E-Commerce to Elusive Poverty; Digital Transformation Needs to Be Inclusive.
Imagine a Uganda with only 3% unemployment, and 90% living above $5 a day. Imagine a Uganda where it takes small and medium businesses less than one week to sell their stock. Imagine a Uganda where 95% of small and medium businesses aren’t turned away by credit institutions, and easily contribute tax revenues. We’re no longer imagining — we’re building this Uganda.
The trend is digital. The masses are digital. Corporates are already digital. Government is going digital. But Small and Medium Enterprises (SMEs) are sluggish. Yet digital transformation translates into economic transformation down to even personal incomes.
SMEs employ 4 in 5 people, and contribute 33% of GDP but with only 1–2 going on past the first year, they are the most vulnerable, and to support them we need innovative partnerships to ensure an inclusive digital transformation.
From Elmot’s market research, the number one problem SMEs faced is reaching clients to buy their products and services. Yet we are 41 million people and from e-payments, shipping/delivery, regulations, to the fast-paced internet usage, all relevant factors required for a vibrant e-commerce ecosystem are now in place, but the mindset of business owners needs a nudge to focus on the digital customer.
The problem is no longer technology, or experience. Rather how do SMEs make their businesses ready for a digital world, a digital client? This means strategic partnerships, with payments providers, transportation providers, conventional media channels, digital marketers, financing institutions, packaging, government, and development partners to redirect SMEs to the digital trend.
The overarching objective of this partnership would be helping SMEs use technology to find new distribution networks and models, to create sustainable growth in their current businesses and affordably spend to build new digital businesses and mutual partnerships.
SME owners need motivational (inspiring business owners to embrace digital) but mostly informational (guiding SMEs on how to sell to hitherto unreachable customers) to access new markets, promote personal income of the ordinary citizen to stimulate growth and attract investors.
This partnership should ensure that SMEs are prepared to trade to benefit from the digital trend in a way that benefits every citizen, and this should help achieve Uganda’s Vision2040. Serving everyone, creating new jobs, opportunities, better incomes in this new digital economy.
Let’s visualise a quick example of the ripple impact focusing digital transformation on small businesses has on the economy. Ggonja (Roasted Plantain) normally sold by women (usually single moms normally called “Nnalongo” for birthing twins) on Kampala’s streets and upcountry highways.
Many office workers love Ggonja but they only get to taste it while travelling upcountry. What if we helped 100 Nnalongos around Kampala to innovate their product and process to serve office goers. For each Nnalongo you have employed 5 Bodaboda riders to deliver, 1 to offer packaging, 5 farmers to supply the plantain, 1 shamberboy , Airtime for ordering and coordination, 1 Environment Friendly stove, 1 to supply bricketts, quality management and others along the Ggonja value chain. When demand increases, farmers will need to start irrigation, acquire loans, etc. So that is around 1,500 jobs maintained by just the Ggonja value chain. So do this for roasted maize, Kigere/Molokoni (Cow Hooves), fruits, cakes, roasted goats meet, etc, the impact is just explosive.
Kampala City Council Authority (KCCA) has built Usafi market and vendors don’t want to occupy them mainly because they believe it’s location just doesn’t have customers. With e-commerce or m-commerce, these people don’t even need to pay rent, they can work from home as long as they are oriented in ensuring a quality product.
Potential Impact
Trade Impact
- E-commerce is highly correlated with increase in trade volumes. — boosting productivity, spreading new technologies, and making products more affordable while creating millions of new jobs with higher wages.
- Increased trade leads to specialization and increased division of labour. g. delivery, shipping, packaging, quality assurance and export coordination, clearing & forwarding, training and education, digital marketing etc.
- Stimulates technological change by increasing domestic rivalry and competition and hence increased innovation.
- Improvements in the e-commerce infrastructure and ecosystem allow the poor to trade more easily and profitably in domestic as well as in international markets.
- E-commerce removes or reduces the impact of non-tariff barriers to trade.
Investment Impact
- Facilitating a vibrant e-commerce environment has a positive impact on exports and increases foreign investor confidence in the market.
Employment Impact
- E-commerce which increases trade volumes, division of labour, innovation and production directly increases employment which help millions move out of poverty.
- A vibrant E-commerce ecosystem reduces income inequalities by lowering trade transactions costs in those sectors where employment of the poor is concentrated.
- A focus on small and medium enterprises trade facilitation has an impact on income distribution and poverty through its effects on international trade, economic growth and government revenue.
- E-commerce enhances trade-induced growth, which increases average incomes providing more resources with which to tackle poverty.
Export Impact
- Exploiting market-access opportunities in the developed world requires an e-commerce strategy because consumers in developed markets prefer online orders. Sectors here can be arts and crafts, agriculture, online services among others. Studies suggest that an export based strategy of development offers the best prospects for economic growth.
