Small and mid-sized businesses are increasingly turning to social networking sites and mobile apps to tap into the burgeoning African internet economy, more than doubling to US$200 billion by 2025.
A joint survey, dubbed the Africa MSME Survey Report 2023, tracking 440 small and medium-sized businesses in Nigeria, Kenya, South Africa, and Ethiopia shows more than half of these businesses have gone online.
Some 53% are marketing their businesses over the internet, 45% sell products and services online and 24% use digital platforms to stock up on wares, according to the survey by research firm GeoPoll together with Africa 118.
“Online advertising is dominant across all industries apart from agribusiness, food production and manufacturing, where most businesses use online channels to sell,” said survey researchers.
Social media channels like Facebook, Twitter, Instagram and WhatsApp are the most popular product and service promotion channels used by 67 % of small businesses in Kenya, Nigeria and South Africa. Conversely, most (47%) companies in Ethiopia rely on billboards and traditional media to advertise.
These businesses are looking to spend more on digital advertising in 2023, albeit at a slower rate, bucking similar global trends. 59% of businesses confirmed spending more on digital marketing platforms, which is less than 71% in last year’s study.
Unlike in 2022, where most businesses (47%) relied on freelancers to market their businesses, up to 64% of businesses will use staff to promote products and services, rising from 34% in the previous year.
“The shift towards marketing internally may be attributed to the increases in staffing in the past year,” according to the report.
The use of staff in marketing is most common in South Africa (68%), Nigeria (67%) and Kenya (59%).
In what is emerging as a growing trend in expanding the use of technology to power businesses, 62% of respondents in the survey said their reliance on tech and online tools has increased over the last five years.
Growth in reliance on internet-based platforms was higher in Kenya, Nigeria and South Africa, which recorded a slight increase from 72 per cent the previous year to 75 per cent in 2022.
Even in Ethiopia, which still heavily relies on traditional media, there are some rising prospects, with 21% of businesses saying their reliance on technology has increased in the past few years.
Kenya is the only country with high usage of mobile apps – primarily for marketing, finance, eCommerce, and operations – which, at 64%, is higher than in South Africa (37%) and Ethiopia (35%).
“eCommerce is the most popular in Ethiopia, finance in Kenya and South Africa, and marketing/advertising in Nigeria,” the report said.
African e-commerce users have grown at a compounded annual rate of 17.9 per cent since 2017 when there were only 139 million users. According to the United States Department of Commerce International Trade Administration (ITA), e-commerce users on the continent are expected to exceed half a billion over the next three years.
Rising internet, smartphone penetration and growth in the world’s youngest population are fuelling this growth.
“Africa leads mobile device web traffic generation, with 69% of its total web traffic consisting of mobile internet users as of 2021 and is forecast to be almost exclusively mobile-based market by 2040,” said ITA.
These trends are mirrored through the rise in funding towards e-commerce startups, now the second most funded ventures in the continent after Fintechs.
Disrupt Africa’s tech startup funding report 2022 shows the sector’s fundraising, which enjoys a four-year boom, recorded annual growth of 70.7% to US $556.7 million from 74 startups and accounts for 16.7 per cent of all funds raised by African startups last year.
“Over these years, retail-tech has emerged as an area attracting substantial investor interest, and has helped drive the growth in the sector,” said The Disrupt Africa report.
The World Bank estimates that small businesses account for 90% of all businesses in Africa, with data from MasterCard showing that Sub-Saharan Africa alone has 44 million micro, small and medium enterprises (MSMEs).
bird, story agency
Small and mid-sized businesses in Africa are increasingly using social networking sites and mobile apps to engage in the rapidly growing internet economy, predicted to more than double to US$200 billion by 2025. According to the Africa MSME Survey Report 2023, over half of the 440 surveyed businesses from Nigeria, Kenya, South Africa, and Ethiopia have gone online.
The survey reveals that 53% of businesses are marketing online, 45% sell products and services via the internet, and 24% use digital platforms to manage their inventory. Social media channels such as Facebook, Twitter, Instagram, and WhatsApp are predominantly used for promotion, especially in Kenya, Nigeria, and South Africa. In contrast, Ethiopian businesses still favor traditional advertising methods like billboards.
Digital advertising spending is expected to rise in 2023, though at a slower pace than previously. A significant shift has been observed in businesses opting to use their staff for marketing instead of freelancers, with a rise in internal marketing activities in South Africa, Nigeria, and Kenya.
The usage of technology and online tools has surged, with 62% of businesses reporting increased reliance over the past five years. This trend is most pronounced in Kenya, Nigeria, and South Africa, with a minor increase noted in Ethiopia.
The continued growth of internet and smartphone penetration, along with the continent's youthful demographic, are driving forces behind the expansion of e-commerce, which has seen a significant rise in users since 2017. The ITA projects that e-commerce users in Africa will surpass half a billion in the next three years.
Indeed, mobile internet usage is dominant in Africa, accounting for 69% of its total web traffic in 2021. E-commerce startups have become the second most funded ventures on the continent following fintechs, with substantial investment indicated by a four-year boom in tech startup funding, as per Disrupt Africa's 2022 report.
The World Bank states that small businesses represent 90% of all businesses in Africa, with MasterCard data indicating there are 44 million MSMEs in Sub-Saharan Africa alone.
