E-commerce booms in South Africa, Nigeria and Kenya – Visa

SSA – Report by global payments solution company Visa, shows that over the last three years, South Africa, Nigeria and Kenya have maintained their positions as the top three market contributors to e-commerce in the Sub-Saharan Africa region.

In 2020, West African nation Ghana also broke ground, tied in third place with Kenya.

The report dubbed “E-commerce developments across Sub-Saharan Africa” white paper, highlights Sub-Saharan Africa’s steady growth potential, despite it being one of the smallest regions for e-commerce globally.

Visa’s research reveals that during the COVID-19-induced lockdown, Sub-Saharan Africa saw new e-commerce users rise by 5% when compared to the active user-base the previous year.

“The three leading markets in Sub-Saharan Africa 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 in Sub-Saharan Africa.

In the wake of the pandemic, e-commerce experienced explosive growth the world over.

Visa’s white paper notes that as the world becomes increasingly digital, e-commerce has been driving the acceleration of digital commerce and projections show that e-commerce sales will grow to US$7 trillion across the globe by 2024.

South Africa has also mirrored the growth trends witnessed globally.

According to the Online Retail in South Africa 2021 study, South Africa’s e-commerce sales reached a tipping point in 2020, growing by 66% from 2018, bringing total online retail revenue to US$2.2 billion.

The study, conducted by World Wide Worx, Internet, mobile and hi-tech market research company reveals that online retail sales in South Africa more than doubled from 2018, as a result of the explosion in consumer demand for online shopping and home deliveries, brought about by the pandemic in 2020.

Visa notes that South Africa, Nigeria and Kenya are driving card payments, card not present transactions and e-commerce volumes in Sub-Saharan Africa.

South Africa sits in first place of total volumes in 2019 and 2020, while Nigeria sits in second place, followed by Kenya and Ghana ranked in joint third, reveals the white paper.

“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”

Visa

The research paper found that in the region, 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, and 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.

For South Africa, professional services and telecom/utilities merchants were the top drivers of e-commerce in 2020.

The white paper notes the most important e-commerce enablers, the ability to access financial services, digital payment channels and digital infrastructure are starting to take hold across the region.

“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.”

On the push towards digital payments, the white paper says the use of cards has increased across the continent, with the highest uptick in Kenya.

There has been a strong preference for contactless payments, which is regarded as enabling safe payments on delivery, as well as in the use of e-wallet services, as cash is seen as a vector for the COVID-19.

In March 2021, online payment gateway PayFast revealed digital payments were increasingly becoming the standard for retail in the current climate.

PayFast said it saw a 412% increase in transactions made with Masterpass between March 2020 and February 2021.

Aldo Laubscher, country manager at Visa South Africa, says 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 Sub-Sahara Africa are making use of a wide range of digital payment instruments, so it is becoming increasingly important that e-commerce offers multi- and even omni-channel experiences.”

Visa’s study points out that as domestic e-commerce provision in Sub-Saharan Africa continues to grow, there is an exciting opportunity for the region to develop its own regional e-commerce platforms and sustain growth, while increasing the continent’s connection to the rest of the world.

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