The ecommerce market outlook in Africa remains strong, with revenue set to grow at a CAGR of 18.07% between 2022 and 2025. As such, the market has seen major entries by e-commerce giants into the continent most recently being Amazon into Cairo and Johannesburg. In this note, we review the key considerations for entry into Africa by highlighting Amazon’s success in Egypt and failures in South Africa. 

Local market knowledge, last mile connectivity and government initiatives have underpinned Amazon’s success in Egypt. 

The Egyptian e-commerce market  is expected to grow by at least 30% this year, buoyed by younger shoppers and rising incomes from Egypt’s expanding middle class. These growth projections saw the advent of amazon.eg in 2021, replacing souq.com, the e-commerce platform, which Amazon acquired in 2017 for $580m. With over 3,000 employees and a market presence spanning over four years, Amazon has set the stage for ecommerce in Egypt. 

The launch of Amazon in Egypt also saw the unveiling of its state of the art 28,000 sqm fulfillment center in Sharqia province’s 10th of Ramadan City, east of the Nile Delta in a resultant ripple effect for the logistics sector. With a capacity of over 2.4 million cubic feet, this facility is considered the largest fulfillment center in Africa and has resulted in over 1,500 jobs so far. This is further complemented by over 22 delivery stations across cities like Cairo, Alexandria, Tanta, Ismailia, and Assiut, and several established corporate and customer service offices ensuring last mile connectivity.

In addition, the company is set to double its delivery capacity in 2022 in light of the increase in customer demand with new delivery stations to enhance its reach across the country. The company is  targeting to construct new warehouses in west and east Cairo, Alexandria and Banha, and to open a new customer service center in Cairo. Amazon’s investment expansion in the Egyptian market also includes creating over 2,000 job opportunities across its network in 2022.

Land Acquisition has been the hallmark of Amazon’s failure in South Africa

Despite its success in Cairo, Amazon’s case has been different in South Africa. Its plans to set up a 70,000 sqm headquarter in Cape Town are now on hold following a court ruling against the land they had earmarked for the project.

Developed by LLP, Amazon was set to be the primary tenant of the River Club, a $320 million mixed-use real estate development in Cape Town’s Observatory neighborhood, which will also include residential units, public green space and other amenities. Construction on the project began last year after it was approved by city officials

The Indigenous Play

However, opponents have long argued that the development was being built on an important Indigenous historical site and the project should never have been authorized to move forward. In 1510, it was the location of a battle between Portuguese forces and a group of Khoi people, an event considered by some South Africans to be one of the earliest instances of Indigenous resistance to colonialism

The Khoi and the San were the earliest inhabitants of South Africa, the latter roaming as hunter gatherers for tens of thousands of years, and the former joining them as pastoralists more than 2,000 years ago

The proposed site lies at the confluence of two rivers — Black River and Liesbeek — and is of spiritual significance to the community. The construction would also block the view to the Lion’s Head mountain, also considered sacred by the indigenous communities.

While it remains unclear whether Amazon will still pursue its expansion plans in South Africa, its performance in both markets is a clear indicator of the homogeneous dynamic in African real estate markets and the need for local knowledge in various markets especially for multinational players.

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