B2B E-Commerce Catches on in South Africa

South African consumers will spend 2.7 billion rand (approximately US$443 million) in Internet-generated purchases this year, while business-to-business e-commerce will reach almost 4 billion rand, according to a survey by Acuity Media Africa.

According to the “2nd South African Web Commerce Survey 1999,” consumer spending generated by the Web grew 140 percent in 1998, from 500 million rand to 1.2 billion rand. It will rise by at least another 125 percent this year. The biggest growth areas are investment, car sales, property, and retail.

Business-to-business transactions will overtake consumer spending for the first time in 1999, after a dramatic rise from 15 million rand in 1997 to 207 million rand in 1998. The seemingly explosive growth to 3.9 billion rand forecast for 1999 is largely a result of companies moving existing client relationships from a physical to online transaction channel.

The study also found that business that already generated income from an online presence in 1997 reported that 1998 exceeded expectations. Business-to-business e-commerce, which in 1997 accounted for just 14 million rand of the 500 million rand in sales generated by the Web, finally grew in 1998 to 207 billion rand.

While consumer-oriented e-commerce will fall under the shadow of B2B e-commerce in 1999 and remain a smaller market for the next four years, a relatively smaller proportion of this sector will represent “cannibalization” of traditional business, the survey found.

For the second year in a row, the survey found that many companies reported low return on investment despite high levels of spending. This is a result of high infrastructure spending, the survey found.

This trend is not expected to change soon, as customers demand increasingly more sophisticated transaction and security solutions. In the longer term, as infrastructure matures, profits are expected to rise dramatically.

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