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Lack of research hinders bigger picture e-commerce growth

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Alastair Tempest, CEO of the Ecommerce Forum of South Africa. Photo: YouTube
Alastair Tempest, CEO of the Ecommerce Forum of South Africa. Photo: YouTube

While South Africa’s e-commerce sector is growing at a significant rate, the lack of available economic data and high mobile data costs hamper investments and future growth of the online shopping market.

This is according to Alastair Tempest, CEO of the Ecommerce Forum of South Africa (ECFSA).

He spoke at the recent public hearings on the online platforms market inquiry conducted by the Competition Commission (CompCom), to help promote fair competition and combat alleged conglomeration in the market.

In May, the CompCom officially commenced with its investigation into online platforms in SA. The inquiry focuses on digital platforms with intermediate online transactions between business and consumers, with the scope covering e-commerce players, infrastructure developers, fintech players and payment platforms.

The CompCom published an initial paper for public comment at the end of last year. It noted the local digital platforms industry is rapidly becoming concentrated, and there are many tactics and exploitation methods used to ensure dominance by market leaders.

In the paper, the competition watchdog highlighted several concerns, including conglomeration, that may be used by e-commerce players to gain an unfair advantage over rivals.

During his virtual presentation, Tempest pointed to several issues of concern in SA’s e-commerce market. He noted that when considering the impact of competition rules in SA, it is essential to have a full picture of the sector under investigation – through in-depth research into the online shopping landscape.

EFSA is the national chapter of the Pan-African Ecommerce Forum of Africa, which is recognised by the African Union and relevant United Nations bodies.

“When considering the impact of competition rules, it is essential to have a full picture of the sector under investigation. Data on e-commerce in South Africa is very thin on the ground, and there is a serious need for economic data on turnover for business-to-consumer (B2C), business-to-business (B2B), consumer-to-consumer (C2C), and government use of online purchasing/sales.

“In addition, employment data is completely lacking at present. EFSA is working to provide good data but we have a long way to go,” explained Tempest.

The scarcity of independent data on e-commerce in SA reduces the potential for investment which could lead to further growth of the sector, he added.

Apart from data provided by individual companies, there were two surveys conducted covering last year’s e-commerce sector in SA (World Wide Worx and Statista).

However, according to Tempest, neither survey included estimates for services sold online (such as travel, hospitality, financial services). Nor are online sales for B2B, government-to-business or C2C included. There are also no estimates of the employment generated by e-commerce.

“As we have pointed out in our submissions to you, we have identified this gap in data as a very serious issue. Firstly, although B2C is obviously very important, B2B digital commerce is becoming the driving force for SA business, and it will grow exponentially in the future, especially with the stimulus of the African Continental Free Trade Area. If we look around the world, B2C is the visible top of the iceberg but B2B is the vast hidden activity, three or four times larger than B2C.”

Secondly, he pointed out that in SA, what is often incorrectly identified as C2C e-commerce has a particular and extremely vital role to play in “social media e-commerce”.

SMEs and sole proprietors use the wide range of social media to sell their products directly to the consumer – or to other businesses, with the most popular social media being TikTok, Facebook Marketplace, Instagram and WhatsApp.

“Social media e-commerce favours women and young owners, encourages cross-border trade and promotes innovation by its users.”

Other issues he touched on included high data costs and the major digital divide in SA, the indirect interdependency between the big players and all the other new and smaller entrants to the market, as well as the importance of taking into consideration the African Continental Free Trade Area – to which SA is committed by treaties.

“Despite the CompCom’s efforts, the cost of mobile data in SA remains higher than in the other top digital economy leaders in Africa. The ease of doing business in SA has taken a knock and work is needed to improve government services and remove red tape.

“For those selling to other markets, customs procedures must be improved. Banking costs remain high compared to countries with mobile money, although improvements are promised in 2022,” he concluded.

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