E-Commerce and Digital Transformation: China Sets Model for Africa

08/10/2019

E-commerce is playing a big role in the transformation of Africa into a digital society, thanks mainly to Chinese companies that are not only stimulating the competition but that are also fostering the digital scene

 

The old narrative of Africa on the margins is fading fast. Here, the People’s Republic, whose digital economy has experienced massive growth over the last decade, stands as a model for the continent, which is quickly moving towards e-commerce showing promising results.

Indeed, internet and e-commerce are playing a big role in leading Africa’s transformation into a digital society, thanks mainly to Chinese tech companies that are not only stimulating the competition but that are also fostering the digital scene.

One of them is Kilimall that was founded by an ex-Huawei employer from China in 2014. Named after Africa’s highest mountain Kilimanjaro, Kilimall was the first Chinese e-commerce company to enter Africa and it is now one of the continent’s biggest e-commerce platforms.

 

china in africa - e-commerce - durban - south africa - cifnews

© Unsplash. Durban, South Africa. Many international tech giants, especially Chinese, have entered the African market fostering the local digital scene.

 

In 2012, the founder and chief executive of Kilimall, Yang Tao, was sent to Africa to help local telecoms companies build mobile payment platforms. After spending some time there, he became aware of the inconvenience of shopping in African countries because of the lack of balance between price and availability. “The price of goods was very high in Africa while choices were limited,” Yang said.

Therefore, as African middle-class was booming, Yang Tao saw in the e-commerce sector an answer to the emerging demands of a brand-new society, whose quality of life was getting quickly higher.

In 2014, he thus launched Kilimall, an e-commerce platform selling different kind of products, including electronics, clothing, home appliances, and make-up. In 2015, the company also allowed thousands of Chinese suppliers to sell in the platform and they now make up half of the sellers on the marketplace.

Today, Kilimall has about 10 million users and over 10,000 sellers from both Africa and China. Moreover, inspired by the Chinese experience, the African marketplace also provides its own online payment system, Lipapay, and logistics structure, KillExpress.

 

“No one could ignore the trends, and we should leverage digitalization to realize the new possibility for Africa and China. E-commerce is a new option to accelerate economic growth and create employment,” Yang said.

 

Although African consumer habits are completely different from the Chinese ones, Kilimall’s Chinese roots have certainly played an important role in terms of the experience of operations and marketing techniques, which made it stand among local competitors.

One of them is the Nigerian Jumia, the largest e-commerce operator in Africa. Not only Jumia operates in 23 different countries but it also owns 48% of the continent’s market. Moreover, this platform was able to jump from 2.7 million users in 2017 to over 4 million users the next year.

Headquartered in Lagos in Nigeria, Jumia was founded in 2012 by two ex-McKinsey consultants, Sacha Poignonnec and Jeremy Hodara, together with Tunde Kehinde and Raphael Kofi Afaedor. It is the first African technology company listed on the US stock exchange.

Despite it is an African company, Jumia did not escape the Chinese influence. Indeed, just like the Chinese platforms, the African marketplace also provides a variety of services such as food delivery and travel booking. Made of nine portals in 23 countries, Jumia serves every possible need, from the classic e-commerce to travel, from food to taxis, from job offers to the sale of houses. It is called the “African Amazon” but it actually represents the sum of eBay, Booking, Uber, and Uber Eats, looking more like Alibaba than Amazon.

 

Jumia - chinese influence in africa - cifnews

© Bloomberg. Jumia has adapted e-commerce as we know it to the African reality, thus creating an African way to do e-commerce.

 

Cases like Kilimall and Jumia perfectly represent Africa’s recent digital growth. According to the research site Statista, the digital industry was worth $16.5 billion in 2017 and it is now expected to hit $29 billion by 2022 while necessary infrastructure, such as mobile phone ownership, and household incomes continue to rise.

Moreover, with the surge of internet penetration on the continent, many Africans are easing into the habit of shopping online. According to McKinsey’s report, today, e-commerce in Africa represents 2-3% of total purchases, but it could account for up to 10% of retails sales with a value of around $75 billion by 2025, as more Africans gain access to the internet.

Although the e-commerce sector is still far from Africa’s largest earner, the market is growing, and it is growing fast. The potential is, therefore, huge. Especially taking into account that here the use of the smartphone has grown by 70% only between 2017 and 2018, creating a potential base of 660 million internet users.

Therefore, if in a metropolis like Lagos, where shopping centers are few, buying on the internet is just more convenient, in peripheral centers and villages, where many products do not even arrive, it is a necessity. “We’re making people’s lives better,” says Ms. Poignonnec. “But the path is long. Even for the upper-middle-class e-commerce remains a novelty,” she adds. But China is doing more, it is exporting an e-commerce culture followed by its idea of “cashless” society. And consumers seem to appreciate the change.

 

Africa’s e-commerce market will amount to $18 billion in 2019 and reach $32 billion by 2023, with an annual growth rate of 15.4%, according to market and consumer data provider Statista.

 

Once again, behind this fast digitalization, there is Beijing, which has found in Africa a relatively young market with huge potential. China has indeed spent the past decade building the region’s digital infrastructure, allocating billions of dollars in the continent and becoming the largest trading partner of Africa as a whole.

Actually, Beijing sees in Africa a friend among developing countries. The African market is so much similar to China’s one before its explosive economic boom that at the closing of the summit of the China-Africa Forum for Cooperation held in Beijing in 2018, Chinese President Xi Jinping said China shares with Africa a common future to pursue through a “joint march”. In this framework, Chinese enterprises are serving as a bridge for closer cooperation.

Chinese companies like Huawei and ZTE effectively helped to develop the continent’s mobile network, leading the growth of mobile phone and internet penetration. These early investments contributed to the explosion in mobile telephony and to the birth of e-commerce in many African countries.

But China’s intervention in Africa did not come out of the blue. In order to pursue the realization of its massive initiative of a renewed digital Silk Road, African technological development is necessary. The Belt and Road Initiative here is, therefore, integrated into the region’s agenda, which has the goal to link the 54 countries in an area of free trade and free movement of goods and people together with a shared peace on the entire continent.

 

China in Africa - digital transformation - e-commerce - nigeria - cifnews

© Unsplash. Lagos, Nigeria. While Africa is experiencing a true digital transformation, Nigeria is home to 40% of African e-commerce companies.

 

In the past, structural limitations and immature markets have deterred global players from establishing roots in Africa. But homegrown e-commerce platforms such as Kilimall or Jumia reflect the appetite both among customers and local entrepreneurs for a digital transformation. From one of the poorest countries in the world, China now sits at the big table. It thus has both the knowledge and the will to drive Africa through this transformation.

Referring to the Celestial Empire, Dylan Piatti, chairman of E-commerce Forum of Africa, said: “We don’t need to reinvent or create the wheel but we can take the best practices and the learning that they have gone through and link them to what we are doing here.”

Therefore, on one hand, Africa represents both a challenge and an opportunity to expand its influence for China. But on the other hand, the Dragon sets a model for the continent, which sees in the partner a unique opportunity to leapfrog its own shortcomings to find development through an advanced e-commerce environment.

MORE ON THIS TOPIC

Leave a Reply

Your email address will not be published. Required fields are marked *