The state of E-commerce in Africa
What is E-commerce?
E-commerce, also referred to as internet commerce or electronic commerce can be defined as the buying and selling of services or physical goods through the internet; as well as the transfer of cash and data to execute these business transactions. According to statistics, Africa has approximately 400 million internet users, making the continent the second-largest internet-user population globally after China and Asia. Reports from the United Nations Conference on Trade and Development reveal that online shoppers in Africa continue to grow steadily by about 18% annually since 2014. According to UNCTAD, the number of online shoppers has continued to grow against a global average of about 12 percent from 2014 to 2018.
In addition, our African payment systems continue to evolve as per changing technologies and dynamic customer expectations; which offers highly efficient payment services that facilitate shoppers to buy online even without bank accounts. So far, three countries are commanding the African Ecommerce market: namely Kenya, Nigeria, and South Africa. From the UNCTAD 2017 E-commerce Index Report, the three countries are reported to contribute at least half of all online shoppers in Africa. Specifically, Nigeria is the undisputed champion of Africa’s “business to consumer e-commerce” market both in revenue and in the number of shoppers. Other highly competitive markets in Africa include Egypt and Morocco.
According to the latest reports, at least 495 million Africans are already subscribed to mobile services as of 2020, being about 46% of our continent’s population. It is projected that by 2025, the adoption of 4G services in Sub-Saharan Africa will double to over 50% as compared to the global average penetration of 57%. As of 2020, cash and credit transactions on African mobile money platforms hit over $490 billion.
Africa’s Leading eCommerce Countries
Kenya
With a population of approximately 50 million, Kenya records over 80 percent internet penetration thanks to its leading internet services provider Safaricom. In addition to internet and telecom services, Safaricom runs the biggest mobile wallet payment system in the East African region, M-Pesa. This secure mobile money platform helps clients send, receive, and spend money on their mobile phones without needing to visit the bank or even connect to the internet. It’s reported that at least 45% of Kenyans are regular M-Pesa users, and this has encouraged Safaricom to team up with the leading global mobile wallet provider Paypal. The collaboration has helped further open international e-commerce markets for businesses, entrepreneurs, and customers.
According to the Communication Authority of Kenya, we have approximately 59 million mobile phones connected to mobile networks by last September 2021. The CA quarterly sector statistics report reveals that 26 million of these mobile devices are smartphones which sets their penetration level at 53.4%. Mobile internet services stood at 44.88 million subscriptions with more internet users demanding higher internet speeds, a scenario that has pushed mobile broadband uptake to 26.90 million, or a 0.53% increase compared to last year. The use of smartphones and reliable 4G internet speeds have facilitated many users’ access to the digital market and to make orders online. Up to 96% of the people who connect to the internet do so through their smartphones!
Additional information shows that about 73 percent of Kenyan citizens aged at least 15 years do have an active mobile money account, while approximately 98% of these people own prepaid Sim cards. As of January 2021, Kenya’s population stood at 54.4 million with about 72% in rural areas and just 28% in urban areas. For social media users, we have about 11 million Kenyans with the number continuing to rise by approximately 25% annually. So far, at least 20% of our population has social media accounts.
Nigeria
With a population of 195 million people, Nigeria is ranked as the most populous African country and the biggest economy as per gross domestic product. With an internet penetration of at least 48%, the country is home to at least 40% of the continent’s e-commerce markets which are mostly based in Lagos.
South Africa
South Africa has a population of approximately 55.5 million and an impressive internet penetration of 54%. Its country’s e-commerce market leader Takealot was founded in 2011 by Tiger Global Management with an investment of $100 million. The platform was founded by the acquisition of Mr. D, a logistics company with over 900 drivers. In addition to delivery, Takealot provides warehouse storage services, customer service, and seven days a week pick-up services in Cape Town.
The Future Of Online Shopping And Ecommerce Revenue Projections
Projections In Kenya
The Kenya Private Sector Alliance (KEPSA) has launched an E-commerce Booster Program that is funded by the Foreign, Commonwealth & Development Office (FCDO) and the European Union. The booster program targets both wholesalers and retailers, particularly in logistics and food services. KEPSA aims to support about 2000 MSMEs with e-commerce platforms to boost and diversify their incomes. The program also helps onboard MSMEs to Kenya e-commerce platforms and offers linkages to local and international electronic commerce avenues.
A KIPPRA report reveals that the Ministry of Information Communication and Technology has launched a blueprint that offers a conceptual framework as the country gets towards achieving an effective and sustainable digital economy. The Digital Economy framework is expected to provide Kenya with sustainable opportunities to leapfrog and join “First World’’ nations while actively contributing to the worldwide economy.
Here are a few exciting projections about the Kenyan e-commerce market and Africa in general:
- According to Kenyan Cabinet Secretary for Information Communication and Technology Joe Mucheru, it is projected that the e-commerce revenue in the country will reach Sh 164 billion by end of this year and would reach 254 billion by 2025.
- Further, revenue is projected to show an annual growth rate of 7.58 percent, leading to a market volume of approximately US$4,492m by 2025.
- The number of electronic commerce users is projected to reach about 32.1m by 2025.
- The internet user penetration that is expected to hit 40.3% by the end of the year is projected to increase to 53.6% by the end of 2025.
- The average revenue per user (ARPU) is projected to hit approximately US$159.42 by 2025.
Projections in Africa
- According to the Worldbank, the digital economy in Africa is expected to grow to over 300 billion dollars by 2025.
- The revenue is projected to show a yearly growth rate of about 18% resulting in expected revenues of US$72,239m by 2025.
- With an expected market volume of approximately US$1,412,109m in 2022, the highest portion of the revenue will be generated through China deals.
- By 2025, the number of e-commerce users is projected to hit a record high of 519.4m.
- In 2022, the user penetration in online shopping is projected to reach 31.6% and an impressive 39.5% by 2025.
- Finally, the average revenue per user (ARPU) is projected to reach US$113.25.
Ecommerce in Africa is no doubt on a growth trajectory, spurred by tech-savvy entrepreneurs, internet services providers, government funding, and reliable consumers who regularly make purchases from various online platforms. It will be exciting to realize the projected economic growth which will make the continent’s global visibility increase progressively, ultimately making Africa a world leader in the industry.
