Unlocking Africa’s Digital Economy – AfDB 2020 Outlook

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  • AfDB: Africa lags behind in terms of global digital trends
  • African digital economy expected to grow to over $300 billion by 2025
  • AfDB: tech education, a must!
  • China’s in-roads in I.T infrastructure development

A sneak peek into the African Development Bank’s (AFDB) 2020 outlook shows that Africa lags behind in terms of global digital trends that require digital infrastructural investment as well as a reinvention of the education system to bridge that gap.

The digital economy in Africa is expected to grow to over $300 billion by 2025 at an annual rate of 40% (McKinsey, 2013), on the back of massive mobile penetration, among other technologies. The President of the African Development Bank, Akinwumi Adesina in 2019 said, “We must grab opportunities, we must democratize technology. Africa should prepare itself. Digital technologies, including Artificial intelligence, big data, analytics, blockchains, 3Dprinting, are already upon us.”

The African I.T space remains hugely untapped, with innumerable business opportunities especially in the Digital space. E-commerce continues to grow across Sub-Saharan Africa as evidenced by Africa’s first Unicorn-Jumia, listing on the New York Stock Exchange in 2019.

At the same time, there are 474 million estimated internet users on the continent, representing a 35.9% internet penetration on the continent (Source: Internet World Stats-www.internetworldstats.com). As such, a plethora of opportunities exist on the continent in servicing the rest of the population through various technological services.

The AfDB report shows that Africa lags far behind in Fourth Industrial Revolution (4IR) technologies, with many countries digitally under-connected. Zimbabwe is on the borderline at just below 30%  for the digitally under-connected countries in Africa.                    

Prior to 2017, South Africa distinguished itself as a trailblazer accounting for nearly 70% of all the robot installations in Africa. Since then, all reported robot installations of more than 100 units have been skewed toward North Africa, roughly 75 percent of them in the Moroccan automotive industry and the others in Egypt and Tunisia (International Federation of Robotics database).

According to the 2020 AfDB report:

“South Africa, while the most advanced country in robotization in Africa, is one of the least prepared countries globally for the age of intelligent automation, with a score of 41 of 100 on the Automation Readiness Index, which assesses policy and strategy in innovation, education, and the labour market.”

“At the same time, the 4IR can create tremendous opportunities for creating jobs in Africa and for leapfrogging development hurdles. A 2018 study for Kenya documented the new jobs created through digitalization, including in response to demand for technology experts to enable the expansion of digital services.”

Africa is projected to experience a population growth of 1.3 billion people by 2050. An estimated 15 to 20 million increasingly well-educated young people are expected to join the African workforce every year for the next three decades. Delivering quality jobs to match in order to fully leverage on the continent’s demographic opportunity is set to be one of Africa’s defining challenges over the coming years.

The World Bank, biannual Taking the Pulse of Africa’s Economy for 2019 report reveals that; across the African continent…digital transformation could increase growth by 1.5 percentage points per year and reduce the poverty headcount by 0.7 percentage points per year.

AfDB’s 2020 outlook report shows that Africa is lagging behind on the knowledge base of technological explorations, demanding a shift in our education systems:

“Digital platforms are also stimulating entrepreneurship and self-employment. To take full advantage of such opportunities for turning technological disruptions into opportunities, African countries need to reimagine their education, employment, and growth strategies in light of the 4IR.”

Not only does AfDB have recommendations, but it is also taking the initiative to try and bridge this gap:

“The African Development Bank, as part of its Jobs for Youth in Africa strategy, launched the Coding for Employment program to nurture a new generation of digitally enabled African youth. The program will support the establishment of 130 innovation centers and the creation of 9 million direct and indirect jobs by 2025. The Coding for Employment Program has identified 14 centers in the pilot countries (Kenya, Nigeria, Rwanda, Senegal) and trained over 2,000 youth (46 percent women) between March and June 2019.”

Investment in tech infrastructure that remains essential on the continent where a gigabyte of data costs an average of 8% of a monthly income in Africa, according to the Alliance for Affordable Internet. That is much higher than in the Americas and Asia. China has partnered with several countries on the continent, spending billions through its “Digital Silk Road Project” in a move to address the infrastructure chasm (despite the security threat).

Africa has also made significant progress where fintech is concerned. There is nowhere else in the world that money moves faster on mobile phones than Sub-Saharan Africa. The region is currently responsible for a mind-blowing 45.6% of mobile money activity in the world—an estimate of at least US$26.8 billion in transaction value in 2018 alone—this figure excludes bank operated solutions.

Evidently so, In November, US payments technology corporation Visa acquired a minority stake in Lagos-based digital payments firm Interswitch Group at a valuation of $1-billion, effectively making the fintech company Africa’s latest unicorn.

Digital tax would also be a part of this matrix. The United Nations Congress on Trade and Development -UNCTAD, notes that the introduction of digital taxes in Africa would derail the gains made on a digital scale thus so far. Mozilla and The African Union Commission (AUC) released a 2019 study examining the misconceptions, challenges and real-life impact of additional taxes on Over the Top Services (OTTs) imposed by governments across the African continent. The study, using Uganda as a template proved that digital taxes resulted in GDP losses of 2.8% in 2018 in Uganda.

With the Africa Continental Free Trade Area (AfCFTA) having been launched in 2019. If every African country joins, it is expected to be one of the world’s largest single markets, accounting for $4 trillion in spending and investment across the 54 countries. This spells value on a digital front that Africa must ready for!

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