The Competition Commission has for the first time presented specific data on how much businesses in rural areas and settlements in South Africa are excluded from online retail. The main reasons cited for this exclusion are informality, lack of necessary capabilities, and weak infrastructure.
These findings are contained in the Commission's first report on the economy of rural areas and settlements, which was presented on Thursday at the opening of the 20th annual conference on competition law, economy, and policy in Melrose Arch, Johannesburg. The study is based on two national surveys—a business survey and a consumer survey—conducted for the Commission by the research firm RedFlank.
Only 11% of businesses in settlements and 9% in rural towns use online marketplaces for sales. Furthermore, only 11% of firms in settlements and 6% in rural areas have their own e-commerce websites. In contrast, approximately half—51% in settlements and 48% in rural towns—still rely on physical store sales.
The gap is also noticeable in terms of demand: online customers account for 7% of reach for businesses in settlements and 5% in rural towns, with the vast majority of respondents indicating that local residents are their primary, and often only, market.
Reasons for lack of online sales
When the Commission asked business owners about the reasons for avoiding online trade, the issue of registration came first: nearly a quarter stated that their business did not meet requirements or was unregistered (24% in settlements, 23% in rural towns). Additionally, seventeen percent of firms in settlements felt that online sales were not a suitable sales channel, as did about 20% of independent firms in rural areas. Other reasons included limited knowledge of how to sell online (15% in settlements and 19% in rural areas) and a lack of necessary infrastructure to support online sales (15% and 20% respectively).
The Commission views these answers as evidence that the barriers to online sales are 'closely linked to informality, capabilities, and infrastructure.' Notably, in settlements, the second most significant obstacle is not exclusion, but the opinion that online is the wrong channel, which seems somewhat inconsistent with the report's broader argument about latent demand.
Structural limitations
The report links structural limitations to the Commission's investigation into the online intermediary platform market, which required Takealot to separate its retail and marketplace divisions. It argues that platform rules, search rankings, commissions, and fees ultimately determine whether small sellers can compete online at all, warning that online intermediation can only provide access 'if platform conditions ensure fair participation of small sellers.' This argument is drawn from a previous investigation, not from the new survey data.
It is critically important for the sector that the Commission stated it will not stop at research alone. It concludes that the appropriate response is not a single intervention, but a combination of competition protection, stakeholder coordination, potential in-depth investigation, and, if necessary, enforcement. Commissioner Doris Tshepe emphasized that the stakes concern who has the right to participate in the mainstream economy: inequality will only narrow if residents of settlements and rural areas actively participate in the so-called 'Kasi economy' and can 'expand beyond it to participate in formal shopping centers and middle-class online purchases in South Africa.'
Private players are already seeking to capitalize on this opportunity, for example, through the Shop2Shop initiative to convert cash to digital format in the spaza sector or Shoprite's move towards B2B e-commerce. The report notes that the low adoption rate reflects latent demand, not disinterest: many surveyed firms stated they would start selling online or transition to formal retail if barriers were lowered.