Stepping up e-commerce would boost SA Inc
A market of 1.3-billion people could be tapped into if postal and internet services were made efficient and accessible.
ust over 25 years ago, on August 11 1994, a man went online and used his credit card to buy a Sting CD. Today this seems normal. Many customers subscribe to music streaming services for a monthly fee, which gives them instant access to 30-million songs.
A quarter of a century ago a CD held just 12-15 songs on average. Yet this purchase marked the first online sale and the start of a global era of e-commerce, an industry that reached $29-trillion (R433-trillion) in 2017 sales. Is SA taking advantage of an e-commerce market with about 1.3-billion users — a quarter of the world’s population?
The e-commerce market in SA is still nascent, contributing less than 3% to GDP. Consumers also purchase mainly from local e-commerce platforms. But the growth potential of e-commerce in the country is enormous. SA’s population is 57-million, including 39.3-million citizens aged 15 and over, 50% (19.9-million) of whom are internet users but only 20% (8.3-million) of whom are e-shoppers. The digital divide — a societal issue referring to those with internet access and those without — is to blame here.
In 2018 the World Bank named SA as the most unequal country in the world out of a list of 149. Mobile data, which is how the majority of the poor population access the internet, remains prohibitively expensive and the cost in SA is among the highest globally. According to Research ICT Africa, the price of data in SA is the highest among all leading African economies. One gigabyte of data in SA costs six times more than in Egypt, three times more than in Ghana and Tanzania, and twice as much as in Nigeria.
The SA government needs to prioritise investment in wireless and mobile broadband infrastructure to increase the number of people with access to the internet and decrease their data costs. Some progress was made on November 3 when the country’s telecommunications and broadcasting regulatory body released its guidelines for licencing of the 4G and 5G spectra. SA cellular operators have previously blamed the lack of spectrum for their high data prices.
The SA private sector should also use best practices from its counterparts in the BRICS grouping of major developing economies — Brazil, Russia, India, China. For instance, the largest telecommunications provider in Brazil provides a service through which e-commerce companies and others can offer customers free access to their websites, provided they watch a few adverts first. This goes a long way in mitigating data costs.
"One gigabyte of data in SA costs six times more than in Egypt, three times more than in Ghana and Tanzania, and twice as much as in Nigeria."
The other matter to consider is enabling legislation. SA does not have a unified policy that prescribes regulation of e-commerce. Rather, there are numerous policies applicable to e-commerce processes, such as electronic payments, protection of personal information of consumers and financing.
The department of telecommunications & postal services believes SA has some of the most progressive and liberal legislation in terms of e-commerce, compared with the rest of the continent and even BRICS, though it is not in one document. However, the department acknowledges the need for a more stable co-ordinating system between the government and its various agencies for dealing with e-commerce matters.
The government can help local e-commerce businesses by improving customs processing and the reliability of the SA Post Office (Sapo). Most SA retailers ship goods only within the borders of the country, due to slow customs processing and the unreliability of the Post Office. While courier services remain an option to deliver to the rest of Africa, the costs tend to be prohibitive for consumers. Post Office problems, including slow delivery and theft of parcels, are also the reason Amazon does not have an official presence in the country and only ships selected goods to SA through a courier service.
To further help local e-commerce businesses the government should adopt a strategy to support sustainable cross-border and intraregional e-commerce, including regional provisions on the alignment of e-transaction laws, streamlining of consumer protection policies and harmonisation of digital competition, data privacy and cybercrime policies. Such measures would allow SA e-commerce shops to expand by shipping to other African states.
At the moment though SA, along with India, has decided not to participate in global negotiations on a plurilateral e-commerce agreement, citing concerns about developing countries suffering from revenue losses due to customs duties.
Given the potential of e-commerce to drive economic growth and create employment, SA needs to prioritise it and create a conducive environment. However, it is necessary to bear in mind the multiple socioeconomic challenges the country faces. There are no shortcuts.
The fourth industrial revolution — defined by combining technologies and blurring the space between the physical, digital and biological spheres — is gathering pace in SA. But unless the government provides its people with the necessary tools, it will remain a pipe dream.
This article is based on the South African case study in the recently-released report ‘BRICS Plus E-Commerce Development Report in 2018’, published by the United Nations Industrial Development Organisation (UNIDO). The case study was written by Yarik Turianskyi and SAIIA-Konrad Adenauer Stiftung scholar at the time Cayley Clifford.
(Main image: young woman ordering Christmas gifts online - stock photo/Getty Images)
The opinions expressed in this article are those of the author(s) and do not necessarily reflect the views of SAIIA or CIGI.