Report says Kenya lags behind peers in e-commerce

Jumia staff at the e-commerce company’s Arbor House office in Nairobi last year. The Communications Authority of Kenya says in its latest report that online trade is still low Kenya. Photo/FILE 

By OKUTTAH MARK, mokuttah@ke.nationmedia.com

In Summary

• Industry regulator cites high taxes on goods and cybercrime fears as some of factors that keep buyers off platform.

E-commerce remains relatively low in Kenya despite good Internet connectivity and high uptake of mobile payment services, says a report by the industry regulator.

 

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The Communications Authority of Kenya (CA) identifies four key factors in the report that it says stifle uptake of e-commerce, namely, a lack of addressing system on buildings and high custom duty and taxes paid on imports.

Others are inadequate cybersecurity systems to allow merchants verify the identity of their customers and manage potential fraudulent usage, and a lack of reliable, low-cost delivery services and system to enable consumers return unwanted or defective items.

The CA estimates the value of e-commerce in Kenya at Sh4.3 billion compared to South Africa’s Sh54 billion while in Egypt and Morocco it is about Sh17 billion and Sh9.6 billion respectively.

“The total duty and tax paid for incoming items amounts to almost 50 per cent of the value of an item. This are some of grey areas that need to be addressed to increase the uptake of e-commerce in the country,” Richard Tonui, manager, competition and tariffs analyst at the CA told the Business Daily.

“The authority through the ICT ministry will be engaging the government on customs and taxes for low valued e-commerce items, with a view of lowering the duties and taxes currently charged.”

Improved Internet connectivity increased the number of users to 13.1 million by December last year from 1.7 million users during the same period in 2007.

The increased numbers and preference by the youths to access information on their mobile phones has opened a window for investors in the retail industry such as Bata, newspaper and book publishers as well as in the hospitality industry such as fast food outlets to leverage on technology.

Other investors are IT firms that have built online trading platforms such as N-Soko, OLX that is owned by South Africa’s Naspers, Jumia and Rupu, among others.

The big challenge especially for investors who offer classified online services is how to monetise these platforms and sustain the huge investments in branding and marketing of their websites.

OLX country manager Peter Ndiangui said a lot of online business opportunities in Kenya are untapped.

“With the 50 per cent Internet penetration and the adoption of smartphones and tablets, there is a huge potential of e-commerce,” he said.

OLX has been operational in the country for nearly two years and it is yet to break even, said Mr Ndiangui.

“We are still at investment phase which is growing our numbers or traffic into the site. We still don’t care about the profit, that will come later,” the OLX country manager said.

OLX links buyers and sellers online free of charge. To get started sellers need to upload the OLX application on their mobile phones, take a photo of the product they wish to sell and give it a brief description before uploading it on the site.