E-commerce in sub-Saharan Africa: Can Covid-19 growth be sustained?

The coronavirus pandemic triggered an e-commerce boom in sub-Saharan Africa, alongside the rest of the world. With a global recovery under way, the question now is: can that growth be sustained?

There is no doubt that 2020 was a watershed year for the digital transition.

Lockdowns around the world accelerated the deployment of digital solutions in most aspects of daily life: the expansion of e-commerce was one standout consequence.

E-commerce companies and platforms enjoyed a rise in activity and profits, while retailers that had not previously developed their online presence found themselves obliged to do so in order to survive.

To take an example, Latin America saw a boom in the sector, with an estimated 13m people making an online transaction for the first time in 2020, while retail ecommerce in the region grew by 36.7% to around $85bn, according to data company Statista.

A recent UN Conference on Trade and Development (UNCTAD) report anticipates that this growth will be sustained even as the pandemic is brought under control, with e-commerce platforms likely to retain gains in market share, and around 50% of consumers planning to continue to shop online more often than they did before Covid-19.

However, growth in ecommerce has been unevenly spread in global terms, being concentrated in wealthier countries and regions.

On a related note, the UNCTAD report highlighted that the benefits of this uptake will depend on the digital readiness of individual countries.

One key determinant is ICT infrastructure. As OBG has detailed, one of the most important challenges currently facing emerging markets is the digital divide.

This is particularly important in the context of ecommerce. If enough people do not have access to the internet, the expansion of digital commerce will be severely curtailed.

Sub-Saharan Africa is particularly prone to the effects of limited ICT infrastructure: the International Telecommunication Union estimates that the proportion of individuals in the region who use the internet at least occasionally is 28.2% – considerably below the average of developing (47%) and developed (86.3%) countries.

Other common barriers include the high cost of broadband; limited digital training and a lack of trust among citizens; a traditional preference for cash; and little government support.

Notwithstanding these considerations, however, ecommerce in the region saw significant successes last year, suggesting that growth in this field could be sustained going forwards.

Leading lights

One notable African success story has been ecommerce platform Jumia, which reported a 50% rise in transactions during the first six months of 2020.

Jumia was founded in 2012 in Lagos, Nigeria, and grew to become Africa’s biggest e-commerce platform, as well as the continent’s first unicorn, in 2016. Today, it is often mentioned in the same breath as other regional leaders, such as China’s Alibaba and Latin America’s Mercado Libre.

Capitalising on its success during the pandemic, in December 2020 Jumia raised $243m by selling American depositary shares. This move was followed by a secondary share offer at the end of March, which netted $341.2m.

While there are still question marks around Jumia’s medium-term prospects – the company has yet to make a profit – these results show confidence in both the company and the future of ecommerce in the region.

Companies within the broader e-commerce ecosystem have also seen impressive growth in recent times. For instance, by March this year Paystack, a Nigerian financial payments company with more than 60,000 merchants across Africa, reported a five-fold increase in transactions relative to prepandemic levels.

Logistics companies have similarly enjoyed a surge in business. In Nigeria, Max.ng and Gokada pivoted away from ride-hailing at the outset of the pandemic in order to concentrate on logistics, while Kenya’s GetBoda, an e-commerce delivery company, saw a 150% rise in orders in the first weeks of the pandemic.

Elsewhere, various initiatives were launched to cater to an increase in demand amid the challenging conditions. For example, in April last year the UN Capital Development Fund partnered with transport company SafeBoda Uganda to create an ecommerce platform designed to connect small businesses to customers.

A bright future?

As well as mitigating the worst effects of the pandemic, the broader e-commerce offering has changed consumer habits.

Survey results published in the UNCTAD report in March found that more than 40% of customers in four large African countries were planning to reduce their supermarket shopping in the future by purchasing food, clothing and electronics online.

Other developments are also set to boost e-commerce in the region, among them the African Continental Free Trade Area (AfCFTA), which became operational on January 1. The third phase of AfCFTA negotiations – covering e-commerce and digital trade – are set to take place this year.