Why doesn't Africa have its own Amazon yet?

Buying and selling online may be the norm in many parts of the world, but in Africa, it's still very much in its infancy. Are things likely to change?
Written by Hilary Heuler, Contributor
Online retail in Africa has its challenges, but hopes are high
Online retail in Africa has its challenges, but hopes are high. Image: Shutterstock

His company may consist of little more than two small offices in Kampala, with a handful of desks and a fleet of growling motorbikes. But Anamaiy Bajpai, the country manager for Jumia Uganda, is nothing if not ambitious.

"It's our vision to become the biggest retailer in Africa", he said of the Nigerian-based company. His Uganda branch is the latest addition to Jumia's expanding empire, which also extends to Kenya, Morocco, the Ivory Coast, and Egypt.

Jumia Uganda has only been operational for two months, and for most Ugandans the concept of online shopping is completely foreign. But Bajpai is convinced the potential is there. "The demographic here is quite young, and younger people are more into technology and ecommerce," he said."It's the right time to start now."

Jumia isn't the only company with stars in their eyes. The buzz surrounding online retail in Africa has been growing louder over the past several years, despite the fact that relatively speaking, internet retail has barely made a dent in Africa's retail market.

"Africa would be well behind even Asia and South America in its evolution for online shopping, but a lot of these big guys have woken up to it and are investing a lot of money in it," said Andy Higgins, managing director at online shopping technology company uAfrica.com, and founder of South African online marketplace Bidorbuy.

uAfrica has partnered with Shopify, and in May the New York-based investment firm Tiger Global announced a $100m investment in South African online shopping firm Takealot. Jumia and Konga, also based in Nigeria, are attracting significant international investments as well. "The [income] numbers are still small, but I think people are very optimistic about the potential", Higgins said."The hype is building up."

Given the technological and logistical challenges online retail still faces in Africa, some wonder if the hype is justified. Speaking at the Tech4Africa conference last year, Emilian Popa, CEO of African Internet Accelerator (AIA), pointed out that most ecommerce companies in Africa were losing money. It would be years, he said, before even the most successful would turn a profit; four months later AIA's own parent company, Naspers, pulled the plug on four of its African online shopping sites.

One of the biggest hurdles, say industry experts, is not a lack of connectivity among consumers; it is a lack of viable payment systems. "To make online shopping happen you need a complex ecosystem for making and processing online payments. Africa's bandwidth problem is well on the way to being solved, but the online payments system still has a long way to go", Peter Harvey, founder and managing director of PayGate, said in a statement.

"We need our issuing banks to speed up the rate at which they are rolling out cards to their customers," said Harvey, though he noted that the expense and exposure to fraud that such a rollout would incur make banks unwilling to take the plunge.

In the meantime, online retailers have been finding other ways to process payments. Most are forced to rely on cash-on-delivery. "That means having to work with a courier company to collect the cash, which obviously comes with a lot of challenges," Higgins said.

In Kenya and other parts of East Africa, the widespread system of mobile money provides a convenient solution, allowing customers to pay through their mobile phones. Kenyan online shopping companies already offer mobile money as a payment option. But Jumia Uganda only uses cash-on-delivery, and Bajpai said they will continue to do so until the company becomes better known. The payment issue, he said, is essentially one of trust.

Higgins agrees. Even when African consumers do have credit cards, he said, "they are apprehensive to use them. They feel more comfortable saying, 'I'll pay you cash.' They're so used to being a cash society."

This lack of trust extends to other types of sensitive personal information as well, said Lilia Severina, business development director for Europe, the Middle East and Africa at the Uptime Institute. African consumers tend to be wary of the idea of storing bank details, phone numbers and addresses in the cloud, and such databases are often at the heart of online shopping operations.

At a recent conference in Morocco, she said, "one message that came out very loud and clear was security – there were lots of security concerns about buying things on the internet and keeping data via the internet". Nor will added electronic security measures necessarily make a difference. "The issue is not just in actual security concerns, but also perceptions," she said.

There have nonetheless been attempts to push African consumers away from cash, said Higgins, pointing to the Nigerian government's campaign to promote electronic payments and mobile banking in order to tackle corruption. If it works it could greatly benefit Nigeria's online shopping industry, already one of the strongest on the continent.

Delivery logistics, often cited by companies as a major concern, are also being improved by technology, Higgins said, especially in places without street addresses.

"The delivery address could be: 'It's 1km past the mango tree on the left on the dirt road over the hill'," he said. "So what would happen is, rather than putting in your address when you check out, the consumer can actually go to Google Maps and put a marker on there, and say, 'this is where I live'." GPS coordinates can then be used to deliver the goods, he said.

Nor does the scarcity of reliable datacentres on the continent have to be a major obstacle. South African online shopping companies, said Higgins, manage to run their operations while hosting their content overseas through companies like Amazon EC2 (Elastic Compute Cloud) or the Texas-based Rackspace.

"The undersea cables have improved dramatically over the last few years", he pointed out, providing connectivity good enough to serve customers. As a result, he said, cloud computing is fast becoming more viable across the continent.

All of this is fueling speculation as to when Amazon, which has shown little interest so far, might finally set up shop in Africa. "That's the question on all of our minds, and for many of the local players as well", said Higgins, though he added that since the online shopping giant has yet to venture into South America, Africa is likely to be low on their list of priorities.

But with more and more home-grown companies like Jumia popping up, they might find the market rather crowded when they finally do decide to take the plunge.

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