Why we need to embrace the digital revolution in Africa

While the Fourth Industrial Revolution brings with it global concerns of deepening inequality, in Africa, new evidence suggests that digitalisation and big data could bring more inclusive growth through real job creation.

According to the latest edition of Africa’s Pulse, the World Bank’s bi-annual analysis of the state of African economies, digital transformation could increase regional economic growth by up to 2% per annum, providing fresh opportunities for inclusive growth through innovation, service delivery and job creation.

Africa has the world’s fastest growing labour force. About 11-million young Africans will enter the labour market annually over the next decade. But with less than one quarter of these expected to secure stable jobs, real growth and new jobs are crucial for the development of the continent and social stability.

Africa has already demonstrated its capacity to harness digital technologies. These have helped the continent leapfrog traditional models of development, and mobile telephony is a great example of this.

From being almost entirely disconnected just 25 years ago, today Africa boasts over a billion SIM connections with an 80% subscription penetration. There are more than 500-million smartphones across the continent, which most Africans use as their primary access to broadband internet as data costs are rapidly decreasing. This has connected Africans around the continent and with the world, and has enabled those who were economically excluded to access a range of facilities from financial services to mapping and healthcare.

Mobile connectivity and data has improved the lives of millions through greater efficiencies, while igniting new areas of economic productivity by awakening dormant opportunities and finding workable solutions to some of the continent’s most daunting challenges.

Despite this, Africa still lags behind other digital economies around the world, with comparatively low access to digital technologies. Some examples from theAfrica’s Pulse report include:

• Eighteen of the 20 least wireless-connected countries in the world are in Africa.
• Twenty-four percent of Africans have access to the internet.
• Seven percentof African households subscribe.d to high-speed internet services.
• While 90% of the households in advanced countries have access to fixed broadband services, the median penetration rate in Africa is just 2%; 16 of 51 countries in Africa have household penetration rates below 1%.
• Fixed broadband subscriptions, essential for larger data needs of growing businesses, sit at just 0.6%.
• Africa’s level of internet bandwidth used represents just 1% of the world’s total.

These statistics indicate a severe infrastructure deficit and the need for deeper investments in the digital economy for Africa to keep pace and avoid falling further behind the international norm. This, along with basic literacy and skills, financial services, platforms and digital entrepreneurship, were outlined by the World Bank report as the five foundational areas that will harness the opportunities of digitalisation in the Fourth Industrial Revolution.

Key aspects to these five foundations include:

• Available and affordable internet that allows people to connect to the digital world.
• Digital identification (ID): it is estimated that 29% of adults in Sub-Saharan Africa have no way to identify themselves, limiting their access to essential governmental and financial services.
• Harmonising regional frameworks (such as payment systems, data privacy, cyber-security, cross-border data flows, and consumer protection) to drive regional integration and economies of scale.
• Governments must play an active role in designing and implementing data policy frameworks, competition policy, anti-trust policies, and labour protection.
• Investments in physical infrastructure, e-government and digital financial services.
• There must be access to affordable digital financial services to allow individuals and businesses to participate in the digital economy.
• Digital entrepreneurship and innovation ecosystems must be fostered so that existing businesses can be transformed to offer new products and services. These must contribute to employment growth and skills development, and enhance the competitiveness and productivity of economies.
• Investments in digital literacy and skills training are essential for building robust digital economies and competitive markets. The report emphasises the need for advanced digital skills to create “local content and drive made-in-Africa solutions to ensure an inclusive digital economy, in which Africa is not only on the consumer side of the digital revolution but also plays an important role in producing technology.” Afro-innovations come to mind here.

According to the World Bank, 90% of all jobs in developing countries are created by the private sector. Entrepreneurship and the growth of small- and medium-sized enterprises (SMEs) are key to future employment. African governments can contribute by creating a vibrant business environment conducive to growing digital economies that allow small businesses to scale well beyond their immediate borders.

The full economic potential of digital technologies cannot benefit only a small elite if they are to have a real and lasting impact on Africa’s development. The continent has two options: harness the opportunities presented by the digital revolution to foster new opportunities through connectedness and greater economic inclusion; or run the risk of isolation, widening inequalities and market stagnation.

The World Bank plans to invest $25bn in Africa’s digital transformation over the next decade. It hopes to match this with $25bn more from the private sector. This investment is based on the belief that Africa is pivotal to the future of global development, when we will witness a collision of demographics and technology, and where the role of data and digitalisation will be key to a positive outcome.

However, technology, innovation and entrepreneurs are not enough. African governments must act now to support these changes and the players driving the new world of work and business toward inclusive growth and digitalised job creation.

• Prof White is the senior director of the Johannesburg Business School at the University of Johannesburg. Liezl Rees is the head of the Centre for African Business at JBS.