Given the COVID-19 pandemic and the various lockdowns that many countries across Africa have implemented, many people on the continent have been restricted as far as retail shopping is concerned. As a result, many people not only in Africa but around the world have had to resort to online shopping.

This is also partly the reason why on 26 August 2020, Jeff Bezos (founder of e-commerce giant, Amazon) became not only the world’s richest person but the first person to be worth $200 billion.

Compared with well-established digital retail markets such as the USA, e-commerce in Africa is still fairly nascent as a result of market inefficiencies.

Confidence in the future of e-commerce

A new report by Baobab Insights reveals that there has been a spike in e-commerce investment deals during the second quarter of 2020 across Africa. This is despite the challenges that are generally faced by the e-commerce industry across Africa.

According to the research company, the spike in Africa's e-commerce Venture Capital deals is indicative of investors’ confidence in the long-term trend of a young digitally savvy population shifting more of their consumption habits online.

Investment into African E-commerce and Retail technology companies over 2019 and 2020. Source: Baobab Insights, 2020 (2020 data taken as of 24th July 2020) 

What is interesting is that the analysis conducted by Baobab Insights highlights that while the number of deals in the second quarter of 2020 reached the highest number of rounds-per-quarter over the past 18 months, the total sum of investment was down as compared to the second quarter of 2019.

This is reflected in there being a particularly high level of investment activity at the seed stage, totaling 17 deals in the first quarter and second quarter of 2020 in comparison to only 22 deals over the whole of 2019, and just 21 in 2018.

In addition to the shift in investment stage and the amount being secured per round, investor focus appears to be adjusting regarding business model preferences. In 2019, 30% of deals were secured by companies that provided food and grocery delivery services and 22% focussed on companies providing online pharmacy services.

Investment in 2020 has continued to favour food and grocery services, however there has been an increased focus on companies offering online car retail services.

Share of investments by e-commerce sector across Africa. Source: Baobab Insights

The ones to watch

Typically when e-commerce is mentioned in Africa, the bigger companies like Jumia and TAKEALOT typically come to mind.

However, given these insights the logical question for people looking to invest in e-commerce ventures across Africa would be: which e-commerce startups should we be tracking?

10 African e-commerce startups to watch. Source: Baobab Insights

β€œWhile short-term trends indicate increased investor appetite for the e-commerce space. It is a fairly nascent industry. COVID-19 restrictions are forcing consumers to seek new retail options. Consumers are comfortable using applications such as WhatsApp to enhance their shopping experience. Though it is too soon to tell if this behaviour change is permanent, e-commerce companies have an ideal opportunity to capitalise upon," said Maria Inziani, Data Scientist at Baobab Insights.

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