Internet economy critical to Africa’s economic take-off
As we strive to understand the fourth industrial revolution and its impact on our work and our lives, the conversation about the digital economy becomes critical to understanding the opportunities that technology presents. The term ‘digital economy’ has continued to evolve with a variety of definitions, each attempting to capture the potential and impact of technology on the economy.
Although we won’t dwell too much on the definitions, there is one by Deloitte that I found quite complete and simple to understand. They define the digital economy as “the economic activity resulting from billions of everyday online connections between people, businesses, devices, data and processes”.
Basically, it is any economic activity generated as a result of human and technological connections online. This will range from a business using technology to deliver goods and services to customers, to customers making payments using technology-enabled platforms, to online shopping, to accessing educational materials online, to content streaming platforms and even to some of the finishing house using technology.
Given our highly digital lives, it’s safe to say that the digital economy is becoming more ubiquitous than we ever imagined, and soon it may be the only way we know how to do business.
In Africa, the internet economy is expected to grow significantly and affect the continent’s gross domestic product (GDP). According to a 2020 report by the International Finance Corporation (IFC) and Google, Africa’s internet economy has the potential to reach more than $180 billion by 2025, contributing up to 5.2 percent of the continent’s GDP. The Internet economy is also projected to reach more than $712 billion by 2050 and contribute 8.5 percent of the continent’s GDP.
Financial stability
Furthermore, digitization is predicted to be one of the continent’s biggest drivers in leapfrogging towards financial stability. In a 2018 report by Prof Njuguna Ndung’u, digitization is transforming African economies across four main themes: retail payment systems, financial inclusion, sustainable business models and revenue administration. With the world’s youngest population, rising education levels and a vibrant startup sector, Africa is an excellent candidate to reap maximum benefits from the promising digital economy.
We have not only seen continental strategies such as the Digital Transformation Strategy (DTS) by the African Union, but also national level strategies that outline specific plans to harness the digital economy.
Specifically, in Kenya we have the Digital Economy Blueprint which lays out a conceptual framework to deliver an inclusive digital economy across five themes: Digital Government, Digital Business, Infrastructure, Innovation-Driven Entrepreneurship and Digital Skills and Values.
The same IFC and Google report notes that Kenya’s Internet GDP potential could reach $12 billion by 2025, contributing 9.24 percent of the country’s GDP, ranking the country alongside Nigeria, South Africa and Egypt.
Dr Chege is a media and technology researcher.
