eCommerce has seen incredible growth rates all across the world, and even recent obstacles due to the ongoing COVID-19 pandemic haven’t slowed its progress. In fact, according to a new Visa analysis, global eCommerce sales are expected to reach $7 trillion by 2024.
South Africa, Nigeria, and Kenya were the leading contributors to eCommerce in the region over the last three years, according to Visa’s white paper, E-trade developments across Sub Saharan Africa (SSA).
Customers turned to eCommerce to fill the void left by the ongoing COVID-19 pandemic, according to the report, which was fueled in part by the implementation of lockdown restrictions around the world to stop the spread of disease. Face-to-face retail was shut down, and customers had to turn to eCommerce to fill the void left by its closure. According to the data, new eCommerce users in SSA increased by 5% during the lockout, compared to the active base in SSA the previous year.
In terms of overall eCommerce volume in 2019 and 2020, South Africa is top, followed by Nigeria in second, Kenya in third, and Ghana in fourth. Mauritius is in fourth place, and Zambia is in fifth, demonstrating the importance of eCommerce across East, South, and West Africa.
“South Africa is by far the most dominating participant, with domestic transactions outnumbering cross-border transactions.”
“Cross-border businesses drive the majority of eCommerce transactions in Kenya. This suggests two things: first, there’s room for growth in the local eCommerce sector, and second, there’s a need to see if there’s enough acquisition infrastructure in place domestically to support these companies.”
“Domestic transactions are more prevalent in Nigeria, with purchases from Discount Stores and various service categories dominating. The growth of strong eCommerce merchants inside local countries is maturing and showing pan-regional penetration (for example, Jumia in Nigeria). As a result, payments providers have a lot of potential to work with pan-regional players to help them develop.”
The region’s top eCommerce drivers
The ability to access financial services, digital payment methods, and digital infrastructure are the most essential eCommerce enablers, according to the report. According to the report’s findings,
- Although bank accounts drive financial access in Nigeria and South Africa, in Kenya, financial access is largely driven by Mobile Money.
- Cash is particularly prevalent in Nigeria, but Kenya and South Africa match their top drivers of access with their second-highest payment instrument usage – electronic payment instruments (likely mobile money) in Kenya and cards in South Africa.
- Digital access is primarily enabled by mobile phones across all three markets. Internet penetration is highest in South Africa at just under two-thirds of the population, while Kenya and Nigeria each have just over one-third of the population with digital access through the internet.
Other important elements influencing eCommerce in the region include:
The use of credit cards is still a crucial component of eCommerce.
Card usage for digital payments in eCommerce is observed across all card types: debit, credit, and prepaid, according to the survey. For volume eCommerce transactions, credit and debit cards are fairly evenly used, and card preference appears to be heavily influenced by overall market preferences.
In South Africa, credit is preferred, whereas in Nigeria, debit is preferred for domestic purchases and credit is preferred for cross-border transactions.
Customers have turned to eCommerce and digital payments as a result of the COVID-19 pandemic.
While spending power has decreased across the continent as a result of numerous lockdowns, the report states that eCommerce spending has not decreased to the same extent as face-to-face spending; in fact, the closure of face-to-face environments has attracted new users and increased the frequency of eCommerce spending.
When it comes to digital payments, cards have grown in popularity across the continent, with Kenya seeing the most growth. However, the type of this usage is also intriguing, since there has been a strong preference for contactless, which is a significant point for enabling secure card payments on delivery and the use of e-wallet services (often enabled by card-on-file).
According to Lineshree Moodley, Head of Visa Consulting and Analytics (VCA) in Sub-Saharan Africa, Sub-Saharan Africa’s three main commercial sectors are starting to flourish, giving the region a foothold. When coupled with the growing infiltration of web-based business, it presents significant portions in the installation space with an opportunity to profit by assisting in the expansion of web-based business in the local area.