How do you see the e-commerce sector's evolution in Africa?
The evolution of African e-commerce depends on numerous factors. The main ones are connectivity and infrastructures, the regulation concerning e-commerce development and use, the digital payment, one of the levers for the sector's growth. Those are the three main factors. I will add a fourth, equally important, the development of the different applications, contents and marketplaces.
If we look at those four factors, what evolution, weaknesses in this Covid-19 crisis context that apparently had an accelerator effect...
When we look at those four areas, there are, of course, strong points and weaknesses. Starting with the internet, as you know, there are disparities on the continent. There is not one Africa concerning coverage; every region is different from the other.
That being said, the internet coverage evolves very quickly, and the smartphone penetration rate with it. Today people access the internet using more and more smartphones and fewer computers. It is a crucial factor. This rate increases every year by 10 to 20% of points, depending on the country. Smartphones are democratizing, prices decrease, and it is even possible to find some for less than 20 dollars. It's an essential lever for e-commerce, and it is not seen as a break anymore.
Second, the regulatory framework is essential, even if there are also differences between countries. It is establishing and developing. There is a sector, mobile money, where some countries still don't have a precise regulation, allowing them to develop mobile commerce paradoxically. In contrast, in other countries where the law exists, it is not always adapted to realities, archaic, and it needs to be renewed. So, on the regulation level, there are many weaknesses, without generalizing because it depends on every country's context. For example, it is significantly developed in Kenya, but Northern Africa is less advanced than Sub-saharan Africa.
The third point: digital payment is an essential factor. If we look at the functioning of African e-commerce, it works on "cash on the delivery" concept. First, because the delivery using postal services is not reliable, so there is a trust issue. E-commerce stakeholders have to set up their own logistic services for deliveries. For a major part of users, for example, Jumia and others, payment is made at the delivery. There is another reason for this: geolocation problems and the difficulty of identifying addresses. The credit card payments are also meager since the use of the banking system is not very popular. The alternative to overcome this problem is mobile payment, which becomes a catalyst. The main e-commerce actors chose this solution, allowing broader coverage. Today numerous financial regulators, central banks, among others, are developing interoperability. We can pay transparently using any phones associated with any telecom operator thanks to a switch allowing payment interoperability with mobile phones. This key element is not developed enough but will be crucial for African e-commerce.
The fourth factor is the development of applications and contents in marketplaces. The logic is the same as for physical buying habits. We prefer to go to the supermarket where we can find anything at low prices than go to the grocery where choice is limited and prices are high. Today, numerous e-commerce stakeholders are small shops that need to develop their marketplaces to feed as many e-commerce actors as possible in a digital supermarket logic. The state can play this federating role by setting an incitative framework to establish marketplaces. The second key factor is to create regional marketplaces to have a mass effect and a critical size. We know numerous constraints for moving digital or physical products and services between countries. This regional marketplace notion is essential and will stimulate the whole industry.
There are other elements, including the Covid-19 pandemic. A real accelerator that makes companies think, especially small entrepreneurs, to survive. We saw companies already prepared for e-commerce growing and better adapting to the crisis. For the others, there has been an awareness, and the Covid crisis has been an accelerator.
The AfCFTA is still going forward and includes a common e-commerce regulation. What do you expect concerning this regulation?
Indeed, AfCFTA is very important. Today it is only the initial phase. There is no field implementation. Numerous states signed their accession but are still working on operational agreements to make this real. The only exception is Western Africa, a region that takes the lead concerning the AfCFTA and where an economic integration has been set up. For example, digital payments' interoperability was set up years ago thanks to an interbank group for West Africa, led by the Central Bank of Western Africa. Those kinds of initiatives boost regional integration. Every other region should do the same. Western Africa is an example to follow. To be concrete and pragmatic, today, the AfCFTA is still political. It remains the set-up.
AfCFTA logic is based on the unique economic market principle. The main interest of this area is to make borders fall. The e-commerce falls within this project: to reach a critical size, more significant markets, stimulate competition... It will develop e-commerce. I want to say the e-commerce will, at this time, be serving every sector, agriculture, transportation, health... Every sector will need to rely on e-commerce solutions to develop their activities. The AfCFTA will be a crucial lever.
