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Mobile-first Africa unlocks digital economy boom

Simnikiwe Mzekandaba
By Simnikiwe Mzekandaba, IT in government editor
Johannesburg, 07 Mar 2022

Mobile is driving Africa’s digital economy, with Nigeria, Egypt, Kenya and South Africa leading the continent’s mobile commerce boom.

This is one of the findings highlighted in the white paper titled: “Towards a flourishing digital economy for all – a spotlight on Africa”, produced by the UK’s Department for International Trade (DIT), in partnership with the GSM Association’s Mobile World Live team.

Launched on the sidelines of Mobile World Congress 2022, the research explores the progress made in building Africa’s mobile-driven digital economy.

It also considers specific obstacles in the African mobile commerce market, including unbanked customers, the lack of reliable identity credentials and last mile delivery issues.

Speaking during the launch of the research paper, Dr Mike Short, chief scientific adviser to the UK’s DIT, stated Africa is a mobile-first continent in every aspect of digital.

For the DIT, the definition of e-commerce stretches into mobile commerce, and most of the emphasis of the report is on mobile commerce, explained Short.

“Our report triggers a much-needed discussion on how to advance the mobile commerce revolution in Africa, which will in the long-term lead to mutually beneficial digital trade between the continent and its trading partners, including the UK.”

On a global scale, the world of e-commerce is forecast to reach $7.4 trillion in revenue by 2025, Short told the audience at the UK DIT-hosted mobile commerce thought-leadership breakfast.

“These are huge growth rates by anybody’s estimation, but the share that’s attributed to Africa is $180 billion, and there is a lot of room to grow given it’s such a burgeoning continent.”

UK minister for exports Mike Freer, who also attended the event, concurred that the digital economy across Africa is fundamentally mobile.

He noted that users are mobile first, adding that mobile commerce has already created successful domestic-owned businesses across the continent.

“The continent will seize the opportunities that lie ahead and strive for economic empowerment. Digital trade, particularly mobile commerce, will be at the heart of this growth. By 2050, half of the global trade is expected to be digital.

“In the UK, we are champions of digital trade. Our government supports the opportunities to trade online; we’re helping global investors to supercharge the digital economy.

“Across economies and societies, the UK is committed to standing side-by-side with Africa to support growth in the years ahead,” Freer stated.

According to the white paper, e-commerce is booming across Africa, with Nigeria, Egypt, Kenya and South Africa making notable progress.

“For example, Nigeria is home to a thriving content production sector (Nollywood, etc), which is driving a strong market for digital products.

“Kenya’s market has been shaped by the success of its mobile money platforms. Kenyans now use M-Pesa and others to make cashless payments at retail, pay utility bills, and buy insurance and savings products.

“South Africa is different again. It has a much higher percentage of banked consumers, which has reduced the need for mobile money platforms. Its MNOs [mobile network operators] are also playing a key role in the evolution of its digital economy.”

On the issue of challenges in advancing mobile commerce on the continent, the report notes digital infrastructure and the issue of identity among the most notable obstacles.

It states that a thriving digital economy requires a strong base of connectivity, customer identity and last mile delivery.

Short explained that 58% of Africa’s population is covered by 4G – it’s not yet a 5G world. In some rural areas, internet usage is as low as 26%. Furthermore, those with feature phones won’t get a suitable mobile commerce experience.

The report highlights that for most Africans, the mobile internet is the internet. “E-commerce marketplace Jumia, which has 7.3 million active customers across Africa, says 75% of its customers use smartphones to shop on its platform.

“On a positive note, Africa’s mobile-centric infrastructure means it is also unencumbered by many of the legacy technologies that slow progress in the rest of the world. It doesn’t have the ageing infrastructure of Europe or the US.

“Because it is mobile-first, it can build infrastructure from scratch to facilitate wireless smartphone-oriented service.”

According to the report, in the world of physical commerce, especially in a cash economy, identity is not really a barrier to making a purchase. When commerce goes digital, things change.

“In developed countries, digital ID generally centres on a combination of bank card, phone, address, e-mail and so on,” it states. “But in Africa, many of these elements are unavailable.

“It is estimated that 29% of adults in Sub-Saharan Africa have no way of identifying themselves. The percentage is much higher among women, youth and the very poor.”

However, there are efforts to address this challenge, with many African countries trialling digital ID programmes that are robust and workable despite the absence of bank accounts and even postal addresses.

For example, Egypt was the first nation to launch a national ID programme using vein biometrics. Kenya’s answer is to give every person in the country a unique “Huduma Namba” – Swahili for ‘service number’ – which will allow them access to all government services.

The Nigerian government launched a national identity card in 2015. It contains a chip that securely holds the national identification number, address, name and other details. It also supports fingerprint recognition. Most important for digital commerce, the card gives previously unbanked Nigerians a tool for payments.

Many African companies and state bodies have adopted online addressing system and mobile app, what3words.

In 2020, Vodacom South Africa zero-rated what3words for its 43 million subscribers. Meanwhile, Zulzi, the on-demand grocery delivery company in South Africa, has integrated what3words into its delivery process.

Short stated: “We recognise that things like addresses are not as uniformly used in some parts of Africa as in other parts of the world.

“The whole area of identity management is a key enabler for Africa’s mobile commerce. It’s not just about networks, it’s not just about smartphones; the identity and the addresses are needed to participate in a thriving digital economy.”

Click here to download the white paper.