10/05/2010

By Greig Holbrook, Oban Multilingual

South Africa’s First National Bank (FNB) and global internet payment system PayPal announced their new partnership at the end of March. This means that South African internet shoppers can now carry out transactions to and from their FNB accounts, and sell and purchase services and goods with 190 markets worldwide swiftly and safely. The move highlights ecommerce opportunities for foreign markets at a time when, thanks to the World Cup, South Africa is in the spotlight, and reflects the general progress being made in SA to improve and encourage international ecommerce.

Previously, South Africa has been considered an almost ‘no-go’ area for foreign businesses wanting to carry out ecommerce. A low internet population, poor connectivity, and issues with fraud and payment problems being a few of the hurdles they would have been expected to jump. However, the internet is moving forward in SA, and this is opening up windows of opportunity for businesses worldwide.

The 17,000 km SEACOM undersea cable system was launched in July 2009, and is the first in a series of undersea cable systems expected to vastly improve South Africa and neighbouring countries international internet connectivity by linking them to various regions across the world. The cable has increased bandwidth enormously, and the hope is that it will support South Africa’s economic and technological growth. Already, the effects the cable has had on internet usage in South Africa are evident. Between 2002 and 2007, internet population growth never rose above 8% year on year. In 2009, there was a reported 15% growth from 2008, from 4.6 million to 5.3 million, and by 2011 the internet population is expected to be at 11 million. Plans for further cables are underway, and if all are carried out, the international internet capacity of SA will have increased 150-fold since 2008.

The undersea cable has also had a positive effect on internet pricing in South Africa. Before 2009 Telkom held the ISP monopoly in the country. Now, although Telkom still holds the market share, there are a range of competitors, including Neotel, Vodacom and MWeb. With such competition, operators are now working on providing users with the best rates. MWeb and Vox Telecom have just announced plans to provide customers with an uncapped ADSL broadband tariff, and Vodacom offer a 50% off deal for their business customers. In a country where, for many, internet has been inaccessible due to expensive rates, these price drops should open up access for a much wider demographic of the country.

The outlook is promising for ecommerce in South Africa. Statistics show that there was a 7% increase in internet retailing in 2009, and with higher rates of employment and disposable incomes, people will be looking for quicker and convenient ways to shop. Previously, trust in online shopping has been low, however, with some of South Africa’s leading retailers such as Woolworths and Pick ‘n’ Pay opening online stores, trust is expected to increase. The Mastercard Worldwide Online Shopping Survey 2010 showed only 5% of respondents use only offline channels to browse and purchase goods. With these statistics in mind, South Africa could hold a lot of potential for UK businesses. Research into South African ecommerce and internet usage should be carried out in order to develop a country-specific web marketing strategy. By doing this, businesses can not only expand into a market which holds great potential, but also assist in the economic and technological advancement of 2010’s most celebrated country.