Like other sub-Saharan African countries, the Rwandan economy has been hit hard by the Covid-19 Pandemic.
The Government of Rwanda is rightly focusing on ensuring a rapid economic recovery.
One policy area of focus, to help ensure rapid economic recovery, is expanding e-commerce – the use of online platforms to sell and buy products and services.
There is need for removing fees on small transactions or smoothing the transitions between fee amounts while using e-commerce platforms.
Ismael Byaruhanga, a Research Fellow at Institute of Policy Analysis (IPAR-Rwanda) sheds light and recommends five options that can help to maximize e-commerce.
Review transaction fees
According to Byaruhanga, there is a need for removing fees on small transactions or smoothing the transitions between fee amounts while using e-commerce platforms.
“Firms need to be rewarded in order to provide their service. However, they also act as a deterrent to transactions taking place. Therefore, it may be helpful for a review of transaction fees to take place,” he said.
One option for stimulating economic activity could be to exempt transactions on some small transactions, he explained
“Given that there are many potential options for alternative fee schedules, trials could be conducted to identify the lowest transaction fees that could be profitably sustained by service providers,” he noted.
Increase access to and use of smart phones
Byaruhanga says to ensure the increased use of smart phones, a package of measures could be used that increase access to smartphones, improve digital literacy, and allow more activities to be done digitally.
“One option of increasing access to smart phones is to conduct another Connect Rwanda campaign. This would increase digital literacy as people become more familiar with the devices and could be linked to the National e-Commerce in Agriculture Value Chains Strategy 2021 – 2026,” he said.
Increasing a range of public services that are available through Irembo, and therefore through smart phones, he said, will further increase trust in digital services.
“Over time this would likely increase the use of e-Commerce as people become more comfortable using digital services to demand and pay for different services, as well as having more developed digital skills. It would also increase smartphone purchases as people require smart phones to access public services,” he explained.
Reducing cost of internet
Reducing the cost of the internet and improving geographical coverage by improving the structure of the provider market is among recommendations to stimulate adoption of e-commerce.
The current 4G network is adequate for smart phones and e-Commerce.
However, he said, costs are high, with internet users in Rwanda spending an average of 7.1 percent of income on mobile data according to International Telecommunication Union (ITU) 2019 report.
“Since Rwanda already possesses some of the least expensive data options for mobile internet, lowering the cost for all would prove difficult but connecting the least connected villages or populations may be beneficial,” he said.
He added that the government could co-develop with Internet Service Providers a plan for a targeted ‘rural internet’ to help the least connected individuals enter the market, he said.
Expand exports through e-Commerce
Byaruhanga said that expand exports through e-Commerce is also needed.
At present, SME exporters using e-Commerce platforms selling directly to international consumers are not fully protected, he said.
“For example, one risk for exporters is that their buyers can make fraudulent claims or attempt to cancel a purchase with their credit card company – a process known as chargeback. This fraudulent action may deter some sellers from entering the international market,” he said.
He said the government could seek to acquire improved ‘Seller Protections’ for Rwandan transactions.
“Acquiring these protections would connect Rwandan SMEs and the international community by an already established safe transaction method. Government could agree to a deal to access consumers from a specific country who desires a unique Rwandan good. This could support SMEs in particular to enter the e-Commerce market,” he noted.
Target new SME exporters
There is a need for supporting new exporters to use e-Commerce besides other packages, he said.
” There is also a case for increased focus on e-commerce to help connect exporters to international markets – creating market linkages – and an opportunity to engage new and small exporters who may not be able to trade at volume to wholesalers,” he noted.
He said an e-commerce Recovery Challenge Fund targeted at SMEs in priority sectors could be based on the market assessment and comprehensively brings together the strong existing policies on promoting exports with the government focus on e-commerce for maximum effect.
It is estimated that across sub-Saharan Africa, the potential size of the e-Commerce market will grow to $180 billion by 2025 and over $700 billion by 2050 – with a considerable increase from the 2020 figure of $115 billion in 2020.
In Rwanda, the estimated e-commerce growth is from $0.52 billion in 2020 to $0.97 billion in 2025.