Barriers to online Africa marketplace presents a challenge to growth of the online business. The online marketplace is becoming popular as a selling channel among consumers across Africa. The online marketplace offers a platform for seller to reach large number of consumers. Consumers have the opportunity to find all the sellers at one point and compare prices. Additionally, they can make one purchase and have it shipped from the same platform. However, online Africa marketplace faces several barriers that have hindered growth of the platform. Some of the barriers include:
- Unregulated sector and Distrust– Online Africa marketplace, such as ad-listing is completely unregulated. There have been increased cases of unscrupulous people using trusted platforms such as OLX to list products and corn consumers. There is no way most of the platforms can handle the process of listing and understanding among the buyers and sellers. Most of the buyers have complained of people that have disappeared with the money without delivering the products. Regulation by the authorities or the owners of the marketplace to ensure consumers are protected. Additionally, distrust occurs where the consumers are not willing to provide primary contacts for fear of phishing among others. The risk of data harvesting where emails are sold by the marketplace provider on listing ads and classified ads marketplace increases the distrust among the sellers and buyers.
- Trade barriers– trade between African countries face high Tariffs. Most of the online Africa marketplace vendors are the small and medium-sized businesses that are vulnerable to trade barriers as opposed to large organizations. The trade barriers are all the constraints that hinder the organization from initiating, developing, and sustaining its operations in the long run: product labeling, tariffs, and other foreign market regulations. Tariffs and taxes are among the most common barriers to online Africa marketplace. Consumers often pay high taxes for goods purchased online with hope of low prices, especially between African countries. Although East African, COMESA, ECOWAS, and other regional integration have been adopted to lower tariffs, the barrier is still high for the small business vendors listing on online marketplace with one or two products. Delays on customs for clearance is another barrier. It takes short time to import a product to African country but it takes long for it to be cleared at border.
- Internet access and use
Many Africans in the south of Sahara do not have access to internet or devices that are required to connect to the internet. Most developing countries access the internet for social media purposes and not for e-commerce or listing products on an online marketplace. There is limited data on the number of people accessing internet for purposes of e-commerce market. However, the recent trends of increased internet connectivity have provided more avenue for many African countries. The increased competition for internet service providers is lowering the cost of internet although it is still high.
In Sub-Saharan Africa, it is only Kenya, Nigeria, Cap Verde, South Africa, Mauritius and Seychelles that have up to 30% internet penetration. It is still low compared to 73% of EU average penetration of the internet.
Poor Internet Infrastructure in Africa
The online Africa marketplace can only be a success with ICT infrastructure development and better internet infrastructure for high-speed broadband and low priced connectivity. Broadband connectivity is critical for the success of any vendor seeking to list products on the online marketplace. There is need for quick responses and available online to interact with the consumers. The internet came to Kenya, Uganda, Nigeria, and Togo in early 1990s as the first sub-Saharan African countries. Submarine cables are connecting Africa to the rest of the world to countries with sea borders; hence, landlocked countries must connect through others.
It is estimated that only 0.4% of the African population has a fixed broadband connection. However, there is increased number of people connecting through mobile and 3G technologies. The 3G connectivity has increased the population that is linked to the internet to about 20%. Mobile and 3G technologies are more suitable for rural areas in Africa.
Another reason for low internet penetration in Africa is cost. It is regarded as the most expensive internet connection in the world. The cheapest internet in Africa is in South Africa, while others have increased costs of connection. Lack of competition and infrastructure is seen as the reason for high costs.
Lack of internet connectivity is a clear indicator of slow business growth in the online Africa marketplace. However, there are increased efforts by African countries to offer Infrastructure for the development of internet connectivity. The open trade and allowing competition in the mobile and 3G technologies have lowered the cost and increased the speed of internet hence online Africa marketplace has a brighter future.
Poor Electricity connections in Africa
The African Progress Panel affirmed that unreliable and expensive electricity is the major barrier to the manufacturing sector in Africa. Additionally, there is high cost of alternative energy such as solar power — lack of access to the electricity limits the connection to the online marketplace. The increased cost of electricity further compounds on the African online marketplace today. The proper infrastructure and instability of power generation have made difficult for small business to start and sustain their businesses in the online Africa marketplace.
Level of Literacy in Africa for e-commerce
– I have taken through several small business owner classes on computers. It is a major barrier since some have established business, but they cannot put them on the internet since they do not know how to operate a computer. Computer literacy and general literacy on how to read and write hinders the online Africa marketplace. Lack of knowledge and skills in English or French, which are the most commonly spoken foreign languages in Africa hinders growth of the online marketplace in Africa. Translation to other languages like Swahili in East Africa has increased access to internet by vendors, but there is a need for more non-English translation tools. Literacy limits the consumer market with target only being for those who can read and write in formal languages while native languages are not online yet.
online Payment platforms in Africa
payment systems are another common barrier to online Africa market. Recently, I wanted to join Amazon FBA program. Through the process I could not proceed since there was not payment option for me once I start selling with them. The only country they accept is South Africa where there is a third company that can process payment for them. Unlike the USA and Europe vendors who are paid to their accounts, African vendors have to be paid through third party hence increased cost. I have imported products online, and payment takes long process, and it is expensive. Payment with credit cards and local banks attracts high transaction fees hence discouraging many. International third-party payment providers like Paypal are being used, but many businesses have to go through long process to get limit removed on PayPal business account.
Business accounts enable business to transact effectively, but it is only available in 13 African countries. Paypal has offered solutions for linking bank accounts and international transactions online through secure checkout services. Hence it has its constraints for its use in Africa. The other barrier is transferring money from Paypal to local bank account. Currently, Kenyan mobile service provider Mpesa accepts PayPal to Mpesa direct transfer. However, names used on Mpesa accounts should be same as those used to open the PayPal account hence limiting the business account transactions to local banks or mobile money.
Generally, the financial service for the online marketplace or e-commerce is underdeveloped in most sub-Saharan countries. Gallup in 2011 places South Africa and Kenya on top of the list as the most developed financial service market. In Kenya, mobile money transactions such as Mpesa has reduced the barriers for small business online. However, the risks of secure transactions and protection of the buyer are a challenge. Some of the companies in Africa are setting up escrow like services to ensure payments are made once products delivered.
Cash on delivery CoD has been employed by the e-commerce such as Jumia and Kilimall in Kenya and in South Africa. It has increased level of trust among the consumers where they are able to confirm the product delivered before paying.