Four tracks for advancing digital commerce in Africa
At the African Union Conference on E-commerce, held in Nairobi this week, the AU presented its roadmap for the continent to catch up in the digital economy. The digital commerce market in Africa is booming: estimated at $ 8 billion (€ 6.6 billion) in 2014, it could reach $ 75 billion in 2025, according to consulting firm McKinsey.
These figures, revealed at the African Union conference on e-commerce, which took place in Nairobi from 23 to 25 July, are however small compared with the volume of global e-commerce. According to UNCTAD (United Nations Conference on Trade and Development) – which will also organize a meeting dedicated to African e-commerce, from December 10 to 14 in Nairobi – global e-commerce has in fact reaches $ 25 trillion in 2015.
UNCTAD Secretary-General Mukhisa Kituyi said: “Governments will have to get their hands dirty. Africa needs concerted efforts not to be left behind in the digital economy era, “he said at the opening of the conference in Nairobi.
While intra-African trade stagnates at 18% of the continent’s total trade and Africa’s share of world trade does not exceed 3%, the African Union sees digital commerce as the ideal solution for developing trades. But the challenges are many. State of play.
1. Consolidate infrastructures
In the opinion of the participants, the digital divide and the lack of infrastructure are the main obstacles to the development of e-commerce on the continent. Africa has a low internet penetration rate, ranging from less than 20% to more than 60% depending on the country. The same goes for electricity: the cuts prevent capitalizing on technologies.
“Everyone is talking about the difficulties in credit and financing, but the lack of quality infrastructure and cross-border logistics is the biggest obstacle for sales, and in this case for online sales” sighs Kwame Acheampong, Africa director of the Nigerian platform MallforAfrica, champion of digital commerce in Africa. To compensate for the lack of roads, trains and post services, MallforAfrica has formed a partnership with the DHL group, which specializes in transport and logistics.
2. Banking on training
The private sector complains about the lack of qualified professionals in the sector. “Even if Internet penetration improves, African countries could not really benefit because of a lack of skills,” says Karishma Banga, researcher at the Overseas Development Institute (ODI).
“It is therefore extremely important to develop digital skills with special attention to STEM (Science, Technology, Education and Mathematics) as well as technical education and vocational training. There is a need for awareness so that the demand of young people for this type of training increases, “she continues. For its part, UNCTAD calls for “the restructuring of an education system today completely disconnected from the needs of the market”.
3. Support and finance start-ups
Over the last five years, the level of foreign investment, mainly from venture capital funds, in African technology companies and e-commerce platforms has exploded.
“About ten years ago, the average cost of an investment for an SME ranged from 50,000 to 500,000 euros. Today, we are talking about investments of several million euros for small projects, “says Sid Boubekeur, consultant to the AU. The Jumia platform, present today in more than twenty African countries, mobilizes investments of up to 40 million euros.
Local funding, however, remains virtually non-existent. “Governments should put in place policies to encourage private investment, as in Singapore where the government offers tax breaks to investors,” suggests Kwame Acheampong.
Ibrahima Nour Eddine Diagne, president of the African Performance Institute, urges governments to directly support local start-ups: “the national budget can, through public procurement, help local businesses to develop, even if the private sector now has a role to play in improving the quality of services and helping to digitize them, “he says.
4. Harmonize the legal framework
Despite its backwardness, the African Union is determined to present a comprehensive strategy for the regulation and organization of e-commerce in Africa by its 2020 summit. On the agenda of the latter, the harmonization of national trade regulations and regional, the establishment of a structure dedicated to the digital economy and the creation of a true African digital market.