It is coming as predicted: Amazon will not invest in African ecommerce but will push more into African cloud by possibly partnering/investing in major telcos in key African markets. My thesis that investing in Africa ecommerce would be hard is purely based on the heterogeneous and disparate natures of our economies, unlike India which is one market of a “continent” or China which Amazon failed but not for lack of trying. The logistical challenge to get scale in Africa in order to reduce marginal cost might have scared Amazon on any ecommerce plan.
In Africa, you have to work really harder on pockets of economies which are so small that a small American city can give you more sales than a country! But as the journey to the cloud and broad digitization continues, Amazon Web Services (AWS) understands that Africa is a huge growth opportunity because with our infrastructural paralyses, cloud is even optimized for businesses: when you are not sure the electricity will be there, it is better to put that data in the cloud than a local data center which will require a 24/7 generator.
So, the news that Amazon is partnering with Safaricom to sell cloud services in East Africa should not come as a shock: “In addition, Safaricom will be able to offer AWS services to East-African customers, allowing businesses of all sizes to quickly get started on AWS cloud and accelerate innovation.”
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Safaricom has announced a strategic agreement with Amazon Web Services (AWS), which will see the Telco become a reseller of AWS services.
The agreement is designed to accelerate Safaricom’s internal IT transformation, lower costs and provide it with a blueprint and skilled resources to assist customers with their journey to the cloud.
Safaricom Plc CEO Michael Joseph said the agreement will allow the company to accelerate its efforts to enable digital transformation in Kenya.
“We chose to partner with AWS because it offers customers the broadest and deepest cloud platform, overall commitment to security excellence, and a strong culture of customer obsession,” Joseph said.
In addition, Safaricom will be able to offer AWS services to East-African customers, allowing businesses of all sizes to quickly get started on AWS cloud and accelerate innovation.
In Nigeria, I expect either 9Mobile or Airtel to get that opportunity; MTN has a big cloud business and may not be open to such. Sure, MTN Cloud is mainly enterprise cloud, not for the startups, SMEs, etc which Amazon has built a tribe. Glo is also invested in enterprise cloud.
Yet, while Amazon deploys the solutions, indigenous players like Layer3.cloud which are hosted in Abuja with full sovereignty blessing provide opportunities for highly sensitive businesses. You must not miss that mark.
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Even the numbers coming from Jumia are enough to make Amazon shave the idea of ecommerce here, they are not dumb. Jumia operates in eleven markets and it’s celebrating having 6.1 million active users; that’s comparable or less than what each of states like California, Texas or New York can offer; and yet to serve these small disparate markets across Africa, Amazon may need to spend 10× more than its US counterparts, with no guarantee for higher value. It’s simply not attractive!
So, that leaves the idea of investing in Cloud a straightforward choice, because the broadband penetration will continue to grow, meaning that many more internet/web enabled business will spring up. And if at some point Amazon finds the data within its domain attractive enough for ecommerce investment, it will venture there.
What we have in Africa is big headcount, the pockets and environment are still not big enough to support certain businesses, without massive erosion in value.
As for local players in the Cloud business, they just need to create niches and build moats around them; no need trying to compete with Amazon, no luck there.
The sermon from Francis – what a perspective!
It’s very fantastic seeing Amazon set-up in Africa.