4G internet boon to Somalia’s growing e-commerce and online businesses

MOGADISHU, Somalia - E-commerce and online shopping have experienced significant expansion in Somalia, particularly the capital Mogadishu, resulting in the creation of dozens of online stores that conduct most of their businesses on the internet.

Over 20 online shopping platforms which operate through websites, as well as Apps, conduct online trading in the capital with the number of this innovative business model on the increase since 2018. The online shops sell a wide range of products, such as foodstuffs, electronics, while others provide services, like food and goods delivery and office and property rentals.

While the e-commerce sector is still in the formative stages in Somalia, many online business platforms are entering the market as purchasers continue to turn to online shopping as a convenient method of shopping.

One of the fully-fledged online companies is Faras (which means Horse in Somali). Operating through the address faras.com, the platform sells a variety of items from electronics to groceries, attracting over 50,000 customers on a daily basis.

The founders of Faras, the majority of them young entrepreneurs, are optimistic about the future of this business model, hence their resolve to upgrade their platform. According to the founders, the platform saw a 25% increase in visitors accessing their platforms for shopping, instilling hope in the sector.

While the sector is impacted by a myriad of challenges, many customers are opening up to this business model to save time and see their shopping delivered at the doorstep.

Speedy, affordable broadband

Somalia is considered as one of the countries in the world with affordable internet, ranking number one in Africa, and seventh worldwide in 2020. According to a survey conducted by the British technology research firm Cable, the country is overtaking many African countries with regard to internet accessibility despite the political and security challenges.

Somalia has the cheapest data in Africa where 1GB of data costs $0.5. with over 70% of Somalis having access to 4G, as per Hormuud, and many users are turning to online stores for shopping, with emerging online companies striving to put in place user-friendly platforms where customers can easily conduct their shopping and pay online satisfactorily.

“We 100% depend on Hormuud’s broadband internet for our businesses to remain operational. From our headquarters to our operators and customers, our business fully depends on the accessibility of speedy and affordable internet, and that is what we get from Hormuud," said Abdisamad Ali Abdi, one of the officials at Faras online shopping store.

“When a shopper requests an order, you have to strive to deliver the goods seamlessly and in a timely fashion. So in the event of poor internet connection, our business could not have persevered. Thanks to Hormuud’s 4G data which covers most of the areas where our customers stay, we provide seamless services,” he added.

Seamless money transaction

Not only Hormuud’s internet service is key for the emerging online business, but the telecom's mobile money transfer platform has allowed the e-commerce sector and online shoppers to effectively carry out transparent and reliable mobile money transactions.

“Hormuud’s mobile money service is used by almost all Somalis for its convenience, forcing us to integrate the service to our platforms for seamless but transparent transactions,” remarked the founder of Faras.

The Electronic Voucher Card or EVCPlus, a free mobile money service, is used by over 3 million of thin Somalia. The Somali government issued the first license to the mobile money service in February 2021 after 10 years of operations. The new regulation formalized digital transactions as the main payment method within the country and will enable further integration of the Somali financial system with the international financial system. As per a 2018 World Bank report, approximately 155 mobile money million transactions, worth $2.7 billion in Somalia per month, are conducted, with mobile money superseding the use of cash in the country, with over 70% of adult Somalis using mobile money services regularly.

While the majority of online businesses is in the startup stage, the sector saw an increase of 12 percent in 2021, according to experts, who predict that the upward trajectory of the increase will reach 40% in the next five years, considering the opportunities and demand for this business model.

Better prices to the customers

According to experts, one of the main factors that give this business model an opportunity to blossom is the better prices of products to the customers compared to prices at traditional shops, with prices of products at online shops 5% cheaper.

This promotes the increase of many online stories which rent stores in areas in the city where rent is cheaper, as they rely on online exhibitions rather than physical display.

“Online shoppers do not have to visit shops physically as all the products they are interested in are displayed online, so we save pennies," said Abdi Mohamed Amin, manager of an online restaurant.

Food deliveries is one of the growing services, with online shopping stores observing that 30% of their customers are visiting platforms for food purchases, especially during busy hours and late hours at night.

“Since food delivery is on the rise, we put in place systems to make this service more convenient and reduced prices of delivery,” he added.

Job creation and investment

Online companies in Somalia also contribute to the country's dwindling economy and in job creation as they hire fresh secondary and university graduates as well as motorbike operators.

While investing in such business models is cheaper compared to opening the traditional business, they have notably contributed to job creation, with over 5,000 direct or indirect workers recorded in this sector.

Approximately 70% of Somalis between the ages of 14-29 do not have jobs, according to a UNDP report. Therefore, it is strongly believed that job creation for the youth contributes significantly to restoring stability in the country ravaged by decades of conflict, with youth bearing the brunt of the prolonged conflict in the country.