Chinese Farmers Are Now Selling More Online. Can “E-Commerce for Agriculture” Also Work in Africa?

Chinese Farmers Are Now Selling More Online. Can “E-Commerce for Agriculture” Also Work in Africa?

 In analysis, op-ed
0

In China, e-commerce is everywhere. Walk down any street in a busy city and you come across “Kuaidi” drivers delivering parcels or advertisements for online “Taobao” shops. But beyond China’s bustling cities, e-commerce has a profound impact on job creation and poverty reduction. With 2020 hailed as the deadline for the eradication of poverty in China, at Development Reimagined we have been exploring if this model provides lessons for poverty reduction across Africa, particularly for boosting agricultural sales.

Over the past five years, e-commerce has been used as a tool to support China’s poverty reduction strategy across the country. E-commerce companies have targeted new sellers in rural China, with Alibaba’s “Taobao villages” program being credited with helping many of China’s rural residents to lift themselves out of poverty since 2015. This is especially true for the agricultural sector: In 2018, agricultural e-commerce sales totalled 230.5 billion yuan ($34.06 billion) with 13 million farmers in China selling their products online – E-commerce has played a crucial role in boosting agricultural sales.

Comparatively, Africa’s overall e-commerce market is significantly smaller, with only 21 million e-commerce consumers in 2017, valued at US$5.7 billion – just around 0.5% of the Chinese e-commerce market at the time. This accounts for less than 0.5% of the continent’s GDP, far below the global average of 4%.  Yet, the potential for e-commerce to support agricultural growth is large. Currently, at about 15%, the agricultural industry accounts for a significant share of the African continent’s GDP, alongside employing about two thirds of the population, even without a large-scale coordinate use of e-commerce to boost sales of agricultural goods.

As the COVID-19 pandemic continues to restrict movements and disrupt daily life, e-commerce sales around the world have experienced an exponential surge, especially in essential items including agricultural products.

In light of COVID-19, can Africa’s e-commerce market follow a similar trajectory to China’s and boost growth in agricultural product sales? 

How Has E-Commerce Supported the Agriculture Sector in China During COVID-19?

In China, the pandemic initially stimulated a crisis in the rural and agricultural sector, which, through e-commerce innovations in particular quickly turned into an opportunity.

At first, sales were negatively impacted, due to lockdowns, reduced logistics services and declining supplier demand. Seeing this, Alibaba decided to launch the ‘Farmer Assistance Project’ on Taobao in February to boost agriculture’s e-commerce presence, and the response was surprisingly strong.  It facilitated over 200 tons of excess stock to be sold online within the first few hours.

Further success came from taking live-streaming to farmers: By mid-April, rural live streaming had generated RMB 60 million ($85 million) of sales, with around 2,000 rural users generating an income over RMB 10,000 ($1,400), helping them sell stock which might have otherwise gone to waste. This surge in agricultural e-commerce correlated with increased orders of fresh food, which saw over 200% sales growth, with e-commerce platform JD Daojia’s daily average users increasing by 98.

In this way, e-commerce was essential to China’s rural areas’ recovery from COVID19 and paves the way for green growth in future. Without e-commerce, many farmers may have fallen back into poverty, with large parts of the agricultural sector decimated.

But has e-commerce been as helpful elsewhere in COVID19 recovery, including in Africa?

Although E-Commerce Is Making Strides Across the African Continent, Rural E-Commerce Still Has Not Reached Its Full Potential

Whilst Africa’s e-commerce market is significantly smaller, there already are numerous players, including around 264 operational start-ups across 23 countries. Major players include Jumia (Nigeria), Takealot (South Africa), Zando (South Africa), Konga (Nigeria), and Kilimall (Kenya). However, most e-commerce companies in Africa are highly underfunded. Moreover, sales are unevenly distributed, with Kenya, South Africa, and Nigeria alone accounting for over half of e-commerce consumers in 2017.

Data on e-commerce penetration of rural and urban areas is limited, although Jumia.com indicates rural e-commerce is rising. In 2019, 25% of deliveries were in rural areas, 50% in urban cities and 25% in small cities/towns. Overall, Jumia.com has experienced increasing rural e-commerce usage, with rural deliveries up from 23% in 2014 to 45% in 2016.

Currently, there is little data available on agriculture-specific e-commerce businesses. A few examples include Pick n Pay (B2C, South Africa), Checkers Sixty60 (B2C, South Africa), Twiga Foods (B2B, Kenya), Efarm.cm (B2C, Cameroon), and Farmcrowdy Foods (B2C, Nigeria). However, several key factors indicate a large potential for e-commerce expansion throughout Africa, for instance: a young and increasingly educated population, high levels of mobile phone usage and mobile payments, as well as established e-commerce companies. Additionally, the 2019 Africa Continental Free Trade Area (AfCFTA) will encourage intra-African trade.

Indeed, the COVID-19 pandemic is accelerating e-commerce usage, with many customers opting to order online to avoid physical shops or open-air markets. Over the lockdown period, online consumers increased by 30% in Nigeria, South Africa, and Kenya; with a 200% growth in online food purchases estimated for South Africa in 2020.

This spike is especially prominent within essentials. Jumia reported that demand for groceries and essentials grew fourfold in the first quarter of 2020, compared to 2019. To extend its reach, Jumia partnered with Twiga Foods in Kenya; and fast-tracked the launch of Farmcrowdy Foods.

But has this been enough?

Are There Lessons for African Countries From China’s ‘E-Commerce for Agriculture’ Approach?

First, it is essential to recognise China’s e-commerce model cannot simply be replicated elsewhere. ‘Africa’ consists of 55 countries, each with a diverse range of policies, market sizes, consumer profiles, histories, and languages. Other contextual differences make economies of scale extremely difficult due to coordination and logistics issues. Comparatively, China is a large, unified market, with e-commerce initiatives supported by both local and central government.

Yet, the potential for comparison is there, especially since China’s rural poverty can often look just like that in African countries. At Development Reimagined, we have three key recommendations for growing e-commerce for agriculture and poverty reduction in African countries, based on China’s experience.

1. Infrastructure Investment

For e-commerce to be successful, connectivity is key. Roads, railways, airports, internet portals are crucial to ensure e-commerce becomes convenient, speedier and a trusted alternative than face-to-face shopping. From 1992 to 2013, China spent 8.6% of GDP on physical infrastructure to ensure reliable movement of goods, alongside 140 billion RMB (US $21billion) on expanding broadband internet to 98% of country’s 500,000 villages by 2020. In contrast, since 2000,  African countries’  GDP share on infrastructure investment has been reported at 3.5% per year. To close infrastructure gaps, McKinsey Global Institute in 2016 projected that African countries would need to increase this figure to 4.5%.

In Africa, infrastructural underdevelopment contributes to long delivery times and hampers intra-regional trade. With 204 kilometres of roads per 1,000 square kilometres as compared to the global average at 944 kilometres per 1,000 square kilometres, and 65 thousand km of rail across the entire continent (of which 22 thousand is within South Africa) compared to China’s 139 thousand km (of which 35 thousand is high speed), Africa has a lot of catching up to do. Once infrastructure is established and logistics are smoothed, better trust relations will be instilled due to faster, reliable deliveries. This will complement the AfCFTA, which will help to harmonise cross-border rules and regulation and make trade and logistics more consistent.

2. Focus on Value-Added Products in the Agriculture Sector

Africa currently misses out on the profits linked to producing value-added products. The majority of African agricultural exports across the world are in the form of soft commodities, with little value-added products. Soft exports require costly government subsidies, generate low profits and stifle employment opportunities, locking Africa into a low position in the value chain. For instance, Côte d’Ivoire, Ghana, Cameroon and Nigeria produce over 70% of global output of cocoa, yet 75% is exported raw and only a quarter kept for value-added processing into items such as cocoa butter, powder and chocolate. As a result, West Africa gets a  tiny 5% share of the $100bn worth chocolate market.

Developing the valued-added sector requires increasing both investment and domestic consumption levels.  Africa boasts several advantages for value-addition – a growing population with low labour costs, a huge and increasingly educated youth, low capex costs and abundance of arable land – making it a great investment opportunity. Funding and loans should be channelled into SMEs to support the growth of African companies to compete with cheaper overseas products (many of which are themselves often subsidised), alongside the implementation of government-backed schemes to encourage young entrepreneurs to build e-commerce hubs in the rural areas. Secondly, cultivating local demand for both soft and value-added products is helpful as a buffer against shifting external markets. This can be supported by governments subsiding value-added sectors during their infancy, alongside private sector investment and partnerships, as took place in China. This is a viable strategy, as Africa has the fastest-growing middle-class, with household consumption estimated to be worth $2.5 trillion by 2030.

3. Expand the Use of Mobile Money for Agri E-Commerce:

While behind on e-commerce itself, Africa is responsible for an astonishing 46% of mobile money activity in the world – with an estimated transaction value of over US$26.8 billion in 2018 alone. Despite this, when it comes to e-commerce, cash-on-delivery is widely preferred. Looking at China’s experience, this disconnect will massively limit e-commerce growth into the long-term. However, mobile money use  is a key opportunity. Since citizens are familiar with using mobiles for payments, a standardised mobile payment method should be implemented across African e-commerce markets to facilitate easier and more trusted transactions.

Overall, the COVID-19 pandemic presents an opportunity to develop Africa’s e-commerce sector, especially in agriculture, due to its essential value. China’s experience shows just how transformational this can be. But to ensure this growth continues, vital investments must be made, now.

**This article is based on a forthcoming report on e-commerce for poverty reduction, for the Center for Global Development.

This article was originally published on the China Africa Project Website on 30 October 2020

, , , , ,
Recommended Posts

Leave a Comment

Contact Us

We're not around right now. But you can send us an email and we'll get back to you, asap.

Not readable? Change text. captcha txt
Will the 2021 IMF Forecasted Growth Rates for African Countries Impact COVID19 Recovery?analysis, infographic, Social Media
Can African-Sino Agri-Health Cooperation Champion Green Recovery?analysis, op-ed

EDMOND BOSILONG

Research Analyst

Edmond is a research analyst who is passionate about sustainable development, innovation, and the environment. Passionate about climate financing, he firmly believe there is a more reliable system to promote equality, growth, and welfare in societies without affecting the ecosystem. Through his skills, knowledge and experienced gained over 7 years, he wants to make an impact in the world of development. Edmond holds a Master’s Degree in Public Policy from Korea Development Institute and a BA Degree (Honors) in Business from University of Derby.

   HANNAH RYDER

    Founder and CEO

Hannah Ryder is the Founder & CEO of Development Reimagined. A former diplomat and economist with 20 years of experience, named one of 100 most influential Africans in 2021, she is also Senior Associate for the Africa Program of the Center for Strategic International Studies (CSIS), sits on the Board of the Environmental Defence Fund, and is a member of UAE's International Advisory Council on the New Economy. Prior to her role at DR, Ms Ryder led the United Nations Development Programme (UNDP)’s work with China to help it scale up and improve its cooperation with other developing countries, including in Africa. She has also played various advisory roles for the UN and OECD and co-authored the seminal Stern Review of the Economics of Climate Change in 2006.

LEAH LYNCH

Deputy Director

Leah Lynch is Deputy Director of Development Reimagined (DR), and head of the China office. Leah has over 10 years of experience in development and has lived in China for over 8 years. Leah has also travelled extensively around Asia and Africa for research. Leah supports the strategic direction of the team across China, with a mission to deliver high quality research on sustainable development and poverty reduction. Leah is also Chair of the Sustainability Forum at the British Chamber of Commerce in China, providing direction on sustainability initiatives for British and Chinese business. Leah has also consulted on various evaluations on UK aid (ICAI) and is a specialist on development cooperation from the UK and China. Leah has also consulted on various UN projects, including providing support to the UN China team during the COVID-19 Pandemic. Prior to DR, Leah was at the United Nations Development Programme (UNDP) China, supporting the UN’s portfolio on communication strategies, China’s South- South Cooperation and the Belt and Road Initiative (BRI). Before UNDP, Leah lived and worked in Kenya developing sustainable water policies for the Kenyan government.

YIKE FU

China-Africa Policy Analyst

Yike Fu is a Policy Analyst and has been responsible for leading numerous areas of work, including on debt analysis in Africa and beyond, and China-Africa trade and investment logistics and analysis. She is the co-author of “African Debt Guide”, in which she challenged the narrative that Africa is in the midst of a new debt crisis by analysing data back to the 1970s and adopting new metrics to present the real story behind the data. She also developed a benchmark to compare the financial distribution of development partners such as the UK, US, Japan, France and China in Africa. Prior to her role at DR she worked at the International Finance Corporation and African Union Representational Mission to the US. She holds a Masters in International Affairs from George Washington University.

JUDITH MWAI

Research Analyst

Judith is a Research and Policy Analyst, where she specialises in Africa-China relations, international development, and diplomacy. During her time at Development Reimagined, Judith has co-authored several articles published in The Diplomat on debt and China-Barbados relations and was quoted by China Daily in a piece on Women Rights in China. Previously, Judith worked as a research analyst for an Advocate and Commissioner and Oats office in Kenya.

OVIGWE EGUEGU

Policy Analyst

Ovigwe specialises in geopolitics with particular reference to Africa in a changing Global Order. He is adept at critically analysing the politics of contemporary development processes and providing insight into the geopolitical interests that influence them. His work includes research, publications, tailored briefings and advising on global and regional trends, and issues at the nexus of geopolitics and development. Ovigwe appears frequently in media around the world such as Al Jazeera, TRT World, SABC, CGTN, BBC Radio, and other platforms.

JING CAI

Policy Analyst

Jing leads China-African health and agriculture cooperation research at Development Reimagined, having managed our FOCAC Policy Analysis and Advocacy project. She is also the co-author of “China-Africa Health Cooperation under FOCAC Umbrella”, in which she analysed China’s commitments around health cooperation since the first FOCAC summit and deepdived into four African countries’ health overview, challenges and cooperation with China as cases studies. Before DR, Jing worked at GIZ Cambodia on M&E of a disability advocacy project. She also worked as a translator with Chinese medical team in Benin.

PATRICK ANAM

Trade Policy Analyst

Patrick is an International Trade Policy and Trade Law Expert with over 5 years of experience. His expertise includes trade law, trade policy analysis and regional integration. He is currently engaged with Development Reimagined as a Senior Trade Analyst and was the lead author of Development Reimagined's recent Report on Africa-China Relations titled "From China-Africa to Africa- China: A Blue Print for a Green and Inclusive Continent-Wide Strategy Towards China." and “Reimaging FOCAC Going Forward.” Patrick has previously consulted for the East African Community, UNECA and for the Kenya Ministry of Trade.

ROSIE FLOWERS

Senior Policy Analyst 

Rosemary is our Senior Policy Analyst. She is a skilled policy analyst and has previously worked as a UK civil servant. She is studying Human Rights at Birkbeck, University of London with a research focus on international law in the context of health crises such as the COVID-19 pandemic.

JADE SCARFE

Project Manager and Africa-China Communication Assistant

Jade is a Project Manager for Development Reimagined’s flagship project Africa Unconstrained, which focuses on financing needs and debt vulnerabilities of African countries. Her research focuses on China-Africa development finance alongside debt vulnerabilities, infrastructure needs and South-South cooperation. She has worked with a breadth of stakeholders from China, Africa and the wider international community, including governments, private sector, NGOs and civil society. Her writing has appeared in a number of publications, including The Africa Report, The China-Africa Project, The Diplomat and more. Jade holds a Master’s in China and Globalisation studies from King’s College London.

ROSIE WIGMORE

Programme Manager

Rosie is the Project Manager of Africa Reimagined (AR) at Development Reimagined (DR) where she supports high-end African brands with entering the Chinese market by operating services such as trademark protection, Chinese market research, Chinese partnership building, and Africa to China logistical support and import/export services. Rosie has worked with DR for over two years now with proven success in helping high-end African brands navigate the Chinese market. She is extremely passionate about her work because more African brands selling in the Chinese marketplace means African countries can export MORE value-added goods, create MORE jobs and foster MORE innovation in African countries.

Rosie is also alumni of the School of International Studies at Peking University in Beijing where she is also an editor at the Peking Africa Think Tank. PATT is led by a diverse group of scholars who specialise in African Studies within the context of Sino-Africa relations.

LAUREN ASHMORE

Consultant

Lauren has lived in six countries from the Americas to Europe and Asia and speaks both French and Spanish proficiently. At Development Reimagined, Lauren’s research focuses on climate action both in the Asia-Pacific and in Africa, and how countries are using tools such as SDGs and Covid-19 action to build a more climate-resilient future. She holds a Masters in International Relations from Leiden University.

ETSEHIWOT KEBRET

Consultant

Etsehiwot holds a Masters’s degree in Development Studies from the London School of Economics. She has diverse experience in humanitarian and development issues by working in both multilateral organizations and international non-governmental organizations. Etsehiwot is currently a consultant focusing on the SDGs and development finance.

DIBEKULU MULU

Economist Consultant

Dibekulu is an economist by training. He holds an MSc in International Development Studies from Palacky University Olomouc, an MSc in Development Economics from the University of Clermont Auvergne, and an MSc in Economics, Finance, and International Integration from the University of Pavia. At Development Reimagined, he works as an Economist consultant. He has strong data analysis skills, with research interests centring around development finance, impact assessment, food security, and agricultural insurance.

OSARU OMOSIGHO

Project Manager

Osaru is a health professional with an MSc in Health Systems Policy and an interest in women’s health and population management. At Development Reimagined, she applies her health sector experience to global health research and collating locally applicable development insights from China.

PIER FERDINANDO CINOTTO

Research Analyst

Ferdinando’s research at Development Reimagined is centred on South-South Cooperation dynamics, specifically on the analysis of Chinese investment and debt flows in Africa and their linkages to African industrialisation. He is currently a Yenching Scholar at Peking University, after having graduated from the University of Cambridge with an MPhil in Development Studies.

DAVID TINASHE NYAGWETA

Research Analyst

David is a Research and data analyst at Development Reimagined. His scholarly focus is mostly on interdisciplinary research in demographic economics and development with interests in migration, economic development and policy, education, health and subjective well-being. He is currently a PhD scholar at Nelson Mandela University from which he also holds B.com Economics and Statistics and M.com respectively.

IVORY KAIRO

Research Analyst Kenya

Ivory is a Kenyan lawyer with experience in policy research and analysis. She also supports the communications team at DR. Ivory speaks English, Swahili and French.

JOY ENE

Research And Data Analyst China 

Joy Ene is a Research and Data Analyst at DR. Joy is passionate about African/global development, poverty eradication and trade policies between underdeveloped and developing countries. She is also a fourth-year student of International Economics and Trade at the  Liaoning University, Shenyang, China. She serves as the President of the Student Union, Liaoning University, International Students chapter.

CHENSI LI

Research Analyst 

Chensi Li is a research analyst. She has previously worked for local NGOs in Nigeria and Cameroon and think-tanks in China.  Her research areas include Sino-African relations, African foreign affairs, public diplomacy, state-building and national governance.

Yixin Yu

Research Analyst 

Yixin is a Junior Research Analyst and her focus areas is on public-private partnership and entrepreneurship. She has over three years of working experience in both private and public sectors in Ethiopia. She was the China Liaison Officer for project ‘Partnership for Investment and Growth in Africa’ at International Trade Centre, where she accumulated rich experience in investment and trade promotion
HANNAH RYDER

Founder and CEO

Hannah Ryder is the Founder & CEO of Development Reimagined. A former diplomat and economist with 20 years of experience, named one of 100 most influential Africans in 2021, she is also Senior Associate for the Africa Program of the Center for Strategic International Studies (CSIS), sits on the Board of the Environmental Defence Fund, and is a member of UAE's International Advisory Council on the New Economy. Prior to her role at DR, Ms Ryder led the United Nations Development Programme (UNDP)’s work with China to help it scale up and improve its cooperation with other developing countries, including in Africa. She has also played various advisory roles for the UN and OECD and co-authored the seminal Stern Review of the Economics of Climate Change in 2006.