Ethiopian Business Review

Absence of E-payment Hampers the Development of Online Business in Ethiopia

It’s no secret that the Internet has changed the way companies do business. E-payment in particular has helped multinational companies like Amazon and e-Bay expand their enterprises and become household names. However, as EBR’s staff writer Yoseph Mekonnen reports, while on-line marketing has increased in Ethiopia, it still has a long way to go. 

Technology has changed the way people live and the activities they pursue in their day-to-day lives. The application of information communication technologies (ICT) has made it easy and convenient for people to do businesses that would have once cost a lot of time and money. Online shopping now has enabled people in many parts of the world to buy and sell things quickly, expanding opportunities for companies to do business worldwide.

An increasing number of companies consider online marketing one of the main strategies to promote and sell their products. Multibillion international companies like Amazon and eBay, for example, are engaged in online marketing all over the world. 

Even in Ethiopia, despite numerous barriers to technology use, many are using online marketing as a means of reaching potential buyers. Used car importers and dealers as well as real estate brokers are exploiting the new way of marketing. They employ internet marketing to advertise and promote goods and services and also to communicate with potential buyers. 

Samuel Derbew is one such broker. He uses the Internet marketing strategy to sell vehicles. He says he has been benefiting a lot from the new marketing practice. “Previously doing business was tiresome, but now the online marketing has resolved most of our problems in many ways,” Samuel told EBR. “We can reach thousands through the internet and we are able to disseminate very important information about the vehicle including the price for potential buyers.” 

The online marketing has helped a lot in improving the long lived distorted image of brokers among the general public, according to Samuel. “People have started putting trust on brokers because of the online marketing.” 

Dealers like Samuel and others who have something to sell use different websites for marketing their products. Business developers usually give the services for free then start charging fees when a substantial amount of viewers start viewing the site. 

Araya Lakew is an Ethiopian web developer. He launched his first website early in 2008 aiming to engage in the sales of cars online. His website “Mekina Online” was almost the replica of online marketing websites from the West. “The first website couldn’t get acceptance that it was not user-friendly for many Ethiopians and it had so many search categories” Araya told EBR.

But later in 2010 he launched another website Mekina.net with a new appearance and simple features. The user-friendly features and the expansion of internet services through mobile phones have made the website one of the popular websites in looking for used vehicles for sale.  In addition to Mekina.net, Araya now runs two other websites businesses -- Betoch.net, which markets real estate and Shger.net engaged in promoting and marketing different stuffs. 

The trend of online marketing is expanding with the availability of ICT services in the country. In Ethiopia there are more than 26 million mobile telephone users and 4.5 million Internet service subscribers as of June 30, 2014, according to Abdurahim Ahmed, Ethio Telecom’s head of Corporate Communications. And the trend of using internet is changing positively. 

For instance, when Araya started his first website six years ago the maximum number of visitors in a day was not more than 1,000. But now that figure has reached around 20,000 visitors per day for the three websites. The majority of the viewers go to Mekina.net he told EBR.

This website used to advertise cars for sale for free until recently. But now people who want to market their cars using Mekina.net have to pay ETB 250 per car since the beginning of this year. The online market pioneers in Ethiopia believes that online marketing can minimize the hustle and the tiresome marketing process.

Another online marketing business popular in Addis Ababa is Delala.com, which promotes and markets car as well as other goods and services including real estate.  Hafiz Ezedin(MBA), a graduate of Wuhan University of Technology, in China, is presently working as an operation manger for this website. The company started its operation officially six months ago and it took Hafiz and his friends more than a year and half to contemplate the preparation. It also cost them ETB200,000 to establish the company, furnish the offices and hire staff.

Since most internet users are concentrated in big cities like Addis Ababa most visitors for these marketing websites are from Addis Ababa. The online marketers however want to expand their sphere of reach to people out of Addis Ababa. 

“Even if we are using internet our reaching capacity is limited to the capital, since people cannot buy what they want from their respective city or town,” says Araya.

Nowadays the online shopping share in the economies of several countries’ is increasing. In developed countries it accounts up to 42Pct of the business transactions. A nationwide survey by Pew Research Centre in 2009 revealed that 74Pct of adults in the U.S. use the Web for marketing. In emerging economies like China online shopping has reached to 20Pct of the business transaction. 

But in Ethiopia the idea of online marketing is very new for many, including government offices. The regulation of Internet sales, which includes monitoring and controlling the business and trade activities, seem challenging. “When we went to the government institutions to get a licence even there were no categories in the area that we applied for trade license,” Hafiz said. Even though it’s new and perceived as helpful to expedite the business process, starting an online business is a tough task [in Ethiopia]. The publics’ low level of understanding the business as well as the absence of appropriate legal framework complicates doing busines.

Currently Delala.com doesn’t charge for advertising different products available for sale to promote itself like Mekina.net did at first. Because of this the number of visitors of the site has reached 260,000 in one week, according to Hafiz.

In the developed world, the online market is supported by e-payment in which a market exchange also happens online. Even if their future plan is to bring this trend, the Ethiopian online marketers currently do not have the means to exercise the payment systems online. 

Araya hopes that currently there are efforts to introduce mobile money as a means for the transaction of businesses through mobile payments.  This can overcome distance barrier which is influencing the flourishing of online market. Hafiz also agrees that if the means for the e-payment was there it could help the realization of the online shopping in the country at a full scale. 

“The online shopping has the ability to overcome physical barrier both between the buyer and the seller. The behaviour of Ethiopian customers is very flexible to new things and I hope in the coming years the business will grow fast. This will however hugely depend on the availability of a system that will allow financial transaction to be made online,” he said.

The National Bank of Ethiopia which is responsible to draw directives and regulations as well as monitor and control the country’s financial transactions has refused to give explanations on the issue. A senior official in the Bank, however, told EBR on condition of anonymity, that there are not yet evident directives or any plans to issue a directive that will allow financial transactions to be made online.


2nd Year . August 2014 . No.17


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