Alibaba tests water with e-commerce initiatives

Chinese e-commerce giant Alibaba has a relatively light commercial footprint in Africa, but its moves to encourage digital entrepreneurship on the continent may hint at future expansion, as David Thomas reports.

Twenty years after founding the world’s largest e-commerce company in his Hangzhou apartment with a group of friends, Alibaba’s billionaire supremo Jack Ma celebrated his retirement with a lavish stadium celebration on his 55th birthday in September.

The four-hour music and tribute-laden extravaganza, witnessed by 60,000 revellers and Alibaba employees at the Hangzhou Olympics Sports Centre, was an emotional end to the colourful and wildly successful career of China’s richest man. From humble beginnings, the firm’s market capitalisation of over $450bn reflects its success in cashing in on China’s phenomenal economic growth story and subsequent internet boom, embracing e-commerce, media, and internet services in a diverse portfolio of assets. 

Yet while relinquishing his role as executive chairman represents the beginning of a new era for Ma and the company that he ushered to dominance, the publicity-savvy leader has set his sights on new challenges. In November, Ma and his Foundation head to Accra, Ghana as co-hosts of the Africa Netpreneur Summit, a meeting aimed at boosting African participation in the emerging e-commerce and digital sectors that Alibaba pioneered in China. For Ma, the summit – headlined by a business pitch contest boasting a $1m prize fund – is the latest stage in an evolving Africa relationship which began with his first visit to the continent in 2017 and has involved effusive praise for the continent’s potential.

For Alibaba, whose Foundation is also co-hosting, the summit is a way to encourage e-commerce development while keeping an eye on future opportunities in a continent with boundless potential but where the company retains a relatively light commercial footprint.

“This really started when Jack came [to Africa] in 2017 for his first trip in the capacity of special adviser to UNCTAD on entrepreneurship and small business,” says Brian Wong, vice-president of global initiatives at Alibaba, “When he came to Rwanda and Kenya he was really struck by the level of passion and energy of the youth around entrepreneurship but he also realised that Africa was in a stage that wasn’t unlike China in terms of its stage of development. The state of e-commerce and the digital ecosystem is very nascent.”

The percentage of Africans using the internet increased from 2.1% in 2005 to 24.4% in 2018, according to the ITU, but e-commerce remains embryonic in the face of limited transport and logistical infrastructure, regulatory uncertainty, low digital trust and moderate regional integration. Estimates suggest about 264 e-commerce startups are operational across the continent. Yet the sector has the potential to be much larger, creating as many as 3m new jobs in Africa by 2025, according to the Boston Consulting Group, ranging from delivery drivers to retail and hospitality workers. McKinsey estimates that e-commerce sales could reach $75bn a year by the mid 2020s. In a bid to move things along, Alibaba has launched initiatives to encourage entrepreneurs to take their activities online.

Prominent among those is the eFounders Fellowship, which provides emerging entrepreneurs with exposure to e-commerce and digital innovations and access to business leaders in Alibaba and China. The scheme will work with some 1,000 entrepreneurs from developing countries, including about 200 from Africa.

“The idea is that we help identify entrepreneurs building platforms in e-commerce, payments, logistics, big data. If we can get them to really see what’s possible by building a platform, they can build the infrastructure of Africa’s digital economy. From that, many other initiatives branched out, and we had governments coming to us saying we want to understand what China and Alibaba have done. So Jack said why don’t we create a workshop programme where we can bring ministers and show them the role of government [and] the private sector.”

Creating the digital mindset

Central to these initiatives – which also include working with university faculties to develop an e-commerce curriculum – is Alibaba’s bid to explain how China expanded from just 8.8m internet users at the company’s birth in 1999 to over 800m today, greasing the wheels of e-commerce in large cities and remote rural areas. Wong believes that a detailed knowledge of how Alibaba capitalised on China’s rise will help spur African entrepreneurs.

“What we’ve proven in China is that [e-commerce] is accessible even to people in rural areas. In the rural areas, 90% of users only have high school education but they make a very good living from e-commerce. About 6.8m jobs have been created. That’s significant.”

And yet many governments and businesses in Africa are still stuck in a pre-digital mindset, according to Wong, fearing upheaval rather than embracing the opportunities.

“A big challenge is really the mindset shift of government and the private sector that digital is actually a good thing. A lot of governments warn that digital will bring unknown risks, whether its inequality, loss of jobs, privacy issues. And I think a lot of traditional businesses don’t want digital coming into their spheres because it will threaten their business models… What we would like to do is focus on certain regions that are already committed to this digital paradigm and work with them to really get some proof of concept so the rest of the continent can see that this is possible.”

In September, the World Economic Forum, in partnership with the International Trade Centre, released the Africa E-Commerce Agenda, an eight-step action plan. It includes a policy refresh, expanded connectivity, and logistics and e-payments solutions. The African Union Commission and other stakeholders have been tasked by governments to develop a digital trade and digital economy development strategy by February 2020. While a pan-African framework could be held up by intensive and protracted negotiations, Wong says that individual governments should take note of the light-touch Chinese regulatory regime that allowed Alibaba to flourish in its homeland.

“The best approach is to be cognisant of what’s happening as a government but not to overly regulate it. That’s what China did, for seven years they did not regulate digital payments even though we had AliPay. They knew what we were doing and were monitoring such that they could protect consumers, but they allowed the model to develop and innovate and that’s the balance that governments need to play.”

More connections, more value

The creation of an enabling environment for e-commerce and the establishment of a network of web-savvy African retailers and traders will surely benefit Alibaba if it chooses to play a more expansive role on the continent. For now, Africa’s e-commerce story has been dominated by Nigeria-founded Jumia, the first African startup to be listed on the New York Stock Exchange following an April IPO which valued the company at over $1bn. Jumia sells goods and services in 14 countries, and has some 80,000 active merchants. Seemingly unfazed by first mover advantage, possibly owing to its substantial financial firepower, Alibaba seems content to bide its time and focus on its modest initiatives until such a time that it believes the market has evolved.

“The business model will come, (and) will be linked to the fact that by having ecosystems serve the digital economy… at some point they will link to the Alibaba ecosystem and by definition the network effects a two-sided platform model, which is what Alibaba is. The more connections you have, the more value you create.”