Digital economy set to change Africa’s story


An attendant makes an M-Pesa transaction for a customer. 

Photo credit: File | Nation Media Group

What you need to know:

  • Driving Africa's digital transformation is a combination of modern innovations in the fields of fintech, e-commerce, telemedicine, edtech, entertainment, transport, food delivery and e-logistics.
  • Since 2000, the number of people with internet access has grown to over 520 million, which is 40 per cent of the population; with 60 per cent of them accessing the internet via mobile phones.

Africa's internet revolution is bolstering its GDP growth even during a period of reduced economic activity caused by the Covid-19 pandemic, thanks to adoption of emerging technologies in the Fourth Industrial Revolution, a new report shows.

The survey, E-conomy Africa 2020 released on November 11 by Google and the International Finance Corporation, estimates that by 2025 the internet economy will contribute Sh19.5 trillion to the continent's GDP, with a projection of Sh77.5 trillion by 2050.

Driving Africa's digital transformation is a combination of modern innovations in the fields of fintech, e-commerce, telemedicine, edtech, entertainment, transport, food delivery and e-logistics.

Since 2000, the number of people with internet access has grown to over 520 million, which is 40 per cent of the population; with 60 per cent of them accessing the internet via mobile phones.

"Increasing internet access to reach 75 per cent of the population could create 44 million jobs. By 2025, 167 million more people from Africa will have subscribed to mobile services, reaching 623 million users, and smartphone connections in the region will more than double," the report says.

In the next decade, research projects that the number of internet users in Africa will grow by 11 per cent, representing 16 per cent of the total global growth.

Mobile money services

Some 144 mobile money services are available across Sub-Saharan Africa, serving more than 469 million registered accounts, with daily transactions amounting to over Sh130 billion by the end of 2019, compared with 298 million registered accounts for traditional bank accounts in 2017, the study states.

Africa has in the past few years seen increased access to faster and better quality Internet connectivity, a rapidly expanding urban population, a growing tech talent pool, a vibrant start-up ecosystem, and more commitment to creating the world's largest single market under the African Continental Free Trade Area, of 1.3 billion people.

"Nineteen of the top 20 fastest-growing countries in the world are in Africa. Urbanisation is on the rise, and an increasingly young and educated population is driving higher consumption of online services," the study says.

Africa, which is home to  700,000 developers and venture capital funding for start-ups, has increased year-on-year for the past five years, with a record Sh205 billion in equity funding raised in 2019, according to Partech Ventures Africa.

"The digital economy can and should change the course of Africa's history. This is an opportune moment to tap into the power of the continent's tech startups for much-needed solutions to increase access to education, healthcare, and finance, and ensure a more resilient recovery, making Africa a world leader in digital innovation and beyond," said Stephanie von Friedeburg, chief operating officer of IFC.

According to Google and IFC, monthly data consumption is forecasted to increase by over 300 per cent by 2024.

"This will lead to a higher demand for faster and more reliable Internet. There has been significant progress in reducing the cost of data over the past few years. Tariffs have dropped from 13.2 percent of average monthly income to 6.8 per cent between 2016 and 2019. As governments continue to implement mandates and the supply of mobile devices continues to grow, Internet access will become more widespread and affordable," the report states.

Inclusive Internet Index

Based on the Inclusive Internet Index, Kenya, South Africa, Tunisia, Morocco, and Nigeria are currently best positioned for thriving internet economies. While the majority of mobile connections in Africa are slower-speed 2G connections, 3G broadband connections are predicted to account for 54 per cent of all connections by 2025, with 4G connections reaching 31 per cent. Fixed broadband has also grown 15 per cent annually since 2015 and is expected to triple by 2023.

The internet revolution has seen the rise of states perceived as war-torn such as Somalia and Sudan, which have ranked incredibly well in the 2020 global mobile data affordability index released by British internet research firm Cable.

The GSMA report of 2019 projects that average mobile data usage in Africa to grow from 1.3 gigabits per person per month to 7.3 GB by 2024.

Of the total GDP for Sub-Saharan Africa in 2018, 8.6 per cent came from mobile technologies and services, translating to 15.6 trillion gain. Nearly 3.5 million people were employed in the mobile sector, and corresponding taxes contributed another Sh1.7 trillion.


But even with such huge potential, Africa still lies at the bottom of the global supply chain, and retains the lowest per capita income, mostly because it was left out during the Third Industrial Revolution of the 1990s, as other continents went big on manufacturing and exports.

Stefan Dercon, professor of economic policy at Blavatnik School of Government at Oxford University, says Africa should work smarter to avoid a similar mistake in Industry 4.0.

"Now is a moment where every developing country has an equal chance to mould its digital future. Governments must show political commitment in delivering transformational plans. The right policy choices must be made," he says.

He adds that African nations must shake off the challenges they face and forge ahead in adoption of new technologies.

"Every country has challenges, for instance, corruption. You must see beyond these hurdles. Don't use this as an excuse. Regulatory sandboxes must be created. The wait-and-see mentality will be costly in ten years' time," warns Prof Dercon.

Digital technologies

Founder of Harare-based technology and energy company Econet, Strive Masiyiwa acknowledges the power of digital technologies in growing businesses and African economies.

However, according to him, to attain inclusive benefit from the new technologies, where all 54 nations walk at the same pace, African governments must design a workable plan.

"Digital tools have enabled entrepreneurs access markets and have also supported governments to deliver services more efficiently to citizens. But without visionary planning and 21st century skills training for everyone, these same technologies over time could lead to job losses and escalate financial inclusion snags," he cautions.

He gives the instance of the global Artificial Intelligence (AI) market which is estimated to be worth over Sh1.8 quadrillion and this money, it emerges, will be split between the United States and China who will take up 70 percent of it.

"Of the remaining 30 percent, the African bloc should strive to get at least 10 percent. Let’s create our own version of Silicon Valley, our own platforms whilst including everyone," he remarks.

Disjointed progress

Prof Bitange Ndemo of University of Nairobi's Business School has similar sentiments, calling for more commitment towards the actualiSation of a trade bloc, to ward off vulnerability to technological manipulation by the developed world, which lies in its disjointed progress in the current revolution.

"Time is running out for the unification of all 55 nations. We need to enhance efforts of strengthening AfCFTA which will be a 1.3 billion people digital single market for Africa to negotiate in the global digital economy. We cannot compete as independent nations, we have to unite so that the world can listen to us," he remarks.

From South Africa to Eritrea, Kenya to Benin, Morocco to Malawi, Egypt to Lesotho, African countries are at different stages of technological adoption, and this disjointed progress could hurt the continent’s dream of a powerful tech market.

AU Commissioner for Trade and Industry, Albert Muchanga recently pledged AU’s commitment in utilizing AfCFTA to foster digital sovereignty through innovation harnessing digital technologies but internet penetration is still way below the global average.

“We have prioritised creating an enabling environment for the digital platforms to adopt the digital transformation strategy. A plan is in place for September 2021 to provide a platform to 150 youth across the continent on a competitive basis to interact with professional tech players and probably have their start-ups funded by the partners,” he noted.

Free trade zone

When AfCFTA was enacted in May 2019, the African Union created the single biggest free trade zone on the planet, containing almost every African country, and it aims to reduce tariffs on 90 per cent of all goods traded.

But to achieve this, Mr Masiyiwa says all African countries need to open up their borders for one another to facilitate free movement of goods, services, capital, and people.

"The continent has 2 billion mobile money users which is a great step in adoption of fintech. But we have to pull together, and speak as one continental voice regarding tech regulation," he says.

Melinda Gates, co-chair of the Bill and Melinda Gates Foundation as well as Pathways Commission, stresses the need for inclusivity in the digital realm, saying glaring gender gaps will hurt Africa's development.

"Today, huge gender gaps in digital access are the norm in developing countries. If we invest in closing these gaps, women and girls can start to meet their untapped potential," she says.

Charles Murito, director of government affairs and public policy for Sub-Saharan Africa at Google Africa calls on governments and the private sector to guarantee cyber security for organizations and the safety of the juvenile internet users in the continent, even as conversations around creating a robust digital economy gain attention.


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