Successful digital entrepreneurs in Africa build those contrasts into their business model and create innovative solutions that are tailored to the market. Instead of decrying the lack of infrastructure, they use technology to solve problems that are typically reserved for more traditional forms of infrastructure. For example, in the absence of postcodes to correctly identify delivery addresses, companies may use one-time passwords that are unique per individual customer shipment for delivery authentication and confirmation.
How has Covid-19 changed the outlook for e-commerce in Africa?
This is perhaps the most common question I hear. Like everywhere else in the world, the pandemic transformed e-commerce in Africa from a convenience to an essential utility for both consumers and merchants. In Africa, though, the need was perhaps direr. With open markets closed for a period of time during lockdowns, e-commerce provided a safe alternative for consumers and merchants alike. Shopping online is now an established habit, and it will remain so for the foreseeable future.
How can companies better leverage the opportunity that digitalization provides?
Part of the answer lies in how policymakers will respond to the opportunity. E-commerce, for example, is playing several roles in Africa, but two of them are especially important: 1) reducing barriers of entry to retail and enabling millions of Africans to be economically active and 2) driving aggregation of a super fragmented market. That combination is extremely important.
Economic activity that remains fragmented does not readily attract targeted institutional investment capital. This is the challenge that social commerce, which exploded during the pandemic, presents for Africa and its businesses. It is digital but still remains largely fragmented. Reported investment capital flowing into the African digital space has grown sizably to circa $5 billion in 2021 and is tellingly concentrated in segments such as e-commerce and fintech, where platforms are leveraging aggregation to drive value creation.
Given there is still a significant headroom for investment across all segments (including others such as health, agriculture, energy and more), recognizing this distinction between fragmented digitalization and aggregated digitalization seems to be very crucial to how African countries can attract more investment to harness the power of digital business models.
What are the lessons for African businesses?
It’s important to remember that, in order to thrive, companies need to build Africa’s sometimes unnerving contrasts into their business models and develop unique solutions customized for the market. And as digital adoption grows on the continent, investment capital will follow where innovative solutions and digital aggregation are driving tangible value.