Boosting e-commerce, Prosper Africa creates opportunities
E-commerce and digital transactions expanded rapidly on the African continent during the outbreak of the COVID-19 pandemic as health-related restrictions limited foot traffic in malls, prompting greater levels of online retail activity.
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Africa led mobile internet usage as of 2021 compared to other regions.
The continent led by 13 per cent above the global average, and almost five per cent more mobile usage than Asian region markets.
This development was therefore, expected to signal a “mobile-first” approach to any business looking to sell online to the various African markets.
In spite of the progress made, experts believe that because of the drastic reduction in the deadly impact of the pandemic, African nations collectively are lagging behind global consumer banking habit averages, with almost half of the adults not in possession of any formal bank account preferring to pay in cash.
Debit card payment methods makes for only a paltry 10 per cent penetration of the population, while credit card ownership rates are low with an average two per cent for the entire continent according to data from the International Trade Administration.
Against this background, online payments remains a perennial challenge for businesses wishing to target e-commerce consumers in the African markets.
Opportunities
To bridge the gap, the tech alliance of major U.S. and African companies will accelerate e-commerce and digital trade in Africa and address legal, regulatory, and logistical bottlenecks across the continent.
Consequently, the U.S. Government’s Prosper Africa initiative officially launched its Africa Tech for Trade Alliance on April 12 at the 2023 Africa Fintech Summit in Washington, DC.
Speaking at the launch event attended by U.S. and African tech executives and entrepreneurs, USAID Assistant Administrator in the Bureau for Africa, Dr Monde Muyangwa, emphasised that the rapid evolution of Africa’s digital ecosystem is fueling economic growth and prosperity on the continent.
“Through Africa’s digital transformation, we are seeing new connections taking root,” he said adding that; “These transformations are building an inclusive and resilient African digital ecosystem, which is leading to increased productivity, competitiveness, and service delivery.”
Package
The Prosper Africa Tech for Trade Alliance was first announced at President Biden’s U.S.-Africa Leaders Summit in December as part of a package of $15.7 billion in new and expanded trade and investment commitments made in the summit’s Business Forum Deal Room.
The alliance will also advance the White House’s new signature Digital Transformation with Africa (DTA) initiative, which will strengthen digital access, literacy, and digital enabling environments across the continent.
By leveraging leading U.S. and African companies’ technology assets, services, and expertise, the Alliance will grow African trade and e-commerce flows in goods and services; promote African firms’ and economies’ trade and productivity; strengthen the African workforce’s technological talent; and promote a better policy-enabling environment for trade and investment in Africa.
New activities
New activities launched under the Prosper Africa Tech for Trade Alliance, which is part of the U.S. Agency for International Development’s global eTrade Alliance, will focus on key sectors such as supply chain and logistics solutions, digital payments and trade finance, e-commerce, policy enablement, and digital skills and training.
Executive Director for Visa’s Economic Empowerment Institute (VEEI), Dr Barbara Kotschwar, said improving the policy and regulatory environment is a key reason why Visa is part of the Alliance.
He noted that removing bottlenecks like overlapping regulations and restrictions on cross-border flows will help promote greater trade and economic activities.
Alliance member, Visa pledged in the US-Africa Business Forum’s Deal Room to invest $1 billion towards spurring innovation in Africa.
“The pledge will further scale Visa’s operations in Africa and will help enable greater access to digital payments as an entry point for expanding formal financial services for individuals and companies,” he said.
Way forward
There is ample evidence to the potential of e-commerce on the continent, particularly when the pandemic broke.
For instance, the pandemic accelerated the expansion of e-commerce during the initial lockdown from late March to April 20, 2020. As much as 79 per cent of retail business was conducted online during that period, according to the e-Commerce Association of Ghana (e-CAG).
Executive Director of the e-CAG, Paul Asinor told Oxford Business Group (OBG); “While most brick-and-mortar retailers have an online presence, the lockdown period incentivised a number of smaller traders to leverage online marketplaces. New stores continue to come online every day.”
According to the association, conservative estimates that the value of the e-commerce market will expand from $481m in 2021 to $674m in 2025, with more than 11 million users.
The expansion of e-commerce was reflected in a rise in digital transactions. Digital transactions increased by approximately 120 per cent between February 2020 and February 2021 in response to voluntary and mandated restrictions on movement. By comparison, transactions grew by 44 per cent year-on-year in February 2020.
There are many other countries on the continent which also witnessed growth in this space, an indication of the huge potential.
The Prosper Africa initiative can be a game changer if Africa can fully leverage the opportunity to scale up projects in the e-commerce and digital trade space.
The role of central banks in that regard will also be crucial.
This means that while the continent moves to take advantage of opportunities to expand, there is the need to consistently build strong legal and regulatory frameworks as part of measures to protect players in the e-commerce space.