South Africa’s leading online retailer Takealot says Amazon.com Inc.’s plans to launch its e-commerce business in the country show the market is poised for growth, even as it faces power cuts, antitrust issues, and inflationary pressures.
(Bloomberg) — South Africa’s leading online retailer Takealot says Amazon.com Inc.’s plans to launch its e-commerce business in the country show the market is poised for growth, even as it faces power cuts, antitrust issues, and inflationary pressures.
“When you get a big player like that into the economy, it demonstrates the potential that sits within this market,” said Chief Executive Officer Mamongae Mahlare in an interview with Bloomberg TV in Johannesburg.
Takealot, owned by Cape Town-headquartered internet group Naspers Ltd., launched in 2011 and has become the largest online retailer in Africa’s most developed economy, reporting $827 million in revenue in 2022. E-commerce only makes up about 4% of South African retail, which presents a market growth opportunity three to five times the size of peer countries, Mahlare said.
South Africa has a growing, tech-savvy and youthful population together with one of the largest upper-middle-income economies on the continent, making it an attractive base for tech giants like Amazon and Microsoft Corp. seeking to expand on the continent. Although Amazon has provided web services in the country since 2004, it has held off on launching its e-commerce business due to challenges including a less affluent customer base, and problems with power and connectivity in some places.
Online market players including Takealot and Google have also faced government scrutiny over competition concerns in the sector.
Mahlare said that South Africa’s digital sector needs an enabling regulatory environment to ensure continued growth “as it impacts on job creation and inclusivity by providing equal access to products and services.”
As Amazon prepares to launch its e-commerce business in South Africa and Nigeria later this year, previously reported by Bloomberg, Takealot will focus on its local advantage and boosting profitable growth of its three business units.
Takealot.com, the group’s largest business unit, became profitable in 2021, Mahlare said, and the company is targeting profitability for online fashion platform Superbalist and food delivery service Mr D Food in the next two financial years.
To deal with power cuts, the business is running generators and investing in solar power options, while remaining optimistic that national solutions for the electricity problem will come into play, said Mahlare. “There is always something that is not necessarily going according to plan, and you have to be agile and responsive in dealing with any of these challenges,” she said.
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