A report by Visa has shown that the top market contributors to e-commerce in sub-Saharan Africa over the last three years were South Africa, Nigeria and Kenya, with Ghana also showing growth, having replaced Kenya in the top three contributors in 2020. According to Africa Business Community, SSA may be one of the smallest regions of e-commerce globally, but it shows steady growth potential. During lockdown, the region saw new e-commerce users rise by five per cent when compared to the active base in SSA the previous year.
“The three leading markets in SSA are starting to mature, providing the region with an established foundation and, when twinned with the growing penetration of e-commerce, it offers players in the payment space an opportunity they can capitalise on while helping to further accelerate the expansion of e-commerce in the region,” explains Lineshree Moodley, Head of Visa Consulting and Analytics (VCA) in sub-Saharan Africa. Visa’s white paper, entitled e-commerce developments across SSA, confirmed that, as the world becomes increasingly digital, e-commerce has been driving the acceleration of digital commerce.
It has experienced phenomenal growth rates around the world and even recent setbacks as a result of the continuing COVID-19 haven’t stopped its rise. In fact, according to recent GroupM estimates, e-commerce sales are projected to grow to $7 trillion across the globe by 2024. The research paper found that in SSA, cross-border transactions make up half of all ecommerce transaction volumes, e-commerce is driven by retail goods and professional services, mobile phones are the main source of digital access, payment facilitators are a critical catalyst for digital payments, and fraud protection is key to maintaining customer trust.
In terms of the merchant categories driving e-commerce, for Kenya and Nigeria, there is a steady dedication to service-based merchants with a strong spread across services categories such as professional services, education, government, and business- to-business merchants. In South Africa, professional services and telecom/utilities merchants were the top drivers of e-commerce in 2020.
The most important e-commerce enablers – the ability to access financial services, digital payment channels and digital infrastructure – are starting to take hold across SSA. Although cash may remain the dominant payment instrument in the region for now, there are signs that this will eventually change. In Nigeria, for example, cash is still particularly prevalent, while in Kenya mobile money is most popular and many South Africans choose cards as their main payment methods.
Covid-19 has pushed consumers towards digital payments in the key e-commerce markets for SSA. At a primary level of cash versus digital payment instruments, there has been a strong move away from the use of cash across the board. This is due to a shift to e-commerce behaviour that is mostly enabled by digital payments and a reduced preference for face-to-face interactions that involve handling common surfaces, such as cash. When exploring digital payments usage, the use of cards has increased across the continent, with the highest uptick taking place in Kenya. However, the nature of this usage is interesting. There has been a strong preference for contactless payments, a notable point for enabling safe card payments on delivery, as well as in the use of e-wallet services, as cash is seen as a vector for the virus. With these realities, how can payment industry stakeholders and merchants capitalise on these opportunities, to sustain the growth of e-commerce in the region? Aldo Laubscher, Country Manager at Visa South Africa said that it is important that e-commerce platforms are designed with end-to-end mobile enablement in mind, and that online payments provide a strong user experience that is secure and appears seamless to the customer, both for local and cross-border transactions.