The role of technology in Africa

In Africa, this sector is remarkably resilient, showing adaptability and innovation by adopting new tools and ways of doing business.

This is seen for example in the uptake of mobile Internet and other technologies allowing informal retailers to realise some of the benefits of modern trade on their own terms.

Made up of 68% of the total retail market across Kenya, Nigeria and South Africa and comprising 85% of Africa’s labour force, the informal sector is found in a wide range of formats from the spaza shops of South Africa to the air markets of Nigeria and the kiosks in Cameroon.

In South Africa the informal economy contributes around 6% of the country’s GDP, employing at least 2 647 000 workers (Stats SA, 2021) with retail sales in the region of USD$12 billion annually.

Outside of South Africa, it’s estimated that informal channels on the continent account for between 40% and 90% of total food sales depending on the country, catering to consumers of all income groups due to its:

• convenience
• credit-based payment flexibility, and
• fresh foods.

So, these spaces have become distribution points for essential financial services that will transform informal retail — driven by products and services aimed at this market from payments to remittances. In turn, tech-enabled retailers are able to:

• improve their connection with their shoppers
• facilitate supplier purchases more efficiently, and
• get access to credit at their fingertips.

With that said, not all technologies are created equal with five emerging themes driving sector transformation now and well into the future.

Point of sale technology facilitates payment as shoppers choose cashless transactions as well as being a valuable source of shopper data. In South Africa, iKhoka and Yoco have started to transform the way informal traders do business.

Mobile technology drives efficiencies in purchasing and increasing sales with mobile Internet penetration projected to reach 51% in 2025 (Statista, 2021). In Africa, the mobile phone is a force for the transformation of this sector — allowing for online payments and the use of mobile money, with Vodaphone’s M-PESA, launched in Kenya in 2009, Africa’s most successful mobile money service.

Rising Internet penetration is enabling greater adoption of technologies. While still evolving in Africa as a tool for business purposes, ICT use typically revolves around communication with and purchase from suppliers and also a quick and easy platform for price comparisons for informal retailers to consider when purchasing stock.

The growth of social media, especially WhatsApp, provides an efficient avenue for communication between informal retailers and potential customers. So too, Facebook Marketplace provides a space for the marketing of products with minimal cost and effort from the seller.

In turn, social media provides an opportunity for larger suppliers to reach informal retail customers.

Fourth Industrial Revolution technology advancements are unlocking informal trade shopper data, some of which may assist businesses that serve the trade. In Kenya, Twiga Foods a B2B logistics platform for kiosks and food stalls does just that in partnership with IBM, analysing sales data from mobile transactions using AI to predict creditworthiness.

With opportunities abounding, there is no doubt that informal markets remain dynamic retail environments. When building a technology-enabled strategy with this sector one must ensure what is built is:

• relevant
• usable, and
• effective.

Ensure to adopt a gig economy and digital market research platforms to gather intelligence along with leveraging the technology ecosystem to understand it, the operations, how business is done and what traders require.

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