10 Obstacles That Impede Africa’s International E-Commerce Growth

By Peter Pedroncelli AFKI Original Published: July 14, 2017, 4:44 pm
E-commerce is growing in Africa, but barriers still remain that stall its potential. Photo - Nairaland

While e-commerce growth in Africa continues to take place at a faster rate with each passing year, there continue to be barriers that hamper development of e-commerce on the continent.

The e-commerce potential throughout Africa is huge, but a number of common barriers which fall into the categories of financial, infrastructure, socio-political and digital divide, remain a challenge for this industry, especially with regards to international growth.

The current share of consumer e-commerce by African enterprises is below 2 percent, and has great potential. By 2018, the African e-commerce market is projected to be worth around $50 billion, from just $8 billion in 2013, according to the International Trade Centre.

By understanding the obstacles and embracing the challenge ahead, changes and innovative thinking can help Africa’s e-commerce sector to reach the next level and continue to grow.

Here are 10 obstacles that impede Africa’s international e-commerce growth.

Sources: AfricanExponentIntracen, HBR, Memeburn.

Digital payments - MallforAfrica is an e-commerce platform that allows Africans to buy online internationally. Photo: MFA

MallforAfrica is an e-commerce platform that allows Africans to buy online internationally. Photo: MFA

Domestic e-commerce is absent

While several nations on the African continent have thriving domestic e-commerce businesses, specifically in large African countries such as Nigeria, Kenya and South Africa, the same pattern is not present in smaller countries. Strengthening those local e-commerce patterns is the first step to international success.

Local banking restrictions and lack of international links hamper growth. Photo: biznews.com

Struggles with international banking transactions

Some African countries have domestic restrictions on the amount of money that can be transferred across borders, while some only receive payments from foreign credit card holders through intermediaries which are expensive, due to the lack of international links within local African banking systems.

Mastercard and NetPlus deliver cashless e-commerce in Nigeria. Photo - Payments Afrika

Some international marketplaces exclude Africans due to negative perceptions. Photo – Payments Afrika

Exclusion from international e-marketplaces

Negative perceptions about doing business in Africa remain, and this translates into many small and medium-sized businesses in Africa being blocked from listing their products on international marketplaces. This is a perception problem that has a knock-on effect which compounds the issue.

Construction of infrastructure to support large-scale agriculture is underway throughout the Nacala Corridor.
Photo: Erico Waga/Grain.org

Poor infrastructure

Local and regional physical infrastructure can be poor in parts of Africa, with underdeveloped roads, ports and air transportation and unreliable electricity supply posing obstacles to e-commerce in much of Africa, with many African companies put at a disadvantage when trying to compete globally.

Sales tax remains an issue, as many Africans lack experience in such matters. Photo: Wikipedia

Inexperience with import duties and sales tax

Due to inexperience with import duties and sales tax, mistakes in failing to accurately calculate these fees when exporting through e-commerce channels can often result in costly return shipments or a loss of business entirely.

E-commerce growth - E-commerce is growing in Africa, but barriers still remain that stall its potential. Photo - Nairaland

E-commerce is growing in Africa, but barriers still remain that stall its potential. Photo – Nairaland

Lack of trust and perceived security problems

Compliance with banking regulations and related private-sector rules are yet another challenge for many on the African continent, as are trust and perceived security issues. The perceived issues cause great concern and are incredibly damaging for Africa’s international e-commerce prospects.

Africa's e-Commerce

Doing business across borders should be made easier with government support, promoting e-commerce growth. Photo: adwords.facemedia.hu

Sociopolitical barriers

Many governments and local African institutions are simply not doing enough to create local services and structures in support of small businesses. And companies themselves are often challenged by the cultural requirements of doing business across borders, such as foreign language skills and customer service differences within varied markets.

DotAfrica domain finally ready to come online. Photo: thehabarinetwork.com

Governments should avoid over-regulation. Photo: thehabarinetwork.com

Over-regulation

Building on the previous point, governments need to work harder to help the small and medium businesses, not hinder them with over-regulation, and this is simply not the case in many parts of Africa, where requirements on businesses from government make it difficult for these businesses to thrive.

People get online at an internet cafe in Nairobi. Photo: Wikipedia

Internet connectivity issues

Internet connectivity in Africa continues to lag behind other regions, although the gap is closing rapidly thanks to mobile internet, which is a positive that in future will entirely eliminate this particular issue.

digital technologies

A significant digital divide still affects economic development opportunities in Africa. (Photo: Accenture)

Digital divide

Limited access to broadband widens an already significant digital divide that deprives many businesses of economic development opportunities, such as business process outsourcing services. This is one of the issues that needs urgent tackling in order to benefit African e-commerce growth in leaps and bounds going forward.

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