According to The growth of the Internet can generate significant economic opportunities in Africa, in particular when it comes to e-commerce. What are the challenges hindering the development of African e-commerce, and how can the private sector reap the opportunities?
After the dramatic take-off of mobile telephony in Africa, the growth of the Internet is the next technological revolution expected on the continent, encouraged by urbanization, the development of the middle class, and the high demographic proportion of young people. For now, the trend seems to be developing. Internet adoption is increasing, in particular south of the Sahara where the percentage of individual users grew from 7 percent to 20 percent of the population between 2010 and 2016 according to the World Bank.
This evolution seems promising for Africa, as the growth of the Internet should help solve some of the major issues hindering the development of all the social and economic sectors, such as high transaction costs, spatial constraints, limited information exchanges, and lack of access to international markets. Digital solutions are appearing in non-market sectors, such as health, education, and governance. However, the growth of the Internet also presents new opportunities related to domestic e-commerce, that is to say the trade of goods and services through the Internet between companies (B2B) and between companies and consumers (B2C).
Over the last two years, this sector has been hugely popular with investors and entrepreneurs, galvanized by the current and expected dynamism of the e-commerce market in Africa, which could represent 75 billion dollars in 2025. However, those who have embarked on this adventure are not finding it an easy ride. Regardless of the enthusiastic speeches about the technology leap in Africa, the spread of the Internet is limited on the continent by the low level of development as well as the market conditions.
The simple transfer of e-commerce models that exist elsewhere does not work as it is ill-suited, which explains why international leaders of the sector such as Amazon and Ali-Baba have not yet established themselves there. The constraints with which operators are faced in Africa – both upstream and downstream – force them to develop skills and innovations unlike those that are needed in developed country markets. Through their actions, these key players help shape the structures and the ecosystem of African e-commerce.
Read more https://www.ictsd.org/bridges-news/bridges-africa/news/how-the-private-sector-is-shaping-african-e-commerce
Author: Maxime Weigert, Economist, Geographer specialised in Africa.