Africa's "digital laggards" must embrace digitalisation or risk being irrelevant

By Mluleki Ntlemeza

South Africa is the 49th country to agree to the creation of the world's biggest free trade area. The country signed the African Continental Free Trade Area (AfCFTA) agreement in July 2018.

This agreement has far-reaching implications for achieving sustainability goals as set for the African continent. But first, procurement functions operating within the hoped-for free trade must address a few barriers: a lack of trust, transparency and infrastructure as well as the cost of doing business.

Digital transformation or digitalisation is considered to be one way of overcoming these barriers.

The African Union E-Commerce Conference, held in Nairobi in July 2018, was a bold step for Africa to catch up and take a quantum leap in the digital transformation race.

But is Africa in a position to make the leap? The continent is playing commercial and technology catch-up with many parts of the world - players who are moving the goal posts day by day.

"The question is no longer whether businesses should be transforming digitally, but rather how quickly this transformation can be achieved" (Business Day: 16 February 2018). The same article describes how, in the last two decades, about 52% of Fortune 500 enterprises have gone bankrupt, been taken over or gone out of business completely. This pace is said to accelerate. Research estimates that "80% of companies around the world believe digital transformation is important to their survival in the next five years".

Trying to go digital, while at the same time grappling with fundamental development issues, means that Africa's leap must be on its own terms, but remain competitive at the same time.

Creating an enabling environment best suited for African conditions
According to global-growing.org, 63% of Africa's sub-Saharan population lives in rural areas, compared with 26% of the European Union. This poses commercial challenges as these far-flung geographic areas are under-developed.

Furthermore, in 2014, about 66% of sub-Saharan Africans did not have formal bank accounts (ELIXIRR, June 2017). A lack of established financial systems, combined with poor or absent communications infrastructure, make it difficult to receive payment for goods and services on eCommerce platforms.

To alleviate this problem, many African countries use cash on delivery (COD). Transactions thus get completed as soon as the goods are delivered to the purchaser. In Nigeria, eCommerce platform providers Jumia and Tracklist have integrated COD payment methods into their online payment systems.

Mobile phone operators, such as MTN and Safaricom, have taken advantage of this development by introducing mobile money to close the digital divide. Safaricom's mobile money application M-PESA is very successful in East Africa, especially in Kenya, with more than 17-million clients and more than 40 000 agents across the country.

M-PESA's growth in its client base is attributed to its simple new account registration requirements, such as the ubiquitous voter's ID or passport, while traditional banks require onerous personal details, such as proof of address and employment.

It is not only citizens but also small-, medium- and micro-enterprises (SMMEs) that are struggling to find their way into the traditional banking system. Financial Technology (FinTech) start-ups are trying their best to turn the tide in the banking space. According to the Finnovating for Africa report, payments and remittances have grown to be the most popular sub-sector in Africa's FinTech space, followed by lending and financing.

Africa's conditions have made it necessary to leverage the large-scale use of mobile phones and mobile applications to conduct business over the Internet. The integration of mobile money into eCommerce platforms is a ground-breaking innovation that presents stark competition to other merchants, such as Visa, MasterCard and PayPal.

Some African countries still have very strict regulations that seek to restrict cross-border money transfer. They do this by imposing hefty duties that discourage any free flow of international trade. This is where the African Union's intervention is most critical.

The platform economy
Africa's eCommerce providers have a lot to learn from top cloud-computing providers, such as Microsoft, Amazon, IBM, Salesforce, SAP and Google.

Cloud computing conjures up software as a service (SaaS), which is a subscription-based service, but this is only one layer of the cloud. The abovementioned providers are involved in all three layers of cloud computing: software as a service (SaaS), platform as a service (PaaS) and infrastructure as a service (IaaS). These all present different levels of engagement.

Platforms further provide a space for third-party vendors to develop complementary applications, forming a formidable force that could end up being the core of an enterprise's supply chain. The third layer (IaaS) is more about infrastructure and involves hosting data in huge datacentres.

In 2015, Amazon launched Amazon Business, which is a re-skinned business-to-business (B2B) version of its renowned, tried-and-tested business-to-consumer (B2C) eMarketplace platform. This platform is disruptive in the way that companies conduct peer-to-peer business: it provides a better handle of procurement tail-end spend and companies gain exposure to hundreds of thousands of suppliers when they plug in their eProcurement systems, while buyers enjoy the look-and-feel of Amazon's shopping user interface.

Bring back trust, transparency and cost effectiveness into business transactions
It is not a far-fetched idea that blockchain technology could soon become embedded into eMarketplaces. Blockchain is a decentralised ledger that is characterised by a machine-to-machine network that records transactions in multiple databases. The records in blockchain are immutable and cannot be hacked, which addresses the issues of transparency and trust, as all participants can view and track records.

Furthermore, there is no need for intermediaries to form part of the cost of traditional eCommerce transactions.

An example of the above is the partnership between Overstock and Coinbase, in which Coinbase (a Bitcoin platform) facilitates payment on overstock.com. Bitcoin is a digital currency that uses blockchain technology.

Embrace the change
The digital wave is disrupting all industries. As a result, Africa must rise to and embrace the change.

While Africa is at the forefront of adapting technology to suit its own conditions, it is, simultaneously, playing technology catch-up with many of its global counterparts.

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