Tanzania among African countries with thriving e-commerce

19Dec 2018
By Financial Times Reporter
DAR ES SALAAM
Financial Times
Tanzania among African countries with thriving e-commerce

An increase in internet penetration has propelled Tanzania to the 7th position among ten countries in Africa with the highest proportion of online shoppers aged 15 and above.

The latest business to consumer (B2C) e-commerce index by the United Nations Conference on Trade and Development (UNCTAD) ranks 151 countries globally, including 44 African nations, by measuring their readiness for online shopping.

The index is based on four indicators: bank or mobile money account penetration, internet usage, availability of internet servers and the reliability of postal services.

Tanzania has 5.1 per cent of the population in the targeted age group doing their online shopping, being the second in East Africa behind Kenya with 9.3 per cent.

Libya leads the Africa list with 14.6 per cent of its people aged 15 and above conducting online shopping, while Mozambique - with 4.3 per cent - is bottom of the top ten countries in Africa.

In its 2015 data, UNCTAD ranked Tanzania in the 102nd position out of 142 countries measured, with the share of people with internet account being 40 per cent. Tanzania has scored 30 on the postal reliability index by the Universal Postal Union (UPU).

The UNCTAD B2C E‐commerce index reflects the processes involved in an online shopping B2C transaction.

Some type of web presence is required by the seller to accept online orders. The process also requires Internet access on the part of users to place an order.

A payment method is needed such as credit card, e‐wallet, mobile payment, bank transfer or cash on delivery. Finally, the product must be delivered to the customer.

The availability of secure Internet servers is included in the index as a proxy for the readiness of a country to enable secure transactions online.

Most e‐commerce sites need to employ security protocols to safeguard payment and personal information.

Secure servers use encryption technology in online transactions to protect the transfer of data from unauthorized interception. This indicator is available for most countries from the World Bank.

The use of secure servers may allay security concerns, often mentioned as a barrier to online shopping.

However, experts argue that having the best conditions for e-commerce to thrive does not translate into actual online sales in most of Africa.

But the report notes a “disparity in core indicators and actual shopping” across Africa. Libya, ranked 13th in Africa for e-commerce readiness, has the highest proportion of online shoppers on the continent among people aged 15 and older.

Indeed, six of the top ten countries by proportion of online shoppers do not rank among the ten highest ranked countries for readiness in UNCTAD’s report.

By sheer volume however, Nigeria, South Africa and Kenya accounted for nearly half of Africa’s estimated 21 million online shoppers in 2017.

Mauritius is the highest ranked of the 44 African nations in the index largely thanks to its large banked population, estimated at 90 per cent financial inclusion.

It’s the latest validation for Mauritius’ economy after recently being the only African country ranked in the top 20 of the World Bank Doing Business report.

Nigeria—the continent’s largest e-commerce market by number of shoppers and revenue, according to the report—is the second highest ranked African nation while South Africa ranks third.

While the number of online shoppers across the continent has grown 18 per cent yearly since 2014—higher than the global average, Africa’s consumer e-commerce market, valued at $5.7 billion in 2017, is less than 0.5 per cent of the continent’s GDP, far below the global average of 4 per cent.

Ultimately, Africa’s e-commerce markets have what industry insiders usually refer to as the “last mile” challenge.

This refers to the movement of goods from a fulfillment center to their final destination. E-commerce retailers in some markets are still struggling to earn the trust of consumers with efficient delivery.

There’s still plenty of room for growth however as 68 per cent of internet users in European Union countries made online purchases in 2017 compared to 13 per cent in Africa.

Increasing that number to 50 per cent in Africa could translate into 77 million additional online shoppers and more than double of current revenues.

And there’s cause for optimism given growth in internet connections in Africa from 2.1 per cent in 2005 to 24 per cent this year.