The growth of E-commerce, rapid digitalization and cedi depreciation

Ghana is digitizing fast, building a robust internet ecosystem, giving more and more people the opportunity to sell or engage in some form of trading activities online. According to International Trade Administration, Ghana has approximately 15 million internet users who are buying online every day. Leading local e-commerce platforms include Hubtel, Jumia, Plendify, Jiji, as well as Uber Eats and Bolt Food. Ghanaian customers also order goods from Amazon for delivery to U.S. locations that then use discount express couriers to ship goods to Ghana more cost effectively.

About five decades ago in Ghana, trading activities were limited to retail and wholesale shops and open spaces like the Kaneshie Market, Makola Market or in traffic in major cities. But the scenario has changed so greatly today, with the internet opening up the space for anyone who wants to trade, to start online without even worrying about the cost of renting a structure or space. Buy and Sell groups on Facebook are enough today to get started as a young entrepreneur.

In 2020, Ghana's ecommerce sector was estimated to be worth about 429 million dollars with it equivalent 2.54 billion cedis in revenue. And it is expected to rise to 811 million dollars and its equivalent 4.81 billion in cedis by 2024. Globally, UNCTAD estimated e-commerce sales at 25.6 trillion dollars in 2018, an 8% increment over 2017, saying "a growing share of e-commerce involves cross-border sales."

Factors accounting for the success of e-commerce

According to Shopify, "e-commerce also known as electronic commerce or internet commerce, refers to the buying and selling of goods or services using the internet, and the transfer of money and data to execute these transactions. E-commerce is often used to refer to the sale of physical products online, but it can also describe any kind of commercial transaction that is facilitated through the internet."

A number of factors account for the extent to which online businesses are successful in every nation. These factors include Internet speed and penetration, payment platforms and solutions, e-commerce software, delivery and logistics management, and property addressing systems. In the case of Ghana, a lot of significant investment has been made in these areas, for instance, the country provides a mobile money interoperability service, the GhanaPay platform, to enable easy online payment as well as the provision of a viable digital property addressing system, all of which are accounting for the development of the e-commerce sector in the country.

The rapid development of the internet ecosystem, especially e-commerce sector in Ghana is good news as it has resulted in an entrepreneurial drive amongst the youth, changing the youth unemployment narrative. However, the cons to this rapid development is the continuous cedi depreciation in value to international currencies like the US Dollar, British Pound and the Euro. A dollar now stands at twelve cedis, to really grasp the

tenets of this possibility, get rhetoric on the following questions;

How is the growth of e-commerce in Ghana affecting the performance of the Cedi? Who are producing the bulk of the goods being traded over the internet on platforms like Jumia, Tonaton? What goods are mostly being traded over the internet? Are they Made-in-Ghana goods? Or made in China, Japan, South Korea, US, UK, France and US goods? Is the industry in Ghana doing enough to bridge the gap between the ever increasing demand for goods brought about by e-commerce, and supply? Is the existing local production of goods and services meeting the rising demand on the internet?

Maybe we need to know how the Ministry of Trade and Industry is working to ensure that the One District One Factory policy of President Nana Akufo-Addo's Government is able to increase local production of goods that are mostly traded over the internet because the current rate at which the Ghana cedi is depreciating is a clear indication that there is high demand for the US Dollar apparently because we are importing more and exporting less, that the country’s industrial subsector is not doing well enough and the impact of the One District One Factory is not being really felt as expected.

History of E-commerce in Ghana

A journey down memory lane will show that eshopafrica.com was the first e-commerce website in Ghana. The firm was established by an English woman named Cordelia Salter-Nour back in 1999, and its website was officially launched in February 2001. eshopafrica.com was mostly dealing in products manufactured in Ghana such as Kente cloth, jewelry, carvings, baskets, collectibles.

Other e-commerce websites such as shopafrica53.com , afrochiconline.com , africaretail.com , tisu.com.gh , ahonya.com and mogoogi.com then emerged and were trading in similar products made mostly in Ghana.

But today, the case is different. Among the top e-commerce websites in Ghana currently are: jumia.com.gh , superprice.com , kikuu.com.gh melcomonline.com , zoobashop.com , and arguably, much of the goods traded on these ecommerce platforms are imported ones. For example, smartphones, laptops, fridges, television sets, in general electronics, clothes, shoes.

Top categories

A 2020 report by WopeDigital titled: 'E-commerce In Ghana, 2020 - An Insightful Report, showed that the fashion industry, including "all those into clothing, shoes and fashion accessories" ranked top among the categories online. A significant number of fashion products traded in Ghana are imported. According to the Observatory of Economic Complexity, in 2020 alone, Ghana was the world's biggest importer of Used Clothing ($182M).

In second place, according to the WopeDigital report, was the electronics industry covering laptops, phones and other electrical gadgets. Ghana imports of electrical, electronic equipment was US$685.02 Million during 2019, the United Nations COMTRADE database on international trade, indicates. Of course, it is an open secret that Ghana does not produce electronics but rather imports.

Ghana has historically been an import-led country and the rate of importation is rapidly increasing because selling or trading in Ghana today has been made easy and less costly. Check the whatsapp statuses of three or four friends or relatives, you might find one of them selling a product either made in China or UK. Check Facebook, you might see products made overseas being advertised in Ghana by your friends. You probably have asked a friend to order a bag or shoe from kikuu.com.gh for you, that bag certainly made in China and requires currency exchange to enable its importation. Today, almost everyone is selling. Some of us sit in our offices and sell through our WhatsApp or Facebook pages. I have a neighbor who sells electronic devices but does not own a physical store. He imports, store the items in his room and sell online, and use a dispatch rider to deliver his items to clients and he sells everyday. The economy may not be doing well today, but there is no denying that Ghanaians' spending and consumption have increased over the last few years, a development attributed somewhat to the growing middle class with greater spending power. Today, Ghanaians are spending on everything – from healthcare products, apparels, electronics to building hardware, and food products.

Boost industrialization

So it is imperative that as Ghana focuses more energy on fully digitizing its economy, significant efforts must also be placed on boosting the performance of the industrial sector because the growth in digitalization will mean a growth in trading activities and if the nation cannot produce bulk of what will be traded on ecommerce platforms, it will be left with no choice but to import from those countries that are producing such products, hence it will (holding all other things constant) continue to record a depreciation of the Ghana Cedi because more and more people will be buying the dollar for import purposes.

There is the need for the Ministry of Trade and Industry to engage leading e-commerce platforms like Jumia, Tonaton to find out what Government can do, through the One District One Factory Policy, to find out ways of producing or increasing production of some of the main trading items on e-commerce platforms.