Kenya third in Africa’s e-commerce rankings despite local market woes

Design | Stanlaus Manthi | Source: Statista

Kenya has grown to be the third-biggest e-commerce market in Africa, driven by the increase in internet penetration that has made it an attractive market for investors.

Statista, a German data and business intelligence platform, has ranked Kenya as the third in the continent’s e-commerce market penetration with 46.7 percent. This is behind Egypt, which came top with a 55.4 percent e-commerce penetration and South Africa (49.4 percent). This is an improvement from being the fourth fastest-growing e-commerce economy in sub-Saharan Africa based on United Nations Conference on Trade and Development’s 2020 analysis.

Kenya’s improving rankings, however, come at a time when e-commerce companies continue to make big losses that have driven some out of the market. For instance, Jumia which had made accumulative losses of $87.8 million (Sh11.5 billion) by the end of 2021 recently closed down its food delivery business in Kenya alongside seven other countries in Africa.

Other players, including SkyGarden and OLX, encountered several challenges in the market, causing them to shut down or find buyers.

In 2020, Statista revealed that e-commerce in Kenya topped in digital revenues with a share of 76.1 percent estimated to the tune of $1.1 billion. The growth of e-commerce has been fuelled by the implementation of the digital economy blueprint targeting ICT sector and e-commerce activities.

Additionally, the proportion of Kenyans aged above 15 with a mobile money (68.7 percent) or bank accounts (50.6 percent) is grown over the years.

Design | Stanlaus Manthi | Compiled by John Waweru | Sources: Kepios, Statista

Notably, the number of individuals using the Internet has tripled in a decade from 7.48 million users in 2014 to 22.7 million in January 2024.

As a result, more Kenyans can now transact online due to the high usage of developed mobile money systems such as M-Pesa.

In a recent report by Kepios, e-commerce revenues were primarily drawn from electronics ($366 million), fashion ($280.3 million), toys and hobby ($45.5 million) and furniture ($32.2 million).

The report also indicated the share of Kenyan Internet users engaged in e-commerce activities. It put Kenyans purchasing a product online at 37.6 percent, followed by those using online price comparison services (15.7 percent).

However, some challenges inhibit e-commerce growth in Kenya such as regulatory framework following the introduction of digital service tax in 2020.

The lack of good fraud detection and prevention mechanisms in many African countries makes it difficult to develop and build trust in continent’s marketplaces, leading to delays in e-commerce adoption.

Therefore, there is a need to reduce the cost of technology, strengthen cybersecurity, make the regulatory environment favourable and improve the logistics to lure more companies into e-commerce.

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