High costs, poor infrastructure scupper regional e-commerce growth

High transport costs and inefficient express logistics infrastructure could scupper e-commerce growth in Africa, particularly for last mile deliveries. That’s the view of a number of regional and global players in the e-commerce space, although one online retailer believes there has been some improvement – at least in South Africa. According to the McKinsey Global Institute, recent data shows that African consumers could be buying $75 billion worth of goods and services online by 2025.  However, researcher and

business writer for online news site Practical Ecommerce, Marcia Kaplan, highlighted that the lack of a national street address system in most African countries was “a major obstacle”. She pointed out that the delivery person and the customer often had to stay in constant touch by mobile phone on the day of delivery. This, in combination with the lack of paved roads, keeps global logistics companies out of most countries. “Last-mile delivery is extraordinarily expensive, and transportation costs are at least three times higher than they

are in developed countries,” she noted. Alibaba founder and chairman, Jack Ma, agreed. Following a fact-finding trip to southern and East Africa late last year, he remarked that Africa needed to invest in its logistics, infrastructure and payment systems to enable the growth of e-commerce on the continent. Global realtor Knight Frank estimated that the warehousing and logistics sector in Africa had catapulted 24% over the past decade, due to the growing shift towards e-commerce. The firm added, though, that poor transport infrastructure

and traffic congestion remained a key area of concern for online portals as well as the logistics companies with which they have partnered for deliveries One of their reports states that “transport costs in Africa can represent as much as 50-75% of the retail price of goods”. Kevin Tucker, founder of the online e-commerce price comparison website, Price Check, said that many of the “fundamental issues” that were hindering rapid growth in e-commerce adoption in South Africa had been addressed, including logistics.

“Logistics infrastructure has come a long way with many opportunities to ship deliveries around the country,” he said. He also highlighted that while it was still not cheap to subsidise deliveries for merchants, not forgetting the effect this had on profit margins, it was “generally accepted” that this was a necessity in South Africa because of the dysfunctional postal service. Tucker added that technology and the adoption of innovation could address some of these issues through lastmile drone delivery.