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Key Contributors to the rise of eCommerce in Africa

E-Commerce has rapidly grown in the recent years across Africa and the world at large.


This is conceivably because of the plentiful positive outcomes it has had on various industries including travel, tourism, and hospitality sectors, with a ripple effect on entire economies especially in developing countries. These include but not limited to increased revenue returns as businesses diversify their clientele reach, as well as efficient and faster transactions both online and via mobile money solutions.

For instance, the popularity of the famed HYPERLINK "https://travel.jumia.com/en-gb/kenya-black-friday-deals?utm_source=WebEngage&utm_medium=onsite&utm_campaign=BFSH"  Black Friday Sales in Africa that take place on every 25th November on various platforms such as Jumia Travel, is in itself a success story on eCommerce. Statistics by the leading online hotel booking company show that in 2015, it registered record performance on Black Friday having attracted more than 5 million visitors in Africa with a record of 250 000+ gross orders.

 

Bigger impact is expected this year, with mind-blowing deals already running since 14th November, with the actual Black Friday taking place on 25th November, 2016. That said, various factors have contributed to the rise and success of eCommerce in Africa, as discussed below.


Increasing mobile penetration
Statistics by GSMA Intelligence, the definitive source of mobile operator data, indicate that 46% of the population in Africa subscribed to mobile services at the end of 2015, which is equivalent to more than half a billion people. In Kenya alone, mobile penetration stood at 88.1% with 37.8million subscribers in 2015/2016, according to CAK. The adoption of mobile and smart devices has largely contributed to the growth of ecommerce due to the easy availability and accessibility of real-time information on the go.

Better connectivity/Internet growth
GSMA Intelligence also reports rapid growth in mobile internet adoption in Africa with the number of mobile internet subscribers having tripled over the last five years. By the end of 2015, 300 million mobile internet subscribers were registered, and an additional 250 million are expected by 2020.
The implication of this is that more people have access to more online services and products, which in turn boost eCommerce.

However, note that about 65% of mobile subscribers in Africa still operate feature phones according to Pew Research Center. Therefore, there’s need to develop ways to diversify operations to both online and offline processes, thus fully tapping into the market.

A digital savvy population
There is a growing population of DIY (Do It Yourself) millennials who are extremely ‘digitally’ smart. They seek relevant online content that will engage their energetic and curious mind. They are also after memorable online experiences, be it while doing an online purchase, a hotel booking, ordering food online etc. Online service providers are therefore propelled to give nothing but the best, as well as offer personal experiences to retain customers and stay competitive.

Mobile Money Solutions
Whether sending money to family or friends, booking hotels online or buying goods online, mobile payments which are done via mobile devices provide a convenient and efficient process for users. In Africa, the mobile money market is predicted to be worth $14.27 Billion by 2020. Mobile payment is highly preferred due to its convenient. For instance, approximately 60% of customers on Jumia Travel  HYPERLINK "https://travel.jumia.com/en-gb/kenya-vacation-packages" pay for their bookings via mobile money, including Mpesa in Kenya and Tigo Pesa in Tanzania.

Increased Consumer Spending
A McKinsey Global Institute analysis projects that by 2025, Africa’s household consumer spending will reach US$2.1Trillion, representing an increase of 45% from 2015. This presents promising business opportunities in a wide range of consumer-facing industries from entities offering healthcare to housing and leisure (travel). Projections show that Sub Saharan Africa (SSA) will contribute 67% (US$ 433B) of Africa’s total growth in consumer spending between 2015 and 2025 which is projected at US$ 645B in total.

Foreign Investment
Upon identifying Africa’s potential in ecommerce development, both angel investors and companies are playing an important role by investing in ecommerce businesses in the continent. Driven by the amazing innovative talents, tech startups are on the rise, and require constant mentorship and funding. For instance, Millicom, MTN, AXA, and Orange have equity stakes in Jumia, the parent company of some of Africa’s leading e-commerce platforms, including Jumia Travel, Jumia Mall and Market, Jumia House and Jumia Food.

Josephine Wawira is Global PR Assistant – Jumia Travel
 

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Business

Fiscal policy: new taxes, levies for 2021

25th January 2021
Fiscal-policy-new-taxes,-levies-for-2021

Government has made some adjustments0 in fiscal policy, as some taxes and levies are to be imposed from the beginning of March this year. It is expected that effective 1st March 2021, government will announce an increase on fuel levy followed by increases in tax items including VAT and tax on sugar-sweetened beverages.

FILL UP AND PAY CAESAR TOO AMID FUEL CRISIS

Ministry of Mineral Resources, Green Technology and Energy Security in 2017 approved 17.5 thebe per litre which will be in addition to the already existing fuel levy of 13.5 thebe per litre.
Apparently Botswana consumes 1.2 billion litres of petroleum products and the levy could raise P210 million per annum which could be used to; purchase of stocks for Botswana Oil Limited, meet insurance premiums for government oil storage facilities and construction of other strategic storage facilities around the country.

According to investment manager Kgori Capital, the new tax might not immediately lead to an increase in fuel pump prices as the National Petroleum Fund (NPF) might be able to cushion the effect of the tax in the short term.  Kgori Capital said this however could see increased outflows from the fund which could be unsustainable over the long term.

Recently government released a ‘National Fuel Supply Update’ announcing that the shutdown of three refineries in South Africa, making Botswana look elsewhere to increase sourcing from alternative suppliers. As assurance government stated that it is currently able to meet fuel demand, that back-up is available, it would only be deployed if the situation deteriorates.

Other determinants of fuel price dynamics could be the Rand vs US Dollar. This week on Thursday the Rand rallied for another day, retaining gains from the previous day, as risk appetite stayed high on hints that the new US administration would be in support of a huge stimulus to uplift the economy.

On Thursday commodity news oil prices were supported for yet another day on Wednesday, climbing above US$56 per barrel in mid-afternoon trading, supported by expectations that the incoming US administration would approve a large stimulus package to boost the economy and in turn support oil demand.

According to stockbroker Motswedi Securities, also supporting the commodity’s pricing were ongoing supply cuts by the Organization of Petroleum Exporting Countries as well as expectations that US crude inventories are forecast to decline for the week ended 15 January 2021.

Last week the FNBB researchers said they expect a possibility of a rebound in oil prices as economic activity recovers this year. FNBB said it is probable that fuel prices will be increased to mimic international oil price movements.

First National Bank of Botswana Quantitative Analyst, Gomolemo Basele, in his recent analysis of December inflation, said over the course of this year inflation should receive some upward pressure from volatile items, particularly the transport group index as the fuel levy is anticipated to increase from P0.12 to P1.12, effective 1st March 2021.“We also expect further pressures on the administered prices of water and electricity, as well as increases in tax items,” said Basele on behalf of his FNBB economy research team.

VAT TO GO UP SOONER THAN EXPECTED, JOB LOSSES

Amid being met with a lot of opposition, FNBB expect an increase in VAT from 12 percent to 14 percent, effective 1st April 2021. Last year permanent secretary in the Ministry of Finance and Economic Development, Wilfred Mandlebe told Parliamentary Committee on Government Assurances (PCGA) that as part of economic recovery from Covid-19 shocks, VAT will be increased from 12 percent to 14 percent in the next financial year.

This is despite Basele in his December inflation report warning that the demand side will remain muted this year as the bulk of Botswana’s labour force will be faced with unemployment challenges as well as pressures on disposable income levels due to diminished economic activity.

State of Emergency which bars employers to lay off employees might end the same time when government imposes an increase in VAT, this is why FNBB expects inflation to average 2.8 percent in 2021 and anticipate that the Bank of Botswana will remain accommodative this year and cut the bank rate by 25 basis point.

INTRODUCTION OF SUGAR LEVY

The beginning of the next financial year will see tax on sugar-sweetened beverages be 2 thebe per gram over and above 4 grams per 100 millilitres. This tax will be implemented by a Statutory Instrument to be issued by Ministry of Trade and Investment.

According to World Bank last year September, sugar-sweetened beverages (SSBs) are non-alcoholic beverages that contain caloric sweeteners, such as sucrose (sugar) or high-fructose corn syrup (HFCS). SSBs include carbonated soft drinks (carbonates), energy drinks, concentrates or syrups, sports drinks, less than 100 percent fruit or vegetable juices such as juice drinks or nectars, ready-to-drink teas and coffees, sweetened waters, and milk-based drinks.

SSBs are said to be the main factors of overweight and obesity which leads to a number of chronic non-communicable diseases (NCDs), including coronary heart disease (CHD), stroke, diabetes, and at least 12 cancers (cancer of the mouth, pharynx and larynx, oesophagus, stomach, pancreas, gallbladder, liver, kidney, prostate, colorectal, endometrium, ovaries, and post-menopausal breast).

In his first State of the Nation Address (SONA) in 2018, President Mokgweetsi Masisi blamed the increasing incidence of people who are overweight and obese amongst the Botswana population on the increased consumption of sugar sweetened products, especially beverages.

HOUSING INFLATION TO SOAR INTO THE NEXT FINANCIAL YEAR

Botswana Housing Corporation is expected to rise to the occasion this year by taking more from Batswana pockets in the coming financial year. The housing utility will adjust rentals by more than 100 percent margin effective 1st April 2021.

This could further spike future inflation into the housing and utilities group index which in December registered a rise of 0.3% m/m owing to higher costs associated with materials for the maintenance and repair of dwellings (0.9% m/m).

INFLATION TO REMAIN SUBDUED AND UNDER THE OBJECTIVE RANGE

The December 2020 inflation remained unchanged at 2.2%, bringing the 2020 inflation average to 1.9%. While Basele believes the 2021 inflation should receive some upward pressure from volatile items, particularly the transport group index as the fuel levy is anticipated to increase from, he said the demand side will remain muted this year as the bulk of Botswana’s labour force will be faced with unemployment challenges as well as pressures on disposable income levels due to diminished economic activity.

This moves FNBB to expect inflation to be just below the 3-6 objective range and be lower at 2.8 percent, the bank’s researchers further anticipate that the Bank of Botswana will remain accommodative this year and cut the bank rate by 25bp.

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Business

Gov’t throws weight behind CBM industry

25th January 2021
Anthony-TONY-GILBY

Botswana Government through Ministry of Mineral Resources, Green Technology & Energy Security (MMGE) has underscored its intention to support power generation through Coal-Bed- Methane (CBM).

This week Tlou Energy, one of the publicly listed companies exploring CBM power generation revealed in a circular to shareholders that the Ministry’s commitment to support the industry was a significant push to its ambitions.

Tlou Energy is focused on delivering power solutions to Botswana and southern Africa to alleviate some of the chronic power shortage in the region. The company is currently developing projects using gas and plans to add solar power projects to provide a cleaner power source. Botswana has a significant energy shortage and generally relies on imported power and diesel generation to fulfill its power requirements.

Last year Tlou Energy and state owned Botswana Power Corporation (BPC) singed a Pilot Power Purchase Agreement (PPA) for the first 2 Mega Watts of power from the Lesedi project. A grid connection agreement was also signed which enables the injection of power into the BPC grid.

These according to Tlou are key agreements that will facilitate development of the power project and the sale of first power. The company says things are promising for a larger power purchase agreement. The BSE listed energy outfit revealed that, “Botswana’s Ministry of Mineral Resources Green Technology and Energy Security (MMGE) has provided confirmation that negotiations on a larger PPA are due to commence in February.”

Tlou’s Managing Director, Mr Tony Gilby commented, “It is great to see that Botswana is open for business and the Government is motivated to get the gas industry up and running.” Gilby revealed that his company plans to start development of the Lesedi project as soon as possible noting that “confirmation of the Government’s enthusiasm to provide the necessary support to ensure commercial development of CBM is very well received.”

“In addition, we have also recommenced negotiations with Botswana based project financiers this month as we aim to close a deal for funding as soon as possible. After what was an extremely challenging year the Company is already making progress in 2021 and anticipate further advancement on all fronts in the coming term. We look forward to updating the market with further developments in due course,” he said.

Tlou said it has received written confirmation from MMGE of the “intention of MMGE to fast track the development of Coal Bed Methane (CBM) in Botswana.” MMGE also stated that it is “happy to provide the necessary support to ensure commercial development of CBM.”

In relation to the current tender to implement up to 100MW of CBM fired power plants MMGE has stated that negotiations with preferred bidders are due to commence in February 2021. The letter also acknowledged that the “Government is fully committed to seeing this project coming to fruition, as it will promote the gas industry, contribute toward import substitution, as well as to improve the livelihood of Batswana.”

“We welcome this update and look forward to negotiation and finalization of the tender process in the near term,” Tlou Energy Directors said.In 2018, MMGE issued a Request for Proposal for Development of up to 100 Mega Watts of CBM fueled power plants in Botswana.

Tlou submitted a comprehensive response to the tender including a plan to develop the project in stages, as well as outlining project feasibility, proposed field development, installation of power generation facilities and supply of power into the grid in Botswana.

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Business

KBL shut down operations indefinitely

20th January 2021
KBL

Kgalagadi Breweries Limited (KBL) has suspended its operations indefinitely owing to the tough trading conditions occasioned Government decision to ban the sale of alcohol at the beginning of this month.

The brewer announced the decision today (Wednesday). KBL Corporate Affairs Manager Madisa said from the 25th January 2021 only a minimal number of critical roles will continue to be staffed and all other operational activity will stop.

KBL also acknowledged the impact this will have on the overall supply chain and those whose livelihoods depend on the beer industry and requests their understanding.

The current ban is expected to end on 31st January 2021, KBL said should the ban be extended past this date, suspension of its operations will continue.

KBL explained that its Tuesday meeting with suppliers was to align with them that due to the current situation, the brewer will suspend payments as of 6th February 2021, up for review pending the outcome of the current alcohol ban.

“However, it is regrettable that this latest total ban on alcohol sales has resulted in the suspension of KBL’s operations, which will remain in place for as long as the alcohol ban persists. KBL continues its efforts to engage government on this critical issue, which is having an enormous impact on the industry and its extensive value chain,” said Madisa.

On Tuesday afternoon, KBL conducted an ‘emergency meeting’ with its suppliers addressing some business decisions the company has made amid the current alcohol ban. Botswana has several alcohol bans since the first lockdown of March.

Mostly alcohol has been banned as a measure of curtailing the spread of Covid-19 and government then lived with putting stringiest operating hours for alcohol sales and distribution for a long time. Next week Monday KBL will be shutting down its operations, after a two weeks ban on liquor.

Sources say ever since the 4th of January 2021 when the December curfew regulations were extended, KBL has been brewing stacks of liquor for stockpiling. This is solely the reason why the brewer decided to close shop and stop manufacturing alcohol, because KBL’s depots no longer needed supply. On Tuesday suppliers were told to stop supplying KBL as next week the plant will be closing.

Air of uncertainty was hovering in the KBL plant premises on Tuesday as many workers feared mostly for their jobs. No one knows when alcohol ban will be lifted or if Botswana is going for a hard lockdown following the recent surge of Covid-19 infections. Botswana has 18,630 coronavirus cases, with 88 deaths and 14,624 recoveries.

KBL owner Botswana Stock Exchange (BSE) listed Sechaba Holdings came into contact with response to Covid-19 in March when Botswana recorded its first cases and that was the time when the company was doing well for years since the shedding of alcohol levy.

Sechaba associates, KBL and Coca Cola Beverages Botswana (CCBB), that time according to the holding company in its abridged financial results for the year ended 31 December 2019, continued to forecast growth in 2020 notwithstanding the challenges related to COVID-19.

Sechaba that time saw the business environment has been generally positive including relationship with stakeholders and the associates continue to manage the performance and business continuity risks.

Ten months ago the brewer underestimated the damage that can come with the pandemic and expected Covid-19 disruptions to be “temporary and the business will survive.”

That time Sechaba’s sole associate, KBL operates traditional beer breweries, alcoholic fruit beverages and a clear beer brewery.

In the period that just ended in December 2019, KBL contributed 72 percent to Sechaba’s revenues while CCBB contributed 28 percent. KBL also performed high in contribution to profit after tax with a share of 74 percent while CCBB contributed 26 percent.

Sechaba holds 49.9 percent in the local headline alcohol brewer KBL and 49.9 percent in the non-alcoholic drinks associate, CCBB. Sechaba holds 60 percent of the shares of KBL while SABMiller Botswana B.V. holds 40 percent. SABMiller Plc has management control in the operating company. The Botswana Development Corporation has a 25.6 percent shareholding in Sechaba Breweries Holdings Limited.

The glitter on the glass of KBL or Sechaba, is of December 2019 financial results which was downplayed and turned into a bearish affair in the financial results for the half year ended 30 June 2020. For those results, there was a spill in profit by Sechaba cash cow KBL by 72 percent while CCBB recorded a decline in profit by 15 percent, both and respectively in correspondence with the same period in 2019. All this downfall comes down to a loss of 60 percent of profit by the parent company. That was more than the 60 percent fall expected before the release of results.

In September during the release of the June 2020 results, Sechaba admitted that the intervention put by government since April, to fight the Covid-19 pandemic, negatively impacted its business performance and its associates, KBL and CCBB bore the full brunt. Revenue collected for KBL was lower by 37 percent while for its sister associate; CCBB, the numbers were down by 7.1 percent. This is the time when sale of alcohol was banned and manufacturing of soft drinks was not part of essential services.

Sechaba Chairman, Bafana Molomo last year said even though Covid-19 interventions would have an impact on the associates, this impact is expected to be temporary and the businesses will survive.

“However, it is advised that the situation is changing constantly and that it will be monitored closely. The Group’s associates continue to forecast growth in 2020 notwithstanding the challenges relating to Covid-19. The business environment has been generally positive, and the Group continues to enhance relationships with all stakeholders. The associates continue to manage the performance and business continuity risks,” he said.

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