E-commerce, Fintech, Healthtech, you can name it, Africa has it, but can investors support them all?
Without specific comparison, there are obvious signs that technology has had a massive impact on Africa’s development. In Health, Finance, Catering, Agriculture, and other sectors, the adoption of technology has secured the continent’s growth respectively. Yet a few sectors stand out, such as Fintech, Foodtech and E-commerce.
The adoption of technology in Africa’s commercial activities (E-commerce) began to witness a surge during the pandemic. Post-pandemic, there were predictions that the revenue that would be generated from E-commerce would be on a constant increase. According to research by Tekedia, The sector witnessed a 57% increase in revenue. Attaching currency to the growth rate, Africa generated about $27 billion from E-commerce in 2020.
Every year there are predictions that activities in E-commerce will increase in Africa, generating more revenue than it did in the previous year. According to research by Statista, in 2022, online shopping generated approximately $37 billion. This is an obvious sign of the sector’s growth, yet while the numbers grow, it is necessary to know if the impact is manifested across the board. The generation of revenue is not enough to say individuals and game players in the ecosystem have been affected by the purposely positive game changer.
Fundamentals Of E-commerce In Africa.
In a recent interview with The Ouut, the co-founder of Ponatshego, an E-commerce startup, and book author, Motshidisi Joseph Ngaiti, provides insight into E-commerce activities and fundamentals In Africa.
Motshidisi remarked that technology has had a significant effect on commerce activities in Africa and his startup location, Botswana. “I will say E-commerce has been the reason for the growth and development of businesses in Africa. It also has major significance in the retail sector where we are mostly based. With the increasing adoption of the internet and technology, e-commerce has become the most viable option for businesses to reach a wider audience. It has helped to increase sales” he said.
Being an author of an entrepreneur-help book based on E-commerce on the continent, Fundamentals of E-commerce in Africa, Motshidisi, highlighted E-commerce benefits in Africa. According to him, “E-commerce has provided an opportunity for small businesses, SMEs basically to reach a global audience without incurring significant cost. E-commerce platforms also allow SMEs to market their product or services online without having to provide physical infrastructure.”
The incorporation of other niches of digital technology in Africa’s E-commerce has also been established over the years. Motshidisi noted that “Through E-commerce, businesses can access a range of payment options. This includes mobile money, and online payment systems which provide convenience for the seller and consumer. I will say digital technology has had a massive impact on commerce in Africa.”
The African E-commerce ecosystem has established that financial growth can be generated. The industry’s game players also affirm the ease of business transactions E-commerce establishes. Yet research shows the support has not been equal across all the African nations.
It is important to note that, to secure a certain amount of revenue from any sort of startup, certain investments must have been made, E-commerce inclusive. Yet the amount of investment made into each startup is known to vary due to different factors, such as location amongst others.
E-Commerce Beyond The Big Four.
Regardless of the growth, E-commerce funding, revenue, startup establishment and adoption witness different traction and attention among African nations. While there are already big players in the form of nations in the E-commerce ecosystem, there are other African nations putting in their best towards the development of the ecosystem.
As wide as the African ecosystem is Four countries have risen to dominate activities in the region of the continent. Nigeria, Kenya, Egypt and South Africa get most of the attention, to be fair, they are also pushing out major innovations. Yet the activities of the Big Four alone do not sum up the development reality of E-commerce in Africa.
This is why The Ouut takes due diligence to highlight startups outside the big four that are striving regardless. Whether they can raise funding or not, certain African startups seem to find their way up the ladder.
Ponatshego Activities in Botswana.
Launched during the pandemic like most E-commerce startups in Africa, Ponatshego stands out as it strives to scale in Botswana, a nation in Southern Africa. Ponatshego is a product-based startup that provides a technologically-developed platform for both local and international retailers to perform sales. This E-commerce startup was established to provide vendors with the ease of getting their goods to their customers seamlessly. Since its launch, the startup has been able to pull traction both in vendors and buyers to its online platform, thereby pioneering e-commerce in Botswana.
Before being recognized within the startup ecosystem, Motshidisi and co-founder, William George Whittle, had to bootstrap before receiving support.”At the time of launching my partner and I had no source of income” Motshidisi said. “It was a struggle on our end, we had to make sure, the startup worked, so we struggled to find assistance from outside. Luckily, we became the first startup funded by the first Angel Network in the country at the time.”
Funding Bostwana Ecosystem.
Unlike other African nations where there are a couple of investment platforms to choose from, the Botswanan ecosystem sees zero to little investment. From the eye of Ponatshego’s founders, it took the startup a certain period before they could secure funding. With limited channels for investment, Motshidisi narrated that his team had to do all they could to secure their first investment. “We had to pitch to Five prominent entrepreneurs in the country which was very intimidating. For a startup such as ourselves, this was our first business ever, so we had a little self-doubt.”
While discussing the activities of funding and investment in Botswana, Motshidisi explained that there is little activity in that sector. “In terms of VCs, we are not seeing much of them here, and it’s something you can count with your hands in terms of numbers. There are only a few businesses that get VC funding. The biggest challenge I’ll say in my country is the early stage funding. It is really difficult to find early-stage funding for any form of business, he stated.”
The reality of funding African startups is in the testimonies of startups outside the Big Four. Often VCs and Angel investors look out for startups within a favourable location and technology penetration among others. They can’t be blamed though, the ROI is very important, but where does that leave startups out of their most required demand?
While narrating reasons why Bostwanan startups see fewer investment activities, Motshidisi came up with a few interesting factors. “It will be difficult to get the kind of numbers a VC will be interested in. My country only has a population of Two million people, so the numbers that VC want isn’t that easy to generate. This has caused a reluctance for investors to invest in our startups with such low numbers.” While he emphasised the population size, he also mentioned the lack of infrastructure and internet penetration. These factors have contributed to the stall in investment in Botswanan startups.
How Else Can Startups Bait Investment?
The more the merrier, This is evident in the population size investors seek. But when a nation can’t offer more population size what else can they offer? A nation like Botswana has a population size of about 2.5 million people. Definitely, it can’t compete with South Africa with a population of more than 59 million people, yet they are located within the same region. Numbers are against small-sized nation, yet their startups contribute to technology development across the continent, and startup like Ponatshego is contributing to E-commerce development in Africa. So what can substitute for population size?
Answering this question in the Botswana context, Motshidisi gave a few insights on what his nation has to offer asides from numbers. “Botswana has a lot of intelligent entrepreneurs with amazing solutions. There are so many solutions in the country right now that can attract investors. I believe the intelligence of the entrepreneurs and their competitive level should be able to attract investors to our nation. If a solution exists that can help a majority of the people, it doesn’t matter where it is coming from. The quality of an entrepreneur and solutions should speak for themselves regardless.” The co-founder believes his country has a lot to offer aside from the largely requested.
Regardless of the investment state in the Southern African nation, Ponatshego scaled. In 2021, the startup received early-stage funding which developed its E-commerce activities in the nation. The founders had diverted the funds to specific sectors of the business. “ We started a loyalty program for people who purchased on our platform. This encouraged customers to keep buying thereby creating brand awareness for us. We also intensified our marketing, working mostly with influential people in the country. Our customers could relate with the influencers which built their trust. That helped to really scale our business, we were able to generate around 60,000 Pula per month. We further grew it to 200,000 Pula monthly revenue. This was within a three-month period of receiving the funding, Motshidisi explained.”
Ponatshego is Just One of the other E-commerce startups in the nation. Be it in E-commerce or other niches of digital technology, there are other Bostwanan-based startups active within the nation. Should these startups be left unsupported? In the context of other small-sized nations should startups be left to their fate or can VCs take a leap of faith with them?
Africa has enough potential to be explored. This potential can be in the form of human intelligence or solution provision. The potential can be limitless. E-commerce, Fintech, Healthtech, you can name it, Africa has it, but can investors support them all?