AFRICA is positioned to become a pivotal hub for the burgeoning online consumer class, according to the latest annual Beyond Borders digital payments and commerce report released by global fintech firm EBANX. The report forecasts an estimated 10 million new consumers in Africa in 2024, making it the second-largest contributor to the global surge, following closely behind Asia.
Rising markets in Africa, Asia, and Latin America are driving this global phenomenon, accounting for a substantial 70 percent of the 109 million people entering the consumer class this year, as per insights from World Data Lab.
Digital markets in Africa, although still in their nascent stages, are expanding rapidly, outstripping the growth rates seen in developed nations. While digital commerce grows by 13 percent annually in developed countries, Africa is experiencing a significantly faster pace at 25 percent, as reported by Payments and Commerce Market Intelligence (PCMI).
Projections indicate that by 2026, the digital commerce market in Africa is set to reach a total value of $72bn across its top five markets, including Egypt, Kenya, Morocco, Nigeria, and South Africa. This surge is expected to surpass Europe in consumer spending over the next decade, signalling a remarkable shift in global economic dynamics.
The digitisation wave sweeping across African markets is reshaping the landscape, with internet access forecasted to become nearly universal in some regions by 2028. For instance, Egypt anticipates a doubling of internet penetration to 98 percent. However, despite this digital expansion, only 44 percent of African adults currently engage in online purchases, indicating significant untapped growth potential in the region.
Insider Intelligence and PCMI data highlight that online retail dominates Africa’s digital commerce landscape, constituting 58 percent of digital volume in key countries like Egypt, Kenya, Morocco, Nigeria, and South Africa.
Alternative payment methods (APMs) are gaining prominence in Africa in response to limited access to traditional financial services. APMs, excluding credit or debit cards, now account for 69 percent of the total value in digital commerce, surpassing card payments at 31 percent. Mobile money, in particular, holds a 5 percent share in Africa’s top five economies, with Kenya leading the way with nearly universal penetration. Despite cash remaining a preferred payment method with a 30% penetration, APMs are poised to gain market share in the coming years.
Wiza Jalakasi, Director of Africa Market Development at EBANX, emphasises the growing shift towards mobile-first payments in rising markets, stating, ‘The future of payments in rising markets is instant. Payments in emerging markets like Africa are mobile-first and increasingly not card-based.’
In parallel with the rise of digital commerce, Business-to-Business (B2B) payments are experiencing a surge, particularly in Africa, Latin America, and Asia. B2B digital payments in these regions are growing at a faster rate of 14 percent annually through 2027, surpassing the global rate of 11 percent. By this year, these regions are expected to constitute 40 percent of the total value of B2B payments made online worldwide, according to Capgemini Research Institute.
Kenya stands out with 42 percent of businesses making online purchases, signalling a significant adoption of digital commerce in B2B transactions. The emergence of marketplaces in countries such as Egypt, Morocco, Nigeria, Rwanda, Tanzania, and Uganda further fuels B2B transactions, facilitating bulk payments and deliveries while reducing effort and cost.
The digital transformation in B2B transactions presents a significant opportunity for growth in these rising markets, according to a report by the GSMA, as marketplaces prove to be more adept at retaining sellers compared to B2C e-commerce, with a significantly lower churn rate.
Africa’s rapid emergence as a hotspot for digital commerce underscores the region’s potential as a key player in the global economy, with opportunities ripe for businesses to capitalise on the burgeoning online consumer class and evolving market dynamics.