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The challenge before Africa's ecommerce bosses

Africa , 18 Dec 2014

The challenge before Africa's ecommerce bosses

A number of issues need to be overcome before African e-commerce businesses can move into an era of profitability, according to the chief executive officers of Nigeria's two biggest e-commerce businesses.

The most recent estimates from analysis firm Frost & Sullivan is that Africa's e-commerce market will be worth approximately US$50 billion by 2018, a sizeable jump from the US$8 billion value of the market last year.

Sim Shagaya, chief executive officer (CEO) of Konga.com, told ITWebAfrica e-commerce is growing "exponentially" in Africa due to the fact it provides an increasingly essential service in countries where retail is often unstructured.

"It's an interplay of several factors, the most important of which is the internet penetration in Africa as well as the increasing proliferation of mobile and data services across the continent over the past few years. In a few years, smartphones and mobile broadband will be pervasive across the continent," he said.

"Another key reason is the composition of the population in Africa. Take Nigeria as an example, the country has a population that is of more than half that of the entire United States. Nigeria has a very young, dynamic and growing population of over 170 million people with over 40 per cent less than 15 years old. By 2050, Nigeria is projected to have the third largest population in the world. This represents a rapidly growing number of consumers that can be reached."

He said the fact Sub-Saharan Africa is among the fastest growing economic regions in the world would also serve to boost e-commerce.

Jeremy Hodara, co-CEO of Africa Internet Group (AIG), which owns Jumia, said greater internet penetration and a growing middle class in Africa meant e-commerce would inevitably become a huge market.

"There is a growing middle class with more and more people looking for quality products and services," he said. "Besides generating new opportunities for jobs and businesses, the internet connects buyers and sellers, businesses and customers."

Both men, however, identified logistics as an area that was holding e-commerce back, with a huge need for improvement in that area. Both companies have been forced to develop their own delivery fleets in Nigeria in order to combat these issues, at great cost.

"Transportation is still one of the biggest running costs for business in Africa. This is why Konga recently launched its own delivery arm called KExpress to augment the services provided by its third party courier partners," Shagaya said.

Hodara agrees this is a major issue for the sector.

"If you want to transport a product from point A to B in places like the United States, Europe or China, many options are available. However, moving products around Africa can be a big challenge. Another barrier is the customer's trust deficit when it comes to internet transactions."

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