SA's township economy: where e-commerce meets opportunity and challenge

Andy Higgins, managing director at Bob Group. Image supplied

This is a staggering figure considering that high unemployment rates, poverty and crime blight South Africa’s townships.

Moreover, e-commerce is growing rapidly in townships and informal settlements, with the 2023 Township CX Report finding that 60% of survey respondents either sell products and services online or know someone who does.

That said, township e-commerce still faces many challenges, primarily infrastructural.

“In township economies, the consumers range from informal traders and small business owners to everyday individuals looking for affordable goods and services,” says Andy Higgins, managing director at Bob Group.

“Many of these consumers face financial constraints and limited access to digital infrastructure, so e-commerce platforms must prioritise affordability, ease of use, and trust. Some of the biggest obstacles e-commerce businesses face in township economies are limited internet access, lack of trust in digital payments, security and logistical challenges.”

Accordingly, Higgins recommends that platforms should offer:

• A wider variety of products not currently available in local townships. They should also provide goods at more competitive pricing.
  
• Mobile-friendly interfaces that cater to users relying on low-cost smartphones.
  
• Flexible payment options.
  
• Affordable delivery solutions such as pickup points or courier aggregators that lower logistics costs.

He adds that businesses should consider low-data platforms that function well even with minimal internet connectivity. These platforms allow users to shop and complete transactions without heavy data costs.

Another solution is integrating mobile money platforms and educating people on using them.

“Digital literacy campaigns are essential. Partnering with educational institutions, government bodies or community centres to run workshops on e-commerce, digital payments, and basic digital skills will help bridge the digital literacy gap. I also recommend they use local distribution channels to minimise delivery costs,” Higgins says.

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Regarding affordable delivery solutions, he explains that partnerships with local couriers or logistics services that understand the nuances of township delivery can be an absolute game-changer for township businesses. In addition, pickup points such as Bob Box can overcome the lack of formalised addresses in these areas.

Likewise, security concerns can be alleviated by limiting distribution to more secure locations using a pickup point network.

A further aspect to consider is leveraging online-offline hybrid models, where customers can order online but pay or collect in person, bridging the digital divide.

Higgins says timing is critical for e-commerce entrepreneurs when expanding into township economies.

“They need to assess demand using data-driven insights to evaluate consumer interest in the products or services offered. They also need to ensure that digital and physical infrastructure can support their e-commerce operations.

“I would advise looking into mobile penetration and payment method adoption rates. Expanding too soon without considering these factors could lead to a high failure rate. This can be achieved by piggybacking off service providers already established in the township economy.”

There are various channels for entrepreneurs in township economies to find support to establish their e-commerce platforms.

These include government initiatives like small business grants, digital skills training, and broadband expansion projects; private sector partnerships, especially with telecoms and payment providers; community-driven programmes that offer mentorship, resources, and access to e-commerce tools; and collaborating with NGOs that have a deep understanding of local needs.