African e-commerce earnings are expected to reach $59.18 billion by 2027, with a 10.4% annual growth rate.

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According to a report from TechCabal Insights titled “Future of Commerce: Outlook for 2024,” active e-commerce platforms in Africa are expected to generate a total revenue of $59.18 billion by 2027. This marks a significant increase from $32.49 billion in 2022 and $13.58 billion in 2018. The report anticipates a consistent annual growth rate of 10.4% in this revenue from 2023 to 2027, driven by a growing number of online shoppers, the proliferation of e-commerce platforms, and the continent’s expanding population. During this period, the number of African online shoppers is projected to grow by an average of 17.9% each year, reaching 609.3 million buyers in 2027, compared to 387.5 million in 2022.

Consequently, the e-commerce adoption rate across the continent is predicted to increase from 32% in 2022 to 44% by 2027, representing a significant 12-percentage point rise over five years. This increase is attributed to the growing number of mobile internet users and the increasing use of digital financial services such as mobile money and internet banking. The electronics sector is expected to lead the overall e-commerce revenue growth in the coming years in Africa, with sales projected to rise from $13.93 billion in 2023 to $20.08 billion in 2025. Following closely are segments like fashion items, which are expected to achieve sales of $11.44 billion in 2025, compared to $8.46 billion in 2023, as well as toys & leisure, personal care, and furniture.

Promising Outlook:

The report also reveals that 129 African startups specializing in online commerce managed to raise a total of $948.5 million in funding between January 1, 2019, and June 30, 2023. Notably, the Kenyan online platform Wasoko, which focuses on food products, secured the largest funding amount of $125 million.

However, despite these funding rounds, many of these emerging companies are grappling with significant operational challenges and are struggling to achieve profitability. Consequently, Zumi, Wabi, and Sendy have ceased their operations, while Copia Global, Twiga Foods, and Marketforce have respectively laid off 700, 494, and 54 employees since the beginning of 2022.

In the meantime, Jumia,

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despite implementing an aggressive cost-cutting program, is still facing difficulties in reaching profitability, primarily due to rising inflation in the various markets it serves.

It’s important to note that losses in the early years of e-commerce platforms are not unique to African startups. For instance, the American giant Amazon took eight years to become a profitable company.

The report envisions a positive future for African startups operating in the e-commerce sector in the coming years. This outlook is optimistic, particularly as these companies are expected to leverage the growing prevalence of electronic payments in the continent, improved infrastructure and logistics facilitated by the African Continental Free Trade Area (AfCFTA), and the ongoing development of Buy-Now-Pay-Later (BNPL) services. These advancements aim to mitigate the challenges of limited access to credit.

Source: Public Management