Developing E-Business For Small Businesses In Africa
By: Godwin C. Nwaogwugwu
Published March 7, 2007
In simple terms, E-business (doing business on the Internet) can enable small scale businesses in emerging markets gain greater bargaining power in the global economic exchange despite their limited capital, and mobility. The world economy is moving online. Today people are meeting online and eventually getting married, people who do not have the capital to establish physical stores are getting rich maintaining only online shops, small musicians who find it difficult getting producers are uploading their tracks on ‘Napster’ (http://www.napster.com/choose/index.html) to be downloaded by millions of people around the world, even politicians are using video-sharing tools like ‘Youtube’ (http://www.youtube.com/) to reach potential voters, etc. Therefore, the action or inaction of African businesses to take advantage of e-business will determine how much they grow in the coming years.
Every year Economist come up with a table of e-readiness ranking from a selected number of countries. It is not surprising that African countries often rank lowest in most e-readiness reports. That is not very promising considering that most investors today will be interested not only on the investment climate and infrastructure in a country but also on e-readiness indices such as national connectivity, e-leadership, information security, human capital, and e-business climate.
Interpreting E-readiness Indices
There are many indices used to measure e-readiness. The most common ones are:
• Connectivity: Addresses the ability to exchange information, goods and services with the rest of the world.
• E-leadership: Addresses the commitment of a national government to partner with industry leaders to create conditions favorable to electronic transactions.
• Information security: Addresses issues concerning the protection of personal data, intellectual property, and effective privacy laws.
• Human Capital: Emphasis on developing competent manpower including IT managers who can manage complex technology tasks, policy analysts who can make informed inputs on government policies and regulations that are capable of stifling technology growth; local content creators who can either customize or adapt global technologies to the specific business needs in the country, software and hardware engineers.
Beyond the indices, e-business also requires a larger population of end-users or consumers who don’t have to understand how the technology works, but can use the technology.
How Small Businesses In Africa Can Benefit From E-business:
Even in challenging environments such as Africa, small businesses can still benefit from e-business. Simple information websites with product and contact information, as a first step can open new doors for small businesses locally and internationally. Hospitality industries stand to gain more exposure and market through e-business. Tourists and people in the Diaspora are excellent target customers for hotel and tourism information for online reservations.
Business associations, Chambers Of Commerce, Cooperative societies, and NGOs in Africa can bridge the economy of scale on the technology required for e-business by setting up online malls showcasing a pool of their members’ sites, products and services. Through the online mall people in the Diaspora may order local goods for friends or family. These associations can also help to guarantee the quality of products advertised on the site, as well as the credibility of its members to ensure fraudulent people do not seize the opportunity. Only certified members and certified products will make it on the site. ‘Ghana Mall’, for instance, sells goods made by Ghanaian artisans internationally. It also rakes in some $500 million a year in goods and cash that are sent to the country from abroad. Funds to develop such malls can be sort as grants from multilateral agencies as the World Bank Group’s Small and Medium Enterprise Department (http://www.ifc.org/sme)
No doubt, credit card acceptance is the heart of e-commerce, but technological hindrances and doing business in local currency can drive up transaction costs. There are rules and protocols to gain access to international card association systems, which currently do not favor African countries. The amounts of online transactions originating from most African countries hardly meet the rules required by the international card associations. So there must be a way around it. Therefore, banks in Africa need to establish special ‘Merchant Accounts’ for small businesses to enable them accept secured payments in foreign currencies processed in the same way as credit cards. Online payments will still have to go through SWIFT, encryptions, or other secured sites, as PayPal to ensure adequate security.
Most national and international courier services are currently equipped to handle shipping to any location in the world. Business organizations can enter into partnership agreements with these postal and shipping agencies to either enjoy special shipping rates or develop more efficient shipping methods that can guarantee delivery. In addition, the Customs department should make available list of prohibited items, duties and fees to the business organizations. One workable model is to post their personnel at the post offices to facilitate the inspection of goods.
As a private-sector crusader, I dislike prescribing any solution that will depend on governments. But E-commerce requires vendor credibility. Apart from technology, the greatest impediment African businesses face in embracing e-business is fraud. This is where the governments should play important role. Law-makers should strengthen existing laws to stem out corruption in their countries. People who thrive on advance fee fraud should be put out of business. It is possible! Anything that works through technology can be stopped through technology. It’s simply a digital war amongst programmers (it’s like the virus and anti-virus battle among programmers). Moreover, the world wants to see trials, prosecutions and convictions to believe that African countries are serious in their war against corruption.
How This Will Work
For this to work it must exist as one bundle. A customer does not want to be bothered by the backend technology and how it works. They want an easy-to-use, time-saving, front-end screen. As for now, cross-continental partnerships will play a major role in helping businesses in Africa cross the e-commerce threshold, as African businesses will still need international partnerships to help complete orders. PeopLink (http://www.peoplink.org/EN/) offers such a partnership. They have developed free, downloadable tools to help small businesses build virtual product catalogs, which they then upload to a searchable catalog on their database, thereby offering small businesses the opportunity to benefit from collective marketing power.
One Stop Tech Support Centers:
Technology investors should also consider going into one-stop tech support centers. For instance, in Ghana BusyInternet (http://www.busyinternet.com/) is such a one-stop IT center with a cyber café, call booths, video conferencing services, document services, web hosting, space rental and other tech support for e-businesses.
Exploring E-business will help small businesses in Africa increase their market share in the global marketplace? There should be a concerted effort to make this happen. The World Bank developed a collection of free tools called ‘SMEToolkit’ to help small business develop such potentials. This can be found at: http://www.smetoolkit.org/
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Godwin C. Nwaogwugwu