BUSINESS and FINANCE, POLITICS and GOVERNMENT

Africa: Battle for E-Commerce Intensifies

Mara Sokoni is set to launch in 10 African countries in 2016, including Nigeria and Kenya

Mara Group, a pan-African conglomerate founded by Ugandan entrepreneur Ashish Thakkar, is deepening its investment in e-commerce. The Dubai-Based conglomerate will launch its new e-commerce platform dubbed Mara Sokoni early next year.
Although the initial launch of Mara Sokoni will cover 10 African countries, including Nigeria and Kenya, Thakkar says that the e-commerce platform will span across every African country in just under four years. “We will be in every country on the continent within the next three-and-a-half years,” he told WSJ Frontiers.

The launch of Mara Sokoni comes at a critical time for Mara Group as the organization is turning twenty years next year. Mara Group is now estimated to have an annual turnover of $100 million and operates in 22 countries, employing around 11,000 people in fields as diverse as energy, real estate, hospitality and technology.

Mara Group has leveraged on its size and financial muscle to finance the behind the scenes development of Mara Sokoni. Going forward, however, the conglomerate will make use of external capital. “We’ve self-funded the development to this point. But now we’re looking for $100 million investment to fund the initial roll-out,” Thakkar explained. He said this while he was in New York looking for the $100million investment. It is not clear yet whether this external capital injection will come in the form of debt or equity.

Mara Sokoni’s imminent launch comes at a time when the potential for e-commerce in the continent has tremendously increased owing to deeper internet penetration and rising income levels. In a November 2013 study on the potential growth of internet use in Africa, international consultancy McKinsey intimated that online retail sales across the continent could reach $75 billion by 2025.

Nigeria and Kenya are currently the markets making the most headway with regard to e-commerce. In both countries, the growth of e-commerce has largely been attributed to deeper penetration of smartphones, mobile handsets and, of course, a burgeoning middle class. Penetration of cellphones in Nigeria is 68 percent and around a quarter of Nigerians have a smartphone. There are nearly 130 million active mobile connections in the country, up from less than 90 million in 2010 and only a handful at the start of the millennium. The same scenario has been replicated across Kenya.

smartphones

Increased penetration of smartphones has inspired growth of e-commerce in Africa

The growth of e-commerce in markets such as Nigeria and Kenya has attracted several players, with some of them being able to establish considerably strong brands in a short period of time. Jumia, for instance, operates in both Nigeria and Kenya. In Nigeria, it sells over 100,000 physical items ranging from clothing, mobile phones, books to groceries. CEO of Jumia Nigeria, Nicolas Martin, says “e-commerce will be the next driver of Nigeria’s economic growth, with e-commerce expected to soon contribute about 20% of GDP, in terms of growth”.

OLX, another online retailer, also operates in both Nigeria and Kenya and has a strong presence in South Africa as well. Other equally strong online retailers in the continent include Konga and Mall for Africa. The latter provides an African market for foreign brands.

Mara Group’s huge bet on e-commerce through Mara Sokoni is therefore timely as it is risky. Timely, because the opportunity for e-commerce is huge in Africa. Risky, on the other the hand, because players such as Jumia and OLX that came first will not cede ground without a fight. But Mara Group has survived tough conditions before. Its founder, Ashish Thakkar, dropped out of school when he was 15, but now heads a multibillion dollar conglomerate.

Therefore, for Mara Group, the bigger challenge will not be facing off with competition, but contending with the major challenge that all e-commerce players in Africa face—infrastructure.

Infrastructure challenges

E-commerce depends on a reliable delivery system. The problem throughout Africa, however, is that infrastructure gaps often make it next to impossible to make delivery reliable. The postal system in most countries is anything but efficient, with most of the blame going to the political nature of appointments to managerial positions of post offices. Logistics is a problem and many e-commerce firms have to deal with frequent customer complaints over delay in delivery of goods.

In some markets such as Kenya, e-commerce companies such as Kilimall are exploring the drone option to overcome logistic challenges. Drones can overcome traffic, lack of roads or lack of a proper addressing system. Getting approval for drones in Kenya, however, is an uphill task. This is partly because they are a relatively new concept in the country but also because of security concerns, particularly in this age of militant extremism. In fact, getting approval for drones in developed markets such as the U.S. and U.K. isn’t any easier.

Logistics

Logistics is a big problem for most e-commerce firms in Africa

Getting the logistics right will be crucial, Thakkar admits. But Mara Group believes it can overcome logistics challenges by leveraging on Mara Express, its own grass-roots approach to developing its delivery system. Mara Xpress will sharply cut the cost of delivering packages across Africa from an average $18 per parcel currently to around $8, the company says.

The use of Mara Xpress, which will tap into local networks, fits precisely into Mara Group’s underlying strategy. All along Mara Group has used its extensive contacts on the ground to remain competitive and secure partnerships with foreign players. Foreign companies bring capital and specific technical expertise, while Mara provides that crucial local know-how essential for succeeding on the ground. Mara Sokoni won’t be any different, particularly know that Mara Group is looking for $100 million from foreign investors for the venture.

About the Author

Lennox is a public relations professional and seasoned writer who works with leading local and multinational brands operating in
Kenya and Africa. He is also an assistant catechist at his local Catholic parish and uses this position to sensitize members of his
community on the importance of fighting inequality. In the long-term, Lennox aspires to inspire Africans in all sectors of society to fight
all forms of inequality, as the continent is disproportionately affected by inequality when compared with the rest of the world