The economic prosperity that lies untapped in Africa can only be harnessed through the adoption of the digital economy. There are two things involved. There is an increasingly digitised global economy where it is predicted by the World Economic Forum that 70% of the new value created over the coming decade will be based on digitally-enabled platform business models and then there is Africa, a continent that is erroneously referred to as one country by some westerners whose togetherness and collaboration has the power to reduce a continental-wide poverty less than 30 million people. By 2025, an IFC report estimated that digital businesses could add $180 billion to the continent’s GDP.
What does the digital economy have to offer? Is this real change or is it just talk and what is the digital economy?
The digital economy is the future. It consists not just of startups, venture capital and mobile financing. It is global trade through more digitised means, the reduction of fuel emissions due to smarter cars and gadgets using the Internet of Things (IoT). It is the massive reduction in malaria cases due to more efficient healthcare that uses technology to innovate and attract body and mental prosperity. A digital economy penetrates all aspects of society and forms sectors that the world revolves by i.e health tech, fintech, prop tech, legal tech, e-commerce: E-business, agri tech, ed tech, IoT and so on. The digital economy is the mother of innovation in these sectors which births economic prosperity.
This article will share the pillars of a digital economy, the journey so far in Africa and considers what may be missing to harness the benefits that lie in this future.
The Pillars of a digital economy
- Digital Education and skills
By fostering digital skills through education and training, individuals acquire the necessary competencies to thrive in the digital landscape. Ethical considerations play a vital role in the digital workforce, ensuring responsible decision-making regarding privacy, data security, algorithmic biases, and emerging technologies. Integrating socio-cultural values into digital education promotes inclusivity, diversity, and equitable access to opportunities.
An ethically conscious and culturally sensitive digital workforce contributes to sustainable and responsible innovation. Long-term benefits include the development of trustworthy digital products and services aligned with societal needs. By bridging the digital divide, a digitally skilled workforce reduces inequalities and promotes broader access to the digital economy.
- Digital financial services
According to the World Bank Global Findex report, 65% of the adult population in the poorest developing countries still lack access to a formal bank account, and only 20% use a formal financial institution to save. Digital financial services are important because most of the world’s conversations and creations are for a better use and flow of money. Digital financial inclusion as a basis of a digital economy is also important because it removes geographical and market barrier.
- Digital Infrastructure
Digital services can be fully harnessed by leveraging the vital input of digital infrastructure, enabling individuals as well as the private sector and public sector to come online. Digital infrastructure encompasses several key components, including high-speed internet and internet exchange points for connectivity, mobile devices, computers, sensors, voice-activated devices. Geospatial instruments, machine-to-machine communications, and vehicle-to-vehicle communications for the IoT, as well as data centres and cloud platforms for data storage. Ensuring users have access to reliable and meaningful connectivity plays a pivotal role in fostering the flourishing of the digital economy.
- Digital business and innovative entrepreneurship
A dynamic entrepreneurial ecosystem fosters an environment where innovation thrives, promoting a culture of risk-taking, experimentation, and continuous learning. The achievements of locally grown firms not only fuel economic growth and job creation but also position the nation as a prominent centre for digital innovation and entrepreneurship. By cultivating an ecosystem that nourishes innovation-driven entrepreneurship, countries can position themselves as leaders in the ongoing digital transformation and enjoy the advantages of a flourishing digital economy. innovation-driven entrepreneurship, supported by a nurturing ecosystem, plays a pivotal role in the digital economy. Local firms that excel in producing top-notch products and services stimulate economic growth, boost competitiveness, and establish the nation’s reputation as a vibrant hub of digital innovation.
- Digital government
Digital Government involves the use of digital services and platforms to enhance the delivery of public services. It enables governments to streamline administrative processes, improve citizen engagement, and increase operational efficiency. By leveraging digital platforms, governments can offer convenient and accessible services to citizens.
Online portals, mobile applications, and digital communication channels allow citizens to access government information, submit applications, make payments, and interact with public agencies more efficiently. Digital Government initiatives promote transparency and accountability by providing real-time access to information, public records, and data. This fosters trust and allows for better public scrutiny. These initiatives also enable data-driven decision-making within the government. By collecting and analysing data, policymakers can gain valuable insights into citizens’ needs and preferences, facilitating more informed policy decisions.
The Journey so far in Africa and way forward
Africa is a continent that consists of 54 countries all of which are approaching the digital economy mandate in different ways and different paces. Flowing from the pillars discussed above, we will analyse how countries are approaching these pillars.
The need for this journey became emphasised after the Covid19 pandemic but before that, we have had lots of companies building a more digitised economy. The big four (Flutterwave, Interswitch and Fawry in Fintech and Jumia in e-commerce) are the first startups in Africa to hit $1 billion dollars in valuation making them unicorns. Three of these companies are from Nigeria and one from Egypt. This has largely made Nigeria a leading country in the digital economy mandate and has seen it attract more funding than any other country in Africa.
It is important to note that until recently, countries were not setting out intentionally to contribute to and build a digital economy. This blueprint started from the drive of the private sector. It originated from founders, investors and builders who were passionate about creating innovative products that solve problems of their local economy. This triggered the rest of the economy being aware that a new way of life was springing up including the government.
Now, these companies mentioned above became unicorns because they disrupted the normal flow of service. The fintechs like Flutterwave, drew business away from the regular providers and made things more convenient for consumers.
After these unicorns, we began to see companies across all sectors springing up solving different problems. In health tech, we have companies like Medikea which gives medical consultations from the comfort of the home and Redbird, a Ghanaian startup for patients and healthcare professionals to properly track and manage illnesses, especially chronic ones. In Agritech, there is Farmcrowdy whose business model leverages technology to connect stakeholders with easy access to aggregate farm produce, inputs, and processed food and in fintech, M-Pesa, a Kenyan electronic mobile money service established in 2007 that helps in financial and economic inclusion by enabling the poor people have access to finances through transfers and remittances.
With the private sector consisting of founders and investors taking the initiative to build for the economy, we must implement the digital government. As mentioned above this is the use of digital services to enhance public services. The African governments can adopt the posture of Estonia which implemented the digital government framework through two major concepts. The first was the mandatory use of a digital identity card to recognise individuals within the country; hence linking the digital and physical worlds. This was also adopted by Estonian banks with a mandate to have a digital identity card before any citizen can access their services. Estonia also went ahead to create the X-Road, a data management infrastructure that places all data in the same place. Through their digital government blueprints, elections are conducted online, information is now recorded online, and every sector can easily collaborate to bring useful services to the people. This is a digital economy. This is ICT.
Following this, it is important to note that the full shift from paper to e-identity plays a major role in the adoption of a digital economy. This also includes the full support of the information shift from paper records to digital forms. The emerging technologies have a lesser effect when the basic infrastructure is paper, when more people are offline than online, when the internet is not cheap and when there are still heavy taxes on telecom companies laying fibre optics across the country. Today, Osun state, a southwestern state in Nigeria, has waived its right-of-way fees, allowing telecom companies and internet providers to lay fibre optic cables for free. There is no reason why countries across Africa should not adopt similar progressive strategies.
At the other side of the spectrum is digital skills and education for its citizens. This might be quite straightforward. In order to adopt the blockchain as a means of identity and data management system, the citizens must understand why and how this technology works. After the government legalises many technologies, it must provide a platform for its citizens to learn and actively engage their minds to understand such technology. Beyond the surface education, they need skills to navigate a digital economy. Taking the instance from Estonia, the citizens are educated on their privacy rights. They know that they have a full right to privacy and in each case that they do away with their rights, they understand the ethical standards that must be met.
A startup bill has been passed in Tunisia, Senegal, Nigeria, Congo, and more countries like Rwanda, Ghana, Kenya, Ethiopia and Uganda in the pipeline. These Acts foster an environment of risk-taking and disruptive entrepreneurship.
We also have the General Delegation for Rapid Entrepreneurship (DER) fund introduced by the Senegalese government in 2018. The DER fund, with a budget of US $50 million, has played a pivotal role in supporting various financial initiatives within the country. These initiatives include small financing, incubation funding, equity financing, and low-interest loans.
One significant outcome of the DER fund has been the substantial boost it has provided to entrepreneurship in Senegal, particularly for women and youth, resulting in expanded employment opportunities. The primary objective of the fund is to promote innovation in Senegal by encouraging forward-thinking among creators and investing in financial inclusion as well as small and medium-sized enterprises. Notably, the DER fund adopts a hybrid public-private model, encompassing a range of activities essential for nurturing an innovation-driven economy. According to Senegalese officials, this project holds the potential to empower women, young individuals, and other marginalised groups, promoting their active participation in entrepreneurship driven by innovation. The overarching goal is to foster inclusive economic growth and create a conducive environment for diverse and underrepresented groups to thrive in the realm of innovation-driven entrepreneurship.
If the DER fund achieves its objectives, it can serve as a compass for other African countries to develop similar programs that can impact positively on the digital economy.
Africa can collaboratively adapt the digital economy blueprint and achieve a digital market, digital trade and innovative problem-solving. This depends largely on the six pillars and a collaborative effort to adopt those pillars.
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