<font color="#B84221">The Evolution of E-commerce and the Race to Regulate in Africa</font>
The Evolution of E-commerce and the Race to Regulate in Africa
The world is increasingly going digital. This creates both opportunities and challenges, calling for changes to existing policies and adoption of new regulations in the field. One noticeable way that digitalization is influencing our economies is through the growth in e-commerce. Despite technological limitations in Africa, much of the digital innovation is taking place in Africa. E-commerce is increasingly disrupting the retail industry in Sub-Saharan Africa and the United Nations Conference on Trade and Development (UNCTAD) reported that the number of online shoppers in Africa has surged annually by 18% since 2014. The rapid Internet penetration through smartphones over the past decade largely contributed to the growth of Africa’s e-commerce. Africa’s payments services architecture is evolving in response to changing customer expectations and technology, offering a range of disruptive payment models enabling more people, even without a bank account, to take part in online shopping.
Africa goes online shopping;
e-commerce in Africa and
the most competitive markets
Particular attention should be paid to some of Africa's most competitive markets i.e., Nigeria, South Africa, Kenya, Morocco, and Egypt. These are the largest economies on the continent. Online retail is booming in these markets, thanks to several leading companies, which operate in many other African countries, e.g. Jumia, Konga, takealot.com, and Kilimall. Nigeria is the headquarter of two popular online marketplaces in Africa i.e., Jumia and Konga. South Africa is home to takealot.com, the largest e-commerce platform in the country, while Kilimall was founded in Kenya. According to Statista, Jumia received the largest web traffic in 2021 compared to all the other e-commerce platforms in Africa. The company's monthly visits during the period under review was reported at 23.3 million. Takealot.com is the second most visited e-commerce platform in Africa, with an average monthly visit of 10.5 million while data tracked put the number of monthly website visits to the Konga website at 2.3 million. Since mobile e-commerce plays an important role, a look at the most popular shopping apps can provide a better overview of the main players in these markets. Unsurprisingly, Jumia Online Shopping heads the rankings in Nigeria and Kenya, and is third after Souq and Alibaba in Egypt. Souq.com, renamed Amazon.eg in September 2021, is an Amazon company and the largest e-commerce platform in Arab-speaking countries. Meanwhile, in South Africa, the fashion e-commerce platform SHEIN is the most popular shopping app.
Africa's largest e-commerce markets include South Africa and Nigeria, having the highest e-commerce sales values in comparison to Egypt, Kenya and Morocco. In both countries, the majority of payments were conducted with cards, compared to a bigger share of the total payments stemming from cash-based payments in Egypt, Morocco and Kenya. The banking infrastructure has played an important role in the growth of e-commerce in Africa. For example, Kenya leads the African continent with 88 per cent of its population having bank accounts, followed by South Africa at 82 per cent, Nigeria at 51 per cent, Morocco at 42 per cent and Egypt at 38 per cent of its population engaged with banking products.
With the operationalization of the AfCFTA, the addressable market for small businesses has expanded beyond borders. Covid-19 reinforced the utility of e-commerce, and it has made it imperative for business owners to adapt and integrate technology into their operations more urgent. The promise of e-commerce for Africa’s small businesses is that it might improve economic efficiency and contribute to poverty reduction for a continent so sorely in need of both. In Nigeria, e-commerce companies have supported over 10,000 entrepreneurs with useful technology, resources, and community support to reach their customers. Sokowatch in Kenya has been reinventing informal trade by connecting MSMEs to the digital economy. In Egypt, Moneyfellows has digitized the traditional “money circles” and facilitated access to lending and saving for over 150,000 users. In that time, delivery drivers have seen their average daily incomes rise 400% and over 10,000 informal merchants can access customers on a larger scale.
Regulation driving the growth
of e-commerce in Africa
Despite the success of e-commerce highlighted above, Africa’s infrastructure is still undeveloped to compete with most developed countries. To achieve the required success across the entire continent, the legal framework must be developed to support and aide this industry to protect the processing of personal and consumer data. Currently, only 20 of 54 African nations have enacted online consumer protection and data management laws. With a rapidly growing digital economy and increased use of technology for the delivery of remote services, the protection of data in Africa is assuming ever-increasing importance. Countries like Ghana, Kenya, Nigeria, Rwanda, South Africa, Uganda and Egypt have implemented new measures to protect and secure the personal information of their citizens. In Ghana, the Data Protection Act, 2012 (DPA) and Article 18(2) of the 1992 Constitution provide citizens with a fundamental right to privacy. In Kenya, the Data Protection Act passed in 2019 as the primary legislation for the collection and processing of citizens’ personal data. The law is supplemented by the passing of the Data Protection (Civil Registration) Regulations, 2020 (DPA Regulations), which regulate the processing of personal data by civil registration entities. The Nigeria Data Protection Regulation 2019 (NDPR) is the principal privacy and data protection legislation in Nigeria while in South Africa, the Protection of Personal Information Act 2013 ("POPIA’) came into effect on 1 July 2021. The POPIA sets out eight conditions for lawful processing which include: accountability; process limitation; purpose specification; further processing limitations; information quality; openness; security safeguards; and data subject participation which are similar to the General Data Protection Regulation (GDPR). Not to be left out, Egypt in 2020 also passed the Personal Data Protection Law. Subject to certain exceptions, the Law contains a general prohibition on the transfer of Personal Data to recipients located outside Egypt except with the permission of the Egyptian data protection centre/authority ("Egyptian DPA") and where the level of protection provided is not less than that provided in Egypt pursuant to the Personal Data Protection Law.
How the AfCFTA can be leveraged
With the inclusion of e-commerce on the agenda of the AfCFTA, this should pave the way for African countries to set rules that can facilitate more regional, cross-border e-commerce. As of today, most e-commerce in Africa is either domestic in nature or involves trade with non-African countries. AfCFTA offers an opportunity for consolidating e-commerce rules and regulations across the continent. It is an opportunity for Africa to become a global player in trade and have the voice of the continent heard. At a UNCTAD panel discussing how AfCFTA can be leveraged to impact e-commerce, five key points were highlighted that will affect the potential of AfCFTA.
Infrastructure; as mentioned above, Africa’s infrastructure is still lacking compared to other developed continents. The continent will need robust infrastructure to deliver access, connection, and internet speed. This goes as far as transport infrastructure as well since one of the negotiations of the AfCFTA is free movement of people and services across borders.
Currency; Sub-Saharan Africa remains the most expensive region to send money across borders which adds delays and risk to traders who might otherwise thrive in new markets. To mitigate and solve these problems, the African Union in collaboration with the African Export-Import Bank (Afreximbank) to complement trading under the AfCFTA developed the Pan-African Payment and Settlement System (PAPSS), a centralized Financial Market Infrastructure enabling the efficient and secure flow of money across African borders. The platform minimizes risk and contributes to financial integration across the regions. The goal is to have a single currency on the continent.
Open banking; Several African countries are encouraging open banking API specifications with methods and parameters that enable interactions between participants in the fintech ecosystem. For example, Rwanda’s National Bank has published a regulation to formalize how customer data mining and analysis is dealt with. Nigeria is well underway in developing API standards for multiple use cases, and in South Africa, several banks and fintech are supporting and encouraging the open banking trend.
Digital identity; The free movement of people and services across borders as envisioned by the AfCFTA will require identification of the masses. Digital identification will enable people to move around the continent and transact without having to carry their passports. To facilitate this, in August 2021 the African Union Commission ("AUC") held a public consultation forum to receive submissions from stakeholders on the draft African Union Digital ID Framework. It proposes different models of the IDC such as digitally signed credentials or digital wallets to empower people to have control over their personal data.
Data protection; As detailed above, African states are implementing data protection laws to compete on the global scene. As the world becomes more open and markets open up as well, there is need for the continent to catch up and keep up with the rest of the developed economies if it will be able to compete.
The growth of e-commerce on the continent has been attributed to the technology jump that has occurred in Africa. Because of historically missing economic infrastructure, such as banks, telecom landlines, etc., e-commerce was not a common of business transaction. Today, Africa is forecast to surpass half a billion e-commerce users by 2025, which will have shown a steady 17% compound annual growth rate of online consumers for the market. According to California-based mobile marketing analytics firm, AppsFlyer, e-commerce in Sub-Saharan Africa witnessed considerable growth in 2021 with a 55 per cent increase in online retail spending, even as the volume of downloads and installation of e-commerce apps on Android and iOS also grew, standing at 55 per cent and 32 per cent, respectively. Efforts initiated and encouraged by the AfCFTA, development and implementation of data protection regulations and the increase in technology users on the continent are some of the drivers that have contributed to the success of e-commerce on the continent.
For further information,
please contact Mariam Sabet.
Published in September 2022