Why e-commerce giants exit Tanzanian market

Dar es Salaam. With the number of internet subscribers in the country going past the 27 million mark, one would expect that e-commerce is also going through a boom. Well... that’s not the case - not for giant cross-border digital businesses, at least.

In the period of two years, several digital market place and service sites have exited the Tanzanian market, largely citing the challenge of low engagement and growth.

Early last month a digital career portal and job site Brighter Monday Tanzania announced its plan to cease its operation in the Tanzanian market.

They finally halted operations effective November 30, this year.

The organization’s parental company ROAM Africa said that they had exited the Tanzania market but would continue to operate its “successful and leading marketplaces” in other countries where they were “clear market leaders with a bright future”.

This suggests that the Tanzania local market is still very low and not a profitable affair.

However, in an e-mail interview with The Citizen, Brighter Monday Tanzania chief executive officer Reshma Bharmal-Shariff said the organization decided to take an exit due to the current economic environment and the impact it has caused on many businesses.

Asked if they had plans to return into the Tanzanian market, Brighter Monday stated that for the whole brand and the website would continue to remotely operate by ROAM Africa, who would evaluate the options to re-enter the market in the future.

“Yes, we will evaluate the option to come back in future,” she said shortly.

ROAM Africa, is the organization’s parental company which still has digital market places across sub-Saharan Africa countries such as Nigeria, Ghana, Senegal, Kenya, Uganda, and Ethiopia.

Ms Shariff said one of the major challenges that her organization observed in the digital market was that employers were relying on word-of-mouth hiring through their networks, rather than leveraging data to make the best hiring decision.

Brighter Monday joined other continent’s e-commerce giants such as Jumia, which shuttered its business in Tanzania in November, 2019, citing the need to “focus resources” on other markets as part of an “ongoing portfolio optimization effort.”

Simply put, the company was also looking to cut its operation costs by focusing on larger African markets where e-commerce was currently a more viable proposition.

Economist and social research literate Prof Samuel Wangwe from the University of Dar es Salaam (UDSM) said in order to support the growth of e-commerce as a sector and its contribution to the economy, Tanzania needed a central regulatory framework.

“This is needed because Tanzanians are cautious and sometimes too cautious when it comes to online services, with a state police people’s trust in the business would increase and thus e-commerce as a whole would grow,” he said.

According to him, consumers have cautious behaviour with the fear of being scummed and lose their money.

“E-commerce is the future. There is also a need to enhance information, communication and technology (ICT) infrastructure such as a strong internet connection,” said Prof Wangwe.

Prof Wangwe recommendation aligned with that of the United Nations Conference on Trade and Development (UNCTAD) which suggested that Tanzania had the potential to become a leading contender in online trading in the East African region if it would have a focused stand-alone e-commerce policy.

In UNCTAD assessment study of the country’s readiness to engage in e-commerce it was revealed that lack of a national e-commerce strategy was holding Tanzania back.

“Tanzania lacks specific e-commerce legislation and its legal framework is inadequate to create a conducive e-commerce business environment, limiting trust among users of digital technologies,” the UNCTAD study reads in part.

Mzumbe University professor of economics Honest Ngowi also commented that the country needed a legal policy and regulatory framework that would protect both the consumer and the seller.

“This should go hand in hand with a massive rebranding from these e-commerce businesses, they need thorough marketing so that they can be known by a wider range of internet users in the country,” he observed.

Different studies on e-commerce trade have shown that many indigenous people do not put fully trust e-commerce, specifically cross border e-commerce and just a small portion of those who are aware of the particular trade do engage themselves in.

The use of ICT equipment is also still low in Tanzania compared to other countries in the world but it is growing at a relatively good pace.

Following the assessment, UNCTAD recommends several policy actions to grow Tanzania’s e-commerce sector.

They include crafting a national e-commerce strategy, enhancing information, communications and technology (ICT) infrastructure, creating a conducive legislative climate and providing incentives to startups.

Organizations that ceased operations in Tanzania

Tala

September last year, the digital lender Tala announced that it was winding up its business and has since ceased offering loans to its Tanzanian customers.

In a tweet Tala announced...

“We regret to info you that Tala is no longer offering loans in Tanzania. We appreciate the opportunity to serve you, and wish our loyal customers continued success in your financial journeys. You can use our paybill number to pay outstanding balances.

In a slight twist though, the company claimed that it was not completely shutting down its Tanzania operations but rather putting a pause as they evaluate their future business in the country.

Jumia Tanzania

In November, 2019, Africa’s largest e-commerce operator, Jumia, closed its business in Tanzania.

The Tanzania move came a week after it quit operations in Cameroon. Jumia cited the need to “focus resources” on other markets as part of an “ongoing portfolio optimization effort.”

The was apparently looking to cut operating costs by focusing on larger African markets where e-commerce is currently a more viable proposition. But an offshoot, Jumia Foods continue to run in the Tanzanian market.

Pulling out of Tanzania meant that Jumia now operates in just 12 of Africa’s 54 countries, with Egypt and Nigeria being its largest markets. While it is still the largest e-commerce player on the continent, Jumia’s shrinking size somewhat contradicted its pitch to investors ahead of the landmark New York IPO in April 2020, where it touted its pan-African operations and ambitions as a core strength.

Brighter Monday

After the ceasing of its operation, ceases by November 30, this year, all of the jobs and contents have been shifted to Zoom Tanzania and users who tried to access the website have been redirected to Zoom Tanzania, to continue using the services such as job searching and posting. “Users will still be able to perform free basic functions on the website (Zoom), such as posting a listing and applying for jobs, there will be no offline support or payment functionality as all local and offline business operations will cease on the 30th of November 2020,” the company said in its statement in November of this year.