New brief explores the potential of digital trade to support poverty reduction in Africa

How can e-commerce support poverty reduction? Watch our video to discover more!

Global e-commerce sales surged to US$25.6 trillion in 2018, up 8 percent from 2017. Leading the way are China (US$1.5 trillion), the United States (US$600 billion), and the United Kingdom (US$135 billion) holding the top three spots respectively.  Yet Africa, with 17 percent of the world’s population, still lags behind both in e-commerce sales and the use of mobile money for online purchases. Why is this a problem?

Well Africa now accounts for over half of the world’s extreme poor and has a young, dynamic population set to double by 2050 to 26 percent of the world’s population. E-commerce or digital trade could be a powerful “leapfrogging” tool to boost trade, create employment, raise incomes, and reduce poverty. With lockdowns and social distancing due to the COVID-19 pandemic there is a key opportunity for e-commerce and related digital solutions, tools and services to thrive.

But how can African policymakers and businesses leverage and sustain this? And are international investors and development partners really working in the right way to support African countries to seize this opportunity?

This policy note, commissioned by the Center for Global Development and aimed in particular at policymakers and business leaders in African countries, explores the potential for e-commerce to support poverty reduction and sustainable, inclusive development across Africa by drawing on lessons from China, the world’s largest and fastest growing e-commerce market.

The note uses new research to dive into the current situation of e-commerce in China and Africa, it also explores how China has grown a strong e-commerce industry that now supports poverty reduction efforts, and how China’s lessons can be adapted for Africa. Finally, the note provides recommendations for African policymakers and the private sector in utilising e-commerce for poverty reduction.

We find that although, markets are currently fragmented across Africa, e-commerce DOES have the potential to support poverty reduction. However, policymakers, partners, and the private sector must work together harder and more intentionally to build a smoother, sustainable, and domestically-owned e-commerce ecosystem that views both urban and rural communities as growth creators, not just consumers.

Download the paper from the CGD Website here: download brief

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PhotoCredit: Quartz 

January 2021

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