Connectivity, Content, Policies Key For E-Commerce

A report from GSMA Central Insights Unit, in collaboration with the United Kingdom’s Department for Business and Trade, has shown that while the sector is growing, e-commerce in Africa is underutilised and has tremendous space for growth. The report, titled E-commerce In Africa: Unleashing The Opportunity For MSMEs was launched at the 2023 Mobile World Congress, in Kigali, Rwanda.

It highlighted the impact of e-commerce on micro, small and medium enterprises (MSMEs) to help them grow new markets, profitability and resilience. However, in Africa, online retail as a proportion of total retail sales remains much lower than in other regions around the world, indicating that the continent’s MSMEs are not fully leveraging the e-commerce opportunity for growth. The report was launched on the sidelines of MWC Kigali, during an event hosted by African Business.

Recent years have seen steady improvement in connectivity and an increase in the adoption of mobile technology by both businesses, including MSMEs, and consumers on the continent. However, in 2022, the report estimates that only 400 million of the 1.4 billion people in Africa used e-commerce services, indicating that there is a lot of room for the sector to grow.

The report, which is based on interviews with 1,500 MSMEs using e-commerce in Egypt, Ethiopia, Ghana, Kenya, Nigeria, and South Africa, as well as interviews with experts in those countries in addition to others from Rwanda, Senegal, and Tanzania, aims to gain a better market understanding to help MSMEs better leverage the digital opportunity. It also aims to help donors and development partners to better design their interventions to support MSMEs in Africa.

“E-commerce adoption is growing, and market forecasts suggest that there will be almost 600 million online shoppers in Africa by 2027. Our objective was to understand pain points and opportunities through an MSME lens. We also wanted to highlight how MSMEs can be supported in adopting e-commerce as a key driver for operational efficiency and business growth,” explained Daniele Tricarico, Senior Director, Central Insights and M&E. Tricarico, who presented the findings of the report, highlighted some of the concerns relayed by the participants in the survey, such as the need for capital and training as well as logistical challenges and a lack of trust, which affect the uptake of e-commerce services.

According to the report, some of the barriers to the growth of the sector include limited financial resources and digital skills; regulatory gaps; poor implementation of legislation; low uptake of digital payments; and challenging logistics and delivery. The use of e-commerce is also hampered by factors such as the limited penetration of smartphones, low digital literacy, and the lack of confidence in the quality of goods that are purchased online.

In response to these challenges, the report makes several recommendations to help boost e-commerce on the continent. These include financial products and reskilling to help MSMEs to adopt e-commerce, better quality connectivity, especially in rural areas and interventions to make smartphones more affordable.

Others are reviews of policies and laws to offer better protection to consumers and clarity to businesses, a shift from cash on delivery to digital payments and more reliable and affordable delivery and transport systems to facilitate delivery of purchases to buyers. The report also shows how women, who are more likely to rely solely on social media to promote their businesses, can be further supported in building their e-commerce businesses through targeted interventions including upskilling.

Jamila Saidi, Head of Digital Commerce at the UK’s Business & Trade Department said, “Africa continues to harness the power of technology and drive digital transformation, it will undoubtedly contribute to the advancement of e-commerce, cross-border trade, and digital entrepreneurship on a global scale. We’re excited to be partnering with the GSMA on this important research that sheds light on the e-commerce opportunities for female entrepreneurs and MSMEs on the continent as well as the challenges they face and how some of the key barriers can be addressed.”

Speaking in a fireside chat at the launch event, Philip Lucky, CIO of the Rwanda Development Board, said technology and services were at the heart of the country’s ambitious drive to reach upper middle-income status by 2050. “Over the past two years, we have passed 19 laws to strengthen the regulatory environment, enabling, among other things, companies to set up here in any form they’d like,” he said of his country’s efforts to attract and retain investment.