Digital Markets to Generate Employment, Boost Economic Growth in Africa

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Digital marketplaces in Africa could create up to three million new jobs by 2025, a new study by the Boston Consulting Group (BCG) shows. The report, titled How Online Marketplaces Can Power Employment in Africa, was released during the Africa CEO Forum in Kigali.

A breakdown of the employment to be generated in the report shows that around 58 percent of the new jobs will be in the consumer goods sector, 18 percent in mobility services, and 9 percent in the travel and hospitality sector.

However, there are obstacles to industry expansion for these online markets, which match buyers and providers of goods and services. Some of these are underdeveloped infrastructure, a lack of regulatory clarity, and limited market access. For online marketplaces to reach their full potential, the report called on public and private sectors to work together in building the right digital environment from the outset.

More so, the report states that these digital platforms could raise incomes and boost inclusive economic growth with minimal disruption to existing businesses and workforce norms. This quells concerns of African policymakers about issues such as data security and potential disruption to traditional business sectors.

Benefits of online marketplaces

Of urgent need is employment generation in the continent. According to the African Development Bank (AfDB), one-third of the 420 million Africans age 15 through 35 were unemployed as of 2015.

“Online marketplaces are a good illustration of how the digital revolution can create economic opportunity and improve social welfare in Africa. Because Africa currently lacks an efficient distribution infrastructure, online marketplaces could create millions of jobs,” Senior BCG Partner, Patrick Dupoux said.

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According to the report, concerns that growth in online marketplaces will merely cannibalize the sales of brick-and-mortar retailers are misplaced in the case of Africa. As at last year, there were only 15 stores per one million inhabitants in Africa, compared with 568 per million in Europe and 930 in the U.S. With much of the population still underserved, the extremely low penetration suggests that there is minimal risk that e-commerce will displace existing retailers.

Furthermore, online marketplaces are unlikely to disrupt labor-market norms by blurring the lines between employees and freelancers. Unlike in developed economies, the vast majority of African workers are in the largely undocumented and unregulated informal sector. In Nigeria, for example, 71 percent of workers are self-employed and another 9 percent contribute to labor as family members.

According to BCG partner and co-author of the report, Lisa Livers, while online marketplaces are often seen as disruptive forces in advanced countries, they can be tremendous catalysts of economic development in Africa’s less-structured economies.

The report also recommends that the online marketplace community and African governments collaborate to address the challenges that hinder the former’s ability to grow. Both industry and government should take actions that foster a mutual understanding of both opportunities and concerns, strengthen trust through the sharing of resources, and build the right technological infrastructure and governance systems.

“Fulfilling the tremendous promise of online marketplaces relies on the ability of the private and public sectors to come together to create the right digital environment that is designed from the outset to bring economic and social benefits for all,” BCG principal and co-author of the report, Amane Dannouni said.

Boston Consulting Group (BCG) is a global management consulting firm and one of the world’s leading advisor on business strategy. Founded in 1963, it is a private company with offices in more than 90 cities in 50 countries.

In Africa, BCG has five permanent offices in Casablanca, Lagos, Luanda, Johannesburg and Nairobi, and seven research centers. The company’s projects on the continent cover a large spectrum of industry sectors including financial institutions, energy, industrial goods, consumer products, healthcare, technology, and the public sector.

Culled from – venturesafrica

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