2020 was a transformational year in many respects, with the Covid-19 pandemic leading to large-scale behavioural changes that affected much of our day-to-day lives. One of the most profound evolutions has been the pivot to online consumption, with economic lockdowns and social distancing measures forcing customers to shop differently, creating new habits and accelerating society’s transition from offline to online. 
Be it the growth in athletic wear, the rise of the home office or the rapid increase in gaming, the mechanism for how we consume has evolved rapidly. For some members of society, this meant increased online shopping, whilst others, such as the older cohorts, began to explore the use ecommerce platforms for the very first time. The creation of new platforms not only improved consumer choice and flexibility, but also empowered businesses of all sizes to widen their scope several years ahead of what most thought possible before the pandemic.
The transformations within emerging Europe, the Middle East and Africa (EM EMEA) have been no exception, with growing ecommerce penetration rates attracting the necessary capital to build the infrastructure required to satisfy the demand created by the pandemic. As the number of consumers using digital ecommerce platforms continues to grow, we are observing the number of goods and services available online continue to gather pace. These shopping patterns have helped form long-term habits that we believe will persist even as normality resumes, with consumers rapidly adapting to having the convenience at their fingertips, while the ease of payment and delivery has built trust in the mechanism in which the average citizen consumes goods and services.
Within EM EMEA, companies who have created an ecosystem that enhance the experience of consumption by offering convenience through ease of payment and delivery are at the nascent stages of a long term growth story which sits at the foundations of a future digitized society.
For example, Sberbank, the largest bank on the European continent, is transforming its business model away from traditional financial products towards being a modern financial platform, that aims to help customers bank digitally from anywhere in the world.
TCS is another example, the first fully online bank in Russia that has been one of the most successful fintech companies across EM EMEA over the past 10 years. The company’s online financial ecosystem offers a vast array of products – ranging from traditional banking and lending services to retail investing.
Outside of the financials sector, Yandex is another example, the largest Russian internet search engine and largest taxi aggregator has now entered the very competitive ecommerce space.
Ecommerce has become a very broad term covering a vast array of products and services, from horizontal platforms that sell multiple products to companies offering food delivery or taxi services.
Whilst Amazon is the household name amongst ecommerce platforms, there are home grown champions such as Allegro in Poland or Ozon in Russia that are increasingly competing to replicate the US consumer giant’s services in their domestic markets.
Uniquely, EM EMEA contains particular nuances afforded by the breadth of its cultural diversity, and geography. For example, food delivery in the Middle East has been a part of society for years, but only recently has become digitalised, whereas in eastern Europe, services are at an earlier stage of adoption, owing to deliveries limited by challenging weather patterns and lower adoption of online payments. Despite this, we have seen food delivery sales grow by over 100 per cent in 2020, with little signs of this slowing down. One common advantage across the region is the compelling economics, where a combination of higher GDP per capita and lower marketing and wages allow these services to grow at an accelerated rate.
A prime example is food delivery company Delivery Hero, who have been able to generate the highest margins across their Middle Eastern operations, demonstrating the strength of the business model.
Another enduring impact of the pandemic is the commitment to a more environmentally friendly world. While we see an increased demand for electric vehicles as the most common instance of shifting consumption patterns, what is perhaps more pertinent for investors when looking ahead is the access to commodities that will support the move to a greener society.
For example, nickel, which is an important component of battery technology, or natural gas, which will serve as a transition fuel between crude and green energy. Copper is another example, which will be needed for years to come due to its conductivity attributes. Similarly, platinum group metals (PGMs) enjoy demand drivers in the short and medium term with tightening emission standards for vehicles while hydrogen technology could prove to be a demand driver in the long run. South African mining group Anglo American, a key name within the EM EMEA universe, has compelling exposure to both.
What our society will look like beyond the pandemic is yet to be determined but the path of change is becoming clearer. As lockdowns begin to lift, it is our belief that consumption habits formed during the pandemic will endure, while the push for a greener world puts greater emphasis on next generation commodities and the opportunities this provides.
Adnan El-Araby is a co-portfolio manager at Barings Emerging EMEA Opportunities trust. The views expressed above are his own and should not be taken as investment advice.