East Africa’s E-commerce set for double digit growth

Posted on July 4, 2013 12:03 am

The e-commerce market in East Africa is estimated to be worth hundreds of millions of dollars and a new report indicates it set for double digit growth in the next few years. Increasing broadband access and growth of small and medium enterprises online is expected to help drive the growth. Online business and electronic commerce in the five member states of East African community might reach 10 million transactions worth a total of $200 million by end of 2015. The figures are only for goods transactions across the five countries borders, National and Game parks tickets, airplane tickets, bus tickets, train tickets (Kenya only) and hotel reservations. In line with the growth of e-commerce, distribution service businesses would also grow with Kenya and Tanzania expected to lead the pack. According to the research data in my possession, only an average of 11% of SMEs in the whole region are using e-commerce and therefore, the growth potential is huge.

An American investor in the region I spoke to is looking at a growth of 20% to 35% in the next three years. A 2012 survey highlighted a high potential for the uptake of e-commerce among East African SMEs. The region’s mobile money payments are expected to grow significantly and companies operating in the region stand to benefit from providing services that facilitate e-commerce. I recall very well back in the late 90s and early 2000s when electronic retailing impacted positively on mail delivery services in Australia and this could be the same in the East African region in few years to come. I also think that the uptake of e-commerce could help reverse the decline in recent years caused by the Internet eating into Postal services in Uganda, Tanzania, Rwanda, Burundi and Kenya.

The same research indicates that while postal services across the region have witnessed a massive slide in its regular mail volume, there is a growing demand for door-to-door parcel delivery services and that’s why FedEx and DHL are doing booming business in the region. The region market will likely continue to grow if the Internet infrastructure continues to be strengthened and more East Africans start to shop from home. According to sources at the East African Community secretariat in Arusha, if broadband penetration in the region improves, it will encourage online transactions further and with that comes online shopping. For postal services to survive in the region, they must look at getting on the online shopping business by marketing themselves as retail service providers and combine that with the existing infrastructure and sales portal. Such a move could encourage the consumers in the region to buy online through well-managed and established outlets with a proven track record like postal services.

Contador Harrison