eCommerce markets have experienced phenomenal growth rates around the world, and even recent setbacks as a result of the continuing COVID-19 pandemic haven’t stopped its rise. In fact, eCommerce sales are projected to grow to $7 trillion across the globe by 2024, according to a new Visa report.
Visa’s white paper, entitled E-trade advancements across Sub Saharan Africa (SSA), showed that the top contributors to eCommerce in the region over the last three years, in order of contribution, were South Africa, Nigeria and Kenya. South Africa is by far the dominant player, and Ghana is showing growing relevance, having replaced Kenya in the top three contributors in 2020.
“This has been driven, in part, by the ongoing COVID-19 pandemic, with the implementation of lockdown restrictions across the world to curb the spread of disease, face-to-face retail was shut down, and customers had to turn to eCommerce to fill the void its closure left behind,” the report stated.
It added that “In SSA alone, the lockdown saw new eCommerce users rise by 5% when compared to the active base in SSA the previous year.”
South Africa sits in first place of the total volume of eCommerce in 2019 and 2020, while Nigeria sits in second place, followed by Kenya and Ghana ranked in joint third. They are followed by Mauritius in fourth, and Zambia in fifth, showing the relevance of eCommerce spreading across East, South and West Africa.
Top eCommerce drivers in the region
According to the report, the most important eCommerce enablers are; the ability to access financial services, digital payment channels and digital infrastructure. Data from the report showed that:
Although bank accounts drive financial access in Nigeria and South Africa, in Kenya, financial access is largely driven by Mobile Money.
Cash is particularly prevalent in Nigeria, but Kenya and South Africa match their top drivers of access with their second-highest payment instrument usage – electronic payment instruments (likely mobile money) in Kenya and cards in South Africa.
Digital access is primarily enabled by mobile phones across all three eCommerce markets. Internet penetration is highest in South Africa at just under two-thirds of the population, while Kenya and Nigeria each have just over one-third of the population with digital access through the internet.
Graphical illustration of eCommerce enablers across Sub Saharan Africa
Graphical illustration of eCommerce enablers across Sub Saharan Africa
Some other key factors driving eCommerce markets in the region are;
Card usage is still a key enabler of eCommerce
According to the report, card usage for digital payments in eCommerce markets is observed across all card types: debit, credit and prepaid. Credit and debit show almost equal usage for eCommerce transactions of volume, respectively, and card preference appears to be strongly driven by general market preferences.
For instance, in South Africa, credit is favoured, whereas, in Nigeria, debit remains top for domestic transactions and credit for cross-border.
The COVID-19 pandemic has driven customers to eCommerce and digital payment usage.
While spending power has reduced over the continent due to numerous lockdowns, the report notes that spending on eCommerce hasn’t been reduced to the same extent as face-to-face spend; in fact, the closure of face-to-face environments has attracted new users and increased the frequency of spend in the eCommerce market space.
When exploring digital payments usage, cards have increased across the continent, with the highest uptick taking place in Kenya. However, the nature of this usage is also interesting as there has been a strong preference for contactless, a notable point for enabling safe card payments on delivery and the use of e-wallet services (often enabled by card-on-file).
Lineshree Moodley, Head of Visa Consulting and Analytics (VCA) in Sub-Saharan Africa, explained that Sub-Saharan Africa’s three driving business sectors are beginning to develop, furnishing the area with a setup establishment. When twinned with the developing infiltration of web-based business, it proposes substantial parts in the instalment space, a chance they can profit by assisting in increasing the extension of web-based business in the locale area.
First published on Business Insider Africa by Victor Oluwole.
