Why You Should Play a Role in Africa’s Digital Economy
by Steve Alila on Nov 15, 2021
According to UNCTAD research, there is an urgent need to speed up the growth of the digital economy in Africa at governmental, corporate, and individual levels.
Currently, few governments invest in digital infrastructure, services, entrepreneurship, and skills. Businesses that adopt digitalization are viewed as the exception rather than the norm. Many citizens lack digital skills and could soon be locked out of global digital opportunities.
Read on to find the steps you can take to play a role in the digital economy in Africa.
The Digital Economy Explained
The digital economy is also referred to as the new economy, web economy, or internet economy. It is a collection of activities that use digitized information as the primary factor of production.
Digitized information is text, sound, or pictures converted into a form that a computer can understand. Converting information into a computer-readable form is called digitization, and Digitization leads to digitalization.
Digitalization is using digital technologies to restructure business models and create jobs. The digital economy works by joining professional interactions with economic activities and commercial transactions.
Understanding how the digital economy works enables you to analyze its impact then take suitable action.
Advantages and Disadvantages of The Digital Economy
You should actively participate in the digital economy to fully enjoy its advantages and understand its disadvantages.
The advantages of the digital economy can be divided into first-order and second-order benefits. First-order benefits of digital economies are immediately visible to individuals, firms, and governments upon adopting digitalization. The most notable first-order benefits of gig economies are:
- Eases decision-making: Digitalization makes it easy to gather and analyze data. For example, having a real-time, centralized database in a corporation’s department enables marketers to track consumer behaviors and modify marketing techniques to adjust to changing consumer needs.
- Saves time: Digitalization saves you an enormous amount of time you would spend manually handling production. Machines are faster in handling repetitive, boring, and tedious tasks. For example, instead of frequently correcting human errors, automating an assembly process speeds up production.
- Lowers barriers to entry: You can quickly start and maintain a business online compared to traditional markets that demand intensive capital to achieve the same results. An online business does not incur high retail space costs, and it lets you deliver only what your clients order. You must not carry stock varieties to the market and return the unsold goods to the store regularly. That enables you to serve a broader market than in an offline business setting that suits a small geographical location.
- Fights poverty: Poverty is a problem for Africa’s growing economies. Digitization is a tool to fight poverty because a person working remotely can earn more money than working a similar job locally. Also, more jobs are available online than available at any one location, especially in developing countries.
- Enables remote working: Employees and businesses can save time and chop off extra costs associated with daily commutes to the workplace. Employees become more productive when they must not travel a long distance to work, and they avoid traffic, reduce fares, or the tiresomeness of long trekking distances. Businesses in the digital economy can access a greater talent pool by sourcing employees in various parts of the world.
The second-order benefits of digital economies are more long-term, affecting the development, management, and distribution of digital products.
The digital economy can be disadvantageous to established and growing economies. For example, it:
- Benefits some countries more than others: Countries with many developers, managers, and distributors of digital products enjoy more second-order benefits of digitalization. The economies become more productive and competitive. For instance, they experience steady GDP growth and create more jobs than digital product consumers.
- Reduces marginal benefit: Firms have difficulty controlling marginal benefit because consumer satisfaction falls as consumption rises. That happens because more businesses can enter and exit a market in a digital economy.
- Increases digital war: As more economies become digital, most will want to dominate production and not consumption. The firms may use manipulative competition to prevent startups from thriving.
- Increases cybercrime: Cybercrime and cyberwarfare increase as more transactions occur online. Cyberwarfare is a deliberate attack on an organization's information system.
The message is to adopt and adapt. But is there proof that Africa enjoys or can enjoy both first-order and second-order benefits by adapting to the pace of technological growth? Find out below.
Successful Digital Economies in Africa
A few African countries have experienced massive economic growth after investing in telecommunications, digital trade, and fintech services. The top six are Nigeria, Egypt, Ethiopia, Kenya, Rwanda, and South Africa. For example,
- Nigeria accounts for 23% of Africa's internet users and has more than 90 tech hubs. According to NBSs' September 2021 findings, Nigeria’s tech sector contributes to over 17.83% of its GDP.
- Egypt's IT sector grows faster than the country's GDP growth rate. Its strategic location makes it a key transit hub for submarine cables.
- The digital economy in Kenya has improved through money transfer and telecommunications.
- Ethiopia, like Kenya, is keen on perfecting digital payments and attracting giant East African mobile payment firms like Mpesa.
- Rwanda has improved its e-commerce by providing affordable internet to its citizens.
- South Africa has data and cloud policies to enable social and economic development by creating a digitally empowered economy.
Despite the impact of the digital economy on Africa's top IT adopters, unemployment is still high due to a lack of digital skills.
For example, growing Nigeria's tech market was only able to employ 1% of its population in 2017. In Kenya, internet connectivity and tech training are concentrated in major urban centers like Nairobi, leaving many citizens in rural areas unexposed to digital jobs.
Many economies in Africa should benchmark tricks Nigeria, Egypt, Ethiopia, Kenya, Rwanda, and South Africa use in fueling digitalization. There is a need to restructure national internet coverage and reform education systems to accommodate digital skills. Here are more measures to boost digital economies in Africa.
You Can Participate in The Growth of Africa’s Digital Economy
The four primary ways to participate in the growth of the digital economy are applying suitable training, formulating regulatory policies, increasing internet connectivity, and optimizing public-private cooperation.
- Applying suitable training: Introducing self-efficacy in education is one of the quickest ways to boost digital economies in Africa.
- Formulating regulatory policies: It is crucial to implement policies that shield digital nomads from cybersecurity, protect data and intellectual property.
- Increasing internet connectivity: Apart from major cities, the internet should be accessible to drive the economy, even in rural areas.
- Optimizing public-private cooperation: Public and private corporations should create a robust digital economy by making digital services closer to African communities.
Participating in digitalization at an individual, corporate, or national level will spur innovation, create jobs, boost economic growth, and improve sustainable internet connectivity.
TechLit Africa’s Role in The Growth of Africa’s Digital Economy
TechLit Africa brings digital resources closer to African communities. We collect used from various organizations and redistribute them to African schools.
We teach computer classes in rural African schools, applying interactive teaching models while ensuring all learners access digital resources.
Through monetary and computer donations, we have changed the lives of 4,000 kids in rural Kenya. The digital economy strategy enables us to multiply its outreach ten times annually.
We must invest in Africa’s digital economy now. Although there are advantages and disadvantages to digitalization, growing the digital workforce in Africa will lift millions of families out of poverty. Now is the best time to get involved.