For the past 3 decades, e-commerce has been the bedrock and primary use case for new innovative technologies. It is one of the first industries tinkerers, innovators, and entrepreneurs turn to when new technologies are born. And each time they do, e-commerce drives further innovation in adjacent industries like financial services, logistics, real estate, robotics, etc. The adoption of e-commerce in South Africa has been steadily increasing, especially with the growth of technology and the shift in consumer behaviour towards online shopping.
The reason for this is that commerce is a fundamental human activity. Trading goods and services is how humans continue to evolve as a society. And for centuries we humans have been actively working on ways to alleviate friction between the buyer and the seller. That’s why I have always been fascinated by the evolution of commerce throughout history. Particularly in the last decade, with e-commerce and more granular e-commerce in South Africa.
If you look at the history of e-commerce in South Africa in the 21st century and split it by decade, you’ll find that there are monumental shifts at the beginning of each, often driven by a catalyst company or industry.
With each shift, the dreams sold about e-commerce taking over retail inch a little closer. But this has been gradual, often gruelling to the operators and their patient investors. Every so often, these shifts increase the plausibility that one day, this industry will be large enough to warrant its hype and fulfil the vision of famed investor Lee Fixel had of emerging markets and e-commerce.
Let’s just focus on the past 5 years. I’m sure many have seen the post-COVID articles of e-commerce bucking the trend and accelerating to a 2030 base, only to retreat to its normal trajectory at the end of 2022. South Africa’s e-commerce industry was not immune to that deceleration of growth. By all anticipated measures, a 23% growth rate in 2022 was not a good enough year to sustain the post-COVID trajectory. In 2021, e-commerce in South Africa grew 41%. This was on top of the high base of 2020, which saw e-commerce penetration jump from 1.9% in 2019 to 3.8% in 2020.
Nonetheless, on a current currency basis, e-commerce penetration in South Africa moved from 4.2% in 2021 to 4.8% in 2022, outpacing the brick-and-mortar market.
2023 was an interesting year. I believe that the market has now normalised — but at a higher base. This is due to a myriad of factors despite the macroeconomic conditions that plague the retail industry. The industry saw the monumental shift that a once-in-a-generation disruptive force can have on their brick-and-mortar core business. More competition has led traditional analogue players to invest in their respective digital businesses, more than the startup community can afford to in South Africa.
One of these digital businesses is Bash.com, for which I should introduce a disclaimer that I’m lucky to be a part of. New entrants from China are finding the ever-so-accepting South African market an appealing destination for expansion on their road to world domination, helped, of course, by a slight regulatory loophole for imports. The on-demand grocery market is finding its footing at scale as the nation has accepted this as part and parcel (excuse the pun) of their everyday lives.
The biggest market — general merchandise — with the biggest player — Takealot, is gearing up to accelerate amid the impending launch of Amazon in South Africa. All of this has driven the market to accelerate to a 45% growth in 2023, which saw penetration move to 6.3% of the total retail trade sales.
Nevertheless, $4.4 billion as a total market size appears tiny from a total addressable market perspective. Takealot alone contributes 25–30% of that. The whole of retail in South Africa is $70 billion at current exchange rates. But, this market was only $1 billion in 2019, sub that in 2018. It’s a growth market — despite the micro and macro challenges South Africa faces.
What’s that Bill Gates quote? “You overestimate what you can do in a year but underestimate what you can do in 10 years”? I believe that the timeline for Africa is too short. We grossly overestimate what we can do in 5 years and fundamentally underestimate what we can do in 20 years.
Ububele Kopo leads Project Office: Business & Programs at Bash, with this article the first of a two-part series. Sign up for Ububele’s Newsletter on Substack, where you can access Ububele’s high-quality insights on e-commerce in South Africa.
