Everything takes a little longer to get to Africa; the same goes for digital trade. But the dynamics are changing. The continent has skipped a middle step and is on its way to being the youngest, fastest-growing, and increasingly urbanized workforce in the world. And these dynamics have resulted in increased consumption of online services and the adoption of e-commerce by the public and private sectors.
Let’s have a look at the region’s current e-commerce situation!
The Current Scenario of E-Commerce in Africa
According to ITA, the number of e-commerce users in Africa is expected to surpass half a billion by 2025 at a constant 17% annual growth rate. Overall, e-commerce penetration is forecasted to reach 40% by 2025.
Mobile internet users generated 69% of the total web traffic in Africa in 2021, and the market is expected to turn mobile-based almost exclusively by 2040.
In addition, the digital economy can potentially add up to $180 billion to Africa’s gross domestic product (GDP) by 2025. Therefore, large sectors that contribute to the region’s economy, such as agriculture, health care, financial services, education, and supply chains, are improving the productivity and efficiency of e-commerce.
The public and private sectors are increasingly incorporating e-commerce into their businesses.
On the one hand, governments provide services through them; electronic markets aggregate the demand of consumers and producers, as well as services related to the trade. And on the other hand, traditional companies are incorporating e-commerce into their operations, and SMEs are using social media platforms to interact with market opportunities. Therefore, e-commerce is likely to be an important driver of intra-African trade.
Digital Trade Ensures the Flow of Trade
Digital trade has proven to ensure the flow of trade in every situation. During the pandemic, when a downturn was expected in the import and export sector due to the supply chain lockdown, Nigeria’s ports continued to operate due to online trade platforms, such as Single Window, diminishing the negative impacts of the national lockdown. In fact, it generated 1.5 trillion Naira in revenue, according to the Nigerian Customs Service (NCS). This is the highest revenue ever recorded.
This served as a testament to the governments about the positive impacts of digitization and that more could be done to fully adopt it. This also inspired other agencies to turn digital.
Digital Trade is Beneficial for SMEs
Another proven fact is that digitization is a way SMEs can conduct business efficiently and expand their reach and earnings. It is more than necessary for them to embrace digital transformation for stability and competitiveness.
SMEs are more likely to adopt new technologies and restructure their marketing strategies than big companies and can benefit more from digitization. Through digital innovation, SMEs can:
- Have a greater line of sight of their business
- Implement new market models
- Deal much more with their customers, service providers, suppliers, and other stakeholders
- Improve traceability
However, despite this boom in digitization, is Africa ready for the prime time? Not until the challenges and the weak points are dealt with head-on.
You may also like to read
The Current Challenges in the Face of Digital Trade in Africa
The recent digitization is unlikely to fulfill the African market’s potential until major drawbacks are negotiated. Two major reasons for these limitations are:
- The lack of digital strategies and frameworks in many African countries
- African countries are members of multiple trade agreements with poor digital clauses.
These challenges can become stumbling blocks in the digitization of the African market. Robust digital governance frameworks are required by regional governments to secure digital trade and growth. In addition, they need to develop strong digital trade and investment provisions.
Cooperation among African countries resulting from integration can prevent the barriers that rise in the digital space.
Consistent rules across the African continent could create an environment where businesses (digital or not) can compete fairly and simplify cross-border and domestic e-commerce.
Despite the boom in digitization, the gaps in digital infrastructure and differences in access to technologies hinder the adoption of digital trade, and as a consequence, the growth of trade in Africa.
In January 2019, the Executive Council of the African Union (AU) mandated the African Digital Commerce and Digital Economy Strategy, which serves to be an important step for digital trade development in Africa. This strategy aims to empower the member states to make the most of the fourth industrial revolution. It also intends to enable the enactment of the African Continental Free Trade Area.
In this sense, the member states are very seriously considering policies for developing e-commerce. It includes policies based on investments in digital infrastructures, research and development, training in ICT, and more.
image credit: https://unsplash.com/photos/Tl8mDaue_II
