Why Kenya could lose out in global e-commerce rush

Kenya risks losing billions of shillings in revenue if prudent regulations are not placed on global e-commerce platforms currently making inroads into the country.

At the same time, the East Africa region is in danger of crippling its manufacturing sector by opening the floodgates to Chinese imports facilitated by e-commerce chains.

These are some of the warnings from a non-profit organisation following a move by Western countries to start negotiations that will culminate in the establishment of global e-commerce standards.

According to the Just Net Coalition, the rights of developing countries are underrepresented in the negotiations and the outcomes will disadvantage countries such as Kenya.

“The proposed e­-commerce rules mandate unrestrained global flow of data – the primary resource of the digital society,” says the report.

“This in essence means that data will be the property of whoever collects and hoards it. It provides, in perpetuity, legitimacy to global data land­grabs by a few digital corporations such as Facebook, Google, Amazon and Alibaba.”

The report comes in the wake of a push by the Internet giants to consolidate lobbying efforts and push back policymakers in several countries seeking tighter regulations on data privacy.

“These rules would insulate global digital corporations from national regulation by disallowing any requirement for their ‘local presence’ in the domestic territory, and inspection of their software and algorithms,” explains the report.

As the largest economy in East Africa, Kenya is the region’s e-commerce powerhouse. Just last month, the country hosted the Africa e-Commerce Week where over 2,000 participants from 60 countries took part.

Partnership

At the same time, the Postal Corporation of Kenya last year revealed it is finalising a partnership with US Internet giant Amazon.

The deal will see Posta signed as one of Amazon’ partners in fulfilling orders to the region.

A recent report by financial analysts at Citibank indicates that telecommunication service providers will invest billions of shillings in coming years to build infrastructure to facilitate payments and money transfers in e-commerce. 

It says Kenya’s e-commerce market could be worth more than Sh400 billion in the long term, and between Sh70 billion and Sh120 billion in the short to medium term, presenting a lucrative revenue opportunity for fintechs.

“In China, e-wallet is used for payment of 60 per cent of e-commerce transactions,” says Citibank. “Therefore, growth in online transaction volumes and the number of payments settled through e-wallet should drive payment fee revenue.”

Safaricom holds a key advantage through its e-commerce platform Masoko that, according to Citibank, could earn a commanding lead in the market through early investment in data analytics and logistics management.

“Masoko is likely to expand payment options in the future, including to the wallets of prospective buyers from China, if it was to expand the potential customer base beyond local buyers,” says the report.

The Just Net Coalition however says failure to create regulations that ensure a fair playing field between local users and global tech players could facilitate exploitation, with countries such as Kenya losing out.

“Expanded and more open markets are not necessarily better for their small businesses, an overwhelming majority of which deal in goods that are easily out­priced by global mass manufacturing centres such as in China,” says the lobby.