The Case for Ecommerce in Africa | EMQQ
may represent the next exciting growth opportunity for investors in general,
and for industries such as ecommerce. Africa has a large, young
population with rising disposable income and is experiencing rapid
urbanisation. It may be in the early stages of adopting new technologies
such as smartphones and transitioning from an informal network of roadside
markets to a more formal model of traditional retail outlets and ecommerce.
recent study by Brookings highlights the potential that the African continent
may present for ecommerce .
A Large, Young Population
the African continent has a population of around 1.2 billion. However,
Brookings estimates that by 2030, the population will grow to over 1.7 billion,
surpassing China and India. In addition, while the global population is
aging, the report highlights that Africa’s workforce is young, noting that
two-thirds of the population is under the age of 25.
Brookings highlights that the proportion of the African population
living in cities is projected to increase from its current 40% to more than 60%
over the next decade with some markets, such as Nigeria, Ghana, and Angola,
likely to top 80%. An additional 187 million may reside in cities over
the next decade, and by 2050, over 800 million Africans may live in
cities. The report went on to note that areas that experience high levels
of urbanization tend to experience higher levels of consumer spending than area
that are not urbanized.
Growth in Consumer Spending
consumption grew at an annual compound growth rate (CAGR) of 3.9% between 2010
and 2015. However, official levels of consumer spending in Africa may be
under-reported since much spending takes place in informal markets, overlooked
by traditional methods.
formal consumer markets are the least developed in the world, highlighting
potential for future growth. Currently, Africa’s total consumer expenditures
account for roughly 8% of all spending in the world’s emerging markets, putting
it on par with Russia and Brazil, notes Brookings.
Brookings also notes that consumer spending is the fastest source
of demand in Africa and expects this trend to continue through 2030. As
such, they estimate that consumer spending will surpass $2 trillion in the next
few years – a 30% increase from 2015 levels.
Boosted by Growth in the Middle Class
noted that one in five world consumers will live in Africa by the end of the
next decade, and more of these may fall into the middle or affluent
class. More than half of African households are expected to have
discretionary income by 2020. In 2013, around 34% of the African
population could be considered middle or upper class. That is expected to
reach nearly 43% by 2030.
Growth in Technology May Support Future Growth in Ecommerce
notes that Africa has experienced rapid growth in information and communication
technology. Africa has experienced a 30% increase in mobile phone
connections since 2000, making it the fastest growing mobile telecom market in
the world, according to Brookings. The report also noted it was the
second largest mobile market in the world behind Asia. Nearly two-thirds
of the African population have internet access, 75% are online daily, and the
internet penetration rate has surpassed 80% in many countries.
growth in technology may enable a change in consumption patterns in
Africa. It has given some in Africa access to online banking and
financial services such as online payment platforms.
may also serve as a catalyst to further the development of ecommerce on the
Formidable Challenges and Opportunities Still Exist
there are still challenges to the growth of ecommerce in Africa. The poor
quality of infrastructure tends to impede the transportation of good and drive
up costs. Crime and corruption also present challenges. The African
continent is made up of many countries with different languages, culture, and
regulations for doing business. Localization may be necessary for
ecommerce companies to succeed.
with challenges lie opportunities. Those who can overcome these
challenges may be able to reap rich rewards from a large, increasingly affluent
Potential Access to Africa
Direct access to Africa is limited to a few companies. Naspers (NPSNY) is an internet and media company based in South Africa.
Jumia Technologies (JMIA), a leading African ecommerce company, went public
during April 2019. Rocket Internet (RKET) still holds a 17% interest in
Jumia. However, companies such as Tencent
(TCEHY) and Baidu (BIDU) have units that operate in Africa. Buying shares
of many of the world’s largest internet and ecommerce companies may provide
indirect access to the potential in Africa.
Find out more about the Emerging Markets Internet & Ecommerce UCITS ETF (EMQQ).
As of 23rd of July 2019, the Emerging Markets Internet & Ecommerce UCITS ETF (EMQQ) held 7.08% in Naspers, 0.55% in Jumia Technologies, 7.78% in Tencent and 5.67% in Baidu.
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