January 2023 World Economic Forum 9
sources to recruit and train an extensive network of money transfer agents in the early stages of MPesa. Jumia, likewise, built a network of logistics operators, warehouses and pick-up stations that has helped streamline the complex problem of last-mile distribution in Nigeria. The challenge, therefore, is in defining and enforcing a red line that demarks too much monopoly power among dominant platforms.
Competition with foreign platforms The natural monopoly problem becomes more contentious when the dominant firms are foreign ones with significant technological advantages over their African competitors. In ride-hailing, for example, local applications all over the continent are struggling to compete against Uber.
Given the vast size and resource access of Uber, as well as its network advantages from starting early in many countries, local ride-hailing businesses are unlikely to win this competition. However, policies that are intended to protect local firms can backfire. For instance, Ethiopia, which protects its services sectors from foreign competition, has paid for it by becoming a laggard in this rapidly-changing technological landscape.
A related problem arises when African businesses that are owned or managed by foreigners become dominant platforms. A case in point is Jumia, which bills itself as Africa’s largest e-commerce business. After listing on the New York Stock Exchange in 2019, Jumia was accused of branding itself as African although its top managers were Europeans and its
Below: A Safaricom employee registers an M-Pesa customer for mobile money transfers, inside one of its mobile phone care centres in the central business district of Kenya's capital Nairobi.
head offi ce was in Dubai. Relative to international businesses such as Uber, businesses like Jumia with African roots might have better local integration that enables them to contribute to the development of the business ecosystem. Still, African governments have a long way to go to ensure that local entrepreneurs receive suffi cient backing – from financial access to incubation and acceleration programmes – to improve their competitiveness in a globalised marketplace.
The digital future Internet platforms are growing in importance in many sectors in Africa, taking advantage of expanding digital access. These platforms could enable African countries to leapfrog to more effi cient and modern economic systems that are not constrained by red tape and bureaucratic hurdles. At the same time, designing and implementing appropriate policies that support the growth of digital technologies remains a challenge.
While the benefits of having competitive local firms are apparent, this may not be feasible in digital marketplaces with rapid technological change. What is needed is not protective measures but carefully coordinated policies that support and nurture local digital enterprises. Regulators also need to sharpen their toolkits to better understand and proactively mitigate anti-competitive practices that beset digital platforms, especially in vital services – such as finance and payment – that undergird all other ecommerce activities. n
