/ 14 May 2020

E-commerce will assist economy

Government Eases Lockdown To Re Open Economy
The GDP decline in the first quarter caused a 30.1% decline in the unemployment rate in the first quarter of 2020, which is expected to worsen. (Alet Pretorius/Gallo Images)

South Africa’s online retail industry accounts for just 1.4% of total retail, according to independent technology market research group World Wide Worx. In the United States and China this is closer to 20%. 

This small industry has, however, been forced to the fore with the national lockdown shuttering brick and mortar companies. But it is being artificially constrained by the government. Last week, trade and industry minister Ebraihim Patel said allowing e-commerce will be unfair for businesses such as spaza shops.   

His statement was met with anger.

Dear South Africa, a non-profit organisation which facilitates public participation in government policy formation, called for the opening of all online retailing on the grounds that this would support rather than impede the campaign to stop the spread of the virus. It sent a letter to cooperative governance and traditional affairs minister Nkosazana Dlamini-Zuma, challenging the ban and threatening legal action if she did not respond by Thursday.

Before this deadline could pass, Patel shifted his stance and opened up e-commerce, after President Cyril Ramaphosa’s address to the nation on Wednesday night hinted at tweaks to level-four regulations. This will mean that businesses can begin selling goods online. It will particularly benefit companies that have already started innovating.  

Exclusive Books, for example, said even if shops are open, there are customers who are reluctant to go out to shop because the virus is still lurking somewhere. People can now order books over the phone, on their website and through UberEats.

General manager of marketing retail and procurement for the company, Batya Bricker, told the Mail & Guardian sales had already been depressed, going back to December. It had therefore been thinking of ways to innovate before Covid-19 hit. The pandemic forced an acceleration of their plans. “I think that is the nature of Covid-19 — you do not have a choice; it’s either you adapt or you die.”

Alison Gillward, executive director at Research ICT Africa, said minister Patel’s concerns about unfair competition between online and brick and mortar retailers may be correct, but this is an unusual time. 

“While it may seem unconscionable to be purchasing everything from food and equipment, to video on demand and to shares on the stock market when very many of our compatriots are trying to find enough food to sustain themselves daily, from a purely economic point of view, not doing so does not help them, or the economy”, she said Gillwald.

Gillwald said all e-commerce should be permitted in order for suppliers to clear their inventory and get in revenues to pay staff and order new inventory thereby “stimulating demand and keeping at least some areas of the economy ticking over”.

In South Africa there are also concerns of a digital divide and people not having credit cards to make online purchases. Warrick Kernes, founder of Insaka eCommerce Academy, said the “increased access to smartphones and alternative payment options like Scode from PayFast allow a larger portion of the population to shop online and then pay in-store at Checkers, Shoprite or thousands of other retailers”.

“The question of whether this is fair or not should rather be a question of which sectors can be reopened to uplift the economy while limiting the spread of Covid-19. When that question is asked then eCommerce is an obvious answer,” he said.  

Gillward says that the South African e-commerce market is an untapped billion-dollar industry, and this is an opportunity for the Government to create an policy and regulatory environment that enables a localised, innovative, inclusive, e-commerce model that uses existing logistics systems to drive the industry.  

Kevin Lings, chief economist at Stanlib, said there is no perfect solution and everything might pose a risk of Covid-19. But “easing back on e-commerce activity would represent a modest risk to health but a fairly significant lift to economic activity”. 

He said e-commerce represents a small percentage of total retail sales but because activity is close to nothing, online shopping could help bolster retail sales, therefore creating a meaningful impact in the current circumstances. 

Last week, the World Trade Organisation encouraged the strengthening of e-commerce during Covid-19, explaining that the pandemic has made it clear that e-commerce can be an important tool for consumers during this time.

While this is a good thing, it explained that the pandemic has shown the “glaring need to bridge the digital divide, both within and across countries, given the central role the digital economy has played during the crisis”. But, despite persistent challenges, in light of the pandemic, online purchases and e-commerce have become de facto fall-back solutions. 

It said that Covid-19 has seen an increased use of e-commerce in certain areas as well as e-commerce-enabling services and technologies. This has generally highlighted the importance of electronic commerce. “It has also underlined the continued challenges faced by developing countries and less developed countries and the critical importance of bridging the digital divide.”

Tshegofatso Mathe is an Adamela Trust business reporter at the Mail & Guardian