eCommerce awareness, confidence and capability in Africa
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2018 08 – EFA Mailer

Statista issues its annual estimates of ecommerce

Statista publishes an annual estimate of ecommerce turnover per country. This year it estimates global market volume at US$636,087m, most coming from China (www.statista.com/outlook/243/112/ecommerce/south-africa#market-globalRevenue).


For South Africa, it estimates revenue at US$3,307m (R50,258m) in 2018, with an annual growth rate (CAGR 2018-2022) of 13.2%. If correct, ecommerce revenue will reach US$5,431m by 2022. Statista notes that the SA market’s largest segment is electronics & media with a market volume of US$1,056m in 2018. The average revenue per user (ARPU) is currently US$101.67 per user.

Statista also estimates that user penetration is 56.9% in 2018 and is expected to hit 64.1% by 2022, while the number of users is expected to reach 38.4m by 2022. EFA wonders if the user estimate (about 70% of SA’s population) is realistic, even considering that smartphones will have reached a far larger % of the population by 2022 than they do at present.

PayPal and Ipsos have also issued their annual study of cross-border ecommerce, which predicts SA’s online spend to reach R53 ($3.48) billion this year. The report points out that there are big opportunities for SMEs to capitalize on online marketplaces, but that there is a growing gap for those SA companies that do not benefit from ecommerce.

EFA is encouraged that these estimates are relatively similar, however we continue to be concerned that there is no break down between business-to-consumer and business-to-business.

Africa’s Digital Lions Hailed at Wits University!

The EFA Co-Chairman, Dylan Piatti, attended an event, Netpreneurs: The Rise of Africa’s Digital Lions, co-organized by UNCTAD, the Alibaba Business School and the Jack Ma Foundation at Wits University on 8 August. The event featured an announcement by Jack Ma, co-founder and executive chairman of Chinese ecommerce giant Alibaba, of a $10 million prize fund for African internet entrepreneurs, to be known as – the African Netpreneur Prize. “Let’s make Africa a digital Africa,” said Mr. Ma, who currently serves as UNCTAD special adviser for young entrepreneurs and small business.

Since last year, UNCTAD and Alibaba have been recruiting a number of young net entrepreneurs and sending them to Alibaba Business School in Hangzhou, China, for a short intense training on electronic market platforms, gaining visibility on the global market through remote technology and liberating small-scale producers through a conscious, purposeful impact investment linking them to the electronic market. Around 30 of these African graduates of the eFounders Fellowship Programme (launched in 2017) attended the event and shared their experiences.

The event considered the major issues which challenge ecommerce in Africa. Botswana’s investment, trade and industry minister, Bogolo Kenewendo, said the “last mile” of internet infrastructure was often the hardest in Africa, but “policy infrastructure” in terms of laws, regulations and government awareness of the issues was at least as important. Attendees agreed that the African Continental Free Trade Area (AfCFTA) was a welcome step toward freer regional circulation of goods, but much work remained to be done on transport logistics and connectivity.

UK Prime Minister visits SA, Kenya and Nigeria

EFA submitted a brief to the UK Department of International Trade prior to the UK Prime Minister’s visit to SA last week.

EFA pointed out the great advantages to both countries if both BtoC and BtoB ecommerce are encouraged, however, we pointed out the non-tariff barriers imposed by SA do not help encourage cross-border trade, and also can become a model for other African countries seeking to copy SA.

The UK, however, is not in a strong position to ask for favours – in less than 8 months it will leave the European Union Bloc. At that time it will need to renegotiate all the treaties it presently enjoys as a member of the EU, and to do that it will need all the friends it can find.

As the previous UK foreign minister bluntly said, the UK will be looking to its ex-colonies (most of the Commonwealth’s 53 members are developing nations) for advantageous trade deals to make up for the potential loss of trade with Europe. This policy objective fits with the statement from Prime Minister May’s office, that her trip focused on a renewed partnership between the UK and SA, aimed to maximize shared opportunities and encourage future trade. SA is an obvious partner as the UK was SA’s 6th largest trading partner last year. She also visited Kenya and Nigeria.

The UK government says a series of ambitious new innovation partnerships between the UK and Africa to share skills and ideas are expected to stimulate significant economic growth and support the creation of 1,000s of new jobs (presumably in both the UK and Africa).

However, no mention has been made of the large development aid provided by the EU to which the UK has previously contributed generously. This is part of the ongoing argument in the divorce settlement between the UK and EU, with the UK threatening not to contribute further to its long-term financial commitments (including development aid) to the EU.

In a separate move by the UK government, it has increased its support of UNCTAD (UN Council on Trade and Development) work on the Trade Facilitation Agreement and has pointed out that bureaucratic delays and “red tape” pose a burden for moving goods across borders for traders. Trade facilitation – the simplification, modernization and harmonization of export and import processes – is an important issue for the world trading system, and therefore for cross-border ecommerce.

The Trade Facilitation Agreement (which officially came into force in February 2017) aims to expedite the movement, release and clearance of goods, including goods in transit, and increase effective cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues. The focus of the UK-funded programme are the provisions for technical assistance and capacity building, which are key concerns for developing countries.As readers will recall, SARS has said that it is introducing online pre-clearance for customs which should reduce the time carriers wait at SA’s frontiers/ harbours/ airports.

South Africa and India support the end of the moratorium on taxing electronic transactions  

South Africa and India have made a joint proposal to the International Telecommunications Union (ITU) General Council not to renew the moratorium on duties on ‘electronic transactions’ at the next ministerial meeting.  The issue will also come up at the World Trade Organisation (WTO).

What does this mean for us?

Even though governments can always impose whatever taxes they like on their citizens, there are general guidelines recognised internationally – one of these being that there should be no taxes applied between countries to electronic transactions, such as data, or online banking services, etc. The reason for this rule was mainly practical: if I buy airtime from, or bank with, a non-SA provider how can that purchase be tracked and taxed, and, more to the point, since I’ve probably paid tax on the purchase in the other country, how does the exchange of tax between the 2 countries work?

The problem for some countries being that they do tax their citizens for these services and don’t like the situation whereby their citizens can buy the same services cheaper overseas. In the case of India, which is one of the main producers of these services presumably it is keen to protect Indian IT businesses from cheaper competition from abroad. And SA’s reason…? SARS trying to close a perceived tax loophole?

The issue of taxing access to the internet, which is another side of the same coin, is important  and should not be overlooked (see below).

Taxing Access to the Internet hits the poor and reduces business activity

Uganda, Tanzania and Zambia have recently introduced taxes on different forms of internet access.

Uganda introduced 2 taxes on 1 July – first, a levy of 200 Ugandan shillings (0.79R) per day tax on social media use. Access to social media sites such as WhatsApp, Twitter and Facebook are subject to this daily tax. President Yoweri Museveni presented this as a way to increase tax revenue, but according to the Mail and Guardian he also said that the tax was intended to curb online “lugambo” or gossip. According to data compiled by the Alliance for Affordable Internet in Uganda, the new tax has increased the cost of connection by 10% for the poorest 25% of the Ugandan population and the Alliance points out that that it will cost the poorest almost 40% of their monthly income to buy one gigabyte of data. For the wealthiest quarter of the Ugandans, the cost to connect has only increased by 1%.

Second, Uganda levied a 1% tariff on the sending and receiving of mobile money. The Uganda Central Bank reported that the total value of mobile cash transactions declined by 672-billion shillings ($182 million) in the first 2 weeks of July and inflation rose by 1% in the month after the implementation of the tax. This has resulted in the government reducing the mobile money tax from 1% to 0.5% and applying it only on withdrawals.

Meanwhile, Tanzania has introduced a $930 licence fee for bloggers, online radio stations, online streaming platforms and forums to publish content. It also has imposed other rules, including ‘a requirement for bloggers and any other internet-based service to share the names of their shareholders, their approximate cost of investment, tax clearance certifications and pay … an initial application fee, a licence fee and renewable licence fee after 3 years’.

Last week Zambia joined the trend by introducing a tax on access to internet phone calls. This followed the Zambia Information and Communications Technology Authority fining of the 3 biggest telcos (MTN, India’s Airtel, and Zamtel) for failing to provide quality service amid mounting costs. Business has pointed out that the new tax is yet another cost which entrepreneurs have to face, and that calling-using data is already taxed in the price of the data bundle. Zambian business has also pointed out that the number of Zambia’s mobile internet users decreased from 6.1 million to 5.2 million in 2017, a sign that data prices already were too costly for many. The Zambia government said at the time that it would introduce policies to make access to the internet more affordable. The new tax would not appear to be one of these measures.

The good news is that on the home front the ANC recently issued a statement saying: “”The ANC believes the lowering of the cost of data will be a catalyst for economic growth. It will unlock economic opportunities and thus contribute to economic growth and job creation.”

Now where’s that report promised this month from ICASA on the high cost/bad service of the mobile operators? EFA understands a round of public consultations is planned. Oh dear…

Security Issues

At the beginning of the year we visited the National Consumer Commission (NCC) and SABRIC (the South African Banking Risk Information Centre) to suggest that a coordinated consumer awareness campaign should be prepared. SABRIC already coordinates the banks’ campaigns, as well as reporting on and analyzing banking fraud. We argued that both the consumer and business need to be better informed on internet safety in general.

This is a purely selfish strategy for EFA – consumer and business trust in ecommerce is ETA’s principle objective and the better consumers can identify the good from the bad on the internet, the better for ecommerce. We understand that our proposal has now been taken up, with the NCC, SAPS and SABRIC agreeing to work on a general consumer awareness campaign.

The need for greater awareness has been highlighted in Mimecast 2nd annual ‘State of Email Security’ report which was published this month.  800 global IT decision-makers were surveyed: 85% said there had been an increase in phishing attacks in the last 12 months;  50% anticipate a negative business impact from an email attacks this year. Nearly half of SA businesses have seen a sharp increase in targeted spear-phishing attacks in the past year.

Meanwhile, a report from the USA suggests that some office printers and fax machines (yes, they still exist!) are easily hackable and provide business secrets to hackers.
Meanwhile, readers will be aware of the video from Virgo which has been going the rounds of social media. The video shows a consumer browsing a magazine inside a retail store.

A thief approaches him; taps a near-field communication enabled point-of-sale device on the reader’s pocket and instantly extracts funds from his contactless card. SABRIC has responded on behalf of the banks claiming that this scenario is completely false.


Miscellaneous

Samsung Pay in South Africa.

Samsung has partnered with Absa and Standard Bank through MasterCard and Visa to launch its service, which started in 2015. According to Samsung, the system took 3 years to set up in SA, working with the FSB, the banks and PASA. Galaxy handsets use both MST and NFC technology – or tapping your phone on a point-of-sale terminal – to make payments. Once the app has been installed and credit cards have been added, people can make a payment just by authenticating themselves in the app – using a pin code, fingerprint or iris scan.

Proudly South African Launches an e-Shop

BizCommunity reported last week that Proudly South African (PSA) has launched an e-shop (www.rsamade.co.za) in partnership with RSA Made. Present at the launch were the PSA stakeholders including the Dept of Trade and Industry (DTI) The PSA claims to cover 1,200 companies with 8,800 products.

The e-shop will concentrate exclusively on South Africa made items. According to the publicity, delivery anywhere in SA will be within 48 hours, and will be free for purchases over R500. PSA claims that the e-shop is the first of its kind in SA and has been developed to assist small, medium and even large local businesses to sell more for SA-only suppliers and service providers.

In these circumstances it is always interesting to consider the role of government in the commercial environment. Time will tell if the initiative is a success, however, EFA suggests that the e-shop looks to develop its cross-border selling

Google and MasterCard Share Data on Sales and Search

What if there was data to show the link between consumer search and sales in brick and mortar stores (webrooming)?   A secret deal has apparently come to light whereby Google pays MasterCard to track whether online ad clicks translated to sales in retail stores. According to Bloomberg, Google has for the past year used its access to MasterCard data to gain insight into how online ads affect retail spending.

The deal allows Google access to 2 billion MasterCard shoppers, but it poses privacy concerns on how online and offline information is shared and what information MasterCard and Google need to disclose to their users. If the data is completely anonymized privacy law is unlikely to have an effect, but how can the 2 companies satisfy the Regulators that the data really is anonymized? The Regulators will probably also be wondering, why the need for secrecy?

GSMA (Global Mobile Phone Association) Report on Banking and Mobile in Africa

Recently Standard Chartered Bank launched a digital bank in Côte d’Ivoire and it plans to duplicate this strategy in other African markets.

According to the GSMA 2018 Sub-Saharan Report (www.gsma.com/mobileeconomy/sub-saharan-africa/) mobile money has become the leading payment platform for a digital economy in emerging markets. In 2017, Western and Middle Africa were the fastest growing areas of Sub-Saharan Africa, led by tremendous growth in registered accounts in countries like Ghana, Côte d’Ivoire and Cameroon.

GSMA points out that mobile money serves as a gateway to financial inclusion, it enhances the impact of international remittances on development, digital platforms cost significantly less, and there is evidence of increased cross-selling of products in emerging markets, while smartphone adoption and internet penetration are fueling the expansion of ecommerce

Europe – helping older people to access public services digitally

As public administrations in Europe are becoming more and more digitalized, there is a risk of older people being excluded from public services. This is because they do not always have access to the internet or may not be familiar with new technologies. The EU is funding a new project to create user-friendly applications for elderly people that will make administrative tasks easier, as well as encouraging active ageing projects in their communities.

Apps and websites will allow elderly people to participate in open government, online access to public services and information using open data.
To put this in perspective in the EU in 2017, 19.4% of the EU’s population was aged 65 or over. 45% of people aged 65-74 years in the EU used the internet at least once a week and 16% used online social networks in 2016.

This is where coordination between Africa and Europe could bring great advantages for the African citizen (young and old).

Product Safety – new global concerns

Global cross-border ecommerce has altered the way businesses and consumers sell and purchase goods and has opened significant opportunities for small businesses to expand and access overseas markets. Because of the vast growth and unprecedented volume of physical goods entering Europe and other large markets each day, customs authorities face new challenges in their dual role supporting trade facilitation and managing associated border risks.

Given these new challenges, the EU believes a new innovative and 21st Century approach to product safety is needed. The ecommerce sector needs to be very aware of these concerns. On the one hand there is a genuine need to protect consumers, but at the same time we need to be sure that any new rules are not non-tariff barriers (NTBs) which exclude goods from certain sectors or certain countries.  Watch this space.

EFA Joins the Digital Trade Network (DTN)

EFA has joined the DTN, which is a global initiative with a permanent representative in Geneva and support team in London based at International Chamber of Commerce (ICC) UK. DTN’s objectives are to promote the benefits of digital trade and help provide a voice for business at the World Trade Organization.

EFA will be co-hosting a panel with the ICC and DTN on 2-3 October at the annual WTO Public Forum in Geneva.

For more details please contact me (alastair@ecomafrica.org).

And finally ….. Mirror, mirror on the wall, who is the fairest of them all?

H&M wants its customers to keep visiting its physical retail stores, even though it has a solid presence in the ecommerce market. In its New York flagship store in Time Square H&M has installed a smart mirror that communicates with customers through voice and facial recognition—and allows them to take selfies, which are then sent to their phone via voice commands.

The interactive mirror also provides fashion inspirations based on individual preferences, with a QR code customers can scan to get ‘the look’ at the online store, as well as the option to sign up for the H&M newsletter for a 20% discount. The technology behind the speaking mirror has been developed with Microsoft, Ombori and Visual Art. Snow White’s step-mother would have been impressed!

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