Why the time is right for Africa to harness the power of digital transformation

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Africa needs digital transformation. To create an integrated and inclusive digital society and economy in Africa that transforms communities, economies, and the lives of its citizens, it must harness digital technologies and innovation.

Africa presents a sea of economic opportunities in virtually every sector, and the continent’s youthful population structure is an enormous opportunity in this digital era and hence the need for Africa to make digitally-enabled socio-economic development a high priority. Digital transformation is a driving force for innovative, inclusive and sustainable growth. Innovations and digitalisation are stimulating job creation and contributing to addressing poverty, reducing inequality, facilitating the delivery of goods and services, and contributing to the achievement of the UN’s Sustainable Development Goals (“SDGs”). Furthermore, Africa has fewer legacy challenges to deal with and so can adopt digitised solutions faster.

“For Africa, the current moment offers a leapfrogging opportunity. The World Mobile mission to connect the unconnected with high-speed broadband is a crucial part of this, breaking the digital divide and ensuring Africa’s ownership of the modern tools of a digital economy.”

The importance of digital infrastructure

Digital infrastructure facilitates the development, provisioning, use and sharing of digital systems (products and services). These include fixed and wireless telecommunications networks, including broadband and high-speed networks; terrestrial optic fibre networks, fibre over power lines, submarine cables, satellite communication, mobile communication, IXPs; data centres; digital and smart devices.

Affordable, accessible, and reliable digital infrastructure is the foundation to achieve an inclusive digital transformation. Several studies demonstrate that high-speed broadband penetration and broadband quality are key factors for economic growth.

“According to a World Bank study, it is estimated that every 10% increase in broadband penetration in low and middle-income countries results in a proportional increase of 1.38% of the GDP.”

Other studies also show a positive economic impact, both directly through jobs created by deploying broadband infrastructure and indirectly as a result of ‘spill-over’ externalities, such as increased productivity and accelerated innovation creating new products and services.

This all shows the need to expand national broadband coverage and access. Also required is a conducive regulatory environment and the provision of digital platforms that will serve as a layer on which multiple public and private sector organizations can build new or better services and solutions. Currently, Internet penetration in Africa is estimated to be only 36% leaving many hundreds of millions of people offline. It is increasingly “things” rather than just people who need to be connected (the Internet of Things includes sensors, voice-activated devices, geospatial instruments, machine-to-machine communications, vehicle to vehicle communications, etc.). Furthermore, the intelligence of the network and digital systems resides in the cloud rather than in the devices themselves, necessitating ubiquitous connectivity. Therefore, to harness the benefits or dividends from digital transformation, abundant, low-cost Internet connectivity is essential.

Digital platforms are also a crucial element of digital infrastructure. They can serve people, businesses, and government agencies in all aspects of life, including healthcare, education, commerce, transportation, and public benefits. Users can access their monthly pensions, securely log in to a government e-services portal, pay their utility bills, submit a complaint, access public information, or find a person to rent their car or motorbike. These platforms can provide a seamless service delivery experience that increases user convenience, savings, and agency.

For governments, digital platforms can increase the efficiency and effectiveness of core functions and services, reduce unnecessary duplication of systems, combat fraud and corruption by increasing the security and traceability of transactions, and improve civic engagement and accountability. For businesses, commercial platforms are an efficient mechanism to help firms, especially small and medium-sized enterprises (SMEs), expand access to markets, exchange goods and services and tap into underutilized assets and human resources, potentially leading to more and better jobs in the economy.

“Nearly 300 million Africans live more than 50 km from a fibre or cable broadband connection; hence the lack of widespread availability of high-speed broadband Internet remains a significant hurdle for Africa to harness the full potential of digital transformation.”

Mobile devices remain the primary way by which people access the Internet today, as dedicated Internet connections to homes and offices (such as with fibre-to-the-premise) are mostly absent, except in some capital cities. Dependence on mobile rather than fixed-line broadband means unmetered pricing, or unlimited data use, which is not very common in Africa. Thus, bringing coverage and access to mobile broadband Internet connectivity and reducing the cost of connections remain critical obstacles to digital transformation that World Mobile is directly addressing.

The benefits of digital transformation in Africa:

1 - eCommerce

While digital trade represents a multi-trillion-dollar market globally, Africa currently claims only a small slice of eCommerce revenues. Nevertheless, digital trade in Africa is rapidly growing and McKinsey has projected that the value of eCommerce there will reach US $300billion by 2025 from US $8billion in 2013.

New digital technologies give access to previously closed markets and remove distortions in demand by giving customers direct access to products previously controlled. Rapid technological developments have created new markets that now connect consumers, lower transaction costs, and reduce information asymmetry. For cross-border trade, there is the opportunity to export a greater number and diversity of goods to a larger pool of countries.

“Despite the opportunities, there are several limitations that African countries continue to face, some of which relate to the current digital infrastructure and technological gap.”

Increasing digital infrastructure and deploying the right policies for eCommerce will enable both the large informal sector and enterprises to come to the global market, receive payment and make purchases with international buyers, thus increasing the scale of their activities beyond the local market.

2 - Digital Financial Services (DFS)

Digital Financial Services (DFS) is also another sector that needs to be further tapped into, providing users with the flexibility to do financial transactions and banking online and on the go. It’s also a means to settle trade payments, digitise government transactions through central banks, and move from traditional paper-based banking to digitised and automated systems that are more efficient, easier to track and monitor, and quicker to access.

The link between financial inclusion and development is well recognised, and that financial inclusion can play a significant role in attaining many of the SDGs.

“The use of financial technology, in particular mobile money, is becoming increasingly widespread in several African countries. For example, Kenya is ranked 26th worldwide in the Digital Financial Inclusion Rankings, and Africa uses more mobile banking than the sum of all other developing regions.”

Mobile financial services are becoming an important component of Africa’s financial services landscape, from payments and current accounts to savings, loans, investment, and insurance. So, the DFS market in Africa looks very promising.

3 - Education

The introduction of technology in education in Africa has not generally been successful at scale. There have been many promising pilots, but scaling up has run up against implementation challenges, including technical barriers, policy and regulatory constraints, and capacity to manage the integration of technology.

Connecting Africa’s universities, skills-training institutions, and secondary schools with broadband Internet is essential if the continent is to realise the potential of digital technologies in education. Further, all young people need to acquire digital skills at the basic and intermediate levels if they are to use technology. Integrating digital skills training into the core curriculum of formal education courses for all learners, irrespective of their specialisation, is essential.

4 - Digital Health

A digitally enabled health system is expected to contribute to Sustainable Development Goal 3, which aims to ensure good health and wellbeing for all, at all ages.

“Universal access to affordable high-speed broadband communications technology promises to assist the health system in providing higher quality and more patient-focused care, especially in rural and remote areas.”

This means giving health workers access to tools that allow them to do more, make better decisions, and draw on resources previously only available in major urban centres. It also promises to put patients firmly in control of their own health data and contribute to improved security of this data.

While there has been progress on digital health in Africa, substantial barriers remain because the foundation elements have not been adequately addressed. Barriers to scaling up digital health interventions include weak infrastructure and device access (including reliable electricity and affordable high-speed broadband Internet connectivity, especially in rural areas), a lack of sufficient and consistent funding for digital health programs, and limited human resource capacity and digital skills.

5 - Agriculture

According to the Food and Agriculture Organization of the United Nations, Africa is projected to be home to about 2 billion people by 2050. This population increase adds to the mounting demand for food and soaring food prices. Therefore, farm productivity must accelerate at a faster rate than the global average to avoid continued mass hunger. Obviously, sustainable solutions for decent employment in agriculture in Africa must address the intertwined issues of minimizing drudgery while maximizing returns to effort. This could be achieved through harnessing opportunities in agribusiness entrepreneurship and innovations to enhance productivity and competitiveness.

Considering agriculture as an essential driver of economic development and an area of great opportunities for people in Africa, harnessing opportunities in agribusiness entrepreneurship and innovations, including in ICT innovations, along the value chain, will contribute to improving the sector’s image. It will also increase productivity and returns to investment, providing new employment opportunities, and attracting more young people. Access to cheaper and more reliable ICT devices, particularly mobile phones, and increased broadband Internet connectivity is a prerequisite.

Digital technology opens vast untapped potential for farmers, investors, and entrepreneurs to improve the efficiency of food production and consumption in Africa. Technology could bring major economic, social, and environmental benefits from precision farming to an efficient food supply chain.

“It’s possible that extreme hunger could be sharply reduced in Africa in this generation by significantly transforming the industry that employs most of its citizens.”

Three characteristics of Africa’s food system make it well-suited to benefit from digital technologies. First, the food system is large and complex, with many dispersed actors. Digital technology has the potential to connect Africa’s hundreds of millions of rural inhabitants, many of them farmers, with the emerging trillion-dollar African food market. It would connect upstream input suppliers — whether suppliers of seed, machinery, fertiliser, finance or advisory services — with farms and farm enterprises. It would also link food buyers and sellers more efficiently, both within countries and across borders.

Second, vast inefficiencies in resource use and marketing represent an opportunity for digital technologies to transform African farming. Food production is risky due, in part, to limited information about weather patterns, soil characteristics, future market demand, and other variables.

Third, Africa’s food system is characterised by inequalities in access to technologies, information, and markets that digital innovations can help to overcome. Even in poorly connected rural contexts, sophisticated offline digital agricultural technologies can provide opportunities to help illiterate farmers. Digital agricultural information platforms or mobile finance solutions can level the playing field for marginalised groups, such as women, who traditionally have lower access to information and markets. Farmer identification programs can help to target vulnerable farmers with support services better.

6 - Digital ID

Digital ID or the digitalisation of identity is the unique identification of individuals through a digital channel. The benefits of digital ID cover not just the entire spectrum of the social and economic domains but also human rights. Digital ID forms a key mechanism for furthering the United Nations concept of “legal identity for all” and supports the attainment of the SDGs (Sustainable Development Goals).

Digital ID can form the basis of a foundational ID as part of civil registration. Other functional elements such as national ID, refugee ID, non-resident ID, etc., can then be “stacked” or built onto this. By digitalising ID and, in particular, using biometrics (fingerprint, iris, facial recognition, etc.) stored in a secure, trusted, immutable way, such as with blockchain, gives people the ability to positively and uniquely identify themselves. It also allows them to control who has access to their identity credentials in a way that paper-based identification cannot achieve.

Many of Africa’s citizens have no legal means of identification. Comprehensive civil registration forms the basis of a well-functioning Civil Registration and Vital Statistics (CRVS) system. However, many of the civil registration and identification systems in African countries are fragmented and under-resourced.

“This has led to the current situation where about 542 million people in Africa do not have a foundational identification and are therefore ‘invisible’. Of this number, around 95 million children under five have never had their births recorded, and 120 million children do not have a birth certificate.”

This lack of identities implies that about half of the continent’s population are not only disempowered from meaningfully participating in the productive process to generate economic growth but are also inhibited from accessing various services to improve their well-being.

Citizens who do not have legal identity have difficulty asserting their rights, including their rights of citizenship. Legal identity can spur innovation and entrepreneurship by reducing transaction cost and enhancing the traceability of products. Legal identity can also strengthen the capacity of state institutions and their ability to deliver essential social services to the citizenry.

The rapid modernisation and urbanisation of African societies and the increased sophistication of commercial transactions escalates the need for legal identity. ID is required to obtain health services, tax certificates, travel documents, open bank accounts, exercise franchise, establish credit, etc. Further, conflicts in Africa have resulted in the internal displacement of large numbers of people, all of whom need humanitarian assistance. Without legal identity, it has been difficult to deliver this to them or to repatriate them to their communities/countries following the cessation of hostilities.

In a recent study, nearly one in five people without a bank account identified the reason as the lack of necessary identification documents. In low-income countries, women disproportionately lack identification, which contributes to their higher levels of exclusion. For example, 45 percent of women over 15 lack identification in low-income countries, compared with only 30 percent of men.

Several African countries are taking advantage of rapid advances in digital technology to establish national digital ID platforms or systems, a vital component of the digital economy. Without this, full participation in Africa’s emerging digital economy will be impossible.

“The drive for digital ID is in recognition of the fact that the economy in Africa must evolve or even transform to achieve sustainable, inclusive growth. Therefore, digitalisation is a key enabler, which would allow African citizens to participate in the digital economy, and especially empower women and the excluded.”

The infrastructure for digital ID exists and is growing. This includes coverage of and affordable access to the Internet, digital security, biometric technology, smart devices, and Cloud services. The trend in each of these areas is for improved service and performance at a lower cost. The foundational digital infrastructure that supports digital ID is continuously growing in reach and dropping in cost. However, after almost 25 years of ICT development on the continent, ICT readiness (infrastructure & access) is still low for many African countries, with only seven countries in Africa having “affordable Internet.” All these improvements mean the technology needed for digital ID is not only available now but is more affordable than ever. This situation makes it possible for African countries to leapfrog paper-based approaches to identification.

Finally, digital ID and the digital economy thrive on trust. Data privacy breaches, cyber-attacks, and cyber-fraud are rising worldwide, impacting productivity, revenue, and client trust in the digital economy. While digital ID is designed to mitigate the low levels of confidence in the digital economy (and eCommerce in particular), a high level of trust is equally required for digital ID systems to succeed, i.e., in the ID issuing authority, in the design of the ID, and in the technology. Therefore,

“African countries must have adequate regulation, particularly around data governance and digital platforms, to ensure that trust is preserved in the digitisation process.”

Connecting the unconnected needs to happen now

The advantages of digital transformation are immense. An inclusive digital economy will vastly improve the quality of African lives in areas including eCommerce, DFS, eEducation, digital health, eAgriculture and digital ID. But without affordable, accessible and reliable digital infrastructure, this simply will not happen. The tens of millions of Africans who do not currently have access to the Internet must be connected. Using high-speed and high-quality connections, and providing foundational infrastructure and platforms for digital ID and other digital services, World Mobile will help Africa achieve its goal of an inclusive and integrated digital economy.

Andrew Bartley
Andrew is a World Mobile Advisor with an impressive background in telecoms and technology, including serving as Chief Investment Officer at the International Finance Corp, which has a US $70+B portfolio in nearly 2000 companies across 100+ countries. Since receiving his MBA from Northwest University Kellogg School of Management, Andrew has managed over US $10B of financings and is the Board Director for various TMT and infrastructure businesses.