Ecommerce in South Africa – an outsider looking in

by Brooke Anderson on 2012-02-17

I vividly remember the panic attack bought on by the Captain’s announcement “We are now descending into Johannesburg”.

It was 2009 and my only impression of Africa was the last movie I had seen, ‘Lord Of War’ with Nicholas Cage. For those of you who haven’t seen it you can probably tell by the title; every one got murdered at some point in the film. I was going to die – I knew it.

Gladly, despite a rocky start as my driver initially refusing to make eye contact as he had been told I was woman (with a name like ‘Brooke’ I am used to it) my first time in South Africa, and subsequent trips since have literally changed my life. I love the place, especially the people. But I also see ‘gold in these hills’ and I am not alone.

You may be aware that SAGE was biding on Australasian based software company MYOB. Being the largest supplier of SME accounting in New Zealand and Australia, I was up late (and early) hitting ‘refresh’ to track its progress online. Possible access to a database of over a million companies on an upgrade path to Sage ERP was pretty exciting. Volatility on the European markets forced Sage to withdraw its bid, eventually going to a US based Ban Capial for 1.3 Billion, from Archer Capital and HarbourVest Partners LLC, which bought it for about A$450 million in 2008… wait a minute – triple the value in three years?! Well, yes. Their reasons are the same reason I fly to South Africa every year, as Walid Sarkis, a managing director at Bain put it;

“The growth potential in this market is strong, with a growing trend of entrepreneurs starting up their own businesses…"

Let me make it even simpler; The growth areas are Southern Hemisphere, Mid-Market and Accounting Software. If the North Americans are putting big money into our markets, we must be in the right place.

In these challenging financial times, South Africa is growing. More than this, we are living in a world where it’s no longer who has the most money who wins; it’s who has the least debt. Your national debt is $78 Billion USD, which is quite frankly pathetic; you don’t even rank in the top 40 for overspending. The RAND is safe-haven currency at the moment.

These facts are probably well known in by locals, but I was surprised that you have the fourth-fastest growing cellphone market in the world, a market that is expanding at a rate of 50% a year. But the fact that bought me here is that South Africa’s online shopping market is doubling every 2.4 years.
That is staggering…. and I wanted to know why. It would seem that this phenomenon breaks into three main parts;

1) Improving Internet Access at Lower Cost
The statistics for broadband penetration for South Africa are somewhat misleading. They put South Africa behind the OECD for ADSL penetration by population, which is pointless. They aren’t taking into account which economic section of the population the 6.8 million internet users occupy. The top 6.8 million income earners represent a huge market by any countries standards. Besides, 11% broadband penetration vs. the international norm of 32%... just means ‘room to grow’.

Advances in both fibred and wireless technology (especially 4G) means the cost to penetrate areas with internet access has never been lower and will continue to decline. It’s by no means there yet… but it’s improving and (once again) has room to grow.

2) Lower Credit Card Fees
I hate to say this, but South Africans certainly get the bum-wrap for Credit Card fees. I am happy to say this is changing and has already, with international suppliers such as our partners DPS (Payment Express) now doing direct integration to Standard Bank, with more banks to follow. Their direct connection involves no third parties and as a result has nearly halved the fees Merchants used to pay.  

3)Trust in Transport
Buying products online loses its appeal after things go ‘missing’. The most challenging aspect of the South African ecommerce is the delivery. But the biggest ‘movers’ are investing in Africa. DHL plans to roll out a road freight service connected by three main hubs in East, West and Southern Africa focusing on inter-regional movement of goods. Just three weeks ago FedEx Express declared that it is planning to expand its presence in the key African markets including Tunisia, South Africa, Nigeria, Morocco, Ghana, Tunisia and Mauritius.

It won’t happen overnight but with big players like this expanding into these markets it’s just a matter of time before viable, reliable delivery is here.  

As these three ecommerce enablers improve I can foresee the up-take of online shopping accelerating. Leveraging our seven years of integrated ecommerce and logistics experience in the largest Sage ERP Accpac Market outside of North America, with the fastest growing ecommerce sector in any Accpac region is the most exciting opportunity for growth we, and our potential new customers have ever had.

Brooke Anderson