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In this article we ash the question, what exactly is holding back South Africa's online market? South Africa is the most developed economy in South Africa but the ecommerce sector in South Africa is growing a lot slower than expected. The question is why?
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So what's holding back South Africa's online market
The continent of Africa is increasingly being looked at as one of the most exciting emerging markets in the online space. Several nations have achieved very high levels of internet penetration, opening up online services for banking, shopping, entertainment, and even sports. However, even though South Africa is often considered to be one of the more developed nations of the Sub-Sahara region, its online market is either seen as underdeveloped or incredibly slow-growing.
SouthAfricanMI.com has shown that millions of phones are imported to the country each year, with the vast majority of them coming from China – thus implying that the devices are relatively cheap. Despite this, only 38.19 million people of the 59.67 million population are internet users, showing a year-on-year increase from 2020 to 2021 of just 1.7 million. It’s also apparent that smartphones are the main access point, with some 36 million of the 38 million internet users being active mobile internet users.
The highest percentages for what people in South Africa use the internet for belong to emailing, banking, research, reading the news, and social networking. These are all very cheap activities in terms of data usage and time consumption, with the more demanding, time-consuming activities like shopping, downloads, instant messages, online radio, blogging, and gaming all being rather low in usage despite the platforms being in place. So, what is it that’s holding back South Africa’s online market, and will the situation change in the coming years to create a bustling, high-value online economy?
SouthAfricanMI.com has shown that millions of phones are imported to the country each year, with the vast majority of them coming from China – thus implying that the devices are relatively cheap. Despite this, only 38.19 million people of the 59.67 million population are internet users, showing a year-on-year increase from 2020 to 2021 of just 1.7 million. It’s also apparent that smartphones are the main access point, with some 36 million of the 38 million internet users being active mobile internet users.
The highest percentages for what people in South Africa use the internet for belong to emailing, banking, research, reading the news, and social networking. These are all very cheap activities in terms of data usage and time consumption, with the more demanding, time-consuming activities like shopping, downloads, instant messages, online radio, blogging, and gaming all being rather low in usage despite the platforms being in place. So, what is it that’s holding back South Africa’s online market, and will the situation change in the coming years to create a bustling, high-value online economy?
Source: Pixabay
Slow-growing online shopping crowd
It’s not often that the internet becomes accessible to tens of millions of people and a drift from brick-and-mortar retail to eCommerce doesn’t take place rather swiftly. In South Africa, though, eCommerce has been unexpectedly slow-growing. Online shopping offers merchants the chance to reach customers from across the country, and the world, through convenient storefronts. In developed online spaces, almost every land-based store also has a website or at least a sturdy social media presence to tap into this potential.
While nearly 40 percent of South Africans are expected to go online to shop in 2021, following an unprecedented uptick in eCommerce use last year, eCommerce market revenue is only projected to hit US$4.6 billion. By comparison, the nation’s GDP in 2019 held up at just over US$351 billion. Perhaps the main driver of this is that the vast majority of businesses in South Africa are small and medium-sized enterprises. These individual business entities comprise some 98 percent of businesses in the nation and employ over half of the workforce.
Competition remains at this level, with the individual businesses being somewhat hesitant to open an eCommerce line while shoppers are happy to stick to the established form of shopping. The local mall is still where many go for the day to enjoy some shopping, browse the stores, and make impulse purchases. As detailed by Accenture.com, around 76 percent of South Africans attend a mall at least weekly, and 63 percent prefer to make purchases at the mall. As such, there’s been little visible need to invest in eCommerce so far.
That’s not to say that some companies aren’t already positioning themselves in the ZA eCommerce market to be ready for a potential surge. Sites like TakeALot.com, Makro.co.za, Game.co.za, and Woolworths.co.za are already seeing millions of monthly users, cultivating the next generation of online shoppers. Many industry experts who have been part of the online space for years, such as ActionGear.co.za co-founder Warrick Kernes, say that businesses need to position themselves now for the upcoming surge.
While nearly 40 percent of South Africans are expected to go online to shop in 2021, following an unprecedented uptick in eCommerce use last year, eCommerce market revenue is only projected to hit US$4.6 billion. By comparison, the nation’s GDP in 2019 held up at just over US$351 billion. Perhaps the main driver of this is that the vast majority of businesses in South Africa are small and medium-sized enterprises. These individual business entities comprise some 98 percent of businesses in the nation and employ over half of the workforce.
Competition remains at this level, with the individual businesses being somewhat hesitant to open an eCommerce line while shoppers are happy to stick to the established form of shopping. The local mall is still where many go for the day to enjoy some shopping, browse the stores, and make impulse purchases. As detailed by Accenture.com, around 76 percent of South Africans attend a mall at least weekly, and 63 percent prefer to make purchases at the mall. As such, there’s been little visible need to invest in eCommerce so far.
That’s not to say that some companies aren’t already positioning themselves in the ZA eCommerce market to be ready for a potential surge. Sites like TakeALot.com, Makro.co.za, Game.co.za, and Woolworths.co.za are already seeing millions of monthly users, cultivating the next generation of online shoppers. Many industry experts who have been part of the online space for years, such as ActionGear.co.za co-founder Warrick Kernes, say that businesses need to position themselves now for the upcoming surge.
Source: Unsplash
Entertainment is big business in the online space and continues to be a growing industry across South Africa. In 2019, entertainment and media revenues climbed to over US$9.5 billion and were tipped to grow to over US$11.7 billion over the next few years. People are more than willing to pay for entertainment, and the internet is filled with stuff to enjoy.
Among the top-grossing mobile games, there are online shooters like PUBG Mobile, Call of Duty: Mobile, and Garena Free Fire, as well as less-connected puzzlers like Gardenscapes and Candy Crush Saga. While these games are popular, they’re being held back by the nation’s data pricing. They’re top-grossing titles within the country, but globally, South Africa remains a minor player. Still, South Africans continue to seek low-data-cost entertainment platforms that have a presence in the market.
Perhaps the primary player in this regard is online sports betting. The cost-effective platforms for data can be easily accessed and accept popular South African payment methods, like eWallets and cards, but the main driver is the prestige of the brands offering betting to the nation. As detailed by SBO.net, only online sports betting is legal, gambling-wise, in South Africa. So, their top-rated sites focus on sports betting to perfect the offering for South African bettors, making sure that all of the markets are on mobile-compatible sites, but that accessing the platform isn’t taxing on mobile data.
These lighter sites are far more accessible in the current mobile ecosystem, with many industries having vast potential to grow should data become cheaper. Music streaming is of very high interest in South Africa, with the likes of Spotify.com seeing the demand but relatively low usage. While companies do their best to make aspects like subscriptions low-cost, they can’t decrease file sizes or streaming requirements, making data cost the biggest barrier to all forms of streaming, from music to video.
When you look at the data cost comparison reports, it’s clear to see why the current state of play in South Africa would inhibit online platforms that can’t offer lighter ways to access the entertainment. As shown by Cable.co.uk in mid-2020, South Africa ranks 148th from 228 nations based on the cost of mobile bandwidth. While cheaper than the big two North American nations, ZA’s US$4.30 per gigabyte of data is far more expensive than in Tanzania, Nigeria, Kenya, and Rwanda. The appetite is there for online-based entertainment, but the data costs don’t make it accessible.
South Africa’s online economy has the potential to rank among the biggest in Africa. However, a very slow rate of adoption for eCommerce and high data costs are inhibiting its growth. Of course, should data rates come down, more of the small and medium enterprises would be more encouraged to set up shop online.
Among the top-grossing mobile games, there are online shooters like PUBG Mobile, Call of Duty: Mobile, and Garena Free Fire, as well as less-connected puzzlers like Gardenscapes and Candy Crush Saga. While these games are popular, they’re being held back by the nation’s data pricing. They’re top-grossing titles within the country, but globally, South Africa remains a minor player. Still, South Africans continue to seek low-data-cost entertainment platforms that have a presence in the market.
Perhaps the primary player in this regard is online sports betting. The cost-effective platforms for data can be easily accessed and accept popular South African payment methods, like eWallets and cards, but the main driver is the prestige of the brands offering betting to the nation. As detailed by SBO.net, only online sports betting is legal, gambling-wise, in South Africa. So, their top-rated sites focus on sports betting to perfect the offering for South African bettors, making sure that all of the markets are on mobile-compatible sites, but that accessing the platform isn’t taxing on mobile data.
These lighter sites are far more accessible in the current mobile ecosystem, with many industries having vast potential to grow should data become cheaper. Music streaming is of very high interest in South Africa, with the likes of Spotify.com seeing the demand but relatively low usage. While companies do their best to make aspects like subscriptions low-cost, they can’t decrease file sizes or streaming requirements, making data cost the biggest barrier to all forms of streaming, from music to video.
When you look at the data cost comparison reports, it’s clear to see why the current state of play in South Africa would inhibit online platforms that can’t offer lighter ways to access the entertainment. As shown by Cable.co.uk in mid-2020, South Africa ranks 148th from 228 nations based on the cost of mobile bandwidth. While cheaper than the big two North American nations, ZA’s US$4.30 per gigabyte of data is far more expensive than in Tanzania, Nigeria, Kenya, and Rwanda. The appetite is there for online-based entertainment, but the data costs don’t make it accessible.
South Africa’s online economy has the potential to rank among the biggest in Africa. However, a very slow rate of adoption for eCommerce and high data costs are inhibiting its growth. Of course, should data rates come down, more of the small and medium enterprises would be more encouraged to set up shop online.