Connect with us

Cover Story

Amazon Will Discover e-Commerce in Africa Not a Tea Party

Published

on

, SiliconNigeria

By Tarila Ben-White, Ph.D.

Feelers indicate that Amazon may now be ready to explore what the continent has to offer on the e-commerce front but the nous and experience of indigenous giants such as Konga will come in handy if it is not to stumble heavily in Africa’s biggest market

It is no longer news that global e-commerce giant, Amazon is all but set to extend its tentacles to Africa. Earlier this month, a South African court ordered a halt on the construction of Amazon’s new African headquarters, a massive 70,000 square metres (17.3 acres) structure. The ruling came after some descendants of the country’s earliest inhabitants said the land it would be built on was sacred.

As reported by Reuters, the Western Cape division of the High Court interdicted the project developer from continuing with works at the Cape Town site until there had been meaningful engagement and consultation with affected indigenous peoples.  Among these are the Khoi and the San, two of the earliest inhabitants of South Africa, some of whose descendants had objected to the River Club development, arguing that it lies at the confluence of two rivers considered sacred, the Black and Liesbeek Rivers.

It is important to state, at this juncture, that Amazon has retained a presence in Africa for years. The e-commerce giant has several employees on its payroll working in data hubs located across Cape Town. Notably, the origin of Amazon’s current expansion into Africa began in 2004 when it set up a development centre in Cape Town. Incidentally, that centre eventually went on to build Amazon’s first cloud platform, known as the Amazon Elastic Compute Cloud which heralded its hugely successful cloud computing arm – Amazon Web Services (AWS). Today, AWS is responsible for the lion share of Amazon’s global operating income.

The firm’s adventure in Africa is thus intrinsically tied to its long-standing relationship with the South African city of Cape Town, the oldest and second largest city in that country after Johannesburg. As reported by fDi Intelligence, Amazon, in 2000, had gone ahead with plans to hire 3000 customer support staff in Cape Town. In addition, AWS, its cloud business, had plumped for Cape Town to host its first cloud region in Africa. Furthermore, nine of Amazon’s 19 projects in Africa are located in Cape Town, with five others in Johannesburg. The rest are split between Kenya, Morocco and Egypt.

The foregoing shows Amazon has established its cloud business in parts of the continent. But is it now ready to join the e-commerce race in Africa?

, SiliconNigeria
Source: AP Photo/Michel Spingler, File) AP

Although still a growing industry, the e-commerce space in Africa has begun to capture the attention and imagination of international investors. Research from Statista indicates that revenue generated via e-commerce in Africa was estimated to be around 27.97 billion U.S dollars in 2020, representing an increase of over $6bn since 2019. Correspondingly, e-commerce revenue in Africa is expected to keep up an upward curve, with estimates projecting the entire e-commerce sector in Africa to reach a value of over $46.1 billion by 2025.

Historically, Amazon is reputed to consider significant expansion into a region only when it becomes commercially viable for its line of business. But despite the fact that the promise of Africa still lies within the realms of potential rather than actuality, e-commerce watchers and analysts are of the view that a budding $46bn market in the next three years or thereabouts is more than enough justification for Amazon to throw its hat into the e-commerce ring.

Stanley Ugboaja, a Ph.D. student and e-commerce enthusiast, captures the prevailing mindset succinctly.

‘‘Africa’s population dynamics naturally makes it a frontier for e-commerce to explode in the next few years. The continent is home to the world’s youngest and second largest population. Digital literacy and numeracy is also on the rise here, same as internet penetration. Many young Africans are gaining useful exposure, either from flocking abroad for further studies or even from working remotely here for foreign firms or multinationals. When you throw in the rise in the number of fintech platforms further expanding the net of the unbanked and under-banked on the continent, you can see that the trends all tilt towards favourable conditions for e-commerce or online shopping to grow.’’

So far, on the e-commerce front, Amazon is only present in a solitary African country. That country is Egypt where Souq, an Amazon subsidiary acquired in 2017 for $580m, operates. Souq, initially founded in Dubai, UAE in 2005, was the largest e-commerce platform in the Arab world. With the acquisition by Amazon, the Egyptian site turned into Amazon.eg on September 1, 2021, officially marking the end of Souq.com.

But if, as anticipated, Amazon’s African adventure will now accommodate playing in the continent’s major e-commerce markets, Nigeria will be uppermost in its reckoning.

In addition to being Africa’s most populous nation, Nigeria remains the leading African economy in terms of nominal GDP in 2021, making up 18.4 per cent of the continent’s $2.7 trillion economy. According to the International Centre for Investigative Reporting (ICIR), Nigeria’s GDP, which measures how much a country produces in financial terms within a year, grew by 11.89 per cent from 2020 to 2021. Likewise, data from the International Monetary Fund (IMF) revealed that Nigeria’s GDP went from $429.423 billion in 2020 to $480.482 billion in 2021, making the country the highest contributor to Africa’s economic output/ GDP and the 29th in the world.

However, cutting it in Nigeria, Africa’s biggest market, will test the might and resilience of Amazon.

Currently dominated by Konga and Jumia, the Nigerian e-commerce market is a challenging ecosystem that has signaled the death knell of many promising players. Although Amazon – especially considering its roaring success in other advanced markets – cannot be placed in the same bracket as some of the startups that have quietly exited the market after finding the Nigerian e-commerce space a mountain too hard to climb, it is fitting to call to mind the instructive words of a globally renowned tech leader and Africa Chair for IEEE World Internet of Things (WIoT), Chris Uwaje.

Uwaje, who is widely hailed as the Oracle of the Nigerian IT Industry, had pinpointed the challenge in cracking the Nigerian e-commerce market as one that lies heavily in the approach or business strategy adopted by most players, many of whom fail to situate foreign business models, ideas and strategies within the culture of the people and Nigeria’s existential realities.

“Nigeria remains a fertile business environment, especially for online-focused ventures such as e-commerce companies. It is also a country with peculiar challenges and a very strong traditional approach to retail which requires a deep sense of local know-how and understanding by players. This is one of the biggest hurdles faced by e-commerce start-ups here. Many e-commerce ventures run with foreign concepts and strategies more suited to foreign climes, making it harder for them to survive the difficult terrain that is the Nigerian business space.”

But beyond the foregoing, the challenge of making a success out of e-commerce in Nigeria is one that is fraught with huge infrastructural and institutional bottlenecks.

The combination of a frustratingly underdeveloped public transport infrastructure network, absence of a proper addressing system across cities, the still-largely traditional shopping predilection of the average Nigerian and the mega-hurdle of logistics, among others, are not issues that having deep pockets alone or a popular name will solve. During the height of the COVID-19 enforced lockdown, the activities of overzealous state actors saw delivery vans conveying essential items to Nigerians delayed needlessly for days on end, or even sent back in some cases – a debacle which almost eroded the gains that accrued from the increased dependence by many Nigerians on e-commerce for safe, contactless shipping during the pandemic and which epitomised the sheer scale of some of the institutional obstacles e-commerce companies may encounter in Nigeria.

Konga, acquired by the Zinox Group from erstwhile majority owners, Naspers and AB Kinnevik, and which has become the first e-commerce company to hit profitability on the continent, may represent a fitting playbook for Amazon to study.

Considering its technology-driven status (a factor that would resonate with Amazon); a revolutionary composite fusion of online and offline which it pioneered and subsequently adopted by other players (including Amazon); the way and manner it has resolved the thorny obstacle of logistics; its massive physical assets strategically located across Nigeria (warehousing, delivery, nationwide physical stores/pick-up locations); penchant for customer service and the confidence it enjoys in the minds of shoppers, among others, Konga stands apart. However, it is in the magic of how it found a way to break the cycle of unprofitability which continues to dog other e-commerce players in Nigeria and Africa – transitioning from a business that once posted monthly losses of over N400m to emerging the first profitable African e-commerce venture – that Amazon would most admire Konga.

, SiliconNigeria
Konga

Most importantly, under its new owners, the current management of Konga boasts that keen understanding of successfully navigating the difficult terrain that Africa’s biggest market represents. It is a strength which has come to weigh heavily in its advantage, making the Konga template arguably the one to beat. Backed by entrepreneurs with over three decades of consistent success in the Sub-Saharan African technology space, Konga has not only thrived where others have failed or are struggling, but the business is now set, as feelers indicate, for a run across other African markets and a much-anticipated listing on major global exchanges, with a glut of external investors waiting.

Succeeding in the continent’s biggest market, even for a big name like Amazon, may mean seriously considering a partnership with Konga or at least, borrowing a leaf from its strategies.

Amazon would also have to decide if some of the unethical practices it has been accused of would unearth more dire consequences if they were exported to Africa. The e-commerce giant was recently accused of anti-competitive behavior by preventing third-party sellers from offering lower prices for their products on other platforms, including their own websites. The foregoing formed the crux of an antitrust lawsuit filed against Amazon by District of Columbia Attorney General Karl Racine, which was thrown out in court last Friday, according to a report by The New York Times. However, the suit was thrown out partly because Amazon faces a nearly identical lawsuit, in this case, a class action complaint that claims the company pressures sellers into selling products for an equal or lower price than what they offer elsewhere.

Also staring it in the face are allegations of tax avoidance which may land the e-commerce behemoth in hot waters here in Nigeria and elsewhere in Africa. Research reveals that Amazon’s tax behaviours have been investigated in China, Germany, Poland, South Korea, France, Japan, Ireland, Singapore, Luxembourg, Italy, Spain, United Kingdom, multiple states in the United States, and Portugal. According to a report released by Fair Tax Mark in 2019, Amazon is the best actor of tax avoidance, having paid a 12% effective tax rate between 2010-2018, in contrast with 35% corporate tax rate in the US during the same period. Amazon countered that it had an 24% effective tax rate during the same period.

Africa’s budding e-commerce lustre may represent an allure too difficult for Amazon to ignore. Nevertheless, it would discover that this ecosystem will tax its wits, determination, and sheer ability to adapt to their very limits.

But in Konga, Amazon can learn from a proven success story.

Tarila Ben-White (Ph.D.), an e-commerce researcher, writes from Bayelsa

Continue Reading
Advertisement Advertisement
Click to comment

Leave a Reply

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

Cover Story

Visa Unveils Africa Fintech Accelerator Program to Kickstart $1bn Investment

Published

on

, SiliconNigeria

Visa has announced the launch of the new Visa Africa Fintech Accelerator program to help enable Africa’s expanding start-up community through expertise, connections, technology, and investment funding. 

The launch of the Africa Fintech Accelerator program follows Visa’s recent pledge to invest $1 billion in Africa’s digital transformation and its long-term commitment to advancing Africa’s economies and driving inclusive growth.

The initiative was introduced by Visa Executive Chairman Alfred F. Kelly Jr. at Bloomberg New Economy Gateway Africa in Marrakech, Morocco.

The Visa Africa Fintech Accelerator will enable up to 40 start-ups each year to accelerate and grow through a three-month intensive learning program focused on business growth and mentoring.

Following the program completion, Visa intends to further support fintech growth with capital investment in select participating businesses, while accelerating their commercial launch through access to Visa technology and capabilities.

Fintech startups throughout Africa can apply to be part of the program through two application phases each year, starting from July 2023. With more than 1,000 Africa Fintech start-ups taking part in the Visa Everywhere Initiative* (VEI) competition in 2022, finalists from Africa country editions this year will be invited to join the accelerator program.

“Africa has one of the most exciting and admired fintech ecosystems in the world, bringing outstanding entrepreneurial talent to a young digital-first population that is growing fast,” said Alfred F Kelly Jr., Executive Chairman, Visa, Inc. “Visa has been increasing our investments in Africa for decades and strengthening partnerships throughout the continent to support the next wave of innovation and growth.  Our new Fintech Accelerator will bring expertise, connections, and investment to Africa’s best fintech start-ups so they can grow at scale.”

The support for participating fintechs will help further strengthen the payment ecosystem by fast-tracking new innovations and technologies that provide solutions to challenges that are unique to the African continent, and which can further advance Africa’s digitization. In line with Visa’s corporate purpose to uplift everyone, everywhere by being the best way to pay and be paid, this support of Africa’s fintechs will facilitate additional opportunities to expand financial inclusion.

“Africa’s fintech community is at the forefront of payments innovation and connecting more of the unbanked with access to the digital economy,” said Otto Williams, Head of Partnerships, Products and Solutions, Central Europe, Middle East and Africa, Visa. “Visa has been working with this innovative community to create new programs and solutions to help fintechs scale, while giving access to Visa’s technology and partner ecosystem.  Through the new Visa Africa Fintech Accelerator, we are looking forward to working with more brilliant entrepreneurs and companies to shape the future of money.”

In addition to its $1 billion pledge to Africa, Visa has recently introduced several business initiatives and programs to further advance the payments ecosystem in Africa.  These include:

  • Establishing local operations in the Democratic Republic of Congo, Ethiopia and Sudan to help support and strengthen the local financial ecosystem. Visa has 10 offices across Africa from which it supports payments in all 54 countries.
  • Unveiling the first dedicated Visa Sub-Saharan Africa Innovation Studio, in Nairobi, Kenya, to provide a state-of-the-art environment to bring together clients and partners to co-create future-ready payment and commerce solutions.
  • Introducing and expanding new technologies that help African consumers and merchants make and receive digital payments, such as Tap to Phone to turn a simple mobile phone into point-of-sale terminal, as well as lowering remittance costs through innovative solutions like Visa Direct.
  • Establishing Visa as the fintech partner of choice, working with innovators and entrepreneurs, including through the Visa Everywhere Initiative program, with dedicated country programs in South Africa, Kenya and Egypt.
  • Launching new programs to support women’s empowerment together with financial partners, including She’s Next, which is bringing funding, mentoring and networking opportunities to female entrepreneurs leading growing SMBs in Egypt, Kenya, Morocco, and South Africa.
  • Collaborating, with partners, to advance financial literacy in several languages, including localized versions of Practical Money Skills in Egypt and Morocco for the first time.

Continue Reading

Cover Story

Nigeria’s Telecom Access Gaps Drop by 53%

Published

on

, SiliconNigeria

The number of identified areas of clusters across Nigeria without access to the telecommunications services has been reduced by 53.1 per cent as at the end of 2022.

The Executive Vice Chairman and Chief Executive Officer of the Commission, Prof. Umar Garba Danbatta, disclosed this at a recent telecoms industry stakeholders forum in Yenagoa, Bayelsa state.

Danbatta, who was represented at the forum by the Head, Pre-Licensing at the Commission, Usman Mamman, said from 207 clusters of access gaps in 2013, the industry has witnessed a reduction to 97 as of end 2022 by bridging 110 clusters of access gaps, representing a 53.1 per cent reduction.

He said by implication, the number of Nigerians who fell within the access gap which were estimated at 37 million in 2013 has been reduced to 27 million, following increased access to telecoms services by those hitherto not digitally included.

Access gaps refer to the cluster of communities or grouped areas in different parts of the country that are bereft of access to telecom services and till date, the NCC has reduced clusters of access gap by more than half.

Danbatta said, “We have worked tirelessly to ensure we bring telecom services to people living in rural, unserved, and underserved areas of this country, totalling 37 million people courtesy of the consultancy that was conducted in 2013.

“By 2019, we had succeeded in reducing the clusters of access gaps to 114 through the deployment of the necessary infrastructure needed to bring services to people living in rural, unserved and underserved areas of the country. The deployment of infrastructure is in terms of base transceiver stations, which resulted in the reduction of Nigerians in those clusters from 37 million to 31 million in 2019.

“By 2022, we have reduced the clusters of access gaps to 97 from 207 in 2013. The number of Nigerians again have come down from 37 million in 2013 to 27 million as we speak. We achieved this by deploying, from 2009 to 2011, a total of 79 new base transceiver stations,” he said

Danbatta stated that in 2013 to 2018, the telecom sector also witnessed the deployment of additional 124 base transceiver stations while from 2019 to 2022, a total of 364 base transceiver stations were deployed.

“So far, the total number of base transceiver stations we have deployed to date between the time the access gaps were identified till the end of 2022 are 567,” he said.

While describing the reduction in access gap so far as a landmark, Danbatta, however, said the Commission will not rest on its oars as it thrives to ensure that the remaining 27 million Nigerians, who currently lack access to telecoms services, are provided with services.

Meanwhile, the EVC said part the regulatory interventions of the Commission to bridge the remaining 97 access across the country to provide ubiquitous connectivity in all the nooks and crannies of Nigeria are the issuance of the Mobile Virtual Network Operator (MVNO) Licences and the deployment of Fifth Generation (5G) networks, among others.

Continue Reading

Cover Story

NCC Grants Routelink MVNO License

Published

on

, SiliconNigeria

The Nigerian Communications Commission has granted Routelink a Mobile Virtual Network Operating License.

The Mobile Virtual Operators’ License MVNO license is a new mobile license category in Nigeria aimed at bridging the gap between the Unserved and the Underserved in the society. The MVNO license is the third license to Routelink from NCC.

 THe group managing director of Routelink Group, Mr. Femi Adeoti said that the NCC granted this license to Routelink based on the perception of what it is  set to do in the market.

MVNOs are carriers that don’t have their own wireless network but instead, they piggyback off another carrier’s platform for coverage through their cell phone plans.

It is a new license category in Nigeria and the ultimate beneficiaries are the subscribers as it would translate into lower costs, more service options, and better quality of service.

“Routelink is excited about the opportunities that abound in the Nigerian telecom marketplace and is determined to make a major difference as regards quality of service and innovation,’’ Femi Adeoti said.

In its drive to create an enabling environment, the NCC has introduced the Mobile Virtual Network Operators (MVNOs) License that will generate employment and bridge the gap between the unserved and the Underserved in Society. It will also further engender competition and provide choices for telecommunication consumers.

 The.managing director of Routelink Telecom, Mr. Ikechukwu Nguzo said that the introduction of MVNOs in Nigeria has the potential to stimulate growth in the Nigerian telecom industry and benefit consumers in a number of ways, including coverage expansion, more innovative services, improved service offerings, and partnership opportunities.

Hide original message

MVNOs have continued to gain traction across the world, with the increase in mobile phone users globally. The increased usage of smartphones and mobile data services, as well as the growing preference for flexible and customized mobile services, are primarily responsible for the growth.

However, the success of MVNOs in Nigeria would depend on various factors such as regulatory policies, infrastructure availability, and market demand.

Routelink Telecom provides advanced switching infrastructure and highly reliable Clearing House and Voice Gateway services to major Mobile Network Operators in Nigeria and International partners.

Continue Reading

Popular News