Introduction
The COVID-19 pandemic accelerated digitalization in Africa, creating new employment opportunities in fields such as technology and entrepreneurship. Thanks to digital platforms, many Africans can work remotely and access international markets. However, this transition also brings significant challenges, including technological infrastructure deficiencies, limited digital skills, and inequalities in internet access. Additionally, automation poses a threat to certain traditional jobs, potentially increasing job losses in sectors already affected by the crisis. To ensure digitalization truly benefits society, it is critical to implement public policies that strengthen digital infrastructure, improve education and training, and support vulnerable workers.
“The internet holds a central place in all activities, yet Africa still struggles with fully utilizing and controlling it.”
In this era where digital technology increasingly takes on a central role in the daily lives of individuals and businesses, digitalization is positioned as a fundamental driver of the global economy, including Africa. While the continent's potential is undeniable, many challenges remain. It is essential to consider significant differences between African countries in analyzing this situation in a balanced manner.
Internet Penetration Rate as an Indicator
Internet penetration rate is an important indicator of digital transformation. The annual digital report prepared by We Are Social and Hootsuite provides illustrative data on this topic. As of January 2023, the global internet penetration rate was determined to be 62.5%, representing approximately 5 billion users. This report highlights the significant disparities between African regions. North and South Africa show rates well above the average, while East and Central Africa, with respective rates of 24% and 26%, have some of the lowest penetration rates globally.
Technology in Africa: A Growth Engine?
In recent years, Africa has been presented as a rapidly expanding market, drawing the attention of international investors. The continent is viewed as one of the last "blue oceans" for technological growth globally, attracting major digital players. With a very young population, Africa presents an important market opportunity for the next three decades. This opportunity is further bolstered by the increasing spread of smartphones and internet access, made possible by continuously developing infrastructures.
In Africa, technology and development often progress in parallel. An emerging or maturing digital ecosystem promotes infrastructure growth and significantly impacts people’s daily lives. In rural areas, where access to technology is more limited compared to large metropolises, the tech sector plays a critical role. Technologies act as “growth multipliers,” enhancing access to information, creating employment, and supporting financial inclusion.
Hurdles and Growth Prospects
Despite the optimism, technological growth in Africa is still in the developmental phase and faces various obstacles, particularly a lack of funding in rural areas, which hampers progress. Private organizations and funders play a significant role in the technological hubs of the continent. Tech start-ups are working to address these gaps, especially to meet the increased need for remote services that rose during the COVID-19 pandemic.
Tech Giants Turning to Africa
Africa's favorable environment for technological innovation is increasingly attracting foreign investors and international major companies. Following Google, Microsoft, Facebook, Huawei, and Amazon, Twitter announced on April 12 that it would open its first office in Africa. This decision is part of a dynamic initiated in 2018 when Twitter appointed Nigerian Ngozi Okonjo-Iweala to its board, reflecting growing interest in the continent.
The opening of Twitter’s regional office in Ghana is based on several criteria: being an “exemplary democracy,” “freedom of expression,” “online freedom,” and an “open internet.” Furthermore, Ghana's selection as the host country for the Secretariat of the African Continental Free Trade Area (AfCFTA) influenced this decision. For Twitter, this establishment aligns with its main objective of creating a presence to support efforts to “improve and adapt services” on the continent. Twitter also plans to hire its first team of “African engineers” on the continent.
The presence of these digital giants in Africa serves as a strong growth engine, creating thousands of jobs for young Africans, providing special training, and investing in local infrastructures. However, for sustainable growth and stability in the sector, supporting Pan-African initiatives and efforts by African states to initiate a genuine “African digital revolution” is crucial.
Potential for Market Transformation
“By 2040, digitalization has the potential to transform job markets in Africa, but public policies need to be implemented for the benefit of everyone.”
Before 2020, digitalization in Africa had gained significant momentum, with numerous remarkable successes and dynamic tech ecosystems emerging. The year 2007 marked a significant turning point in the continent's digital transformation, particularly with the launch of M-PESA by Safaricom as Africa's first mobile payment service. This groundbreaking innovation addressed banking infrastructure deficiencies, such as the lack of ATMs in Kenya, and met financial needs in underserved regions. Additionally, this business model significantly reduced transaction fees.
Since 2007, the mobile payments revolution has rapidly spread. By 2018, there were over 300 million mobile payment accounts in Africa, the highest number globally. Currently, over 500 companies offer technological innovations in financial services, including mobile payment services known as fintech. African countries now provide a wide range of digital financial products and payment systems, such as deposit and savings accounts.
New major players have emerged on the continent. For instance, in November 2019, Interswitch became the first African start-up valued at over $1 billion. This company employs over 1,000 people and generates more than $76 million in annual revenue. In February 2020, South African start-up JUMO raised $55 million to expand its operations in Bangladesh, Côte d'Ivoire, India, and Nigeria. Cities such as Johannesburg and Cape Town (South Africa), Nairobi (Kenya), and Lagos (Nigeria) are now ranked among the top 100 fintech ecosystems globally.
Challenges Faced by Public Authorities
Public authorities in Africa have the opportunity to leverage digital transformation to create widespread employment. Although complex, this approach is crucial for the continent's economic development and centers around four main strategic axes, each requiring special attention.
“Promoting universal access to digital infrastructure means offering advanced connectivity and fair, affordable access.”
Access to digital infrastructure, such as broadband internet, mobile technologies, and online services, has become a fundamental requirement for participation in the modern economy. However, deep inequalities persist between rural and urban areas in Africa. Currently, only 26% of the rural population regularly uses the internet, while this rate rises to 47% in urban areas. This digital divide limits the opportunities for individuals in rural areas to participate in the digital economy, risking deepening socio-economic disparities.
Promoting universal access to digital infrastructure means not only improving connectivity in underserved areas but also ensuring this access is fair and affordable. Initiatives such as developing fiber optic networks, expanding mobile coverage, and reducing internet access costs are crucial. Public authorities should also encourage the adoption of digital innovations in medium-sized cities, which are often overlooked. When equipped with proper digital infrastructure, these cities have the potential to become major centers of economic growth, creating jobs and revitalizing local economies.
“Preparing African youth for the digital age: The only way to fully participate in modernity.”
The future of employment in Africa largely depends on preparing its young population for the demands of the digital labor market. The informal sector, which makes up a significant portion of Africa’s economy, can be transformed by integrating digital technologies. However, many workers in this sector lack the necessary skills to take advantage of the opportunities digitalization presents.
Creating targeted training programs for youth and workers in the informal sector is essential, providing basic digital skills as well as more advanced capabilities, such as programming, e-commerce, and the use of online work platforms. Projections indicate that by 2040, freelancers and family labor could comprise up to 65% of employment in Africa, representing at least 51% in the most optimistic scenarios. These figures underscore the urgency of equipping these workers with the necessary tools to thrive in an increasingly digital environment. Without such preparation, a significant portion of Africa’s workforce risks being left out of the digital economy, exacerbating existing inequalities.
“Collective effort is needed to remove barriers to the adoption of digital technologies.”
Small and medium-sized enterprises (SMEs) play a key role in Africa’s economy, but their growth potential is often limited due to barriers in adopting digital technologies. In Africa, only 17% of new entrepreneurs plan to create at least six jobs, one of the lowest figures globally. This statistic reflects the challenges African entrepreneurs face, including access to finance, inadequate digital skills, and unsuitable regulatory frameworks.
To address this, it is crucial for public authorities and private sector partners to collaborate on creating an environment conducive to digital adoption and innovation. This can include providing training for entrepreneurs on digital skills, simplifying administrative processes for start-ups, and establishing financial support programs for innovative businesses. By facilitating access to digital technologies and encouraging innovation, African SMEs will be better equipped to grow, create jobs, and enhance their competitiveness on the global stage.
“Accelerating continental and regional coordination is more urgent than ever.”
Lastly, to fully capitalize on digital transformation in Africa, coordination at the continental and regional levels is essential. While national strategies are important, they need to be bolstered by increased collaboration among African countries, particularly within the framework of the African Continental Free Trade Area (AfCFTA). Aligning for the digital age requires coordinated efforts to improve communication infrastructure, streamline mobile services, harmonize data regulations, and strengthen digital security.
To date, only 28 African countries have comprehensive legislation on personal data protection, and just 11 have enacted significant laws to combat cybercrime. These regulatory gaps pose a significant barrier to the continent’s digital integration and efforts to protect citizens and businesses from cyber risks. Overcoming these challenges will require enhanced coordination among African nations, creating harmonized legal frameworks, sharing best practices, and developing robust communication infrastructures. This will not only secure Africa’s digital landscape but also foster an environment conducive to innovation and economic growth.
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