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This report is part of Pyramid Research’s series of Africa & Middle East Insider Reports | September 2014 Edition
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M-Commerce in Sub-Saharan Africa: Making Sense of a Growing Mobile Business
Kerem Arsal | Manager, Africa & Middle East
Severin Luebke | Analyst
© 2014 Pyramid Research | Africa & Middle East Telecom Insider
Executive summary
Although the term m-commerce is widely used in both literature and news media, understanding of this industry is still lagging. This report provides an overview of the growing m-commerce market in Sub-Saharan Africa by looking at four aspects of mobile transactions.
About the author
Severin Luebke is the Pyramid Research Analyst for the Eastern and Southern African regions. He is responsible for producing in-depth analysis, forecasts and reports for all of his designated countries and has contributed to a number of consulting projects on a variety of topics, including wholesale growth, IT services and enterprise market sizing. Severin is also interested in customer retention programs as well as the growth of national broadband strategies. He works out of Pyramid’s London office.
• This report first outlines the current structure of the m- commerce industry in Sub-Saharan Africa. It looks at two types of m-commerce transactions, distinguishing between transactions completed on a mobile phone and purchases of goods or services using mobile money.
• The report examines the industry growing around both of these types of transactions. In order to assess the various aspects of the market, we use a four-step framework consisting of product identification, purchase and payment, delivery and post-purchase feedback.
• The section on product identification looks at the way companies in Africa are able to target consumers based on a set of criteria revealed through the online content viewed on their mobile phones.
• The second part of the report investigates the existing mobile-payment infrastructures in Kenya and Tanzania. It highlights the differences between the two systems and the potential for a payment platform targeting enterprises.
• The infrastructure deficit, both domestic and international, is a key cost to African companies looking to set up an m- commerce platform. The third section explores why companies have located in certain countries.
• The report also focuses on the interaction between companies and consumers, providing an understanding of the existing and potential relationships between the two.
• Finally, we summarize the key findings of the report and
highlight some of the issues that need to be overcome in
order for the industry to grow.
© 2014 Pyramid Research | Africa & Middle East Telecom Insider
• Pyramid Research expects mobile-money transactions to continue to become more common across the continent.
• We believe the key to growth will be an increase in the interoperability of payment systems offered by providers.
The combination of mobile money and mobile commerce has the potential to dramatically alter the way commercial transactions are completed in Africa.
• Improvements in mobile connectivity are increasing the number of potential shoppers online across Sub-Saharan Africa, but the mobile-money infrastructure remains a constraint for the industry.
Key findings
© 2014 Pyramid Research | Africa & Middle East Telecom Insider Although Tanzania has many mobile subscribers and a significant number of them, about 40%, have mobile-money services, no operator dominates the m-money market.
The largest operator in Tanzania, Vodacom, has only about XX%
of the market; the other big players, Airtel, Tigo and Zantel, have a combined XX%. Until recently, the most advanced mobile-money transaction service that operators were able to provide was bill payment with a number of partner organizations. This is a common service in Africa, and the number of partners was small.
In June 2014, the market was shaken when Airtel, Tigo and Zantel decided to combine their P2P transfer services. The reason the operators are implementing this interoperability is to enable their customers to send money to family members who may not be on the same mobile network. This offers the possibility of creating a payment system that lets consumers pay any merchant with a mobile-money account, regardless of which MNO they use.
In September 2014, there were no other markets in Africa with similar interoperability. Although there are still relatively few merchant accounts in Tanzania, this platform could increase the number of companies accepting mobile-money payments significantly.
EXHIBIT 18: Mobile market shares in Tanzania by operator, 2014
Purchase & payment: Tanzania highlights the potential for interoperability
Kenya is a unique case because of the dominance of Safaricom in providing the mobile money infrastructure. The situation in Tanzania is different, and cooperation will increasingly drive growth in this market.
Source: Pyramid Research (2014) Operator Mobile-money service
Vodacom Tanzania M-PESA
Airtel Tanzania Airtel Money
Tigo Tanzania Tigo Pesa
Zantel Ezy Pesa
Zantel XX%
TTCL XX%
Vodacom Tanzania
XX%
Tigo Tanzania
XX%
Airtel Tanzania
XX%
© 2014 Pyramid Research | Africa & Middle East Telecom Insider EXHIBIT 25: Cost of importing a 40ft dry container by port or
airport (US$)
0 - 999 1,000 - 1,999 2,000-2,999 2,000-2,999
The advantage of coastal areas is reflected in the existing and planned footprint of online retailer Jumia, which has focused on countries with relatively low transportation costs. Jumia's only exception is Uganda, where costs are relatively high: its infrastructure is, however, heavily dependent on the Mombasa and Dar es Salaam ports and by extension on the costal infrastructure in East Africa. Furthermore, Uganda’s economy has grown rapidly over the past few years and presents a strong long-term opportunity. The costal countries are also likely to have higher GDP per capita, which means there is likely to be more disposable income. This makes them more attractive to e- commerce providers, whose consumers will demand larger and more expensive products, which are hard to source locally.
Sources: World Bank (2014), Pyramid Research (2014)
Delivery: Transport cost are a key determinant of m-commerce operations
Costal countries have a significant advantage over land-locked countries when it comes to transportation costs. Their port and sometimes rail infrastructure means goods can be delivered faster and cheaper than in landlocked countries.
EXHIBIT 26: Countries with an existing or planned Jumia presence
Egypt Nigeria
Cameroon Uganda
Ghana Angola (not active yet)
Ivory Coast Senegal (not active yet)
Kenya Tanzania (not active yet)
Morocco XXX – XXX
XXX – XXX XXX – XXX XXX – XXX
© 2014 Pyramid Research | Africa & Middle East Telecom Insider Executive summary
Introduction
Defining mobile commerce
Mobile vs. electronic commerce in Africa The role of mobile phones in Africa
A framework for mobile-commerce transactions in Africa Product search and identification
Purchase and payment Delivery
Post-purchase feedback
Key findings and recommendations
Table of contents
© 2014 Pyramid Research | Africa & Middle East Telecom Insider EXHIBIT 1: Household consumption in three markets in Sub-Saharan
Africa (current US dollars)
EXHIBIT 2: Bank account and mobile-money account penetration in Africa 2012
EXHIBIT 3: Mobile-device transactions and mobile-money transactions
EXHIBIT 4: MasterCard Mobile Payment Readiness Index EXHIBIT 5: Activities most often performed on mobile phones in
Africa
EXHIBIT 6: Most popular e-commerce providers in Africa by website traffic ranking
EXHIBIT 7: Level of comfort with mobile advertising EXHIBIT 8: Where do you start product research?*
EXHIBIT 9: Website distribution of targeted ads EXHIBIT 10: Age distribution of consumers targeted EXHIBIT 11: Process of delivering m-advertising EXHIBIT 12: ATMs per 100,000 adults in four markets EXHIBIT 13: Conventional use of mobile-money transfers for
commerce
EXHIBIT 14: Percentage of cashless transactions by country EXHIBIT 15: Overview of mobile-money payment systems EXHIBIT 16: Documents required to open an account
EXHIBIT 17: Money transfer flow in an M-PESA merchant transaction EXHIBIT 18: Mobile market shares in Tanzania by operator, 2014 EXHIBIT 19: Merchant payment system duplication in Tanzania EXHIBIT 20: Supplier payment methods of informal businesses EXHIBIT 21: Customer payment methods of informal businesses
EXHIBIT 22: Overview of payment options in Kenya
EXHIBIT 23: Performance on the International Logistics Performance Index
EXHIBIT 24: Cost of importing a 40ft dry container by port or airport (US$)
EXHIBIT 25: Countries with an existing or planned Jumia presence EXHIBIT 26: Existing structural deficits in various regions globally EXHIBIT 27: Overview of minimum delivery costs
EXHIBIT 28: Jumia basic facts
EXHIBIT 29: Jumia’s key locations in Nigeria EXHIBIT 30: Number of Facebook users by country EXHIBIT 31: Overview of findings
Table of exhibits
© 2014 Pyramid Research | Africa & Middle East Telecom Insider
• This Insider Report provides a comprehensive examination of the value chain and some of the key companies involved in the growth of the mobile-commerce industry in Sub-Saharan Africa.
• The report looks at some of the existing m-commerce infrastructure in Africa as well as the industry’s potential for expansion.
• The report looks at a number of the competitors in the sector and assesses their business models and ambitions.
• The report discusses existing opportunities in the m- commerce market in region, providing a number of actionable recommendations for market participants.
• The report gives key recommendations on how companies should act if they are interested in this market.
Reasons to buy
© 2014 Pyramid Research | Africa & Middle East Telecom Insider
Methodology
This Telecom Insider Report comprises opportunity and competitive market assessments of m-commerce in Sub- Saharan Africa. Insights and data were captured through primary and secondary research:
• Primary Research consisted of interviews with key contacts at m-commerce players to gather insights on areas from consumption patterns to a market overview.
• Secondary, desk-based research ranged from data collection
on mobile data services and pricing plans of mobile
operators across the selected countries to a review of
industry trends; it also drew on Pyramid’s proprietary
databases for mobile market indicators. Our sources include
publicly available documents from market players, including
financial statements, quarterly and annual reports,
presentations and press releases, as well as information
from local and international authorities, online and print
media, and publications by infrastructure vendors.
© 2014 Pyramid Research | Africa & Middle East Telecom Insider
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