The e-commerce sector in Botswana has faced considerable setbacks in recent years, with at least five startups shutting down since 2023. Founders of these companies point to fractured payments and logistical challenges as key reasons for their closures. Despite efforts to build a thriving digital economy, the sector has struggled to gain traction.
One of the notable closures is Artify Botswana, an online marketplace for visual art. Artify, which launched with the aim of providing artists a platform to sell their work, shut down in early 2024. Co-founder Nonofo Thamage highlighted the platform’s struggle with offline transactions, which resulted in missed revenue opportunities due to its commission-based business model.
“We implemented secure payment systems and verified seller profiles to build trust,” Thamage explained. “But the heavy reliance on traditional payment methods such as cash-on-delivery continues to hinder the scalability of e-commerce in Botswana.”
Artify’s closure highlights a significant issue plaguing many of Botswana’s e-commerce ventures: the incomplete integration of online payment solutions. Despite initiatives to incorporate secure and reliable systems, consumers remain wary, preferring cash or other offline payment methods, which drastically limits revenue generation for platforms relying on digital transactions.
A Broader Problem: Payments and Logistics Challenges
Botswana’s e-commerce penetration remains low at just 5%, according to UN Trade and Development. This figure starkly contrasts with South Africa’s penetration rate of 49%, revealing the gaps in Botswana’s digital economy. While the country’s e-commerce sector generates 89% of its digital revenues, the infrastructure supporting e-commerce is still in its infancy.
In addition to payments, logistics pose another significant challenge for startups. Vaisa, an e-commerce platform focusing on a variety of consumer goods, also folded due to the logistical difficulties of delivering outside Gaborone, Botswana’s capital. According to Phumulani Makgetho, co-founder of Vaisa, the cost of courier services was prohibitively high. While owning a delivery fleet may have solved some issues, it presented its own set of financial challenges.
“Botswana’s population is small, but the country is relatively large,” Makgetho said. “It’s tough to manage deliveries nationwide without having an in-house fleet, but even that solution is expensive.”
Government Efforts and Missed Targets
In an effort to bolster the e-commerce sector, the Botswana government, in partnership with the UN Trade and Development (UNCTAD), launched the National E-Commerce Strategy in 2021. The initiative sought to modernize the country’s digital infrastructure and facilitate online business growth. Part of this strategy included the creation of BW Reka, a national e-commerce marketplace. However, BW Reka is now defunct, and the strategy has failed to make a meaningful impact on the sector, much to the frustration of business owners.
Many founders, including Tavonga Muchuchuti, former head of the now-closed BuyBDub, point to gaps in both infrastructure and government policies as barriers to success. “The development of warehousing, distribution, and last-mile delivery systems is essential for reducing operational costs and improving customer experience. These improvements would make e-commerce more appealing to both businesses and consumers,” Muchuchuti explained.
He also emphasized the need for policies akin to open banking, which could ease the creation of e-commerce solutions. Suggestions from entrepreneurs include government investments in payment infrastructure, more efficient customs procedures to support export-focused platforms, and standardized inventory management systems.
The Path Forward: Collaboration and Innovation
The situation in Botswana underscores a broader challenge for e-commerce in developing economies. With a population of just 2.4 million, the country lacks the scale necessary for a bustling e-commerce ecosystem without collaboration among startups, the government, and private sectors. Experts argue that e-commerce players must consolidate efforts and pool resources to overcome these challenges.
There is hope on the horizon. The Botswana government recently announced plans to implement a national payments switch, which would centralize and streamline online transactions, creating a more seamless experience for consumers and businesses alike. By building local payment gateways, startups could better capture online sales, minimizing the leakage caused by offline transactions.
Startups are also taking matters into their own hands. Several companies are forming partnerships with local courier services to overcome last-mile delivery challenges. This collaboration, although still in its early stages, could help reduce delivery times and costs, making e-commerce a more attractive option for Botswana’s consumers.