The Digital Transformation Strategy Africa Needs

ADDIS ABABA/PARIS – Many African countries reacted quickly and effectively to mitigate the health and economic risks posed by COVID-19. Less well documented is the agility with which the region’s private and public actors have adapted their digital practices in light of pandemic-related constraints. But the success stories are spectacular.

For example, person-to-person mobile money transfers in Rwanda increased fourfold during the first month of lockdown from mid-March to mid-April 2020, as contactless payments became the “new normal.” To slow transmission of the coronavirus, innovative start-ups developed digital solutions, like remote mobile app DiagnoseMe in Burkina Faso and COVID-19 triage tools in Nigeria. Education ministries in at least 27 African countries set up e-learning platforms for students affected by school closures.

In fact, entrepreneurial and tech-savvy Africans were devising digital responses to the continent’s evolving needs well before the pandemic. They have revamped business models in many sectors, from finance to e-commerce, agriculture, education, and health, and established over 640 active tech hubs across the region.

But these extensive entrepreneurial resources, and the opportunities created by the global digital revolution, will not be enough to fuel the economic transformation envisaged by the African Union’s Agenda 2063. In particular, the magnitude of Africa’s job-creation challenge is such that isolated success stories cannot substantially improve the numbers.

As the number of Africans aged 15-29 with upper secondary or tertiary education rises from 77 million today to a projected 164 million by 2040, the demand for more jobs will keep growing. By itself, the digital sector will be of little help: start-ups typically create few opportunities – usually for highly qualified innovators. The solution lies in the widespread dissemination of digital innovation across the economy as a whole.

Triggering large-scale job creation in Africa therefore requires policies that bring digital solutions to the non-digital economy. Yet, although eight out of ten African countries have digitalization strategies in place, they tend to focus overwhelmingly on the digital sector. In the 2021 edition of Africa’s Development Dynamics – a joint report by the African Union Commission and the OECD Development Centre – we propose four guiding principles to help governments reorient and strengthen their digitalization strategies.

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First, policymakers must promote the dissemination of digital innovation to everyone, not just to those living in large cities. Although 73% of Africans will be living in intermediary cities and rural areas by 2040, today only 35% of those cities are within ten kilometers (6.2 miles) of a high-speed terrestrial fiber-optic network. Likewise, only 25% of the continent’s rural dwellers have internet access, compared with 35% in Asia and 40% in Latin America. Universal access to digital technologies also requires more affordable data across the board. Currently, only 17% of Africa’s population can afford one gigabyte of data each month, compared with 37% in Latin America and the Caribbean and 47% in Asia.

A second priority is to prepare Africa’s workforce to embrace digital transformation. Some 45% of young people believe their skills are inadequate for their jobs. On current trends, self-employed and contributing family workers will account for 65% of the region’s total employment by 2040, compared to 68% in 2020. The emergence of new forms of work in the digital economy will drive much of this growth, and calls for a solid regulatory framework and social protection schemes for all, especially self-employed workers who rely on insecure contractual arrangements with e-platforms.

Third, governments need to help African start-ups as well as small and medium-size enterprises adopt the most effective digital tools to compete and innovate in the digital era. Only 31% of firms in Africa’s formal sector have a website, compared with 39% in Asia and 48% in Latin America and the Caribbean. And only 17% of Africa’s early-stage entrepreneurs expect to create at least six jobs, the lowest percentage of any region.

Lastly, policymakers must coordinate at the regional and continental levels. National digitalization strategies cannot work in silos. Integrating the continent’s digitalized economies in the African Continental Free Trade Area calls for supranational cooperation in areas including digital taxation, data security, privacy standards, cross-border data flows, and interoperability. As of today, only 28 African countries have personal data-protection legislation in place, and just 11 have adopted substantive laws on cybercrime. These countries should share their experiences and lessons learned with the rest of the continent.

Digitalization is well underway in Africa, but scaling up its benefits requires bold and coordinated public policies. With the COVID-19 crisis likely to disrupt the global economy for some time yet, African leaders should focus on implementing critical components of the Digital Transformation Strategy for Africa to navigate the challenges and opportunities ahead.