Taobao villages, defined as villages that generate 10 million yuan (US$1.4 million) or more in e-commerce sales annually and which have 100 or more active online shops operated by local residents on the Taobao e-commerce platform, are the brainchild of China’s technology giant Alibaba and aim to reduce poverty by creating online shops for rural residents.

In 2016, China’s State Council Leading Group for Poverty Alleviation and Development and a host of top government bodies jointly released guidelines that called for the construction of 60,000 e-commerce poverty relief stations, as well as a quadrupling of e-commerce sales for villages in impoverished rural counties by 2020.

As part of China’s targeted poverty alleviation campaign, local governments sponsored e-commerce and clothing-production training classes, provided low-cost loans, and encouraged successful entrepreneurs to prioritize hiring locals who remained below the poverty threshold. Young entrepreneurs also played a pivotal role in growing e-commerce in rural China. Government-backed policies encouraged over 130,000 new graduates to return to their hometowns or villages and — among other projects — set up online shops and services to help their friends and families.

A joint World Bank and Ali Research report released in 2019 credited “Taobao villages” with helping China’s rural residents lift themselves out of poverty. Women seem to benefit the most too. According to the Alibaba Research Foundation, the ratio of female to male entrepreneurs in e-commerce is almost equal, compared to a ratio of 1:3 in traditional businesses.

E-commerce or digital trade has been a powerful leapfrogging tool to boost trade, create employment, raise incomes and reduce poverty in China. It could do the same for Africa. Yet, despite some African countries leading in mobile paayments, Africa, with 17 percent of the world’s population, still lags behind in terms of e-commerce sales. While Chinese e-commerce is dominated by two big tech giants, the African sector has multiple players with many startups (around 264 operational across at least 23 countries). Jumia, Africa’s biggest and best-funded e-commerce platform is yet to turn a profit; sales are still very unevenly distributed with Kenya, South Africa and Nigeria accounting for over half of e-commerce consumers in 2017.

The potential remains, however.

Africa has the fastest growing youth population in the world, and they need jobs. According to the African Development Bank, of Africa’s nearly 420 million young people aged from 15 to 35, one-third are unemployed. The World Bank report says that there are 650 million mobile users in Africa, surpassing the number in the United States or Europe. In some African countries, more people now have access to a smartphone than to clean water, a bank account or electricity.

Africa also has a growing middle-class population — 330 million people concentrated in Egypt, Nigeria, South Africa, Algeria and Morocco — that wants to spend money. Finally, an increasing number of “Made in Africa” brands and goods being produced across the continent, in the larger markets as well as emerging markets such as Rwanda, Senegal and Ethiopia, are becoming well respected and desirable.

There is a huge opportunity for e-commerce growth in Africa, but it is not easy to just replicate China’s model.

First, Africa is made up of more than 50 countries, with a diverse range of policies, market sizes, consumer profiles, languages, and other contextual differences. This makes economies of scale difficult to achieve in terms of coordination and logistics.

Too often the focus of African e-commerce is on building the technology and platforms. The key, however, is in building the physical infrastructure around it — roads, railways, airports, and internet portals among other things needed for e-commerce.

Second, fundamental “ways of working” are holding e-commerce back from flourishing across the continent. In China, 54 percent of the population use mobile payments for e-commerce purchases. Due to a lack of trust in products and delivery, 90 percent of customers across African countries pay cash on delivery. In rural locations, this is particularly complex and costly.

Part of the challenge in Africa is that while customers are familiar with mobile payment systems such as Mpesa, these systems have been developed to support inclusion as opposed to building trust and convenience like in China. Only 10 to 15 percent of the population has access to a bank account. Most African online retail stores and services therefore effectively limit their customer base by requiring that their customers have a bank account or a payment service linked to one.

China and other partners can help overcome these two challenges.

First, partners such as Alibaba, Amazon and others should invest in existing African e-commerce platforms and empower these to expand their reach as opposed to capturing the market themselves.

Second, China’s success was spurred by investments in e-commerce companies allowing the private sector to grow and expand. In the wake of COVID-19, the growth of digital trade in Africa offers a unique opportunity for investment, based on a growing middle-class consumer market. E-commerce can also — as Taobao villages did — create jobs and reduce poverty.

If funding and loans are channeled into training Africa’s huge, increasingly educated young population and the vast number of small and medium-sized enterprises to utilize e-commerce and market their “Made In Africa” products, it could achieve similar results to China’s Taobao villages.

The author is deputy director at Development Reimagined. The author contributed this article to China Watch, a think tank powered by China Daily. 

The views do not necessarily reflect those of China Daily.