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Entrepreneurs in Côte d’Ivoire are circumventing high retail rents and government bureaucracy to start businesses online, resulting in a thriving informal digital economy.

From baby clothes to handmade jewelry, small business owners are finding that selling via the internet has become the viable option for those who cannot compete with big players in the country. That includes a community of Lebanese entrepreneurs who have escaped an economic crisis at home to build a sizable presence in the country’s physical retail sector.

Social media-run businesses are proving so popular that they are fueling a second economy of “motorcycle boys,” who pick up parcels and ride across town to deliver at the doorsteps of clients.

But the government, which does not profit from the sector and is facing pressure from tax-paying businesses, has begun to put a squeeze on online entrepreneurs, introducing regulations that are making it harder for them to deliver their goods. The moves are emblematic of a wider issue playing out across the continent: how do governments profit from, or even control, the rapid growth of social e-commerce across the continent without stunting the sector?

Bringing down barriers

For newcomers with modest capital, owning and running a brick and mortar store in Côte d’Ivoire is an almost impossible challenge. Besides the trying process of getting the paperwork needed in order to run the business, exorbitant rents for shops, which often include steep advance payments, are enough to scare off most hopefuls.

A shop in the downtown area of Abidjan, the country’s economic hub, costs between 100,000 cfa francs ($200) and 1 million cfa francs ($2,000) per month, with a compulsory 12-month deposit. With the average Ivorian earning 60,000 cfa francs ($120) a month, setting up a business can be a formidable cost.

After plans of migrating to Europe didn’t work out two years ago, Ibrahim Conté, a former taxi driver in Abidjan, tried rechanneling funds for his failed sojourn to setting up a brick-and-mortar business, but was scared off before he even got started.

“Shop rents were so high and could have eaten up my capital even before gathering goods to sell,” Conté says. “I jumped inside the new train of business here—social media.”

Conté bought men’s leather shoes wholesale and on discount, photographed them at home, and advertised them using a sponsored Facebook post. “That was my first online business experience, but it was very encouraging. About 18% of the responses turned out to real sales. I have been repeating the cycle for two years now and my conversion rate has grown to 61%.”

Not long ago, Conté’s story would have been different. Internet access in Côte d’Ivoire was narrow and social media was unpopular. Now, the west African nation has 38 million mobile phones in use, with a population of only 25 million, according to figures from the country’s telecoms regulator, ARTCI. (Consumers often sign up with multiple operators to take advantage of different promotions). About half of those users access the internet using their phones, which is good news for e-commerce entrepreneurs.

Josiane Aké, a 32-year-old university graduate, sells homemade jewelry online through her trademarked business Pearl Price. “When I graduated, a job was difficult to come by, so I decided to learn how to make jewelry,” Aké says. “After my training, I needed to buy a few machines for production and then rent a shop. I couldn’t afford both, so I opted for machines, and started crafting my designs right in my kitchen and exposing them on social media. It caught fire immediately.”

Avoiding high shop rents is not the only advantage she enjoys over offline sellers. E-commerce is currently an unregulated space in Côte d’Ivoire, which means the government is seeing little profit from any social media-driven sales.

“I handle orders for wedding rings, earrings, bracelets, and even medals. All for zero rent. Not just rent, no taxes. Those who own physical shops welcome regular visits from fiscal agents and representatives of the ministry of commerce. Even if your sales are poor you keep paying taxes. We are off that hook.”

Messaging app WhatsApp is another popular medium used by online retailers in Côte d’Ivoire, thanks to its user friendliness and lack of advertising costs, unlike Facebook. Sellers from university students to housewives create groups from their contact lists and begin to churn out images of their stocks like clothes, mobile phones, and even food.

Sellers say they enjoy building a cordial relationship with customers using the platform. “You have a closer relationship with your customers using WhatsApp, unlike other platforms. I can even place a call to some when new products arrive,” says Mignonne Gohoun, a 23-year-old economics student at Felix Houphouet Boigny University in Abidjan, who sells infants clothes and accessories.  “We discuss product quality and trends in my group. It’s like a family. Some members introduce their friends to the group which keeps growing.”

Targeting delivery 

Thriving online sales have created a cottage industry of “motorcycle boys” who charge 1,000 cfa francs ($2) per trip, a fee happily footed by the buyer. They’ve flocked to fill the gap between formal courier services which don’t service online sales, and licensed online retailers like Jumia and Glovo, which have their own delivery services.

“My boss owns the motorcycles and employs us to work with online traders. You are asked to pay 5,000 cfa francs ($10) per day, anything excess you make belongs to you,” explained 23-year-old Armand Koffi. “Personally, I run between nine and 15 trips each day, covering my zone. It’s profitable. I am currently saving to buy my own bike so I can be my own boss.”

Online selling and delivery might be helping to cushion the blow of high youth unemployment. Three quarters of the country’s population is younger than 35, and an estimated 25% are unemployed, according to official estimates. While the government claims it has been able to reduce that figure by 8% since taking power in 2011, several local analysts contest those figures.

In a bid to crackdown on unregulated e-commerce, the government is targeting the informal delivery.

But a new law targeting delivery services, introduced by the authorities in January, could clog the entire chain, and douse the enthusiasm for online business, mostly for those operating on the informal side of the coin. Parcel delivery services have been asked to acquire a formal license for a whopping 5 million cfa francs ($10,000)—well beyond the reach of motorcycle boys.  While the Ivorian government claims delivery regulations are meant to merely regulate the sector, and not to kill it, they will be difficult to enact, as it would involve checking every passing bike, be it a parcel deliverer or not, to see if it is licensed.

Israel Guebo, a digital economy expert based in the country, told Quartz Africa that he suspects the moves might be intended to protect sellers operating in the formal economy—“those who pay taxes and are recognized by the authorities,” he says. “Big players in the retail sector like the Lebanese, and even e-commerce giants, have complained of the proliferation of online sellers who rob them of valuable customers.”

“They buy from us wholesale and retail online. We already pay taxes. It’s a win-win affair. They should be allowed to prosper.”

But Hassan Kafal, a 47-year-old Lebanese businessman in Abidjan, says a restriction on informal online retail will hurt formal businesses as well.

“Those young boys and girls and housewives are even helping us to sell. They buy from us wholesale and retail online. We already pay taxes. It’s a win-win affair. They should be allowed to prosper,” Kafal says.

Social media platforms have found huge success in Africa, with its young population and growing internet usage. However their growing presence has also led to run-ins with some governments, the latest being Uganda, which banned social media in the aftermath of its recent contested elections. So far, the moves to regulate or restrict the platforms have been a blunt tool which may come at a significant economic cost.

Côte d’Ivoire has struggled to crack down on cybercrime in the country, which explains its focus on the delivery end of the chain. Indeed ARTCI, which regulates the sector, says it is easier to monitor the activities of parcel delivery services than those of thousands of online sellers, most of who use pseudonyms on their respective platforms.

If the regulations don’t work, tighter restrictions may be on the way.

Some shoppers aren’t dissuaded. “I don’t think they would be able to thwart the business,” says Salimata Koné, a regular buyer who enjoys shopping online for everything from makeup kits to shoes. “It’s more convenient than going out to shop under the hot sun. Online sellers would blossom whether they like it or not.”