The digital platforms the sector could contribute as much as R91.4 billion to the economy by 2035 and has increased its share to 1.38% from 0.02% in 2022.
The digital platforms sector, which includes e-commerce and financial technology (fintech), has the potential to grow South Africa’s economy but infrastructure and economic challenges are holding the country back, according to a report released by Naspers this week.
The report projects that the sector could contribute as much as R91.4 billion to the economy by 2035 and has increased its share to 1.38% from 0.02% in 2022. This growth includes a cumulative tax contribution of R10.7 billion.
It could create over 341 000 and 157 000 full-time equivalent jobs, based on monthly earnings of R12 000 and R26 000, respectively.
The growth of digital platforms in South Africa enables inclusive participation in the economy, Naspers South Africa chief executive Phuthi Mahanyele-Dabengwa said.
“These platforms effectively lower traditional market barriers, enabling diverse and previously marginalised groups to participate meaningfully in the economy,” she said.
The report, published in partnership with the Mapungubwe Institute for Strategic Reflection, notes that constraints relating to infrastructure, accessibility, costs and redundant regulations are hindering South Africa’s drive towards digital transformation.
“Reliable electricity, IT infrastructure, data centres, logistics networks (including roads, transport and mapping) and access to affordable bandwidth are all essential for powering devices, processing data and payments and ensuring efficient supply chains and last-mile delivery,” it said.
“Incumbents and startup platforms alike are increasingly realising that they cannot take advantage of platform opportunities because of their inadequate digital tools, skills and security issues.”
According to the report, the average cost of 1GB of mobile data in South Africa is around R33, making it more expensive than other African countries such as Nigeria, Namibia and Kenya.
South Africa has a “stable macro-environment characterised by a relatively low inflation rate and steady currency and interest rates”, which set it apart from other African nations, making it an attractive investment market but weak economic growth and high unemployment are setbacks.
“A protracted low-growth environment and a small population limit the scalability of local platforms. Broad reform efforts aimed at growing the economy and increasing household incomes will improve the fortunes of digital platforms,” the report says.
The digital economy is projected to contribute 5.2% and 7.8% to GDP in Africa and South Africa, respectively, by 2025, with potential growth to 8.2% and 13% by 2050.
“Platforms in innovation (like software and app stores), classifieds (such as AutoTrader), and accommodation (for example, Trivago) are seeing broad adoption,” the report says.
The e-commerce market, which includes platforms such as Takealot.com and Checkers Sixty60, is valued at between $5 billion and $6 billion, representing 6.3% of total retail value, and boasts between 11 million and 18 million users.
Fintech companies such as Yoco are also growing rapidly. According to the report, revenue in this market is projected to reach $434 million in 2024, driven by developments in digital payments, digital assets and neo-banking, a form of online banking. The portfolio of assets in fintech is valued at $7.5 billion and slated to have significant impact and potential for future growth.
E-hailing services like Uber, and food delivery platforms such as Mr. D, are expanding fast but are approaching critical scales.
According to the report, the ride-hailing sector, valued at $350 million, is set to expand at an annual rate of 2.9%, reflecting increasing demand for convenient transport solutions.
Digital platforms are increasing competition by allowing price comparisons and have a social impact in areas like agro, health and educational technology, although these sectors are still emerging.
But South Africa also needs to consider new challenges.
“Key concerns include the potential impact on job security and losses, limited market competition for both consumers and businesses, and issues surrounding privacy and access to services,” the report says.