According to the chief executive of Ringier One Africa Media (ROAM) Clemens Weitz, Africa’s digital-driven e-commerce sector will change significantly over the next ten years which will enable it to leapfrog developed world structures and establish its own special trade and economic structures.
Understanding the African Context
Weitz highlights that for investors to reap profits from the African markets, they must first understand the continent’s context. Plagued by a large informal sector, the digital transaction experiment will never replace the real-world informal experience, says Weitz.
According to the IMF, the informal economy contributed 65 per cent of all national commercial activity.
“The value of digital transactions in a local exchange context lies in their ability to facilitate and streamline “human” interactions, at scale,” he adds.
That means to bring a digital commerce environment to Africans, investors have to incorporate aspects such as trust that make the informal marketplace so attractive.
Increased Uptake of E-commerce
ROAM predicts that there will be an increased uptake of e-commerce on the continent considering that the company’s online listings grew by 121 per cent in the first quarter of 2018.
However, there are barriers to the rate of e-commerce adoption on the continent such as logistics and connectivity. With regards to logistics, the delivery of items purchased online is a challenge especially for larger and smaller items, Weitz observes.
“Until cheaper and more reliable infrastructure exists for delivery, difficulty in accessing niche products will hinder the further uptake of online trade,” he added.
The challenge of connectivity, on the other hand, is emphasised by the high cost of internet data. According to a 2017 study by UK-based company Cable, monthly broadband internet packages cost more than the national minimum wage.
The study indicates that only seven out of the 36 countries analysed had cheaper monthly broadband packages below $50. Some of the countries include Egypt, Reunion, Tunisia, Mauritius, and Morocco.
In addition, internet penetration was 35.2 per cent of the African population as at 31 December 2017 according to Internet World Stats. Therefore, for e-commerce uptake to increase, African nations need to review internet access and affordability.
Moving Towards a Cashless Economy
ROAM predicts that African economies will move towards a cashless economy in favour of the convenient and secure mobile money payment methods. The shift will be driven by the increasing need for trust in light of increasing fraud cases in the financial sector.
“So far, M-Pesa in Kenya and EcoCash in Zimbabwe are steps in that direction. Whatever happens, though, a simple imposition of Western online banking solutions is not the answer,” Weitz asserts.
An Innovation-Driven Continent
Weitz believes that the willingness to innovate and disrupt by African countries will be the main catalyst as far as the future of e-commerce on the continent is concerned.
In addition, ROAM’s chief executive is of the opinion that the future of commerce will manifest itself in SMMEs.