E-commerce in Africa’s development: 'Leapfrog' is the word

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Editor's Note: Luyolo Sijake is a member of Peking University's Africa Think Tank. The article reflects the author's opinion, and not necessarily the views of CGTN.

As the 10th BRICS Summit held in South Africa concludes and the FOCAC Summit follows shortly in September, it is an opportune moment to reflect on the developmental trajectories of African countries and China alike and to look to the prospects that technology and new innovations hold for the kind of transformative progress Africa is looking to achieve.

The African continent still faces immense developmental challenges. Some of these have been with the continent for decades, others are relatively new. As new challenges constantly emerge, they can certainly seem overwhelming.

Under these conditions, it is essential that key players on the continent, particularly in the economic sphere, thoroughly evaluate the set of tools at their disposal that can not only drive transformative development, but allow African countries to realize their developmental aspirations at a faster rate than has been the case before in a way that is less harmful to the environment than ever before.

E-commerce is a key pillar here.

VCG Photo

It is often cited that one of the reasons why China has managed to develop at the pace it has and in the way it has is that during its process of industrialization, the kinds of technologies available allowed it to leapfrog many of the stumbling blocks that faced economies that industrialized before it.

As Africa’s largest trading partner, China has an important role to play in supporting African economies in these endeavors. It is e-commerce platforms such as the famed Alibaba that have an important role to play in facilitating growth and economic expansion on the continent by expanding access between the two markets and enhancing the efficiency with which exchanges in the marketplace occur.

So where does e-commerce on the continent currently stand and what role could it play going forward? E-commerce on the continent is experiencing a rapid uptick both in sales of goods to African consumers and sales by African producers and merchants.

For example, Alibaba.com saw an increase in transaction values in Africa of 188 percent, 389.9 percent and 62 percent in the financial years 2016, 2017 and 2018 respectively. The bulk of this growth has been in Africa’s “hub economies”: South Africa, Nigeria, Kenya, Egypt and Morocco as well as markets like Ghana, Ethiopia, Sudan and Algeria.

Whilst this growth is from a relatively small base, the pace of the growth is indicative of the fact that conditions are ripe for explosive growth in e-commerce on the continent.

The high rate of mobile phone penetration, growing Internet penetration – which currently stands at around 35 percent – and the fact that almost 300 million Africans have mobile wallets, eclipsing the number of Africans with bank accounts, necessarily means that the need for traditional commercial infrastructure can be sidestepped.

Close-up of hands swiping card using mobile payment method on cell phone /VCG Photo

Achieving this would require players like Alibaba that have been able to establish a firm foothold in Africa’s e-commerce market, with 4.2 million consumers making purchases through its retail portal AliExpress in 2017, to develop solutions that fit the African context and consumer.

In addition to e-commerce platforms tapping Africa’s growing middle class to allow the way in which Africans consume to leapfrog traditional, often more costly, retail channels, they reduce many of the barriers associated with accessing markets around the world for African producers.

This is crucial for Africa as it seeks to industrialize at a time when other regions have deeply entrenched reach and presence in markets around the world. E-commerce thus acts as a leveler for emerging African producers and industrialists looking to find foreign markets.

As key high-level meetings take place between China and Africa, consideration must be made for the importance of e-commerce in fostering cooperation towards meeting developmental objectives. This is particularly the case because it offers the ability to fast-track certain elements of the process of economic expansion.