5 African Countries That Are Great For E-Commerce Startups
by John-Paul Iwuoha and Dr. Harnet Bokrezion, authors of 101 Ways to Make Money In Africa
I will never forget an article, which I read in 2012, titled ‘Want to become an Internet Billionaire? Move to Africa‘. The reason why this article is so meaningful to me is because it kicked off my curiosity about the new entrepreneurial wave in Africa when the whole ‘Africa Rising’ narrative received still little attention.
Running an E-Commerce business has great advantages – anywhere in the world. Firstly, it allows you to tap into a growing global trend, secondly and for me more importantly, it also allows for a great deal of personal flexibility and freedom. This is in particular true when you do not sell certain products that need local production or storage, but you sell information, you create market or networking platforms, or you sell the products and services of others. Some Africans have even become rich with building popular gossip and celebrity blogs, which they now run like a business.
A hotel booking site like Nigeria’s hotels.ng or jovago.com for example, the download of Nollywood films through iRoko TV, or a job site like jobberman.com are among the most successful online businesses on the continent without the need to store products and ship them from one house to another. You could still continue to run these business from anywhere in the world if you wanted to change your country of residence. And if a major security threat breaks out, your e-commerce business can continue to prosper across borders.
This article will provide you some insights into the best locations to set up an African E-Commerce business on the continent. The good news is that Internet speed has improved manifold in several African countries over the last two to three years.
Nigeria is without a doubt a very exciting market for e-commerce, both as a basis for your start-up and a market you may want to target from elsewhere. Some of Africa’s most successful emerging E-Commerce businesses have started in Nigeria and expanded further from there across the continent. They include jumia.com, kaymu.com, and konga.com who have opened new stores across Africa. Nigeria has a huge population in a single market, there is a large segment with a high spending power, Internet penetration is high, and Nigerians are getting increasingly used to order online. According to a MasterCard survey (2014), 56% of respondents had shopped or intended to shop online via their mobile phones. In short, you can tap into a conducive e-Commerce environment. However, with 5.8 Mbps Nigeria has a slower download rate compared to power houses Kenya and South Africa, and the notorious traffic (if products need to be transported locally) and frequent electricity cuts can be your biggest challenge. Go solar if you are running most of your business operations inside of Nigeria.
With 7.6 Mbps, Kenya is among the best locations for Internet speed in Africa, Internet penetration is high, and according to a MasterCard survey, 56% of respondents had shopped or intended to shop online via their mobile phones – this is as high as in Nigeria. E-commerce is really a growing trend in Kenya and several well-known online businesses have emerged from this East African country already. Kenya is a great market to start your online business or to target customers from afar. Some of its most favorite local e-commerce businesses include car auction sitecheki.co.ke and bidorbuy.co.ke, where anyone can sell. Kenya is very often the next stop for Nigeria based e-commerce companies planning to expand.
3. SOUTH AFRICA
South Africa is another top market for E-Commerce in Africa. A significant segment of the population is ready to buy online (33%) although it is lower than that in Nigeria or Kenya. The trend is slightly different as more recently there is an increased interest in online ticket sales and special restaurant, travel, and event deals. One of the newly emerging local E-commerce companies that are hugely successful is Yuppiechef, an online company that sells premium kitchenware brand. Its founders have decided the company will make the effort to wrap products in beautiful packaging accompanied by a hand-written note. Some analysts in the industry say that this special attention to detail and care has contributed to the success of Yuppiechef, which is featured across various media channels as a success story.
Ghana has the highest Internet speed in the West African region, and although Internet penetration is a little low at 20% there is certainly a growing local market for E-commerce, although it is less dynamic than in Africa’s three economic power houses. Ghana is a great strategic HQ location for regional expansion including into Nigeria and Ivory Coast, which is a dynamically upcoming market with a fast growing upper class who has significant spending power. Just make sure you have French translation options featured on your site.
In September 2013, Ghana’s first ever E-commerce Expo opened, which is another sign for a strong market trend; perfect timing to position yourself. Here is another tip: It may help to be aware that record numbers of African Diasporans from the United States are looking at Ghana, both to relocate to or to create links with. This is a development you can pro-actively integrate in your business sales and marketing strategy. Ghanaian entrepreneur Catherine Hagan has just done that: Her new company Makowla, is an eBay marketplace for African and Africa-inspired designers and her main clientele sits in the US.
This is a bit of an interesting one and not the most obvious choice, but I decided to include Tanzania, as more news has come out of the country in the last couple of months regarding the fast growing trend in e-commerce. In November 2014, following its recent successful launches in Cameroon and Uganda (another upcoming e-commerce market by the way), Africa’s leading online retailer JUMIA has opened shop in Tanzania. During a recent survey in Dare-salaam most respondents who used online services said they had a positive experience and will continue to shop online using mostly mobile devices.
AND : DIASPORA
We need to add this one: If you are based outside of Africa and you cannot see yourself relocating now or in the future, running an Africa e-commerce business from abroad targeting African consumers and companies, will be one of your best bets. Just keep in mind that online and mobile payments are still restricted in many parts of Africa, it is therefore important to be very well aware of the niche you are targeting and which payment methods are accessible for them.
The list above is not complete, but it gives you some overview. Rwanda for example is successfully grooming new e-commerce entrepreneurs in its tech hub Klab – many of them are targeting the East African region. If you are planning to set up an online business in Northern Africa, Egypt, and Morocco are your best markets both in terms of speed, penetration, and consumer adaptation.
Internet connectivity is continuing to improve and grow at a fast rate across the continent, increased number of online businesses are emerging, and African consumers will continue to make more purchases online. There are still several challenges you will face when running an African e-commerce business, but if you choose the right country and the right niche, now is the best time to tap into this emerging trend and position yourself well before the wave takes off!