NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Friday, August 14, 2015

Africa’s middle class is rising and they have money to spend. About a third of the continent spends between $4 to $20 a day—a group that is expected to grow to 42% by 2060, according to data from the Africa Development Bank (pdf). That’s more than a billion people.

Consumption on the continent (pdf) rose to more than $1 trillion in 2012, from $364 million in 2000, an annual rate of growth of 10.7%.

With deepening internet penetration, some of this spending is starting to happen online. With 50% of the continent expected to have access to the internet by 2025, online shopping could account for 10% of retail sales, or $75 billion, according to a McKinsey report (pdf). Google points out that online searches on the continent are rising with commercial queries showing a significant jump.

All this is inspiring the emergence of e-commerce platforms trying to cash in on Africa’s new-found wealth.

Jumia, a Nigerian-based online retailer, has become the leader of this new class of e-commerce businesses on the continent. Founded in 2012, the company is operational in nine African markets. It claims 150,000 unique visitors a day and says it generated $28 million in revenue in 2014. On top of that, it raised $150 million in new funding, putting the value of the company at a little over a $500 million, according to Jumia’s parent company, German start-up backer Rocket Internet.

A lot of what the African e-commerce platforms provide is connecting global brands with the continent’s emerging consumers. One example of this is Mall For Africa. Also Nigerian in origin, it works as a conduit for customers to more than 150 global retailers. “People in Africa love US and UK brands,” founder Chris Folayan tells Quartz. “But there was no simple way to get them. And this is the solution.”