The e-commerce industry has become an unexpected and significant contender to the African market challenging traditional retail industries. The continent’s revenue generation is projected to reach $39.44 billion in 2025 with an annual growth rate of 8.49%. Financial projections for 2025 indicate the following e-commerce market values within African BRICS nations: Ethiopia, $553.98 million; Egypt, $7.96 billion; and South Africa, $7.32 billion.

Driving Forces Behind E-Commerce Expansion

These results are a combination of improved infrastructure, creative innovation in retail, logistics, telecommunications and financial industries. With the increase of internet penetration and the rise of smartphone ownership, the opportunities for e-commerce and online shopping have grown. There are some major driving forces behind this massive expansion like the COVID-19 pandemic, technological advancements in payment systems as well as the changing consumer behaviour.

Impact of COVID-19 on E-Commerce

COVID-19 and the numerous restrictions and regulations accelerated the shift into e-commerce growth, but after the restrictions the convenience of shopping from home became extremely useful for students, the elderly, people working from home, or simply anyone not wishing to leave their premises. The service continues to be economically attractive to major retailers in South Africa by incorporating it into the portfolios of Woolworths, Checkers and Pick n Pay, for example.

E-Commerce in BRICS+ Nations

Prominent e-commerce BRICS+ countries include India and China, where digital mechanisms have been incorporated into many company business models. Brazil has one of the top e-commerce industries in South America with platforms such as MercadoLibre with one of the key factors for this is having a large digital engaged population, increased consumer trust in online shopping and growth in online payment solutions. Russia has also witnessed significant e-commerce development despite the ongoing conflict with Ukraine by focusing on domestic players.

In South Africa the technological advancements in terms of digital financial services have transformed the experience for customers and product producers. The improved dynamic is attributed to options like ‘Buy-Now-Pay-Later' and developments in biometric and digital wallets promoted by systems like Apple Pay, Samsung Pay or Zapper. The proliferation of these newer systems are protected by the Payment Association of South Africa which mandated the use of 3D Secure in 2014 to protect customers from fraud. There is no greater convenience than simply carrying your phone to pay for all daily expenses compared to looking for a spare R10 note to buy a bottle of water.

With the recent developments in South Africa, the industry is entering a new phase of evolution with the introduction of late-night delivery via a partnership with Uber Eats, Engen Quickshop and Woolworths, ‘After Dark’ will operate until midnight. This dynamic is innovative and would reach a wider clientele seeking to fulfil their late night sweet treats. However, it poses great concern for employees with extensive work hours potentially infringing on labour rights, as well as brings a psychological discussion of immediate gratification in acquiring 24/7 convenience.

Changing Consumer Behaviour

The changing consumer behaviour plays a direct and central role in the dynamic of buying online and changing the South African market. For example, in an article from Mastercard, ‘GenZ is the biggest adopter of new payment methods with 98% of them being tech-savvy smartphone owners’, and that there are over 22 million smartphone users in South Africa. With statistics like these it is no surprise that this generation is so attached to their mobile devices.

Additionally, according to a Meltwater report, South Africa is the 3rd highest country globally to access the internet from their mobile phones, this means that retailers and e-commerce businesses main vehicle to customers is via mobile phones; hence the drastic growth in m-commerce (mobile commerce). Similar patterns are evident in other BRICS+ nations, where mobile-first strategies dominate e-commerce expansion.

Challenges in E-Commerce Development

Though the online developments are great, the sector faces significant challenges in developing countries due to inadequate logistics infrastructure. This not only hinders current progress but also poses a barrier to future development and innovation within the e-commerce sector.

The infrastructure available in urbanised areas makes for smoother operations for logistics/ courier service companies, but on the other hand high levels of urbanisation may cause delivery delays because of traffic interruptions. Across the developing world, particularly in Africa, the levels of development are extremely unequal. Rural areas have for decades received little-to-no maintenance attention, low levels of service delivery and when people in these areas do have work completed, it is of poor quality. An innovative solution for this is seen in the Chinese company Meituan where in 2021 it completed its first drone delivery in the tech hub of Shenzhen. This opens the discussion for other future-forward technologies to be implemented in logistics management while infrastructure undergoes overdue upgrades.

The Path Forward

To fully utilise e-commerce's potential in South Africa and BRICS+ nations, collaboration between governments, businesses, and consumers is essential. By addressing challenges and learning from BRICS+ partners, South Africa can lead Africa's digital transformation.

Written by:

*Dr Iqbal Survé

Past chairman of the BRICS Business Council and co-chairman of the BRICS Media Forum and the BRNN

*Banthati Sekwala

Associate at BRICS+ Consulting Group

Egyptian & South African Specialist

**The Views expressed do not necessarily reflect the views of Independent Media or IOL.