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Doing Business in Africa’s Digital Marketplace
March 15, 2018

By Emily Bowman

Africa’s rapid adoption of advanced technology has allowed it to leapfrog in its economic growth. As a result, some entrepreneurs are forgoing brick-and-mortar shops for digital storefronts.

Nigeria, Kenya and South Africa have seen rapid growth in domestic e-commerce businesses in the past 10 years as internet access expands. Elsewhere on the continent, low internet penetration makes online shopping rare.

person using a tablet
Image courtesy of Unsplash.

Other logistical limitations, such as poor web security, limited access to banks and unreliable postal delivery make online business challenging for many African merchants.

But entrepreneurs have found creative solutions to Africa’s unique challenges, and some of these solutions make the region especially suited to online commerce. Africa already contains more than half of the world’s mobile money-transfer services, making secure online transactions a short step away, even though the majority of the continent remains unbanked.

Third-party e-commerce platforms — like Amazon or Alibaba — are a secure, accessible option for entrepreneurs in emerging markets. These platforms help small businesses sell products or do banking easily, saving them the expense of setting up that part of the online business.

They remove much of the overhead cost of setting up shop online. Where security is an issue, reliable third-party vendors offer security and instill confidence that a new, independent website might not. Third-party vendors with courier services or partnerships with shipping companies such as DHL fill the gaps that national postal services do not reach.

Africa’s largest e-commerce platform, Jumia, is also its first “unicorn,” a title reserved for startups valued at over $1 billion. They are called this because such success is so rare anywhere, much rarer on a continent where internet penetration is below 25 percent.

Jumia’s mission is to connect African consumers and entrepreneurs to do better business together. Since its launch in Lagos in 2012, the company has spread to 23 countries across the continent. It is a favorite among Africa’s growing middle class.

In 2015, online retailer Konga launched KongaPay as a way to accomplish successful online transactions. Not only is it more secure for the buyer, but it also opens online shopping to the unbanked, and there is less risk for the merchant than pay-on-delivery.

Vendors that integrate similar services like M-Pesa provide a safer alternative to cash-on-delivery for businesses in emerging markets with low banking penetration and poor server security. Recognizing how integral their services are to the emerging e-commerce market, M-Pesa launched its own online marketplace, called Masoko, in November 2017.

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The views and opinions expressed here belong to the author and do not necessarily reflect those of the YALI Network or the U.S. government. YALI Voices is a series of podcasts, videos and blog posts contributed by members of the YALI Network.