The pandemic has been a tough time for Africa’s online businesses, but in the long-run it may help them find another gear, writes Liam Taylor in Kampala
The Covid-19 crisis brought many challenges to Tony Ayebare’s meat business, but it also came with a lesson: “it has taught us how to adapt”. In 2018 the Ugandan entrepreneur founded Online Butchery, a website selling quality meat to hotels, restaurants and schools. In March those institutions locked down and orders dried up.
“We were forced to turn our heads and start looking at the individual consumer market,” says Ayebare. When his team had discussed this option in the past, they estimated it would take six months to put delivery systems in place. Now, “we had to figure it out in a few days”. They bought some motorbikes and developed a prepaid meal plan. Although the loss of bulk orders was a blow – sales fell from 1 tonne a week to about 300-400kg during the lockdown – household purchases have softened the impact.
The story of Online Butchery is a microcosm of how digital businesses in Africa are adapting to the pandemic. Consumers are changing their habits and companies are fast-tracking new ideas. In the short-run, the crisis will wipe out profits and sink some firms altogether, but in the long-run, it may accelerate Africa’s digital transformation.
One example is the use of mobile money. In Rwanda, the weekly volume of mobile money transfers rose fivefold over the lockdown, according to data collected in April by the telecoms regulator and analysed by Cenfri, a South African think-tank. In Kenya, the central bank measured a 10% rise in the number of transfers. Policymakers in both countries had ordered the temporary reduction of transaction fees to discourage physical cash transfers. Policy was also proactive in Togo, where the government used electronic transfers to support more than 500,000 people through the crisis.
Lockdowns have helped to “open people’s minds” to cashless payments, says Tayo Oviosu of Paga, a Nigerian payments and transfers platform. The number of new sign-ups to its e-wallet has risen by 330% over the previous quarter, mostly through its USSD platform which can be used on basic phones. Paga also accelerated the introduction of QR payments, a contactless payment method where payment is performed by scanning a code from a mobile app.
“We were already planning on doing this,” says Oviosu, but the need became “more heightened, in that there’s just real health issues using cash.”
That view is supported by a McKinsey survey of consumers in major African economies, which found that over 30% of them were increasing their use of online and mobile banking tools. But Chika Ekeji, an associate partner at McKinsey in Lagos, expects to see a drop in the overall value of digital payments, because remittances are falling and growth is concentrated in small transactions. He also notes that new fintech funding was 40% lower in March than it was a year before, which may weigh on future prospects.
Trucks, bikes and shopping
The businesses which have adapted best are those with the lightest physical footprints. Showmax, an internet TV service owned by MultiChoice, a South African group, introduced live news at the start of the lockdown and reduced the minimum required bandwidth. In the first weeks of the crisis it reported a 50% rise in active users and a doubling of usage. Viewing figures have remained high even as lockdowns have eased. “We hope that people will stick around and see the benefits of consuming on demand,” says Niclas Ekdahl, the boss of Multichoice’s Connected Video division.
But most digital businesses are built upon physical infrastructure, from legions of mobile money agents to fleets of delivery vehicles. The impacts of Covid-19 have hit them from several directions at once.
In e-commerce, for example, increased demand from housebound shoppers is set against the logistical challenges of reaching them through curfews and transport shutdowns. Jumia, the largest online retailer in Africa, reported rising sales during March and April in Tunisia and Morocco, but steep falls in Nigeria and South Africa, where e-commerce was initially shut down. “The initial [months] were quite rocky,” says Juliet Anammah, the group’s head of institutional affairs.
Despite the challenges, Jumia’s sales of essentials, such as groceries, were four times higher in the last 15 days of March than they had been in the same period last year. New shopping habits might persist. “Everybody plunged in and decided to try it out,” says Anammah, “and then they said, ‘this thing actually works!’”
The most affected firms in Africa’s digital landscape have been logistics and mobility platforms. SafeBoda, a ride-hailing app for Kampala’s motorbike taxis, has lost most of its business since the Uganda government banned motorbikes from carrying passengers in March. “We know that 40% of our drivers went back to the village because it’s easier to survive where you have access to food,” says Maxime Dieudonné, the company’s co-founder.
The crisis prompted innovation too. Motorbikes are still allowed to carry goods, and SafeBoda has accelerated plans to add grocery deliveries to its platform. “Within two weeks we built a new product,” says Dieudonné. “During April every single day we’d receive a call from different businesses to add their shop.” Over 150 shops are now signed up.
Movement restrictions have also caused headaches for Kobo360, an “Uber for trucks” operating in five countries. Thousands of drivers in its home market of Nigeria stopped work at the start of the lockdown because confusion over the rules meant they kept getting harassed by police (they have since resumed driving after the government issued clearer directives). In East Africa, Covid-19 testing at border posts has caused “quite massive delays”, says Kagure Wamunyu, the firm’s chief strategy officer.
Even so, Kobo360 has seen a 25% increase in driver signups. “The fact that we have a bigger reach means that they are able to get more cargo,” says Wamunyu. “With the erratic market at the moment, we have more and more people coming to us, seeing us as a reliable partner.”
Thinking about tomorrow
Analysis of eight African markets by Cenfri found a 14% increase in online shopping, a 10% rise in usage of logistics platforms, and a 17% fall in e-hailing in the first month of the crisis.
“The Covid environment has really forced many SMEs and also microentrepreneurs in Africa to rapidly digitise,” says Chernay Johnson of Cenfri. But she sees tough times ahead. “While in the short term there may be an uptick, I think in the medium term the picture is not going to be as rosy when we start having large-scale depreciations of local currencies, difficulties with importing goods for consumers and then also a collapse in consumer demand.”
More positively, the crisis could alter regulations, notes Lacina Koné, director general of Smart Africa, an alliance of African countries and organisations promoting digital transformation. “Online platforms help maintain social distancing by their nature,” he says. “In the long term we will witness many governments promulgating many favourable laws and regulations to adopt digital platforms as essential services.”
The question is whether Covid-19 will permanently shift Africa’s digital transformation into another gear. Ekeji, the McKinsey partner, thinks it might. “You’ve responded to the initial shock, you’ve returned to some semblance of work, now you’re saying: ‘what should tomorrow look like?’” He lists a range of digital tools, from advanced analytics to e-signatures, which might become more common as firms reimagine their operations and try to reduce costs.
Underpinning it all are perennial infrastructure challenges such as widening internet access and bringing down the cost of data. “Covid is a wake-up call,” says Anammah. “But like every wake-up call, it’s really what you do afterwards that matters.”