Will digital commerce be the solution to youth employment challenge in Africa?

Over 100 million young people will join the African labor market in the next 10 years: will digital commerce succeed at offering them good jobs as well as market opportunities? The new study “Digital Commerce and Youth Employment in Africa” by BFA for the Master Card Foundation examines under which conditions digital commerce can be part of the solution to achieve SDG 8: “sustained, inclusive and sustainable growth, full employment and decent work for all”.

Digital commerce refers to the sale of goods and services online as well as the sharing economy. In Africa, digital commerce represents less than 1% of retail commerce, as compared to market leaders China and the US with 14%. Whereas many factors contribute to a certain rise of digital commerce in Africa, very few African policymakers have taken a clear stance on the matter. Commissioned by the Master Card Foundation, BFA’s study explores the impact of digital commerce on youth employment in Africa and outlines policy recommendations for an inclusive digital commerce system in Africa.

What are the main drivers and barrier to digital commerce development in Africa?

Five main drivers contribute to the growth of digital commerce in Africa:

  1. Rising internet connectivity
  2. Increasing use of digital payments
  3. Growing labor force with a rising youth share faced with mainly low-quality informal-sector jobs
  4. Continued urbanization making digital technology more accessible
  5. Growing power of superplatforms, such as Nigeria-based Jumia, making significant investments in local infrastructure, logistics, regulation, and training.

However, several uncertainties could impede the growth of digital commerce in Africa: from diverging global and regional digital commerce strategies, especially regarding trade and tax regimes, to uncoordinated policy environment at a national level and trade union resistance. Besides, digital commerce must also face a low-trust environment in Africa, where 85% of e-commerce transactions are “payment on delivery” a sign that buyers are only willing to pay on evidence of delivery. Disrupt Africa’s 2017 survey reported that the major barrier to the growth of e-commerce start-ups in Africa was consumer education and trust while physical delivery is still an issue, due to often ineffective post offices and lack of clear addressing systems.

How could digital commerce impact youth employment? 

Digital commerce affects employment in Africa through three channels:

  1. Directly by hiring workforce for the platforms as well as logistics
  2. Indirectly by enabling the entry of new MSMEs on the marketplace
  3. And by changing the nature of work itself through the spread of labor-contracting platforms.

For instance, Jumia has only 3,500 direct employees and reports 50,000 MSMEs selling on its platform and has over 100,000 commission-based sales agents helping first-time customers navigate the site to make purchases.

The study identified the sales of physical goods, both domestically and cross-border, and  gig platforms (with workers supplying physical services such as ride-hailing drivers, domestic workers) as segments most likely to generate youth employment.

Although there are still concerns whether jobs created by digital commerce are quality employment (i.e. dignified, fulfilling, safe, productive and well-paying), digital commerce is an opportunity for informal workers to gain progressive formalization. Indeed, with 86 % of informal employment on the continent, digital commerce needs to build upon this reality. A new category of iWorkers could make up more than 10 % of the labor force by 2030. They could receive forms of benefits and protection on a spectrum between today’s limited formal sector and the vast unsupported informal sector.

Policy recommendations

To promote digital commerce, the UNCTAD (United Nations Conference on Trade and Development) developed an e-commerce assessment tool, based on 7 sustainability pillars, to help countries build coordinated policies:

  1. Skills development
  2. Financing for E-Commerce
  3. E-commerce assessment
  4. ICT infrastructure and services
  5. Payments
  6. Trade logistics
  7. Legal and regulatory frameworks

Liberia was among the first African countries to conduct such an assessment in 2018 and Egypt was the first African country to issue a national e-commerce strategy in 2017. African policymakers could also inspire from Chinese rural Taobao Villages strategy, which consists of leveraging rural MSMEs competitivity through E-commerce.

Corporate initiatives in the field of impact sourcing (targeting of outsourced jobs to specific groups, including African youth), certification processes for gig-workers as well as workers self-organization, (i.e: driver unions in cities in Kenya, Nigeria, and South Africa) are part of the solution for an inclusive digital commerce. Digital Public Works Programs (“iPublic Works Program” (iPWP)) targeted at the urban youths could help build up relevant skills for future employability. They are being developed in South Africa, Zlto, a program run by RLabs, rewarding youth both monetarily, with digital currency, and via ratings for engaging in community services.

Source : Digital Commerce and Youth Employement in Africa, report by BFA commissioned by the Mastercard Foundation, 27 February 2019