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Five pitfalls to avoid when starting an online business in Africa

An online business is no different from a real-world business. Your customers shop online everyday and when they don’t, they research products on either their desktops or mobiles and respond to advertising which helps to influence their buying decisions.

There’s been an explosion in the number of African internet users in the last five years due to the fibre optic cables that have been laid in various parts of Africa. Such developments have positioned tech-savvy entrepreneurs to leverage this opportunity by investing into online businesses. Examples of these include e-commerce, mobile money, edu-tech start-ups, group buying sites, business directory portals and the development of mobile and web applications.

If you’re exploring the possibility of investing into an online start-up in Africa, take note of these five pitfalls:

1. Ignoring the Real Size of your Target Market Population

Project the size of the market you intend to reach. Many entrepreneurs simply take the entire target market population as the size of the market they intend to reach which is inaccurate, especially when structuring an economic model for an online business in Africa. Consider variables such as internet penetration and national electricity grid coverage.

2. Developing a Site that is not Mobile-Friendly

Mobile phone penetration in Africa is much higher than internet penetration. This increases the likelihood of visitors landing on your site from their mobile devices. It’s best to avoid creating websites with enormous amounts of content and images as this may slow the loading time and create a higher bounce rate when users are browsing from their mobiles.

3. Neglecting to Offer a Variety of Payment Options

This is crucial to consider, and if you don’t approach this in the right way, you may lose a significant number of customers who are willing to buy but cannot pay. As the majority of the African population don’t have a bank account (don’t own credit cards or debit cards), any online payment gateway that requires this will be irrelevant. Mobile money is the fastest growing and most convenient payment option in many African countries, e.g. Zimbabwe. Be sure to include this as part of your payment option.

4. Blowing your Advertising Budget on Traditional Marketing

Target your advertising budget to the market that is active online. Below the line advertising strategies could create potential barriers as many users who are targeted through traditional marketing methods may have no access to the internet to access your site. This target audience could amount to inflated sign-up numbers that do not translate into actual paying users.

5. Forgetting to Consider Withholding Tax

You’ll most likely have to partner with a local business to speed up your entry to market and to acquire a larger market share. In many instances, the partner will invoice on your behalf and may have to deduct withholding tax on all foreign invoices. This can be as much as 15% off your margins. When considering your initial pricing, take this into account.

In conclusion, entrepreneurs who are active in web-based businesses need to consider the hurdles they’ll have to overcome in order to be profitable on the African continent.

If you are exploring business opportunities on the African continent, it’s best to partner up with a company that has experience in operating within the ever-changing market environments of Africa. We specialise in generating qualified leads on the African continent and assist companies by putting them in contact with professionals who can influence their targeted industries. Speak to us today.

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