While electronic commerce penetration in South Africa is rising, high internet costs, poor delivery infrastructure and limited industrial competitiveness present constraints to the sector’s potential growth in the country.
This is according to a report by the E-commerce Forum of South Africa (EFSA) with the Mapungubwe Institute for Strategic Reflection, released this week.
Rand Merchant Bank estimates that transactions in the burgeoning South African e-commerce sector surged 150% to R225bn this year.
The EFSA report said that as e-commerce becomes increasingly central to the global economy, it also raises complex regulatory challenges across multiple dimensions, including platform power, cross-border trade, taxation and product regulation.
“The internet’s global reach challenges the jurisdictional scope of regulations. Rapid technological innovation requires constant updating of the regulatory framework, while cross-border transactions aggravate enforcement challenges,” says the report.
“The growing dominance of multinational offshore platforms makes fair playing field regulations difficult and susceptible to geopolitical pressures. Governments across the globe are adopting and co-ordinating responses to address anti-competitive behaviour, protect consumers, and ensure fair taxation and trade practices.”
The report says there’s about R900bn in untapped e-commerce potential in South Africa’s townships, an opportunity to drive inclusive growth, digital access, and local industrialisation. It adds that focused investment in township e-commerce can stimulate local industry and boost national competitiveness.
Governments are increasingly concerned about the security of consumers conducting online purchases and other transactions. The rise of giants like Temu and Shein is also raising competition concerns in markets, including South Africa.
The report said that while ensuring fair practice and safe transactions, regulations could present an added layer of complexity and cost for online businesses that can stifle innovation. The report said oversight, deindustrialisation, digital exclusion, and data sovereignty are all key challenges.
“Consumer protection, data governance, and intellectual property protection are also crucial. This is why regulatory challenges and interventions, in both developed and developing economies, primarily address unfair competition.”
The report noted “a significant and mostly positive impact” from large multinational e-commerce companies on domestic economies but warned of “level playing field concerns” in labour, customs, products, and data integrity.
The e-commerce sector has rapidly grown into a major employer and economic driver, fuelled by advances in technology. South Africa’s e-commerce share of retail jumped dramatically from less than 1% in 2019 to almost 10% now, moving South Africa from emerging to expanding in e-commerce development
— Alastair Tempest, CEO of EFSA
“This by no means generalises very large online platforms. In the interests of their own brand reputations and business safeguards, they tend to react swiftly to public concerns. Regulatory bodies need to monitor and legislate as rapidly as e-commerce expands.”
Alastair Tempest, CEO of EFSA, said the report highlights a critical inflection point for the country’s online commerce sector and that a careful balance must be struck for South Africa’s e-commerce future.
“The e-commerce sector has rapidly grown into a major employer and economic driver, fuelled by advances in technology. South Africa’s e-commerce share of retail jumped dramatically from less than 1% in 2019 to almost 10% now, moving South Africa from emerging to expanding in e-commerce development.”
He said growth focused largely on business-to-consumer markets but also signalled the need to emphasise business-to-business digital commerce as a key growth area for both domestic and export markets.
“This report recognises the challenges, including bridging the digital divide and the need to guard against cybercrime. The report warns against the influx of ‘ultra-fast fashion’, which threatens national manufacturing and e-commerce. South African consumers’ high uptake of cross-border fast fashion must have a balanced regulatory response.”
The report recommends that the government update the Electronic Communications and Transactions Act to include algorithmic transparency, data sovereignty, intermediary liability provisions and seller protection mechanisms on third-party platforms.
It also recommends strengthening the enforcement of the Protection of Personal Information Act and Consumer Protection Act by creating a unified digital consumer rights portal and establishing a cross-border consumer protection protocol aligned with the African Continental Free-Trade Area.
“South Africa is no exception to both the evolution and revolution of global e-commerce. It has entered the expanding phase of digital commerce maturity, contributing more than R71bn to the retail sector in 2023. This powerful, exponential growth continues to accelerate with greater consumer adoption.”
Frederik Zietsman, CEO of the Takealot Group, said e-commerce was growing rapidly and becoming a vital part of South Africa’s economy, and its recovery — connecting consumers and small businesses, creating jobs and driving innovation, supporting re-industrialisation efforts and economic growth.
“As the sector continues to evolve, it is essential that policy and regulation evolve alongside it, guided by credible research and inclusive dialogue,” he said.
Speaking at the AfricaTech Festival in Cape Town, communications minister Solly Malatsi said the government was responding to regulatory challenges that excluded households from participating in the digital economy.
“The fastest network with the lowest latency does not create access to opportunity for a household that cannot afford a smart device or a small business that bends through its monthly data allocation in a few uploads or transactions,” he said.
“Meaningful access requires that we keep simple things simple, that we reduce the total cost to connect and communicate, that we expand last-mile connectivity, and ensure that devices are fit for purpose.”
Malatsi said following the removal of the ad valorem excise duty on lower-end smart devices, the preliminary research done by the Digital Council showed that there has been a 16% increase in first-time smartphone buyers.
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