Africa Shows Huge Potential for eCommerce Growth

Africa gas reached a tipping point in its adoption of e-commerce, creating more opportunities than ever for online businesses according to a new report.

The research, from PayU, the fintech and e-payments arm of Prosus, highlights unprecedented consumer spending growth in 19 e-commerce in high-growth markets. These include markets that, before 2020,  were often been overlooked in favor of more traditional, Western ones.

Among the three African countries included in the report, South Africa has the highest internet penetration at 56%, with Nigeria and Kenya at 46% and 31% respectively. However, e-commerce penetration is at 37% in both Nigeria and South Africa, and at 25% in Kenya. This, the report says, highlights significant potential for growth in e-commerce in these markets.

The report called The Next Frontier: the most promising markets for emerging e-commerce leaders in 2021 and beyond reveals that Nigeria is by far the largest e-commerce market on the African continent in terms of the number of shoppers and revenue.  

Breaking the trend down further in terms of sectors, The Next Frontier found that year-on-year online spend in the beauty and cosmetics sector in South Africa grew by 140% between 2019 and 2020. In Q3 2020, spending increased by 229% compared to the same period in 2019 and is expected to grow by 69% to $169m by the end of 2021.

In Nigeria, online spending in this sector is expected to grow to $255m by the end of 2021 and to $29m in Kenya in the same time frame.

South African consumer spend on fashion and gallantry through PayU’s platform rose by 180% between 2019 and 2020, with the average transaction value increasing by $11. In Nigeria, spend in this sector is expected to grow to $2.27bn by the end of 2021, while in Kenya it’s expected to reach $504m — a projected 160% increase from 2019 figures.

Online spending on digital goods in South Africa is also projected to grow by 46% between 2019 and the end of 2021, reaching $336m in total spend. The report said that the strong growth was due to people consuming more digital media while spending time at home.

In Nigeria, this sector is expected to grow to $811m by the end of 2021, and to $70m in Kenya — a 94% increase on both markets comparing to 2019 results. Online spend on education boomed across South Africa in 2020 as people sought to upskill themselves during a prolonged time at home.

Speaking about the growth of e-commerce in South Africa and across the continent Karen Nadasen, CEO of PayU South Africa said: “2020 was a year that lit a fire beneath online payments in South Africa, transforming e-commerce while creating immense economic pressure.”

She continued: “There is growing attention on our continent, increased investment from large international brands and payment platforms. Retailers adapted quickly over the last year, and despite early bans on non-essential purchases, we saw significant growth in e-commerce, with more and more transactions being completed on mobile devices.”

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