The Growth of Internet Usage: E-marketing Services Beckons in Africa

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Market Size and the Growth of Internet/E-Commerce in Africa

By: Oluwaseun P. Adeola

Since it is basically not possible to use email without internet, therefore, the market size of emailing services can be measured by the numbers of internet users. The latest data released by the internet world statistics reveals that the total numbers of internet users in Africa currently stand at 118,609,620. Meanwhile, the figure of users in the 2000 statistics stood at 4,514,400. Comparatively, one can see the astronomical surge in the usage of internet between the year 2000 and 2011, in Africa. To be precise, the percentage difference between the 2000 and 2011 figures is approximately 2527% (Internet World Statistics 2011).

As can be seen from figure 1 below, there are sharp differences between African countries internet users. For example, while internet users in Nigeria (the highest internet users in the continent) currently stand at about 44million, the next country on the list, Egypt stand at approximately 20 million users.

FIGURE 1. Africa Top Internet Countries in Millions (Internet World Statistics 2011)

The sum total of internet users in the countries listed above which represent the ten topmost users in Africa is app. 105.2 million. While it is undoubtedly a staggering number any serious-minded business would not want to jettison, I think it is advisable to experiment the probable service(s) in the country which has the highest number of internet users. And the country is Nigeria with internet users currently at about 44 million. It is advisable that the Nigerian market should be penetrated first and if success is recorded the identified success factors can then be transferred or replicated in the other favorable African markets. Now that the market size has been determined, the next critical factor that must be considered is the environmental factors.

The Political and Economic Environment

Strategic business experts do not just venture into any market only because of the enormity of its size. There are more important factors to be aptly considered or measured. Environmental factors are some of the most crucial factors to be analyzed. The analysis of these factors will enable Emailfactory Oy to understand some of the external forces that might have impact on the business and mostly, businesses do not have control over such forces. For the purpose of understanding the external factors that might impact Emailfactory Oy business operations in the said target market, secondary data concerning the political and economic environment was collected and analyzed. The two factors are discussed and analyzed below.

Political

Possible external forces to take into consideration are political stability, competition regulation, type of government, future legislation to mention but the relevant ones. Bala (2000) submitted that political stability can be described as the continuation of the exercise of power by those freely elected by the people of a country for specific periods with definite mandates which conform to the Fundamental Objectives and Directive Principles of State Policy clearly defined in chapter II of the Constitution. Ghauri &Cateora (2010, 122) claim that “A government controls and restricts a company’s activities by encouraging and offering support or by discouraging and banning its activities- depending on the objectives of the government. A country’s overall goals for its economic, political and social systems form the base for the political environment. At the top of the list of political conditions that concern foreign businesses is the stability or instability of prevailing government policies”. Candidly, Nigeria has been experiencing relative political stability since the inception of democratic rule in 1999. There have been elections and democratic transfers of power from one leader to the other in all the three tie of the Nigerian government. Let me set the record straight here, there has never been a time in Nigeria political history where there have been three consecutively civil administration transitions in a democratic manner without any sort of military intervention. As a matter of fact, it is the first time this is happening since Nigeria gained independence in 1960 (Dawudu 2010).

As such, one can conclude that Nigeria has enjoyed some relative political stability since 1999 up till date. In contrast, that doesn’t mean that there have not been some pockets of crisis here and there in the Nigerian political arena but, that can similarly be said of any other nation on earth. The bottom line however is that Nigeria can be referred to as being political stable, in relative terms though; given the current political trend. To lend credence to the claim of relative political stability in Nigeria, I will provide few statistics, obtainable in the webpages of Economy Watch, to that effect:

· In Economics Terms

1. Nigeria reached a GDP growth rate of 8.394% from 0.474% within the period of 11 years (1999-2010)

2. Per capita income has increased from $310.475 in 1999 to $1,389.31 in 2010

3. Projection of annual growth rate stands at an average figure of over 6%

4. Nigeria receives the largest amount of Foreign Direct Investment (FDI) in Africa.

5. Nigeria’s foreign direct investment (FDI) reached $11 billion in 2009 from $1.14 billion in 2001 making her the 19th largest recipient of FDI in the world (Economy Watch 2011.)

· In Political Terms

1. Successful transitions of three consecutive civilian rules from 1999 up till date; the first time it will be experienced in the history of the country.

2. Increased respect for the rule of law

3. The last general election was internationally acclaimed to be a substantial improvement to the previous elections of 2007.

4. Increased phenomenon entrenchment of democratic principles in the Nigeria politicking.

5. Drastic diminished restiveness in the Niger Delta region- the oil-producing region in Nigeria (Economy Watch 2011.)

1.1.1.1. Economical

There are somewhat many variables to be considered under the economical factor. But, the most relevant variables to Emailfactory Oy’s business interest in Nigeria will be precisely addressed here. They are listed below:

1. Disposable income

2. Employment level

3. Economic growth/Long-term prospects for the economy.

· Disposable Income

I wish to affirmatively suggest that one of the most important economic variables to be critically considered by any business before launching into a new market is the strength of potential customers’ inflation-adjusted income, after tax. The more of a product or service a customer can buy ultimately depends on the disposable income. In other words, the higher the customers’ disposable income, the higher the demand for products or services. Factually, Nigeria is universally recognized as a developing country with gigantic socio-economic challenges to grapple with plus the seemingly inadequate ingenuity, creativity and political will to solve problems. Since obtaining accurate figure to represent the disposable income of a household in Nigeria maybe somewhat impossible, it may therefore, be wise to actually weigh the purchasing power of a Nigeria worker through the spectacle of the wages or salary a worker nets home at the end of each month.

The president of Nigeria, Dr. Goodluck Jonathan (24 March 2011) signed the new national minimum wage bill into law. The new minimum wage law raised the monthly pay of the least paid worker in Nigeria from 7,500 ‘Naira’ (Nigeria Currency) to 18,000 Naira. In effect, that implies that a “level 1” worker in Nigeria will see a whopping 140% rise in his or her income. Bear in mind that a level one worker in Nigeria is one without any educational qualifications. So people with, at least, secondary school certificate will earn far more than the 18,000 naira minimum. Furthermore, graduates of higher institutions are normally placed between “level 6 and 8” this latter category usually earns over 100% more than the former category (Economy Watch 2011).

Logically, as Nigerian workers’ income increases dramatically, purchasing power or disposable income increases automatically. But one sure fact is that, taking into account the ‘Nigeria factor’, one will not see a commensurate and/or dramatic surge in the consumers’ disposable income when compared to the increase in income. The reasons for that are not far-fetched. There is a double-digit inflation among other Nigerian factors that are not worth mentioning here. However, what is certain is that Nigerian disposable income is high enough for most businesses to come in to Nigeria and make reasonable profit. And the good news is that the disposable income will continue to be on the rise in the foreseeable future as Nigeria works hard to reach the “20:2020 goal”. (The goal to be part of the 20 largest economies in the world by the year 2020)

· Employment level

The determination or knowledge of a country’s employment level is important in making decision as regards entering the market or otherwise. This is because the higher the employment level, the higher the consumer spending in any economy, ceteris paribus. And in the other hand if unemployment level increases, it will have adverse effect on the general consumer spending of any nation. In Nigeria, the Overall unemployment rate amounted to 19.7% of total Labor Force in March 2009, indicating a sharp increase from 14.9% in March 2008. See table1 below.

I must admit that 19.7% unemployment rate is incredibly high. In fact, that means several millions of employable people are out of work. But one calming fact as can be seen from table 2 is that the age group (25-44) which is the most active segment of the economy has a lower unemployment rate that stands at 17%, 3% point lower than the total group. Basically, the age group (25-44) will be the most significant and important segment to the Emailfactory Oy (National Bureau of Statistics 2011).

TABLE 1. National Unemployment Rates (National Bureau of Statistics 2011)

Year Rates (%)

2000 13.1

2001 13.6

2002 12.6

2003 14.8

2004 13.4

2005 11.9

2006 12.3

2007 12.7

2008 14.4

2009 19.7

Total 139

TABLE 2. National Unemployment Rates (National Bureau of Statistics 2011)

Age Group Unemployment Rate (%)

15-24 41.6

25-44 17

45-59 11.5

60-64 16.7

Total 86.8

In contrast, it is true that the unemployment rate in Nigeria is too high and unsustainable but what is also true is that 80.3% of the total work force is gainfully employed in various industries and sphere of life. With that figure, it is only fair to submit that such employment level can constitute a profitable and actionable market for any business to invest in, given the teeming population of the country.

· Economic Growth/ Long Term Prospects for the Economy

The growth rate and prospects for the future of a particular country should be of a major concern to any business intending to enter it. Nigeria has recorded a substantial GDP growth rate of well over 6% since 2009 and it is projected that the growth rate will reach 8.46% in the last quarter of 2011. Equally, it is expected that the Nigerian economy will continue to experience steady growth rate in the years to come. Therefore, most economists will agree that an economy steadily growing at a rate of about 6%-7% annually has great prospects for the future if resources are well managed (National Bureau of statistics 2011.)

The steady growth, if properly managed, will translate to gradual poverty alleviation, diminishing unemployment rate; more people economically engaged. And in turn, there will be significant consumer spending. And in any economy where there is increased consumer spending, entrepreneurial and investment activities will be positively impacted thereby making it possible for hard-working businesses to succeed. Also, the governor of Central Bank of Nigeria was quoted to have confirmed that the growth rate of Nigeria which is currently about 7% annually will double over the next decade (Channels Television 2011).

Concerning the outlook for Internet penetration level in Nigeria, the chief executive of ‘Main One’, Funke Opeke, told newsmen of Nigerian Channels Television on the 14th of May, 20011 that internet penetration is estimated to triple over the next 18-24 months with a new undersea cable linking West Africa to Europe increasing access to firms and households. Funke Opeke, further states that internet access penetration is expected to increase to 35-40 % from the current 11% as more people in Africa's most populous nation utilize technology to improve their operations. Also, she maintained that broadband usage would mirror mobile phone usage which has around 50-60 percent penetration levels (Channels Television 2011.)

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Comments 2 comments

Lipnancy profile image

Lipnancy 4 years ago from Hamburg, New York

Very interesting hubs. I think the trends in Africa have followed the increased usage of the internet by the world.


abouttown profile image

abouttown 4 years ago from Sydney

Very intersting - we just need to get a few trillion dollars in investment to get the ball rolling :)

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