A man signs up for mobile money transfer service at an M-Pesa outlet in Nairobi, Kenya, on September 16, 2021 (XINHUA)

Following the global trend, Africa is pursuing ramping up trade through the use of digital technology, and jumping on the e-commerce bandwagon. Policy makers on the continent hope the expansion of information and communications technology in Africa will play an instrumental role in promoting economic development. In simple terms, the augmentation of using smartphones for trade can make an important contribution to poverty reduction among nations on the continent.

AfCFTA interest

E-commerce has now captured the attention of the African Continental Free Trade Area (AfCFTA). AfCFTA is an initiative of African Union (AU) member nations, which will be the largest free-trade area in the world in terms of participating countries, since the formation of the WTO.

Having online mechanisms for monitoring non-tariff barriers is to be among AfCFTA’s major operational instruments, while it could also provide a guiding framework for the governance of data flows.

There are players showing growing interest within the African private sector in regional e-commerce platforms and intra-regional data-sharing.

Yenebeb Abebe, General Manager of Info World Link, an Ethiopian-based IT company sees opportunities for the use and expansion of mobile trading systems in Africa.

For him, e-commerce can answer one of the fundamental questions of Pan-Africanism - why Africa could not be able to ensure self-sufficiency to feed its people. “E-commerce can serve as a catalyst to integrate Africa through the application of mobile technology,” said Abebe.

Yet, despite the considerable growth of the e-commerce-driven economy, Abebe believes there is little action taking place to build momentum for continent-wide applicability of the system.

However, the AU Commission is developing an e-commerce strategy in order to strategically approach e-commerce and examine possible linkages with AfCFTA.

The traceable nature of their electronic trading system helps economies reduce informal trading practices, said Sisay Debebe, Lecturer at Addis Ababa University School of Economics in Ethiopia.

However, Debebe said, “In order to gain from the system in terms of macroeconomic stability, governments have to install institutional frameworks that help them switch informal businesses into formal modalities where there also comes ability to monitor transactions.”

Without proper Internet infrastructure, e-commerce remains a challenge; yet usage and literacy are also key elements in pushing Africa’s e-commerce quest forward.

“Unlike in other parts of the world, the Internet infrastructure has not been developed in Africa and that hinders the promotion of an electronic trading system,” said Debebe, adding that the future of business has the tendency to grow into e-commerce.

A courier of AgriApp, a mobile e-commerce platform for agricultural products, prepares a live fish delivery in Douala, Cameroon, on December 4, 2019 (XINHUA)

E-commerce optimism

Despite the challenges, according to International Telecommunication Union data, significant improvement in these areas have been made, which is helping make e-commerce an African reality.

In the context of digital technologies, the COVID-19 pandemic was a blessing in disguise. While e-commerce solutions have played a critical role in ensuring business continuity for many companies across the globe, in Sub-Saharan Africa, the mobile industry is also playing a crucial role.

During the pandemic, a report by the Groupe Speciale Mobile Association (GSMA), an association representing the interests of mobile operators and the broader mobile industry worldwide, shows that mobile operators have implemented measures to support vulnerable communities, including offering discounts on mobile tariffs and providing digital content and tools to help people and businesses get online.

UNECA data indicates that for many micro, small and medium-sized enterprises in Africa, e-commerce has offered a lifeline and can continue to play a principal role in their economic recovery.

Digital transformation in the form of mobile subscriber penetration, and mobile Internet users among others, is well under way across various economic communities of the continent.

This rapid adoption of mobile technology that is trending across the Sub-Saharan Africa region has allowed the development of mobile-enabled platforms, which are increasingly disrupting traditional value chains in different vertical industries across the region.

“These trends have cost implications both for the sellers and buyers of products, which later have positive implications for the macroeconomic performance of a nation,” said Debebe.

The platforms can eliminate the inefficiencies of conventional business models, extend the reach of services and provide greater choice to customers who are still often underserved compared to those in more developed markets, says a GSMA and UNECA joint report.

The Kenya-based Copia Global, founded as a business-to-consumer e-commerce platform to serve middle- and low-income African consumers, for instance, recently announced that it raised $50 million to accelerate its growth in the region.

High growth expectations

Although many of the solutions linked with e-commerce originate in the practices of developed countries and may be considered less relevant for the African context, findings suggest that high levels of mobile phone use have had a significant impact on several economic sectors, including agriculture, fishing, health, and education, according to PricewaterhouseCoopers.

Debebe concurs, saying despite its contribution for job creation appearing limited in the short term, however, in line with telecom infrastructure growth and modernization of the banking sector that promotes the electronic payment system, mobile trading will be a good source of job opportunities in the long run. “Better opportunities are coming for African youth in the digital sector,” he believes. Those mobile jobs will be assisted by the fact that GSMA predicts that 618 million people in Sub-Saharan Africa will subscribe to mobile services by 2025, equivalent to 50 percent of the region’s population. In addition, an estimated $155 billion of economic value added will be generated by mobile technologies and services by 2025. In 2020, transactions on mobile money platforms reached $490 billion, said GSMA, illustrating the massive expected growth.

The GSMA estimates that over the period to 2025, 4G adoption in Sub-Saharan Africa will double to 28 percent, compared to a global average of 57 percent. It is still early stages in the journey to 5G in Sub-Saharan Africa; as of June 2021, there were seven commercial 5G networks in five markets across the region. By the end of 2025, 5G will account for just 3 percent of total mobile connections in the region.

Despite the slow progress of technology infrastructure, several e-commerce providers have emerged across the continent in recent years, serving both the domestic and global markets. In Ethiopia, for example, the opening up of the local market to foreign telecom operators has seen a promising start to the growth of e-commerce in Africa’s second most populous country.

“Like any other basic needs, technology is also becoming so much more vital,” said Abebe, adding that in order to help the local economies come closer to each other, interlinkage between telecom providers of individual countries along with their financial systems is crucial.

“This is a fortune moment to create African entrepreneurs and intrapreneurs,” he said.