Marketplace activity in Africa and South America – what new data shows

The Amsterdam University of Applied Sciences has partnered with the International Trade Center on a key project that represents an expansion of the Africa Online Marketplaces Explorer. A sneak peek of the preliminary results and a comparison with the African online marketplaces landscape was presented by Professor Jesse Weltevreden during the 2022 UNCTAD eCommerce Week event on 28 April, titled ‘Marketplace activity in Africa and South America: what new data shows’. 

An engaging discussion followed Professor Weltevreden’s presentation with key stakeholders in the regions, including Laura Naliaka of the United Nations Economic Commission for Africa (UNECA), Diego Chacon of Novica, and Nanno Mulder of the Economic Commission for Latin America and the Caribbean (ECLAC). 

Africa Marketplaces Explorer is an informative tool for virtually all stakeholders in the digital ecosystem, including (but not limited to) merchants, logistics providers, policymakers, NGOs, and academia. While the session was predominantly a discussion of the tool’s updated results, moderator James Howe of the International Trade Center succinctly put into context the current situation and upcoming future of marketplaces globally. The value of understanding the marketplace landscape in both Africa and Latin America, both with developing digital economies, became more obvious when he explained: ‘Marketplaces will become more and more dominant. We know in global terms that about 22% currently of all retail sales are made through [online] marketplaces. […] NASDAQ has predicted that by 2040, 95% of all purchases will be made through ecommerce platforms in one form or another.’ 

Following the session, Sara Lone, Lead Research Analyst at the Amsterdam University of Applied Sciences, had the opportunity to discuss the results of the tool and the new data presented with esteemed panellist Laura Naliaka, UNECA. 

Sara Lone (SL): You mentioned in the discussion that only 30% of Africans engaged in online shopping in 2020, much lower than in Europe and North America. What are the main factors or challenges contributing to this lower adoption of online shopping amongst African consumers? 

Laura Naliaka (LN): The uptake of ecommerce in Africa is constrained by factors such as limited internet penetration coupled with high data costs, limited access to financial systems (both bank or mobile money accounts), and logistical challenges. This is reflected by the region’s dismal performance in the UNCTAD B2C E-Commerce Index. There are however some countries that have made progress with regards to addressing some of these challenges, and this has positively impacted the uptake of ecommerce. For instance, South Africa is one of the leading ecommerce markets in Africa – and one of the reasons for this is its high internet connectivity, as approximately seven in ten inhabitants in the country use internet. 

SL: What’s your dream or ideal figure for the share of Africans shopping and selling online? 

LN: Ideally, as many Africans as possible should be able to both sell and buy products online. Indeed, ecommerce was instrumental in helping many businesses to stay afloat and consumers to access various products during the peak periods of the pandemic, when most countries had implemented lockdown measures. 

It is important to point out that informal cross-border trade is prevalent in Africa, with recent estimates from a study by UNECA suggesting that it accounts for between 30 and 72% of formal trade between neighbouring countries. The activities of these traders slowed down to almost a halt during the pandemic, as they were unable to leverage on ecommerce due to reasons such as digital illiteracy, in addition to the other common factors such as access to accounts, internet connectivity, and so on. In essence, this shows that we can’t ignore certain segments of our populace when it comes to ecommerce – hence there is need to work towards ensuring that almost all Africans can be able to participate in online shopping and selling activities. Investment in the necessary infrastructure will be instrumental in boosting the growth of ecommerce in Africa. 

SL: Drawing your attention to this image above from Professor Weltevreden’s presentation at the session – did this comparison of marketplace web traffic in LATAM and Africa resonate with you? 

LN: I anticipated that marketplace web traffic would be higher in LATAM compared to Africa, but the magnitude is what was really astonishing. At the same time, the figures demonstrated the potential and possibility of the growth and development of Africa’s ecommerce, as both Africa and LATAM are classified as developing regions. 

SL: After seeing this and the other insightful data from the preliminary results, how has your mindset changed (or for that matter remained steadfast) regarding Africa’s digital economy? 

LN: I am optimistic about the growth of Africa’s digital economy, especially since attention is shifting to the region as ecommerce markets in other parts of the world mature and also get saturated. In fact, a report by WTO shows that although the level of ecommerce in Africa is low, its growth is higher compared to other regions. More specifically, between 2014 and 2017, online payments or purchases in Africa grew by 240.4%, compared to 97.6% in Asia, 42.2% in Europe, and 69.2% in America. I presume that the current figures are actually much higher. 

SL: There are quite a few folks that don’t know about the AfCFTA and whether it will have an impact on domestic and/or global trade. Could you expand on what the AfCFTA is, where the negotiations are at, and what the discussion is around Africa’s digital economy and the future of the AfCFTA in relation to Africa’s opportunities in the global digital economy? 

LN: The Agreement establishing the African Continental Free Trade Area (AfCFTA) was signed in 2018 by 44 African Union Member States in Kigali, Rwanda. To date, 54 AU Member States have signed the Agreement. The main objectives of the AfCFTA are to create a single, liberalised, market for goods and services across the African continent, facilitate the movement of people and capital, establish the foundation for a continental customs union, and deepen economic integration across the continent. 

Negotiations for various protocols under the AfCFTA are currently underway. Phase I of the negotiations cover Trade in Goods and Trade in Services, whereas the issues to be covered under Phase II negotiations include investments, competition, and intellectual property rights. Moreover, in February 2020, the African Union Heads of State and Government Assembly decided that ecommerce (now referred to as digital trade) would be included in the AfCFTA – and negotiations on this protocol are to start in the course of 2022. 

The AfCFTA Digital Trade Protocol is expected to cover a breadth of issues ranging from data governance, cross-border data flows and data localisation, electronic trade facilitation (this encompasses electronic authentication) to ecommerce taxation. More importantly, the Digital Trade Protocol presents a unique opportunity for African countries to collectively establish common positions on digital trade and harmonise digital economy policy and regulatory gaps. This is particularly important as there are differences in the development and status of data governance frameworks across African countries. 

The Digital Trade Protocol, together with other Protocols being negotiated under the AfCFTA, will be instrumental in addressing issues that constrain the uptake and growth of ecommerce in Africa. It is also a chance to address emerging ecommerce issues, including those under the fourth industrial revolution. This is likely to increase attractiveness of the continent, and the various African countries will also be able to harness the various opportunities available in the digital economy landscape. 

I should mention that negotiations on this protocol are really timely and pertinent as African countries at the World Trade Organization (WTO) have taken different positions on digital-trade issues – on one hand, the African Group is opposed to the introduction of new multilateral rules on ecommerce rules, but on the other hand, six African countries are part of the Joint Statement Initiative ecommerce negotiations. 

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If you would like to hear more from Laura Naliaka, as well as the other esteemed panellists, you can access the UNCTAD eCommerce Week video HERE. 

To access the updated Africa Marketplaces Explorer tool, please visit this page. 

If you would like to be informed when the LATAM Marketplaces Explorer tool is launched, please leave your contact details HERE. 

About Sara Lone 

Sara Lone is a Lead Research Analyst for the CMI focusing on ecommerce, digitalisation, sustainability, and diversity. Within the Digital Commerce Research Group, Sara works with international stakeholders to measure and analyse ecommerce in both developed and developing digital markets, generating insights for SMEs, trade and development organisations, and policymakers. 

About Jesse Weltevreden 

Dr Jesse Weltevreden is professor of Digital Commerce at the Amsterdam University of Applied Sciences (AUAS). Jesse is director of the Centre for Market Insights of the School of Marketing at AUAS. He is also chairman of the Retail Innovation Platform, a network of universities in Belgium and the Netherlands that conduct research on retail innovation. His research interests include cross-border ecommerce, online platforms, data-driven marketing, emerging retail technologies, and the mobility effects of online shopping. 

About Nahid Harboul 

Nahid is a junior researcher in ecommerce at the Amsterdam University of Applied Sciences. 

About The Centre for Market Insights 

The Centre for Market Insights is the innovative research centre of the School of Marketing at the Amsterdam University of Applied Sciences. Our experts carry out challenging research projects for top companies and trade associations in the field of digital commerce and marketing analytics.