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Kati Suominen, Founder and CEO of Nextrade Group; Technical Director of the Alliance for eTrade Development


Ecommerce is opening new opportunities for African micro, small, and medium-sized enterprises (MSMEs) to attract customers, grow their sales, export, and create jobs. Ecommerce is also emerging as a critical means to promote MSMEs’ recovery from the COVID-19 crisis, and as a centerpiece in the development of the African Continental Free Trade Agreement (AfCFTA). Africa also has several opportunities for growing MSMEs use of ecommerce, such as rapidly growing penetration of mobile phones and payments; diversifying regional ecommerce ecosystems, such as ecommerce marketplaces, delivery companies, mobile payments, Fintechs and IT services; young, digitally savvy workforces; and growth of venture financing and foreign investments in the ecommerce sector, including in various ecommerce logistics startups.


However, there is to date little data on how and to what extent different types of MSMEs in Africa use ecommerce; what challenges they face in engaging in ecommerce; and what policy and technology solutions African governments are already pursuing to solve these challenges.


This new report seeks start bridging these knowledge gaps. This report leverages firm-level survey data from 2,011 MSMEs in three African economies (Kenya, Nigeria, and South Africa); the Alliance’s data on the adoption of policies conducive to MSME ecommerce in 52 countries, of which 12 are in Africa; and insights form the Alliance’s September 2020 policy dialogue with the African Union on policy and technology solutions to expand African MSMEs’ opportunities to use of ecommerce, especially for engaging in trade. The report is hoped to support the African Union and Member States’ work on an Ecommerce Strategy and the AfCFTA Ecommerec Protocol, to build a robust, trade-creating AfCFTA.


The survey data yields a set of findings about the state of MSME ecommerce in Africa:


  • There are five archetype African MSMEs online sellers: global marketplace sellers that leverage global marketplaces like eBay Etsy, and Amazon; local marketplace sellers that sell on marketplaces like Jumia and Konga; sellers with their own online stores, social sellers that use social media and messaging apps to market and transact with customers, and offline sellers that do not use social media or online sales capabilities. Most African MSMEs are social sellers, but especially more urban and established  MSMEs and large firms are already using regional and global online marketplaces and prioritize ecommerce as a growth lever.  


  • Online sellers and buyers are likelier to engage in trade and outperform offline sellers and social sellers. Global marketplace sellers are particularly likely to derive a strong share of their revenues from online sales, export, and grow rapidly; rural firms are least digitized, dynamic, and export-oriented. African firms of all sizes use ecommerce to import goods and services.


  • African MSME online sellers perceive strong gains from ecommerce, in terms of  new clients, greater revenues, higher margins, and new export opportunities, and look to invest in ecommerce capabilities in 2021. Global marketplace sellers are especially eager to grow their online sales further and to export, especially to the U.S. market. Covid has only cemented African MSMEs’ resolve to invest in digital and ecommerce capabilities; one-half of firms of all sizes look to invest especially in better Internet connections and digital marketing capabilities and a third wants to invest in ecommerce capabilities in 2021.


  • There are no meaningful differences between women- and men-led firms in the use of ecommerce, online sales, or export performance. For example, micro and small women-led firms that sell on marketplaces do just as well if not better than comparable men-led firms, which points to the importance of policies that level the playing field between men and women to start a business and acquire technologies and financial assets.


  • Africa’s ecommerce transactions are increasingly digital, though cash still dominates in local transactions. MSMEs use mobile payments increasingly in domestic transactions; export-driven online sellers accept international payments by bank wires, PayPal, and credit cards.


  • African MSMEs still face significant pain points to doing ecommerce – Online sellers of all sizes report challenges to solidify their online presence, deal with customs procedures and international delivery costs, pay domestic taxes, and access financing for digital transformation, such as optimizing online sales with modern online commerce capabilities and digitizing inventory management and fulfillment capabilities. Social sellers that do not yet have their own online stores face similar  challenges – only these firms also encounter challenges that marketplace sellers have already overcome to an extent, such as setting up on online marketplaces and accessing working capital.


  • Especially challenging are arcane customs procedures, crossborder and last-mile logistics costs, doing digital marketing and maintaining competitive online stores, and accessing financing for digital transformation. Small offline sellers in rural areas report greatest challenges, especially due to poor internet connectivity and logistics. The challenges are similar across the surveyed firm segments and countries, pointing to common regional agendas on trade facilitation and logistics improvements, cybersecurity, digital transformation, and MSME finance.


  • To grow their ecommerce businesses, African MSMEs want above all better digital marketing capabilities and presence on marketplaces, financing for digital transformation, better Internet connections, and easier ecommerce fulfillment.


Path forward: policy and technology solutions to promote African MSMEs’ ecommerce


African countries have taken various measures domestically and together to enable MSME ecommerce. However, the region still lags behind other developing regions in firms’ digital transformation, robustness of ecommerce ecosystems, and adoption of pro-ecommerce policies. The eTrade Alliance’s mapping of the adoption of over 100 policies conducive to MSME ecommerce in 10 major policy domains in 52 countries, of which 12 are major economies in Africa, shows that, the analyzed Sub-Saharan African countries have adopted, depending on the country, 35-55 percent of key pro-MSME ecommerce policies and practices, lagging behind most developing economies. In Northern Africa, Morocco does better at 65 percent adoption; most benchmark advanced economies are at 75-85 percent. While African countries have accelerated their adoption of policies conducive to ecommerce in the past few years, policy adoption is still more limited of such key digital regulations and practices as safe harbors for internet intermediaries and online dispute resolution systems, essential trade facilitation commitments, and policies that encourage financial innovations such as FinTech and equity crowdfunding laws.


As African governments continue working to promote MSME ecommerce, they can grow both the so-called extensive and intensive margins – increase the number of MSMEs engaged in ecommerce, especially via regional and global marketplaces that connect MSMEs readily to hundreds of millions of buyers around the world; and grow online seller MSMEs’ ecommerce sales and exports.


For attaining these objectives, we present for consideration concrete targets, policy approaches, and pilot projects in four key areas for MSME ecommerce (table 1):


  • Customs procedures and ecommerce logistics;


  • MSME finance;


  • MSME digital transformation and capacity-building; and


  • Cross-border digital payments.


These recommendations of course need to be tailored to each country’s unique circumstances.


Table 1 – African MSMEs’ Pain Points in Ecommerce and Policy and Technology Solutions







































The report also proposes five cross-cutting principles for African governments to follow, to best improve these four areas and to enable MSME ecommerce:


  • Digital policy coordination and dialogue. In their work to enable MSMEs’ crossborder ecommerce, African governments can work together to ensure that the rapidly unfolding national policy and regulatory frameworks are compatible and support MSMEs that seek to transact across many markets. Divergent national regulations across markets would hamper MSMEs from taking advantage of ecommerce and scaling across markets – very much as divergent national product standards limit small businesses’ export diversification. In contrast, ongoing regional policy coordination helps ensure MSMEs and ecommerce ecosystem businesses such as Fintechs, Logtechs, and marketplaces can apply similar digital regulations when selling and scaling to service customers across Africa. One useful model to study for ensuring interoperability among national regulations and different digital platforms is the 2020 Digital Economy Partnership Agreement (DEPA) between Chile, New Zealand and Singapore.

  • Open access to data. MSMEs that transact across borders and firms that support them with logistics, finance, and payments capabilities need access to data and global cloud services to analyze data in order to optimize their operations and offerings. Open access to data is critical for African online seller MSMEs and the ecosystem that support them to be able to access, store, move, and analyze data in order to improve their customer service and operations, and innovate new products and services. Open access to data is fully compatible with African governments’ aspirations for digital trade, robust African technology companies, cybersecurity, and application of 21st century digital business models. Data localization policies undercut these aims. African governments can consider numerous regional models around the world that govern the transfer of data across borders, while also enabling each participating country to retain its own privacy regimes. One good example for Africa is the Asia-Pacific Economic Cooperation (APEC) Cross-Border Privacy Rules (CBPR) system, a government-backed data privacy certification that private companies voluntarily join to demonstrate compliance with international data privacy protections. Regulators will also want to be attuned to evolving privacy-preserving technologies such as encryption and confidential computing.


  • MSME digital identity. African governments are actively developing digital ID solutions to ensure parties at both ends of digital transactions know whom they are dealing with, and help Africans access important services. The next step is to arm also African MSMEs with digital ID to help MSMEs to be quickly authenticated by their customers, marketplaces, and trade and financial service providers. To enable MSMEs in cross-border transactions, this solution needs to be decentralized, scalable and interoperable across countries. African countries could champion with the private sector a regional decentralized corporate digital ID solution that enables buyers and service providers to online seller MSMEs to verify and authenticate any company digitally, with no paperwork.

  • MSME cybersecurity. Cybersecurity threats are a cancer on African MSME ecommerce. While regional governments have advanced a great deal on developing cyber strategies, MSMEs are vulnerable and need cyber defenses tailored to their needs and budgets. African governments can partner with the private sector to help MSMEs secure stronger cybersecurity capabilities – for example working with venture capital funds to invest in firms that are developing MSME cybersecurity products and services.


  • MSME formalization. Formalizing is critical for MSMEs to onboard global marketplaces, access bank accounts, use global cross-border payments, secure cross-border logistics services, access financing, and grow. MSMEs will not formalize until the high tradeoffs for doing so are removed. African governments can induce MSMEs to join the formal economy with carrots such as tax holidays and incentive payments, and sticks such as inspections, along with smart targeting of firms most poised to formalize.


An equally critical question as to “what” to do to enable MSMEs in ecommerce is “how” to do it. African governments will create the optimal enabling environment for ecommerce through:


  • Assessing best global practices and measuring progress. African governments can continually learn from ecommerce policy innovations in other markets and track ecommerce development, for example by incorporating ecommerce-related questions in business surveys and censuses that enable systematic monitoring of progress by firm segments, geographies, and gender.


  • Coordinating national policies for regional regulatory convergence. A critical next step in African countries’ digital journeys is regional policy coordination, so that MSMEs and ecosystem providers such as Fintechs and marketplaces can apply similar, pro-ecommerce digital regulations when selling and working to scale across regional markets


  • Leveraging public-private dialogues and partnerships, for policymakers to have their “ear to the ground” and learn from firms at the front lines of ecommerce markets what pain points they face; and to create joint solutions with private sector actors interested in propelling domestic and crossborder MSME ecommerce. 


  • Engaging local governments in ecommerce development. Partnerships between national and local governments and other subnational stakeholders will help reach firms at scale, engage remote firms still disconnected from ecommerce markets, and bring further resources to support MSME ecommerce development. 


  • Driving MSME crossborder ecommerce via AfCFTA. The power of ecommerce is in expanding firms’ markets and supplier pools beyond their regions and countries. Cross-border ecommerce is still nascent in Africa – but also as such offers great potential for growth. AfCFTA, if based on the principles of free trade in digital goods and services, open digital regionalism, paperless trade, and national treatment, can go down in history as the agreement that catalyzed Africa’s cross-border ecommerce.

The author’s views expressed in this document do not necessarily reflect the views of the United States Agency for International Development or the United States Government. The author would like to thank Erica Vambell for research assistance.

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