africans age 15 through 35 were unemployed as of 2015. Around 58% of the new jobs—created directly, indirectly, and through the additional economic activity generated by online marketplaces—will be in the consumer goods sector, 18% will be in mobility services, and 9% in the travel and hospitality sector, according to the report.
For online marketplaces to reach their full potential, however, the public and private sectors must work together to build the right digital environment from the outset, the report notes. Obstacles to industry expansion include underdeveloped infrastructure, a lack of regulatory clarity, and limited market access. For their part, African policymakers are concerned about issues such as data security and potential disruption to traditional business sectors.
The Economic and Social Benefits of Online Marketplaces
“Online marketplaces are a good illustration of how the digital revolution can create economic opportunity and improve social welfare in Africa,” said Patrick Dupoux, a senior BCG partner who leads the firm’s Africa business. “Because Africa currently lacks an efficient distribution infrastructure, online marketplaces could create millions of jobs.”
Concerns that growth in online marketplaces will merely cannibalize the sales of brick-and- mortar retailers are misplaced in the case of Africa, according to the report. There were only 15 stores per one million inhabitants in Africa in 2018, compared with 568 per million in Europe and 930 in the US. This extremely low penetration suggests that there’s minimal risk that e-commerce will displace existing retailers and that much of the population is underserved.
Nor are online marketplaces likely to disrupt labor-market norms by blurring the lines between employees and freelances. Unlike in developed economies, the vast majority of African workers are in the largely undocumented and unregulated informal sector. In Nigeria, for example, 71% of workers are self-employed and another 9% contribute labor as family members.
The report also details the ways in which economic activity generated by online marketplaces boosts employment and incomes. These businesses create demand for personnel in new fields, such as platform development, as well as for merchants, marketers, craftspeople, drivers, logistics clerks, and hospitality staff. Some also offer skills-development programs and help small enterprises raise capital to expand their businesses. Online marketplaces also boost demand for goods and services in areas currently beyond the reach of conventional retail networks and bring new people—such as women and youth who may be currently excluded from labor markets—into the workforce.
“While online marketplaces are often seen as disruptive forces in advanced economies, in Africa’s less-structured economics they can be tremendous catalysts of economic development,” said Lisa Livers a BCG partner and co-author of the report.
“We meet Kenyan SMEs on a daily basis with great products, but who struggle to scale their businesses for lack of capital. Growing in the offline world means more shops & more stock – which takes working capital’,” said Jumia Kenya Managing Director Sam Chappatte, adding that “Online marketplaces allow these entrepreneurs to both reach new customers without additional investment & build up a digital sales history that can be used to unlock finance at a future point”.
The report recommends that the online marketplace community and African governments collaborate to address the challenges that hinder the online marketplaces’ ability to grow. Both industry and government should take actions that foster a mutual understanding of both opportunities and concerns, strengthen trust through the sharing of resources, and build the right technological infrastructure and governance systems.
“Fulfilling the tremendous promise of online marketplaces relies on the ability of the private and public sectors to come together to create the right digital environment that is designed from the outset to bring economic and social benefits for all,” said Amane Dannouni, a BCG principal and co-author of the report.