HARNESSING DIGITAL INNOVATION TO ADVANCE AFRICA’S TRADE

The WTO working session “Harnessing Technology and Digital Innovation to Advance Africa’s Trade and Sustainable Development Agenda” held Friday 30th September as part of the WTO Public Forum 2022. Chaired by Gbemisola Osadua, Lead Advisor of DIA, the session explored the potential of digital innovation and how technology could be harnessed to promote trade in the African region, accelerate sustainable economic recovery, and build back better on the continent. My talking points from the session are shared in this article.

Introduction

Digital economies are increasingly growing faster than overall economies, providing greater employment opportunities and innovative services. The adoption of digital technology is also directly linked to boosting productivity and poverty alleviation. A 2018 study by the International Telecommunication Union showed that a 10% increase in mobile broadband penetration would likely result in a 2.5% increase in GDP in low-income economies in West, East, Central, and Southern Africa (WECS).

My Vision for Digital Africa

Spurred by the COVID-19 pandemic and an influx of talent, Africa’s digital economy is rapidly expanding. My vision for Africa’s 1.4 billion people today, projected to jump to 2.5 billion by 2050, is that all Africans are using advanced technology to solve the continent’s biggest challenges such as productive jobs, and access to basic services such as healthcare, and education. All Africans have access to quality jobs, better healthcare, and skilled-based education. That technology is regarded as an aid to create pathways for government, business, regulators, NGOs and general populations to close the gaps. An Africa where technology is being used as a bridge to growth and prosperity by and through entrepreneurship, including women who are Africa’s future. Technology and human beings co-exist in a mutually beneficial ecosystem.

African entrepreneurs harnessing technology and digital innovation

Let me share a few examples of African entrepreneurs who are harnessing technology and digital innovation to advance Africa’s social and economic growth:

Wazima Healthcare Digital Platform which is providing solutions for non-communicable diseases on the continent;
Mamamoni connecting low-income women to inclusive financial services;
Mustard Venture Agency on a mission to build better products, better brands and better perceptions originating Africa focussed tech ventures capable of resonating with global audiences;
HelpMumwho are dedicated to the reduction of maternal and infant mortality in Nigeria via mobile healthcare technology.

Let me share some statistics

Across the African continent, entrepreneurs are already harnessing technology and digital innovation to advance Africa’s trade and sustainable development agenda. Infrastructure is also increasingly being made available to support Africa’s digital advancement.

In terms of internet penetration, in 2017, while only 22% of people in Africa reported having internet access, but by the end of 2019, there were 526 million broadband connections in Africa. Today, Africa’s average broadband penetration is around 39%.

In terms of sectors, Africa’s digital technology sector growth has been mainly concentrated in its financial services. In 2018, almost half of all mobile money accounts worldwide were located on the continent. By the end of 2019, mobile technology and services had contributed $144 billion in economic value and $15.6 billion in taxation contributions in WECS Africa.

Country-Specific Statistics on Digital Trade

Digital trade is transforming economies in some of the most active countries on the continent.

Rwanda, which in 2020 was ranked first among East African countries in readiness to use technology for growth, has seen the fastest growth in technology services. The subsector has driven growth in other sectors, especially through mobile phone penetration, despite only contributing to around 1.4% of the country’s GDP in 2019.
South Africa is a leading country for internet usage in Africa (over 54%) and is the continent’s most inclusive internet economy, with the highest numbers of internet usage, mobile penetration, and broadband usage on the continent. The country has seen its ICT sector contribute to around 3% of its GDP and 17% of its service exports as of December 2019. E-commerce markets also are major sources of employment, employing an estimated 1.3 million workers and generating revenue of around US$3 billion in 2019.
Nigeria has the largest population on the continent, but an overall internet usage of 27.7% according to the 2018 International Telecommunications Union (ITU) survey. It is Africa’s largest internet economy because of its population and has the most tech companies under classified sectors. In 2018, ICT generated 9.65% of Nigeria’s GDP, and as of 2019, Lagos’ ICT services cluster was valued at around $2 billion.
In Kenya, about 46% of people had access to broadband internet by late 2018, and 83% had financial accounts in 2019 due to the popularity of mobile financial services. Kenya sees the largest GDP contribution from its internet economy (at around 8%) than other countries in Africa, leading in digital payment and the highest banking penetration among WECS African countries.
Egypt’s internet economy is a high-value-add sector and one of the most diverse on the continent based on business classification and ownership, with tech companies more evenly distributed (fintech tends to be major players in other African internet economies). The Egyptian government has also made significant efforts to digitise its services and platforms, emerging in the high-performing group in the United Nations E-Government Development Index (EGDI) as of 2020. This digital adoption in the public sector supports the use of quality data for government decisions and policy making which improves public service delivery. It also builds infrastructure and an enabling environment to encourage the adoption of digital technology by the private sector.

Africa’s Technology-Driven Sectors

The key sectors using technology for digital trade on the continent include:

Financial services are worth over $165 billion in Africa, and mobile payment systems are a valuable means of bridging the “last mile”, often with better coverage than traditional banking services. Fintechs are connecting countries across Africa by providing aggregated payment methods and are going beyond routine transaction services to provide savings, insurance, investment, and lending options for clients.
The agricultural sector, which is an important contributor to African economies despite often being done on a small scale, has been (and continues to be) disrupted by digital innovation through services and platforms that provide smallholder farmers with information and market access, as well as using emerging Internet of Things technology to provide precision farming techniques and increase productivity.
In 2017, e-commerce was estimated to draw around 21 million online shoppers on the continent. A third of commercial activity in Africa is informal. Retail in Africa is mainly composed of medium-and-small-scale enterprises, mostly manual and offline, informal, unregistered, and working on various aspects of uncoordinated value chains. These gaps provide avenues for technology companies to digitise a range of processes and systems to transform the sector, from financial services to business management tools and centralised value chains.
In the health sector, digital channels are providing an avenue for medical service delivery by aggregating healthcare facilities, collecting and analyzing data, designing hospital management service systems, and establishing platforms for electronic medical records, and patient billing and payments. The health sector in WECS African countries is mostly privately funded, with total annual health expenditure reaching around $90 billion, but a lack of access to healthcare services and limited data availability all present challenges that make the sector poised for technology-driven disruption.
Other sectors being propped up by digitalization in Africa are the transportation sector, where problems such as informal operations and market fragmentation are being addressed by ride-hailing services, digital logistics services, and relevant business management services, and the education sector, where edTech companies are creating online tutoring services and learning platforms.

Investment in Technology and Digital Trade in Africa

Individual government economies are making efforts to increase investments in digital trade. For example:

The Rwandan government has been involved in supporting local entrepreneurship ecosystems through the development of infrastructure such as Kigali Innovation City.
In 2019 and 2020, Egypt made investments worth US$1.6 billion in its technology sector and enforced 55 laws and regulations for issues such as cyberspace safety, intellectual property rights, and data protection.
In 2019, the South African government launched a ZAR1.4 billion SA SME Fund, a public-private partnership to invest in SMEs and startups.
The Kenyan government established the Kenya Industry and Entrepreneurship Project, a $50 million initiative designed to support private sector players such as SMEs, support organisations, and startups with grants and technical support between 2019 and 2024.

Private sector investment through venture capital funding has also been a major source of investment for African tech companies. Nigeria’sfintech subsector has attracted significant investment funding, with a recent example being Flutterwave’s $1 billion valuation in 2021. In Q2 2022, $1.26 billion was raised in the African tech ecosystem from 180 deals, despite a worldwide decline in venture capital funding.

Conclusion

Without a doubt, African entrepreneurs and governments are harnessing technology and digital innovation but the challenge is how to better consolidate these successes.

With knowledge of existing businesses, statistics, and investment efforts, in mind, we must consider how to ensure that all sectors, from health to education and agriculture, are equally developed and supported by the government and private sector. We must build the vibrant tech startup ecosystems in fragile emerging economies in Africa so they are not left behind.

The panel, moderated by Gbemisola Osadua, ACIArb, discussed many of these issues with speakers Adebayo Adeleke, Olori Boye-Ajayi, Jan Hoffmann, and Abiodun Dominic Odunuga with comments from WTO Chef de Cabinet Bright Okogu. Please share the recording of the working session here with your network.

About Parminder Vir OBE

In a professional career spanning 40 years, Parminder Vir OBE has dedicated her life to telling untold stories, resourcing the skills and imagination of under-served communities. She is an expert on African entrepreneurship, an award-winning film and television producer and advocate for arts and culture. She currently serves as the Executive Director of Wazima Health, Advisory Board Member of Mamamoni Limited, and Narrative Advisor at Mustard Venture Agency. She served as the CEO of the Tony Elumelu Foundation where she designed and implemented a holistic entrepreneurship programme, impacting over 10,000 African entrepreneurs across 54 African countries from 2014–2019. She continues to advocate for entrepreneurship as the best path for the social and economic development of Africa.