OCL report on e-commerce development in East Africa
OCL Business Associates, the premier corporate services provider in East Africa, is delighted to provide the report on e-commerce development in East Africa.
Commerce is constantly evolving and technology continues to transform the way consumers, businesses, citizens and governments connect, shop, pay and transact. The e-commerce ball is well and truly rolling in Africa.
Kenya’s adoption of E-Commerce continues to grow. According to Statista, user penetration is above the regional average, with revenues expected to have a positive annual average growth of 16.4% by 2025. With revenue of US$1.1 billion and a share of 76.1%, eCommerce generated the highest digital revenues in 2020.
There are several factors that fuel e-commerce growth in Kenya. Kenya recently adopted a digital economy blueprint meant to further develop the ICT sector and e-commerce activity.
East Africa presents one of the most interesting ecommerce opportunities in the world. In so many ways, the region is a global hub of innovation and is therefore able to buck the trend on many of the conventional barriers to e-commerce in developing economies.
For the industry to mature, businesses in East Africa need to acknowledge the potential of ecommerce and the increased sales it brings. By setting up to accept online payments through developed websites, the East African consumers will naturally adopt this convenient, safe and cost-effective means of shopping.
Given an ever increasing level of internet penetration, a significant millennial customer base, growth of disposable income, and tech literacy, demands and expectations in the region are evolving.
East Africa is a truly mobile-first region so adoption of e-commerce is essential for those looking to succeed.
Although full of opportunity and benefits, ecommerce is also full of potential barriers and pitfalls. It is not something that can be rushed into without thought.
Merchants have to overcome the challenges of customer experience, online trust, delivery and fulfillment.
However, history has shown that East Africa is incredibly innovative in the face of adversity and this has often forged unconventional paths.
The rapid development of one of the most powerful sales and marketing channels, to a region that readily adopts innovation, is dramatically increasing competition. The e-commerce opportunity will change commerce in East Africa for every kind of business.
The Kenya Communications (Amendment) Act of 2008 is Kenya’s adoption of the United Nation’s Model Law on Electronic Commerce of 1996. The highlights of the law include promotion of e-government and e-commerce by increasing public confidence in electronic transactions; legal recognition of electronic records and electronic (digital) signatures; imposition of new offenses with respect to cybercrimes involving electronic records and transactions and the use of computing and telecommunications equipment; and clarification of legal uncertainties about the admissibility of electronic records as evidence in court proceedings.
Online trade platforms in Kenya have traditionally not been regulated under the Kenya Information and Communications Act (KICA) as they do not constitute electronic services as envisaged under the act and are therefore not licensable. This means consumers cannot enjoy protection under the Consumer Protection Regulations (2010) which apply in instances where the Authority’s licensees offer services.
The finance act 2020 introduced the digital service tax for all the e-commerce and online business in Kenya.
E-commerce is rapidly growing in Uganda, and it is expected to shortly become the second largest online market in the East Africa region, after Kenya. This is mainly due to the rapid growth in telecommunications users and the widespread use of mobile money payments: in fact, Ugandan commercial banks implemented the Mobile Money service, which allows mobile phone users to electronically transfer funds to retailers or individuals. Moreover, many banks are now offering VISA debit cards which allow for online payments, and some are even offering credit cards.
Uganda’s e-commerce market offers a wide range of goods and services, including the possibility to pay taxes online. However, due to the absence of specific e-commerce regulations, informal and even illicit transactions continue to be carried out online.
E-Commerce is not widely adopted in Tanzania. The online buying behavior of most Tanzanians is through social media pages where business outlets post their products and services, and the customer contacts the seller for delivery. The payment may be done on delivery or through mobile money.
With the growing internet penetration in the country and changes in market forces, we expect eCommerce to pick up soon. Currently there are no specific regulations governing eCommerce in Tanzania. There are also a few eCommerce developers in the country engaged in payment gateway and digital marketing solutions. E-commerce has increased to $26.7 trillion business and contributed 30 percent of GDP globally.
E-Commerce is relatively new in Rwanda, but the sector is growing quickly as local tech start-ups and international payers have entered Rwanda’s market in the past few years. At present, the use of eCommerce for “Business to Client” remains limited for the most part to the airline, hospitality, banking, food delivery, and courier services sectors.
E-commerce is limited due to low Internet penetration rates, poor telecommunications infrastructure, and the high cost of Internet services. In addition, there is limited postal and delivery infrastructure.
Very limited internet penetration means that online eCommerce is only an option in the DRC’s major cities. A few businesses have websites, and many independent businesses have a Facebook page. Some businesses use the WhatsApp application to take orders. The DRC is a cash economy, and it is very rare to be able to buy a product online and have it delivered. Telecommunications companies are aggressively promoting mobile money payments to facilitate commerce, and although its use in the DRC lags more active markets like Kenya, more and more merchants are accepting mobile payments. The largest active companies are Vodacom, Airtel, Orange, and Africell.
The DRC Post is modernizing and in May 2021 announced an ambitious computerization and digitization plan to make the Post the most powerful e-commerce platform in the sub region and a partner for giants like Amazon and others. The Ministry of Telecommunications regulates telecommunications companies, and the Ministry of Finance regulates payments.