McKinsey Global Institute – David South Consulting

Burgeoning African E-commerce Industry Full of Opportunity

By David South, Development Challenges, South-South Solutions

Africa has seen huge change since 2000 in the way people access information and do business electronically. The most championed accomplishment has been the widespread take-up of mobile phones. This has given birth to countless entrepreneurs and innovators who are using phones to help people, do business and sell goods and services.

Not as quick to spread, mostly because of high cost and poor infrastructure, is access to the Internet. While Web access is taken for granted in many wealthy countries and is increasingly commonplace in many developing nations, Africa as a whole still suffers from poor infrastructure for access to the Internet. But this is changing by the month as more undersea cables connect countries and bandwidth is increased (http://www.submarinecablemap.com/).

Africa’s population can be expected to at least double from 1.1 billion to about 2.3 billion by 2050 – and most will live in urban areas (Population Reference Bureau).

And incomes are rising. Africa is richer than India on the basis of gross national income (GNI) per capita, and a dozen African countries have a higher GNI per capita than China (Africa Rising).

According to the McKinsey Global Institute, “The incomes of these new consuming classes are rising even faster than the number of individuals in the consuming classes. This means that many products and services are hitting take-off points at which their consumption rises swiftly and steeply. By 2025 urban consumers are likely to inject around (US) $20 trillion a year in additional spending into the world economy.”

Research firm Jana (jana.com) – which specializes in emerging markets – studied the consumer preferences of people in Nigeria, Kenya and South Africa. They surveyed 600 consumers in each country, seeking to unearth what their preferences were when it came to using e-commerce services (https://en.wikipedia.org/wiki/E-commerce). E-commerce is the buying and selling of products and services over electronic systems such as the Internet and other computer-enabled systems. This is still a young industry in Africa and one ripe with opportunity for hardworking and innovative players. Many are starting to realize they had better move fast because this is a market that still has much up for grabs and is not – yet – dominated by mature players such as eBay or Amazon.

The survey uncovered five trends driving e-commerce in Africa. These trends address the unique conditions present in Africa and what challenges need to be met.

The first trend the firm identified is cash on delivery. This has become the main way people do e-commerce in Africa because of the lack of trust in the security of online payments. Cash is still king in the region. The second trend is having a proprietary logistics network. This comes in response to the poor infrastructure present in much of Africa. This has meant e-commerce companies need to take charge of the whole process of getting a good to the customer’s home. This is, of course, costly and places a big restraint on any new company in the e-commerce market.

The third big trend is one that reflects the reality of how people communicate electronically in Africa. Mobile phones are king, and this means e-commerce needs to be mobile phone-friendly or lose out on reaching many customers. The fourth trend is related to the fact Africa is still off the logistics route for much world trade. This means e-commerce companies need to set aside space for large warehouses to store the goods so that they are on hand when the customer wants them.

And, finally, the fifth trend is the importance of good customer service as the clincher for success in the marketplace. Word of mouth gets around if a company is not able to deliver on what is promised so it is important to have high-quality customer service to build trust, keep engaged with consumers and let them know problems are being resolved.

South Africa has emerged as the continent’s powerhouse when it comes to e-commerce, according to Jana. Successful players in that country include Zando (http://www.zando.co.za/) an online fashion store by Rocket Internet, MIH Internet Africa’s Kalahari online store (http://www.kalahari.com/) and entertainment and consumer electronics online store Takealot.com supported by Tiger Global. Research firm World Wide Worx (http://www.worldwideworx.com/) calculated that online retail in South Africa is growing by 30 per cent a year.

But South Africa cannot rest on its laurels: the survey found Nigeria is fast overtaking South Africa as its large population takes to the Internet. Impressively, Nigeria’s Government has pledged to expand broadband Internet access to 80 per cent of the country over the next five years.

In East Africa, Kenya’s Rocket Internet’s service Jumia (http://www.jumia.co.ke/) is now one of the top 100 online destinations in the country.

Jana also found there were various key areas for improvement for the e-commerce industry in Africa. One, was the importance of explaining to African consumers the basics of online shopping. Many respondents to the survey seemed confused about making purchases on the Internet and through e-commerce. They also showed low levels of understanding about payment methods and available financial products. And finally, one of the big obstacles to expanding the industry is improving delivery reliability.

But all these problems and challenges spell opportunity for innovators who can solve them and make some money too!

Published: July 2013

Resources

1) E-commerce: The latest news from The Guardian newspaper. Website: http://www.guardian.co.uk/technology/efinance

2) E-commerce Expo: From 2 to 3 October 2013 in London, UK, the eCommerce Expo is the industry event for the UK and, increasingly, Europe. It ranks as one of the largest gatherings of e-commerce professionals in Europe and boasts over 180 exhibiting companies plus a comprehensive conference programme. Website: http://www.ecommerceexpo.co.uk/page.cfm/newSection=Yes

3) Mashable e-commerce: E-commerce (or electric commerce) refers to the buying and selling of goods and services via electronic channels, primarily the Internet. Online retail is decidedly convenient due to its 24-hour availability, global reach and generally efficient customer service. Website: http://mashable.com/category/e-commerce/

4) Actinic: An online software system for setting up an online e-commerce website. Website: actinic.co.uk/

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP’s South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South’s innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.

This work is licensed under a
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ORCID iD: https://orcid.org/0000-0001-5311-1052.

© David South Consulting 2023

African Farming Wisdom Now Scientifically Proven

By David South, Development Challenges, South-South Solutions

SOUTH-SOUTH CASE STUDY

Increasing the agricultural productivity of Africa is critical for the continent’s future development, and the world’s. Two-thirds of Africans derive their main income from agriculture, but the continent has the largest quantity of unproductive – or unused – potential agricultural land in the world.

This means the continent has the potential to become the world’s new breadbasket – but there is a problem. A report by the International Centre for Soil Fertility and Agriculture (IFDC) found the continent had a “soil health crisis” and that three-quarters of its farmlands were severely degraded (New Scientist). The causes of this crisis include overuse of the same plot of land due to population growth, which prevents farmers moving around, and high fertilizer costs, leading to African farmers using just 10 per cent of the world average on their farms.

But a new study shows that an existing practice by some African farmers could help solve this dilemma if it was adopted by the majority.

At the University of Sydney in Australia, a study has confirmed the effectiveness of ants and termites as a tool to increase farm yields in dry areas. It found ants and termites in drier climates of the global South improved soil conditions just as earthworms do in northern, wetter and colder climates. Both termites and ants, by burrowing their way through the soil, carve out tunnels that make it easier for plants to shoot their roots outwards in search of water.

In field experiments, ants and termites helped raise wheat yields by 36 per cent by increasing water and nitrogen absorption. This is critical for agriculture in arid climates.

While termites wreak havoc on crops such as maize (corn) and sugarcane, they are very useful for other African crops.

The Australian research found termites infuse nitrogen into the soil. Nitrogen is usually dumped on fields with expensive fertilizers that are subject to market fluctuations. The termites have nitrogen-heavy bacteria in their stomachs, which they excrete into the soil through their faeces or saliva.

The research also found termites helped with reducing water wastage.

This research reinforces what has long been known to some African farmers. Long-held farmer tradition in parts of West Africa uses termites to enhance soil by placing wood on the earth to attract them. By burying manure in holes near newly planted grains, farmers in Burkina Faso attract termites to the soil.

In Malawi, bananas are planted near termite mounds to encourage the creatures. In southern Zambia, soil from termite nests is harvested and used as top soil on agricultural land.

If more farmers adopted this practice, Africa could simultaneously address its chronic malnutrition and hunger problem and contribute to the world’s food needs. As the McKinsey Global Institute (MGI) found, “With 60 percent of the world’s uncultivated arable land and low crop yields, Africa is ripe for a ‘green revolution’ like those that transformed agriculture in Asia and Brazil.”

McKinsey estimated that Africa’s agricultural output could increase from US $280 billion a year now to US $500 billion by 2020 and as much as US $880 billion by 2030.

The UN recently declared that the world’s population has reached 7 billion. That is many mouths to feed and presents Africa with a dilemma and an opportunity.

And as urban growth accelerates across the global South – the world is now a majority urban place – there is a huge profit to be made from providing food to growing urban populations.

The time to act is now, as there have been reports from African farmers that they are seeing harvests declining by 15 to 25 per cent. And the picture gets gloomier: many farmers think their harvests will drop by half over the next five years.

Given that there are 2,600 different species of termites now recognised in the world (UNEP) and with over 660 species, found in Africa, it is by far the richest continent in termite diversity (Eggleton 2000) and they are proof that an affordable solution is close at hand to the current crisis.

Published: January 2012

Resources

1) World Vegetable Center: The World Vegetable Center is the world’s leading international non-profit research and development institute committed to alleviating poverty and malnutrition in developing countries through vegetable research and development. Website:http://www.avrdc.org

2) Songhai Centre: a Benin-based NGO that is a training, production, research, and development centre in sustainable agriculture. Website:http://www.songhai.org/english

3) Marketing African Leafy Vegetables: Challenges and Opportunities in the Kenyan Context by Kennedy M. Shiundu and Ruth. K. Oniang. Website:http://www.ajfand.net/Issue15/PDFs/8%20Shiundu-IPGR2_8.pdf

4) 2050: Africa’s Food Challenge: Prospects good, resources abundant, policy must improve: A discussion paper from the Food and Agricultural Organization (FAO). Website:http://www.fao.org/wsfs/forum2050/wsfs-background-documents/issues-briefs/en

5) African Alliance for Capital Expansion: A management consultancy focused on private sector development and agribusiness in West Africa. Website:http://www.africanace.com/v3

6) Ants and termites increase crop yield in a dry climate by Theodore A. Evans, Tracy Z. Dawes, Philip R. Ward and Nathan Lo, Nature Communications 2, Article number: 262

7) Integrating Ethno-Ecological and Scientific Knowledge of Termites for Sustainable Termite Management and Human Welfare in Africa by Gudeta W. Sileshi et al, Ecology and Society, Volume 14, Number 1. Website:http://www.ecologyandsociety.org/vol14/iss1/art48

8) State of the World 2011: Innovations that Nourish the Planet. Website: http://www.worldwatch.org/sow11

9) Soil health crisis threatens Africa’s food supply. Website:http://www.newscientist.com/article/dn8929-soilhealth-crisis-threatens-africas-food-supply.html