Africa’s finance and banking sector has grown rapidly into an era where traditional payment methods characterised by hectic and cumbersome procedures have been given over to the spark of e-commerce where the invention of fast payment platforms has made banking smooth and easy.
E-commerce in Africa has become central to economic survival as businesses owned by software engineers, web developers and technical experts have leveraged operational software packages as catalysts for transformation in the continent’s economies, further fuelling the rapid growth of e-commerce.
It is therefore important to investigate the rapid growth of e-commerce in Africa and its significant impact, which has been positively driven by the increasing mobile penetration rate on the internet.
Examining how these will shape trends and the economy into the future underlines the need for this article.
The growing internet and mobile penetration in Africa is the underlying reason for the growth of e-commerce in Africa. Without high involvement of internet connectivity, online businesses would not thrive.
The revolution in Africa is purely the result of technology and the accompanying mind shift: according to the GSM Association (GSMA), sub-Saharan Africa recorded 495 million mobile application subscribers at the end of 2020.
This figure is based on a projected growth rate that will see mobile subscribers reach 615 million in 2025 (BCG Global).
This data correlates with internet usage and subscriber numbers. Mobile internet users are over 272 million and are projected to reach a peak of 475 million by 2025, which may grow faster than expected.
Behind these figures lies the accessibility and availability of smartphones and mobile network connections among Africans.
Developed countries such as Nigeria, Kenya and South Africa have been aggressively embracing the internet and paving the way for e-commerce initiatives, especially inspired by the glorious potential of 4G and 5G to ensure a satisfying user experience.
All this has created possibilities that were previously locked out of the IT industry and represents the blossoming of e-commerce in Africa.
Digital Payment Platform
Moving away from the limitations of traditional banks, digital payment platforms are exploring the pattern of convenient banking by providing people with easy payment transactions without the hassle associated with traditional banking infrastructure.
This has contributed greatly to the success of e-commerce, as digital payment platforms have increased, leading to a dramatic development in the industry. In the long run, this ensures employment and financial security for users. These platforms include:
Mobile Money: This digital application, which began operation in 2007, runs a mobile money system, allowing users to easily deposit, send and withdraw money in exchange for goods and services using their mobile phones.
Kenya's widely used M-pesa is a prime example of this type of service, with 40 million users and a major impact on the country's economy, according to BCG Global.
Fintech Innovation: Technological advancements are driving rapid growth in financial technology.
Essentially, these applications are innovations that evolve the payment procedures of mobile money systems by providing the means to carry out transactions in different currencies through a single application. A prime example is Flutterwave, which achieved 140 million transactions worth $9 billion in 2020 (BCG Global).
Cryptocurrency: It is a digital payment platform that is gaining a lot of attention and users around the world, especially Africans who are constantly taking advantage of the opportunities.
Cryptocurrencies are mined to generate coins that can be used to trade for anything. In modern cryptocurrencies, coins are exchanged for a currency value, such as the Naira. Although currently banned in Nigeria, it has opened the way to accumulate wealth through currency trading, making it a bright digital prospect for Nigerians. Platforms such as Luno and Binance are popular crypto-oriented platforms for buying, selling and storing cryptocurrencies (Source: Ventures Africa).
Successful e-commerce ventures
Jumia
Ask 10 Nigerians about their awareness of Jumia and more than eight will likely respond in the affirmative.
Founded in Nigeria in 2012, Jumia is a popular e-commerce venture that sells and buys a diverse range of goods and services across 14 African countries.
The platform has stood the test of time and remains vibrant and thriving thanks to constant technological upgradation and partnerships with local partners that include a well-planned logistics network, ensuring timely and consistent deliveries.
Technologically, Jumia manages inventory and supply cycles using advanced machines programmed with algorithms that optimize costs and efficiency. (Ventures Africa)
conga
Standing tall as Jumia’s main rival, Konga is Nigeria’s leading e-commerce platform with a trading history that bears the trademarks of focus and innovation.
Konga was acquired by Zinox Technologies in 2018 and has since been providing customers with a multi-dimensional shopping experience through technology that incorporates offline and online retail channels.
Technologically, Konga operates a hybrid cloud infrastructure that oversees dynamic operations using microservices that enable feature development and versatility (Ventures Africa).
Take-a-lot
Takealot is based in South Africa and has an advantage as a driver of e-commerce. It has a diverse range of products and is known for its fast delivery. Its technological framework ensures seamless transactions with easy payment patterns.
Technologically, Takealot uses data analytics to manage its marketing strategies, allowing its algorithms to pinpoint user interests. Mr D Food, the platform’s logistics partner, efficiently uses GPS tracking to ease deliveries and reduce accidents (Business Insider Africa).
The advent of e-commerce has been a tremendous boon to the economy.
The growth of e-commerce has contributed immensely to business opportunities and fulfilled the dreams of many people who envision starting a small business, giving them hope that their dreams will come true and bring effective profits to their ventures.
Furthermore, e-commerce has become the basis for employment opportunities, especially in areas related to logistics, customer service, and IT. In areas related to GDP, e-commerce has proven to be a significant contributor to annual revenues.
This further correlates with findings from the United Nations Conference on Trade and Development (UNCTAD) which suggest that the e-commerce sector's share of Africa's GDP could grow from 4% in 2020 to up to 10% by 2025 (Ventures Africa).
What is evidenced here is exponential growth driven by increasing consumer spending, digital expansion and internet penetration.
E-commerce is also strengthening financial inclusion as its digital payment solutions attract more people, especially the unbanked, to use mobile money applications.
This has highlighted the possibility of introducing financial awareness and financial liberalization schemes to minimize the rate of poverty and hunger.
Challenges and opportunities
Challenges facing e-commerce in Africa include infrastructure, regulatory frameworks and cybersecurity.
E-commerce faces harsh realities that impede its smooth operation, from poor roads to erratic power supply, which leads to overall stalled operations.
Regulatory issues regarding cross-border payment liquidity pose a threat to inclusiveness and negate the universal objective of e-commerce.
Cybersecurity is still not in place in Africa, which has led to some e-commerce software being hacked and resources being stolen.
Opportunities for e-commerce in Africa include fintech integration, local solutions and partnerships.
The convergence of e-commerce and financial technology increases the likelihood of achieving great results.
Here, e-commerce can work with financial technology to improve payment solutions covering security and transparency.
E-commerce can be used to curate culturally oriented values. In that way, applications can be written to support local languages and preserve the culture. Just as it is done in other countries where hypertext markup languages are designed in local languages that cannot be understood unless you are familiar with that language. Another big opportunity for the e-commerce industry is that it can achieve greater results, especially when there is fruitful collaboration between technology companies and governments, international organizations and technology companies. This will highlight the situation and foster development.
With Statista predicting e-commerce revenues of $75 billion in 2025 and the GSMA predicting mobile money payments to peak at $500 billion in 2025, the future for e-commerce in Africa is undoubtedly bright.
To ensure consistency and security in the industry, e-commerce promoters must apply their creative expertise to the dynamic marketplace to make the most of these possibilities.
Conclusion
E-commerce is the new gold mine of technology. It creates diverse opportunities for technology professionals to flourish and build infrastructure to establish job relevance. Most prominent are fintech professionals, whose contribution to the digital sector is vital for the ultimate growth of technology and the economies of African countries where it is practiced.
Hilary Utuke is the CEO of Korlod Works, a leading digital marketing company in Lagos. He has written four books including “Digital Strategies for Online Brand Visibility” and created Digital Luminary Pro (TM), a model to help Nigerian thought leaders connect with Millennial and Gen Z audiences.
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