Stocktake: Africa’s ecommerce tipping point
The PayU report into Africa’s ecommerce acceleration is good news for the continent and increases opportunities for brands and retailers.Monday, 26 Apr 2021
The PayU report into Africa’s ecommerce acceleration is good news for the continent and increases opportunities for brands and retailers. There is no doubt that 2020 and Covid created the impetus for much of the retail innovation we are seeing and changed consumer behaviour.
Africa’s ecommerce boom
Multiple factors have combined to bring African countries to an ecommerce adoption tipping point, creating more opportunities than ever for online and omnichannel merchants. This is particularly true for merchants in fashion, beauty, education, and digital goods. This evolution has seen the emergence of more digitally savvy shoppers with strong demand for globally sourced goods and services in regions where parts of the population have access to increasing disposable income. These factors make Nigeria, Kenya, and South Africa particularly interesting for emerging ecommerce leaders from outside these markets: South Africa’s mcommerce is up 35%, Nigeria is Africa’s biggest ecommerce market, and Kenya is primed for massive growth. These are the key findings in a report published by PayU, the fintech and e-payments business of Prosus. Titled, The Next Frontier: the most promising markets for emerging e-commerce leaders in 2021 and beyond, the report highlights unprecedented consumer spending growth in 19 ecommerce in high-growth markets that have often been overlooked before 2020 in favour of more traditional, Western markets, including South Africa, Kenya, and Nigeria. The report examines four of the fastest-growing consumer sectors where PayU sees the biggest growth potential over coming years: beauty and cosmetics; fashion and gallantry; digital goods; and education.
Among the three African countries included in the report, South Africa has the highest internet penetration at 56%, with Nigeria and Kenya at 46% and 31% respectively. However, ecommerce penetration is at 37% in both Nigeria and South Africa, and at 25% in Kenya. This highlights significant potential for growth in ecommerce in these markets. The data reveals that Nigeria is by far the largest ecommerce market on the African continent in terms of the number of shoppers and revenue, with predicted consumer spend via this channel expected to be several times those of South Africa and Kenya combined. However, Kenya is primed for a boom in ecommerce, with the digital goods sector forecast to expand by 94% from 2019 levels by the end of 2021, and the fashion and gallantry sector expected to grow by a massive 160% over the same time. In South Africa, the market is embracing digitalisation and ecommerce, and there are abundant opportunities across every sector, but particularly for specialist merchants in beauty and cosmetics, and fashion and gallantry. “2020 was a year that lit a fire beneath online payments in South Africa, transforming ecommerce while creating immense economic pressure,” says Karen Nadasen, CEO of PayU South Africa. “There is growing attention on our continent, increased investment from large international brands and payment platforms. Retailers adapted quickly over the last year, and despite early bans on non-essential purchases, we saw significant growth in e-commerce, with more and more transactions being completed on mobile devices – up 35% on 2019 levels in South Africa as an example.”
According to PayU data, year-on-year online spend in beauty and cosmetics category in South Africa grew by 140% between 2019 and 2020. Spending particularly ramped up in Q3 2020, increasing by 229% compared to the same period in 2019, and is expected to grow by 69% to $169m by the end of 2021. In Nigeria, it’s expected to grow to $255m by the end of this year, and to $29m in Kenya in the same time frame. E-commerce spending on digital goods in South Africa is projected to grow by 46% between 2019 and the end of 2021, reaching $336m in total spend. This has been bolstered significantly by strong growth of 69% in 2020, with people consuming more digital media while spending time at home. In Nigeria, this sector is expected to grow to $811m by the end of 2021, and to $70m in Kenya – it’s a 94% increase on both markets comparing to 2019 results. Download the full PayU report.
SA’s amended plastic bag regulations
South Africa’s amended Plastic Bag Regulations and the new Extended Producer Responsibility Regulations raise concerns about double taxation in the plastic bag sector, say Garyn Rapson, Paula-Ann Novotny and Emma Bleeker from Webber Wentzel. In the past, retailers provided plastic carrier bags to consumers for free and incorporated the cost into the price of goods. But studies conducted by the former Department of Environmental Affairs and Tourism in 2002 shed light on a serious plastic waste problem, noting that, unlike other waste types, plastic had no organisation dedicated to its disposal and recycling. In 2003, under the ambit of the Environment Conservation Act, 1989, the Plastic Carrier Bags and Plastic Flat Bags Regulations (“Plastic Bag Regulations”) were published. These were followed by the introduction of a plastic bag levy in 2004 under the Customs and Excise Act, 1964. It was an indirect tax on the movement, manufacture or consumption of goods and services, which in this case retailers (specifically, supermarkets) charge on every sale of a plastic bag.
The Plastic Bag Regulations prohibit the manufacture, trade, and commercial distribution of domestically produced and imported plastic carrier bags and plastic flat bags unless the bags comply with the “Compulsory Specifications” (such as a minimum thickness of 24 microns), subject to certain exclusions. These design specifications were intended to make plastic bags more environmentally friendly and reusable. It became an offence for manufacturers, traders, and commercial distributors to contravene the Plastic Bag Regulations, and these regulations remain in force today.
In 2019, the Department of Forestry, Fisheries and the Environment initiated a review of the Plastic Bag Regulations to see how they could be improved. On 7 April 2021, Minister Barbara Creecy published the amended Plastic Bags Regulations, which included the introduction of a definition of “Post-consumer recyclate”. The amended regulations set goals for the minimum percentages of post-consumer recyclate that plastic bags should contain at certain intervals until they achieve a 100% post-consumer recyclate content by 1 January 2027. The amended regulations provide for a person to apply for an exception to the post-recyclate threshold. The new EPR Regulations are aimed at drastically reducing the amount of waste that enters landfill sites. Essentially, they require producers, manufacturers, importers, and brand owners to include an increasing amount of recycled material in their products.
The EPR Scheme for the paper and packaging sector and some single-use products applies to identified products that include an array of paper and paper packaging material, plastic packaging, biodegradable and compostable packaging, single-use plastic products (including if compostable or biodegradable), glass packaging and metal packaging. A producer, in terms of the proposed amendments to the EPR Packaging Scheme, is obliged to comply with the EPR Regulations if it places more than 10 tonnes of plastic bags into the market annually. Depending whether the brand operates/is domiciled within South Africa, the liable producer could be the manufacturer, converter, brand owner, licensed agent, importer or retailer. The lack of clarity on who bears the responsibility as the “producer” leaves much to be desired as set out in our update, Over-extension of Extended Producer Responsibility.
A notable consideration for producers is that an EPR fee is chargeable on identified items, which will fund the relevant EPR Scheme. This fee must be indicated as a sperate line item on every invoice and cash sale receipt for each purchase (or be publicly available on the PRO’s website in terms of the proposed amendments). This raises the question whether this EPR fee will be charged on plastic bags in addition to the existing plastic bag levy of ZAR 0.25. Other obligations for producers in terms of the EPR Regulations include having to submit information about the ‘lifecycle’ of their products, reduce the consumption of natural resources, and show that products are designed to be more environmentally friendly. Under the EPR Regulations, offenders found guilty of non-compliance can be imprisoned for up to 15 years, or fined, or both. Producers of plastic bags now face potential additional obligations under the EPR Regulations which could see a double “taxation” on plastic bags. The advantages of both the Plastic Bag Regulations and the EPR Regulations applying to plastic carrier and plastic flat bags is that they are the only waste type to be regulated both upstream and downstream. However, some plastic bags that do not fall within the scope of the Plastic Bag Regulations do fall within the ambit of the EPR Regulations, such as garbage bags. The implications of applying both sets of regulations to the producers of plastic bags is yet to be seen.
Choose your Simba flavour
Simba is launching a campaign among consumers to decide which chip flavours to save. A national social-listening survey, conducted online and focusing on six months of social-media conversations, found that people are nostalgic about food for the feelings, memories and experiences it evokes. These insights have informed a national campaign asking South Africans to save their favourite of three iconic Simba Chips flavours. The “Choose Me Or Lose Me?” campaign invites Simba fans to choose which of three time-honoured chip flavours – Salt & Vinegar, Tomato Sauce and Cheese & Onion – should survive. “Food is about creating experiences,” said Giulia Iorio-Ndlovu, Simba senior marketing director. “Many of our fondest memories and emotions are linked to food. We want to leverage these emotions to help us decide which flavour we savour the most.”
Consumers can buy a promotional pack, dial the number on the packaging and vote to stand a chance to win a share of R1 million in prizes and #SaveYourFlava. “Food – and snacking – is about more than just sustenance. It’s also about bonding, making memories and sharing experiences with family and friends,” said Iorio-Ndlovu. “We value the opinions of our consumers, who choose Simba to make their magic moments even more magical.
This week in numbers
A youth development programme has been launched by SAPICS, The Professional Body for Supply Chain Management, to address youth unemployment in South Africa; the skills deficit in the supply chain field; and to ensure that young professionals are industry-ready for job opportunities in the dynamic and increasingly critical supply chain management field. According to Stats SA, there is a staggering unemployment rate of 63.2% among young South Africans. The COVID-19 crisis has highlighted the importance of supply chain management, and the need to build a pipeline of talent in this skills-strapped field. Many graduates lack the skills, resources and experience, however, to capitalise on opportunities in the profession. “South Africa is currently facing a youth unemployment crisis, while at the same time experiencing a deepening supply chain skills shortage across many sectors,” comments Kholofelo Mabila, who is heading up the SAPICS Young Professional Committee that is driving the programme. Through the SAPICS Youth Programme, scholars, graduates and young professionals can join the association for just R250 for 12 months. They will regularly receive articles and information pertinent to them and enjoy other membership benefits, including free attendance of SAPICS webinars and the annual SAPICS Young Professional Conference. They will be able to attend SAPICS partner events at a discounted rate. They will also have access to the SAPICS career portal, through which youth members can upload their CVs and pursue advertised job opportunities at no cost to them. A series of webinars has been arranged for SAPICS’s 2021 Youth Programme. The topics that will be covered are CV writing, interview techniques, life and personal skills, workplace skills, up-managing, project writing skills and using social media as a tool. The topics will be linked to the supply chain industry. The 2021 virtual SAPICS Conference takes place from 24 to 26 August 2021. Visit https://conference.sapics.org/ for more information or to register.
QUOTE of the week:
“There are several property groups that are trying to move away from the siloed nature of the retailer’s tenant experience. They’re putting together forums and committees and generally getting retailers more involved in what happens in the shopping space. When these plans come to fruition, the consumer will only benefit,” said Craig Hannabus, strategy director at Rogerwilco, on Retailing Africa this week.
*Stocktake is a weekly roundup of current FMCG retailing and brand news, curated and edited by Retailing Africa Publisher & Editor, Louise Burgers. Keep the industry updated and send your announcements and news to: firstname.lastname@example.org.
Louise Burgers is the Publisher and Editor and Co-Founder of RetailingAfrica.com. She has spent over 20 years writing about the FMCG retailing, marketing, media and advertising industry in South Africa and on the African continent. She has specialised in local and Africa consumer trends and is a passionate Afro-optimist who believes it is Africa’s time to rise again and that the Africa Continental Free Trade Agreement (AfCFTA) will be a global gamechanger in the next decade.
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