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History is playing it differently for Africa

Drones are the future of African e-commerce, but not in the near future. E-commerce players want necessary regulations and economically viable technology ready.

Logistics Update Africa: The domination of informal retail due to underdeveloped infrastructure, the difficult cargo movements because of tough geographical terrains and the appetite to shop due to increasing income is a perfect recipe for drones of e-commerce businesses to hover over Africa, but still, the continent desperately needs economically viable technology and regulations in place to make it happen.

Historically, the African continent was forced to struggle with inadequate infrastructure which inhibited growth, eroded trust and crippled an already challenging business environment. For consumers in Africa, it’s even more difficult to find goods and to shop than anywhere else in the world.

E-commerce on a drone

The new digital infrastructure has paved the way for better access to goods and services more efficiently. Though e-commerce currently represents only less than one percent of all the transactions in Africa – a contrast from 12 percent in the USA or 20 percent in China – yet the share is rapidly rising.

With the buzz created for drones, the natural question is if Africa’s e-commerce scene is ready for cargo bombardment via drones.

“Definitely, drones are the future of African e-commerce logistics. Terrain and speed of end-to-end delivery are the Africa-specific reasons to embrace drones for e-commerce. For example, in medicine delivery, there are already a few examples in east Africa. However, I don’t think drones could replace the network of local partners who can spot the exact address with the local knowledge. However, the local partners empowered with that technology could be extremely powerful,” says Apoorva Kumar, co-CEO of Jumia Egypt.

Jumia is an e-commerce retail platform and logistics service that connects sellers with consumers. It currently has a presence in 11 African countries.

Anne-Marie Green, marketing manager of South Africa’s online marketplace and auction site Bidorbuy echoed similar sentiments. “At the moment, drones do not play an important role in the fulfillment side of e-commerce and is not likely to change in the near future. It will be also necessary to iron out the laws and regulations around the new delivery system before it will, of course, enter the system.”

Kumar informs that some drone pilots are already in progress. “But today the cost of technology is not viable for our business. I expect to see more economically viable drones coming in the next decade,” he adds.

Astral Aerial, which signed a memorandum of understanding (MoU) with Yamaha Motors for Fazer R G2 drone is very keen on implementing it for last-mile deliveries as well as for other applications in Kenya.

“We plan to implement it not only for last-mile deliveries of e-commerce goods but also the delivery of critical equipment and medical supplies in remote and hard to reach locations,” says Kush Gadhia, business development director, Astral Aerial Solutions. He believes drone technology will leverage the already created e-commerce eco-system.

Kenya-based Astral Aerial Solutions offers drone services in the logistics, aerial photography, aerial surveillance reconnaissance, inspections among other industries.

Until then, it’s important to track the growth of e-commerce as the internet continues to propel demand.

The big Africa market

With more than 400 million internet users, Africa has the second-largest internet-user base on the earth immediately after China. Growing mobile and internet penetration will have a revolutionary effect on how the continent will be shopping in the near future.

“The potential for e-commerce in Africa is way bigger than what it is in any other region in the world simply because there is no alternative. Our mission is to provide Africa’s most trusted and essential digital infrastructure to ensure business owners meet the needs of their local and international consumers. Our platform with payment processing, supply chain and business insight solutions supports buyers, shippers and sellers to grow their businesses and helps strengthen their local economies as they compete in the global market. Over 500,000 people use our platform every day to buy, sell, make payments or run their businesses,” says Kumar, putting into perspective the leanings of consumers towards online shopping.

Explaining why online shopping is popular, Green says, “The development of innovative delivery solutions, such as the establishment of pick-up points throughout the country have contributed to the popularity of online shopping.”

“We do not compete with our sellers by selling the same products as they do; we have on our site not only brand-new but also second-hand items, some of which are highly sought and highly-priced collectables and antiques; and we make it possible for our sellers and buyers to trade at fixed prices or in the online auction format,” informs Green.

Jumia Egypt’s Kumar informs that 92 percent of Jumia shoppers recommend the platform to friends and family, while Green attributed the growth of online shopping to more South Africans having smartphones.

Overcoming basic challenges

Being optimistic about the African market and its potential to have drones taking over the retail business, both e-commerce giants also shared their pessimism about the hurdles on the way. Along with aid & relief and oil & gas, e-commerce has the potential to imbibe drones into the geography of Africa.

Due to border management in many countries of Africa, most of the e-commerce players tend to have one centralised warehouse in the capital of each country and distribute products from there. Cargoes can reach places near these cities efficiently, while there are still regions in Africa where even the e-commerce giants have not been able to reach.

Infrastructure, manpower shortage, tough geographical terrain, customer trust, capital shortage with third-party partners, and security issues are some of the logistics problems faced by e-commerce players in Africa till now.

“Very specific to logistics in Africa, we faced a shortage of skilled manpower, capital shortage with our third-party partners, and tough geographical terrain coupled with security issues. We are today Africa’s biggest B2C logistics. Jumia today has Africa’s biggest driver management programme, a financing programme for our third-party partners and we lease our proprietary technology to them and security processes coupled with GPS controlled delivery app for Egypt to minimise risks. In Nigeria, we have collaborated with over 100 local partners and in Egypt more than 40 to manage our logistics flow – those help us navigate the terrain,” he explains.

For Bidorbuy, its sellers and buyers depended almost exclusively on the South African Post Office for the delivery of products ordered online on the website.

“That situation was fraught with problems, stemming from poor performance by the SA Post Office. Today, many courier companies have stepped up their efforts to offer fast, reliable and reasonably priced services. Some companies have developed attractive pick-up solutions, enabling online shoppers to collect the goods they purchased online in one of the thousands of pick-up points distributed all over South Africa, at a reasonable flat rate,” says Green.

Optimism high for drones

As e-commerce growth continues in an upward spiral, the optimism for the use of drones is restrained, but high.

“You are never going to have the density of physical retail in Africa that you have in the US because history is playing it differently. Africa will gradually have more stores, but these aren’t going to be the main way to access goods,” feels Kumar.

Gadhia comments, “In Africa, e-commerce has been a major driver of air cargo transportation. Drone technology will leverage the already created e-commerce eco-system, where the technology will be implemented into an already existing and tested market. This sector has given drone technology a head-start in Africa and will play a key role in enabling the uptake of the technology.” By 2029, Green does not doubt that drone delivery is an innovation that will “surely head to our part of the world.”

“It is only a matter of time when the drones will enter the e-commerce landscape too,” she affirms.

This story was originally published in Logistics Update Africa’s November – December 2019 issue.