E-commerce in Africa, a promising sector

Article published in CIO MAG, July/August 2015


“A good idea never comes alone”. This saying is proven correct once again in this year 2015, while several actors are separately studying the emergence of e-commerce in Africa. This article highlights the means most commonly used in Africa. According to the UNCTAD, even though much remains to be done, the relative progress must be put to the benefit of “improving connectivity and the large-scale diffusion of mobile phones and social networks, as well as the growth of applications and platforms”.

Indeed, this is the theme the UNCTAD chose for the 2015 edition of its annual report dedicated to the information economy1. The Deauville Partnership approved a project operated by the International Trade Centre and funded by the World Bank to develop the access of Moroccan, Tunisian and Jordanian SMBs to virtual marketplaces2.

Finally, the Mediterranean World Economic Foresight Institute (IPEMED)3 is carrying out a study on e-commerce in Morocco, Tunisia, Senegal and Ivory Coast, based on works that have been entrusted to me. Here is an overview of these works, even though they have not been validated yet.

E-commerce first appeared in 1994, with the on-line sale of “Ten Summoner’s Tales”, Sting’s fourth album, released in early 1993.

Twenty years later, e-commerce is spreading all over the world, with a volume estimated at USD 1,500 billion in 2014, according to eMarketer4. However, the Middle East and Africa still find themselves in a marginal position. According to the UNCTAD, Africa remains the region with the lowest e-commerce penetration, with about 2.2% of global B2C e-commerce in 2013.

Within this “e-commerce”, the share of “m-commerce”, that is to say performed from a mobile terminal, is estimated at USD 133 billion in 2013, or 10.6%, with a very high growth rate. In 2017, it is expected to reach USD 516 billion, with nearly half of it coming from Asia.

Over 93 million on-line shoppers

Regarding the four studied countries, Morocco, Tunisia, Senegal and Ivory Coast, there seems to be little homogeneous data covering e-commerce and its three pillars (digital sector, electronic payment and distribution). And yet, large companies have shared their data with eMarketer, which estimates that in Africa and the Middle East the number of on-line buyers was of 93.6 million in 2013 (7.1% of the population), twice less than the world’s average of 15.2%. Regarding the future, eMarketer estimates that this number will reach 170.6 million in 2018 with an 82% growth - highly superior to the world’s average of 50% - mostly due to population growth, significantly higher in Africa than elsewhere.

Without going into e-commerce and its various forms, we will examine the means of payment currently used by Africans when they purchase products or services on-line.

According to the African Development Bank, less than 25% of Africans have access to financial services. This analysis usually refers to the notion of bank-account penetration which is not, and rightly so, used by the UNCTAD6. Indeed, the development of information technologies reveals two types of financial inclusion that are banking inclusion for people having access to a bank account and digital inclusion for those using other means of payment such as mobile money offered by telecommunication operators or microcredit accounts.

A Paypal study on e-commerce in the Middle East7 shows that payment upon delivery remains dominant (60% in 2015) even if it has been decreasing since 2012 (80%), in favour of debit cards (25% in 2015 against 15% in 2012) and Paypal (15% in 2015 against 5% in 2012).

As regards m-banking, let’s quote IDATE’s words: “Financial services represent a major mobile service with the well-known success of M-Pesa (now used by over 17 million people in Kenya). Major operators, such as Bharti Airtel, Orange, Vodafone (in partnership with Safaricom), Etisalat and Maroc Telecom have now included this type of services to their range. Initially developed for transfers between accounts, mobile payment services were quickly extended to other financial services: invoice payment, payment in points of sale, cash withdrawal at ATMs. Operators have already reached critical volumes on this booming market: in June 2013, nine mobile operators had over a million users. However, competition is intensifying between operators but also with new MVNOs (Mobile Virtual Network Operator) specialised in this service. The competitive pressure forces operators to reduce their prices and extend their ranges of services: partnerships with banks and insurance companies in order to offer services of bank accounts, credit, savings and insurance; interoperable services between branches of neighbouring countries. Besides, mobile payment is the first service with a significant value, accounting for 18% of Safaricom revenues in 2014, for example”.

Major disparities between countries

The global figures being stated, one must now observe the major disparities between countries and more specifically between those of North Africa, where the bank-account penetration is high, and those of Sub-Saharan Africa where mobile payment is booming.

In Morocco, the multichannel platform Fatourati9 enables any debt issuer or service or product provider to diversify its payment collection channels by extending them to the Internet, ATMs, mobiles phones with payment services, call centres and points of sales equipped with had hoc terminals. A new banking law (n°103-12) regarding credit institutions and similar establishments10 was passed recently. It explicitly targets payment services linked to e-commerce and especially “the execution of payment operations by any remote means of communication, provided that the operator only acts as an intermediary between the payer and the provider of goods and services”. Therefore, the Central Bank has already authorised three electronic payment platforms and five payment service provider (PSP) platforms. As regards mobile payments (mobile money), they have been authorised since 2013, and yet they do not develop much: according to the regulator11, only 2% of Moroccans say they have used the m-payment service in 2012.

In Tunisia, two main payment platforms are operational. The platform “clicktopay”12 of the Société Monétique Tunisie currently gathers 700 retail sites and a total of 640,000 transactions coming from 96,000 buyers, of which 2/3 used local cards and 1/3 foreign ones. The e-Dinar13 platform of the Tunisian Post claims 320 affiliated retailers and 5.3 million transactions. This figure includes cash withdrawals and student operations in university, where its use has been made compulsory. Mobile payments are not allowed yet. Nevertheless, an agreement between banks and telecommunication operators enables Tunisians to make transfers from or to their bank accounts via their mobile phones (mobile banking). This situation should evolve once the new statuses of the Central Bank enable it to regulate mobile payment operators that are currently excluded from its sphere of competence.

In Western Africa, there is already a certain regional integration in the financial field thanks to the West African Economic and Monetary Union (WAEMU), which has a common legislative framework and common organisations such as the Central Bank of the West African States (CBWAS), which unifies and boosts regional interbanking. Banks ensure the system management via two common private structures. The first one is the WAEMU Interbank Card Processing Grouping (GIM-UEMOA), created in 2003 to ensure the system governance. The second one is the WAEMU Interbank Card Processing Centre (CTMI-UEMOA), created in 2005 to ensure the management of common technical means and make the system operational in order to reduce costs and ensure product quality. Following a negotiation with international transmitters, the latter agreed on a global acceptance of WAEMU regional debit cards so that there is a virtuous ecosystem gathering the concerned actors. By 31st December 2013, the GIM-UEMOA had accredited one hundred and eight banking establishments to issue debit cards, with the following results:

See attached image below : “Table 1 : Share of credit cards transactions in WAEMU in 2013”

We have a few interesting data regarding the first mobile payments per country.

In Senegal, the bank-account penetration14 was of 16.40% in December 201415. Along with traditional banks, many microfinance institutions (or decentralised financial systems, DFS) meet the financial needs of 16.21% of unbanked populations16, which makes it an important access mode to financial services. In 2013, there were 18 banks for 383 microfinance institutions mostly located in Dakar and Thiès7. Taking advantage of the booming mobile telephony, mobile banking is progressively developing in the country thanks to innovative financial services offered by mobile telephony operators, commercial banks, DFSs, non-bank electronic money issuers, etc. The solutions offered by major operators such as Yobantel, Orange Money, Tigo cash, Mobile Cash, W@ri and Joni-Joni are deployed at a national and sometimes regional scale. As for the results, about 1,500,000 clients were registered with a mobile account in March 201418, which remains low compared with the country’s 14 million inhabitants.

See attached image below “Table 2: Use of electronic money on mobile phones in Ivory Coast”

In Ivory Coast, the bank-account penetration20 reached 16.49% in 2014 against 7.35% in 2009. Alternatives to banking solutions have been identified in Ivory Coast. This is the result of a study carried out in the framework of the “Partnership for Financial Inclusion”, which is a joint initiative of IFC and the MasterCard Foundation to develop microfinance and promote mobile financial systems in Sub-Saharan Africa. Once again, the bank-account penetration is not representative of financial inclusion given that Ivorians have 6.17 million mobile financial accounts (mobile banking), 2.81 million bank accounts and 1.30 million microcredit accounts. Ivory Coast is also active in terms of payment and access to bank accounts via mobile with services such as Mobile Money and e-Tranzact, W@ri, and actors like Ekobank and Paypal. The 2 million users of mobile financial services completed nearly 66 million transactions amounting to 1,300 billion CFA francs, nearly €2 billion. But if we take a closer look, it turns out that apart from the purchase of telephone minutes and invoice payment, mobile money is little used for payments.

As for other countries, we can find on one side specialised actors such as Visa, Mastercard and Paypal, on another side mobile phone operators and on yet another one banks, increasingly Pan-African multinational companies. In fact, it is mainly the agreements between these various actors that enable to offer reliable electronic payment services to African people.

As soon as it is published, the IPEMED study will provide more detailed information on the evolution of electronic payments for e-commerce in Africa.

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1. http://unctad.org/en/PublicationsLibrary/ier2015_en.pdf
2. www.worldbank.org/projects/P143929/virtual-market-place-mena-sme-export-development ?lang=en
3. www.ipemed.coop
4. Source = eMarketer, July 2014. Worldwide e-commerce to increase nearly 20% in 2014.
5. Keira McDermott, Payvision, Key Business Drivers and Opportunities in cross-borders e-commerce
6. The owning of a bank account should not be related to the total population but to the number of inhabitants in age of legally owning a bank account or to the number of families within the country.
7. Paypal insights e-commerce in the Middle East September 2013, 2012-2015. http://static.wamda.com/web/uploads/resources/24-09-2013_FINAL-low_res.pdf
8. www.idate.org/en/News/DigiWorld-Yearbook-Africa-and-the-Middle-East_900.html
9. Presse file : www.maroctelecommerce.com/docs/cp.pdf
10. Law officially published in Arabic on January, 22nd, 2015 and in French on March, 5th, 2015. https://ribh.files.wordpress.com/2015/03/loi_nc2b0_103-12_vf_ribh-cover.pdf
11. ANRT, 2013 annual report, p.57. www.anrt.ma/sites/default/files/Ra_Annuel_Anrt2013.pdf
12. www.clicktopay.com.tn
13. www.e-dinar.poste.tn/fr/index.htm
14. Calculations done taking into account over 15 years old population, exception being made of open accounts in decentralised financial systems, money issuers and postal financial services.
15. www.bceao.int/IMG/pdf/note_d_information_4e_trimestre_2014.pdf
16. http://drs-sfd.gouv.sn/sitedrs/documents/Publications/Situation_T4_2014.pdf
17. www.cespi.it/AFRICA-4FON/wp4%20BAYE.pdf
18. http://uncdf.org/sites/default/files/Documents/senegal_french.pdf
19. See some data on electronic money of mobile financial services in Ivory coast. www.agenceecofin.com/monetique/1411-24320-le-marche-de-mobile-money-de-cote-d-ivoire-connait-un-developpement-parmi-les-plus-rapides-dans-le-monde
20. Calculations done taking into account over 15 years old population, exception being made of open accounts in decentralised financial systems, money issuers and postal financial services.
21. www.bceao.int/IMG/pdf/note_d_information_4e_trimestre_2014.pdf
22. Susie Lonie, Meritxell Martinez and Rita Oulai, International Finance corporation (IFC) data on electronic money of mobile financial services in Ivory coast.
23. This does not allow to calculate the banck-account penetration rate as certain persons own more than one account.