Meituan Review has successfully entered the Nigerian market recently. It is another feat for Chinese Internet technology companies to penetrate Africa after China Transsion Mobile and Netease entered African mobile payment. With the acceleration of the current “Digital Africa” process, the proportion of the population using the Internet in Africa has increased from 2.1% in 2005 to 24% in 2018, and the potential is gradually being released. This has brought unprecedented development opportunities to relevant Chinese enterprises.
VC bullish, government support
There are several advantages to investing in African Internet technology industries. First, for international venture capital institutions, although Africa’s technology start-ups are still in the incubation stage, there has been a relatively clear upward trend. Therefore, many international venture capital institutions have set up investment funds specifically for Africa, and have started to raise funds, collect project information, and judge development trends. For example, PartechVentures from Silicon Valley announced the establishment of a special African technology fund that plans to raise $ 122 million to invest in Africa’s early-growth technology projects.
Second, the Internet industry is conducive to Africa’s achievement of the United Nations Sustainable Development Goals and the AU Agenda 2063, making it easier to obtain development financing. The extended development of the Internet in various economic and social fields in Africa has created new payment methods, transaction models, and even new formats. Many companies that provide online knowledge and information sharing have attracted investors’ attention, launched smart energy services through the Internet, and solved African electricity consumption. “Last mile” companies have also been financed.
Third, African countries have gradually increased their emphasis on the development of the “digital economy” and encouraged policies. For example, the Rwandan government has introduced the “Vision 2020”, whose main goal is to develop the country into a knowledge-based, service-oriented economy by 2020, and enter the ranks of middle-income countries. To this end, the Rwandan government has introduced a series of measures to support the development of e-commerce, including laying 4,500 kilometers of optical fiber lines throughout the country and attracting foreign investment to produce affordable smartphones for ordinary people, thereby increasing the use of mobile phones.
Fourth, the accelerated integration of the African continent has created good conditions for the development of the digital economy. In 2019, the Free Trade Area of the African continent was officially established.The digital economy will not only help push small and medium-sized enterprises in different countries out of the small domestic market, expand their business to the surrounding areas and the entire African market covering 1.2 billion people, but also help achieve Africa. The digital unification of the continent is an important aspect of achieving integration in an increasingly digital global environment.
Three industries to watch
With the increase of the Internet penetration rate and the gradual change of users from traditional consumption patterns to online shopping consumption habits, the Internet-related industries in Africa have grown steadily. For this reason, African governments and the business community attach great importance to cooperation with Chinese companies . Taken together, Africa’s accelerating “digitalization” process has created unlimited business opportunities for the following industries:
The first is e-commerce. Data from the International Telecommunication Union (ITU) show that in the past five years, the average growth rate of mobile phone users in Africa has reached 12.7%, far exceeding the global average growth rate of 5.2%; the growth rate of fixed broadband users has reached 19.9%, exceeding the global average. 8.9% growth. The improvement of the communication foundation can provide the necessary network conditions for the development of e-commerce. In addition, World Bank data show that the ratio of per capita expenditure to per capita income in sub-Saharan Africa is higher than that in Europe, the Americas and Asia, which is a positive signal for the development of e-commerce in Africa.
Liao Xuhui, CEO of Shenzhen Justice Network Technology Co., Ltd., is the founder of Amanbo, the earliest China-Africa cross-border e-commerce platform. He reminded those who are interested in investing in digital industries in Africa. There is a gap in China-Africa logistics, and large companies like Alibaba have not yet begun to get involved in the field on a large scale. If you have a friend who understands the local situation, you might as well start.
The second is digital finance. “The current online payment market in Africa is not growing as fast as Africa, and fintech is on the rise in Africa. The current online payment market in Africa is growing by 20% every month -30%, its development potential erupts like an unstoppable faucet. “As Africa has been affected by foreign exchange controls, inefficient cross-border trade and complex institutional restrictions, the development of the financial industry in the region has been hindered, and This is precisely the opportunity for FinTech companies.
The third is Internet technology training. In addition to business activities, Chinese Internet companies also attach great importance to capacity building in Africa, so as to reserve talents for their own development and achieve the role of actively shaping the development environment. For example, the Alibaba Group ’s “Internet Entrepreneur” training program for African countries offers different courses for different groups such as government officials and entrepreneurs, uses digital technology to change management concepts, and trains e-commerce operations skills to serve local e-commerce businesses. To broaden management and management thinking.
Make an assessment before entering Africa
However, in investing in the digital economy industry in Africa, security risks cannot be ignored. On the one hand, cybercrime in Africa is rampant, and the forms of cyberattacks carried out by organized criminal groups have been upgraded and increased in frequency, especially financial institutions are vulnerable to “phishing attacks”. At the same time, African cybersecurity governance capabilities are low, the legal system is incomplete, regional and national levels lack a complete and coordinated legal framework, and the personnel, intelligence, infrastructure and other law enforcement resources of law enforcement agencies are insufficiently allocated.
On the other hand, the ongoing political turmoil in some African countries and regions has seriously affected external confidence in the region’s economic development. Cross-border e-commerce requires mutual trust between the two parties to the transaction, and consumers or merchants need to note the real information in cross-border logistics to ensure the delivery time of the product. However, it is difficult for Africa to establish sufficient online and offline mutual trust regardless of the actual security situation or network security situation. As a result, African e-commerce is still dominated by cash on delivery, which significantly increases the transaction costs of cross-border e-commerce.
In addition, the current Internet construction in Africa is still in its infancy, and many countries have not yet completed national IP backbone networks, with incomplete network coverage and poor carrying and access capabilities. Most wireless network coverage is limited to densely populated cities, and Internet coverage in rural areas is still poor.
Considering the opportunities and risks existing in the African Internet market, Chinese companies must make accurate analysis and make investment and safeguard measures before entering the African market. Liao Xuhui told the Global Times reporter that he had spent two years to explore more than 30 African countries in order to explore e-commerce models suitable for Africa. He said that to treat Africa’s digitalization, we cannot ignore the problem. For example, on the African continent, on average, only 31% of the population has access to electricity. This proportion is only 28% in southern Africa. Africa ’s Internet speed and infrastructure are not yet developed. Therefore, if you want to start an Internet business in Africa, you need to adapt to local conditions. For example, logistics in some African countries is not very developed, we can choose to do B2B first, and try B2C when the time is ripe. In addition, cultivating user habits is also an issue to be aware of. In China, people are very accustomed to using their mobile phones to browse websites and make payments. However, mobile phones in Africa are not so popular. Orders and payments through mobile phones are limited to young people, so Amanbo has set up an online + offline marketing model.