A recent Visa report has shown that the top market contributors to e-commerce in Sub-Saharan Africa (SSA) over the last 3 years were South Africa, Nigeria, and Kenya, with Ghana also showing growth, having replaced Kenya in the top three contributors in 2020. 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 5% 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 Sub Saharan Africa (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 pandemic 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.
Cross-border transactions make up half of all e-commerce 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
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.
Top Drivers in E-commerce
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.
The COVID-19 pandemic has pushed consumers towards digital payments in the key e-commerce markets for SSA.
Cash vs. Cashless
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.
Aldo Laubscher, Country Manager at Visa South Africa says 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.
“Customers in SSA are making use of a wide range of digital payment instruments, so it is becoming increasingly important that e-commerce offers multi and even omnichannel experiences. At Visa, we continue to work with traditional and new financial services companies to develop new products and capabilities that deliver on this.”