Navigating Digital Ethiopia A Look into Ethiopia’s e-commerce Landscape

Many have referred to the current global digital transformation as the “fourth revolution.” Ethiopia joined this journey and expressed commitment through the “Digital Ethiopia by 2025” strategy launched on June 20, 2020. Digital Ethiopia is an initiative of the Ethiopian Government, to leverage and expand digital opportunities and lead the country towards an innovative, knowledge-based economy.

The country started to witness remarkable changes in the digital landscape after the emergence of COVID-19, which enforced lockdowns, social distancing, and several restrictions that called for rapid digitization on all fronts. In this article, EBR’s Bamlak Fekadu tells the story of how the latest digital revolution is bearing fruit for e-commerce businesses.

The Digital Ethiopia 2025 strategy was included in the ten-Year Perspective Development Plan of the ruling Prosperity Party and synced with the homegrown economy agenda to bear digital economy in the country. The strategy is harmonized with the African Union’s continental digital strategy, alongside United Nations sustainable development goals. Digital Ethiopia includes the deployment and implementation of technologies to create jobs and capital that are based on technology to add value to the   six pillars of the Ethiopian economy: Agriculture, manufacturing, mining, information and communications technologies (ICTs), the creative industry and tourism. With digitization implemented in full force, these sectors are expected to play leading roles in job creation, technology transfer, innovation, and in improving Ethiopia’s capacity to export and generate more foreign currency.

The impact of the COVID-19 pandemic, coupled with social distancing and stay-at-home restrictions, fueled the eagerness and readiness of the government to push for digital transformations in Ethiopia. This has provided favorable environment for e-commerce. The regulations and restrictions to prevent the spread of the virus, led to different sectors and service providers to develop digital solutions on e-commerce platforms and digital payment platforms.

Meaza Admasu, a widow who lived in the United States for almost 30 years with her five sons, returned home a few months before the pandemic broke out in Ethiopia. She traveled back to spend the rest of her retirement with cherished family members.  “It was really a scary time for us because Ethiopia’s healthcare service is not developed. It’s not comparable with that of the U.S.,” she said.

The lack of caution by her relatives, coupled with the government’s strong call for social distancing and other safety protocols compelled her to rent a guest house for herself. At this point, Meaza learnt about the burgeoning e-commerce sites that supply food,  beverages, and other groceries shopping. “The first time grocery delivery was made by my eldest son, who made the order on an online platform. For me, it was a surprise to know that e-commerce is developing in Ethiopia.”

After realizing that she could also order her own groceries online, she immediately started doing so. “Unfortunately, the lack of digital payment options made it inconvenient for me.”

It is true that digital transactions and e-commerce are heading in the right direction. For instance, Ethiopian Airlines is already seeing half of its ticket purchases purchased by customers using its mobile app and/or website. The ride-hailing industry is also providing an estimated 90,000 rides on a daily basis utilizing mobile technologies.

According to Cepheus’s analysis on Ethiopia’s digital economy in 2020, despite the country having “virtually no digital economy to speak of”, some notable digital use cases are already firmly in place. The Cepheus portrays banks handling around half a million customer transactions via digital channels every day and ETB260 Billion, which is approximately eight percent of the GDP on an annual basis.

The state giant Commercial Bank of Ethiopia has realized that 62Pct of its customer transactions are taking place via digital channels.

The first ever three-year National Digital Payments Strategy (NDPS) of the National Bank of Ethiopia (NBE), introduced last year, hints that it would apply discouraging instruments like tax incentives and cash handling fees to attain the goal of the NDPS.

The digital strategy that was officially launched on July 15 will be implemented until 2024, Prime Minister Abiy Ahmed (PhD) was quoted as saying that there are efforts within and beyond the Ethiopian payment ecosystem that have laid the foundations for digital payments in Ethiopia.

“I trust that NDPS will assist Ethiopia in meeting the challenges that currently lie ahead as we transform the payment ecosystem to move toward a cash-lite and more financially inclusive economy.” Abiy said in his message on the new strategy.

The NDPS strategy that was developed with the support of partners like the United Nations’ Better than Cash Alliance, amplified the requirements of encouraging and discouraging tools to obtain the expected dream to transform digitization payments in Ethiopia.

Establishing a digital economy without digital payment and digital trading solutions is unthinkable. Under the digitization process in the country, the state has begun the implantation of electronic government procurement (eGP) and an e-commerce scheme at the beginning of the current budget year, which is being piloted at nine public institutions. The procurement platform signifies that the government is diving into the e-commerce pool, involving the Ministry of Finance, Ministry of Innovation and Technology (MinT), Ministry of Revenue, Ethiopian Roads Authority, Ethiopian Pharmaceuticals Supply Agency, Public Procurement & Property Administration Agency, Addis Ababa University, and Addis Ababa Science and Technology University, which all have commenced the pilot program.

Online marketing is one of the plenty resources that hasn’t been utilized to its fullest potential in Ethiopia. This is the case while 17Pct of Ethiopia’s 120 million people were registered users on online platforms.

According to Mathias Aklilu, a marketing specialist, Ethiopia’s large population offers a great advantage to doing really well on online marketing, and there is still so much untapped potential. With internet penetration expected to improve further, the potential is going to be even more attractive.

E-commerce, by its definition, is the buying and selling of goods or services over the internet and the transfer of money and data to execute these transactions. The concept of e-commerce has become common in recent years through social media’s informal digital trading system, which might include hundreds of distributed trading channels in Telegram and Facebook.

E-commerce in Ethiopia is emerging but still at an embryonic stage. This is mainly due to the lack of adequate IT infrastructure and even more with the  absence of an enabling legal framework. Recently, the government approved a national law to regulate e-commerce.

In 2018, the former minister of innovation and technology, Getahun Mekuria (PhD), stated that Addis Ababa was about to house the East African e-commerce center. The e-commerce center, originally planned to be opened in Kenya, is changing its location to Addis Ababa, Ethiopia, due to the benefits it can garner from the focus given by the government to the innovation and technology centers, coupled with the higher number of flights Ethiopian Airlines handles with Addis Ababa as a hub. The progress remains undisclosed.

In Ethiopia, there are roughly 30 e-commerce shops, and the Ministry of Revenue is inching towards deploying technology that allows for electronic receipts and other gig and electronic services.

According to Mathias, when social commerce first entered Ethiopia, the major platforms were Viber and Facebook. “There used to be plenty of ‘sell and buy’ groups on Viber until Telegram became the more preferred line of digital communication in the country.”

On the other hand, more established companies provide products and services through their own developed interfaces, diving into the digital business arena, serving B2C and C2C coupled with on-demand delivery e-commerce platforms. Deliver Addis is a premier food delivery service startup as well as a grocery retailer. Asbeza, Addis Mercato, Addis Ber, and Qefira are also among the big fish in the ecosystem.

Asebeza Delivery, a web and mobile application doing online grocery shopping and delivery services with all categories ranging from fruits, vegetables, and groceries, was established four years ago.  “Most of our customers use payment upon delivery, and we use mobile platforms like Telebirr, Hellocash, CBE birr, and Amole.” Bereket Tadesse, Asebeza Delivery founder and CEO told EBR.

“The overall exposure since we started our online business has been positive. People seem      to be adapting to e-commerce platforms. Although we offer different discounts and free delivery packages, the concept of e-commerce has not been [sufficiently understood] even in the capital.” Bereket reflects.

Furthering the growing ecosystem of payment modalities is among the factors that help businesses like Bereket’s thrive. He witnessed that among mobile banking and wallet platforms, Telebirr is the most competitive. He receives most payments on Telebirr, alongside Bank of Abyssinia, as it owns international payment gateways integrated with Mastercard and Visa.

The Electronic Transaction Proclamation No. 1205/2020 has come into effect as of June 30, 2020. Electronic commerce is also defined by the proclamation as the transaction of goods and services through the Internet and other information networks. The proclamation intends to create a more secure legal environment that enables and facilitates the use of electronic transactions.

The proclamation aims at protecting the interests of consumers by giving them the right to complain to MinT when a supplier fails to comply and also to bring a lawsuit before the law.

“Using electronic commerce positively impacts market opportunities, thereby empowering citizens to be included in the economy and also enabling Ethiopia to be part of the digital era.” Mignot Tariku, a freelance programmer who designed several web and mobile applications for online retail businesses, told EBR.

Numerous institutions, such as the World Bank, have been supporting Ethiopia’s path to digitization. The World Bank has injected a credit amount of USD200 million for the Ethiopian Digital Foundation Project, a five-year project, through its facilitator ministries of finance, and innovation & technology.

The proposed project will also contribute to the Jobs and Economic Transformation (JET) agenda by supporting disadvantaged groups to adopt digital technologies and participate in the so-called “platform economy” through accommodation sharing, ride sharing, and other gig-economy services. It will also help by financing digital entrepreneurs and incentivizing digital businesses to onboard more people to participate in the digital economy, for instance as suppliers for e-commerce platforms.

According to the Cepheus Capital Report, the size of digitally transacted economic activities in Ethiopia will grow ninefold to ETB3 trillion, representing 39Pct of the GDP by 2025. The report portrays that ETB350 billion was transacted in 2020 in gross transaction value, which is equivalent to 10Pct of the GDP, of which ETB5 billion was generated as net revenue/profit.

Mekdes Ashenafi, Deputy Chief Operating Officer at Addis Berara, urges people to cope with the dynamic nature of technology, which exhibits a rapid evolution in less than a decade.      “With improved access, Internet users are growing rapidly. Digital solutions providers are also growing; however, the majority have stuck to the traditional trading.

Mekedes has seen the importance of the national digital payment strategy which opens up the gate for several fintech companies and banks to bring in payment modalities.

With a growing visitors, on their online platforms, her firm accepts international cards alongside debit cards on interoperable POS and several mobile money and wallets like HelloCash and Amole, and cash on delivery. Telebirr, a mobile money and wallet service powered by the state giant ethiotelecom, has also been in the market since May 2021, reaching 28.2 million subscribers in March 2023, up from 21.8 million subscribers in June 2022. Currently, telebirr digital payment system has 112 master agents, 98.8 thousand agents, 25.5 thousand merchants and 615 service centers. The platform has been integrated with 18 banks to transfer money from bank to telebirr and over ETB263 billion has been transacted so far. Further, the service is allied with nine international remittance partners. Thousands of companies have also integrated their services with telebirr to solve payment related hustles.

Meanwhile, issues regarding e-receipts are the most common challenge online businesses face with revenue authorities and officials. A regulation called “Electronic Transaction” that would provide the legal framework for e-commerce and other related aspects, including e-receipts, is in the final approval process. According to Abiyot Bayou (PhD), director of the digital transformation program, the Ministry is advocating for e-commerce through several acts, including amendments to existing regulations.

The e-commerce culture is not where it has to be now in comparison to the evolution of the world and neighboring countries. “The Ministry is working to support a sustainable ecosystem; however, creating awareness should not leave for the service providers and the Ministry alone.” he said.

“Currently we are passing through technical and legal steps to award an e-receipt system,” he says, “and interoperability is being achieved through EtSwitch.”EBR

11th Year • March 2023 • No. 115


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