Amazon takes its e-commerce machine to Africa

Amazon rolled out its online shopping service in South Africa this week promising same day and next day deliveries — marking the US giant’s entry into Africa’s e-commerce space.

South Africans will shop from local and international brands “across 20 different product categories,” Amazon said.

Robert Koen, Amazon’s manager for sub-Saharan Africa, said the company will kick off with 3,000 pick up points to complement home deliveries. First time customers will receive free deliveries and, in acknowledgment of WhatsApp’s local dominance, customers will receive order status updates on the Meta-owned messaging platform.

Amazon.co.za becomes the newest competition for online shopping incumbents in South Africa, including local leader Takealot, owned by media and tech giant Naspers, and Jumia, the pan-African player. South Africa’s e-commerce space also includes the food delivery service Uber Eats and discount fashion retailer, Mr Price.

Amazon has had a presence on the African continent for many years now via its cloud computing operations which were partly started in South Africa in the early 2000s. What has become its hugely profitable Amazon Web Services unit today started as a satellite office in Cape Town working on Elastic Compute Cloud. It later opened a shop in Johannesburg also focused on AWS.

Back in 2020 it launched its first Africa data centers in Cape Town in 2020. Overall, its total workforce in South Africa is estimated at around 7,000 but few, if any, of those workers were directly involved in its e-commerce operations.

Amazon will be hoping to accelerate the steady growth of e-commerce in South Africa. The country’s e-commerce sales totalled 71 billion rand in 2023, a 29% rise on the previous year, according to market research company World Wide Worx.

Jumia has often cited rising inflation and currency devaluation — especially in Nigeria — as the main challenges to its decade-old e-commerce adventure in Africa. The company has implemented steep cost cutting measures in recent years to remain active, including giving up a subscription-based service modeled after Amazon Prime, and shuttering grocery deliveries in some of its 11 markets.

But inflation is relatively stable in South Africa at 5.3%. Also, a mature financial services sector where over 80% of the population have bank accounts (compared to under 50% in Nigeria, for example), offers a better chance at success in South Africa for Amazon. It could then form the basis of an expansion across Africa: e-commerce users on the continent tripled to 435 million between 2017 and 2023, with half a billion users expected by 2025.

A disagreement with an indigenous peoples group over the potential desecration of a heritage site has stalled Amazon’s plans to build its Africa headquarters in Cape Town. But the launch of its online shopping service got the buy-in of the government.

Small Business minister Stella Ndabeni-Abrahams said in a statement she expects that it “will create jobs and contribute to [the] government’s objective of repairing the legacy of poverty and inequality.”

Amazon’s historic success in North America and parts of Europe have not always been replicated in emerging markets. For example, it has not managed to dislodge MercadoLibre as Latin America’s leading online retailer. And it opted to buy thriving Middle East outfit Souq for $580 million after failing to dominate.

“It’s not failing in any of those markets, but its status as the United States’ favorite online store doesn’t seem to give it much of an advantage,” as Russell Brandom, Rest of World’s tech editor, put it last year.

• Africa’s e-commerce growth could be boosted by increasing smartphone connections and “fostering the proliferation of digital payments through digital and financial literacy,” said GSMA, the global industry association for telecom operators.