A surge in mobile payment adoption in Sub-Saharan Africa has contributed to significant albeit uneven digital growth in this sub-region.
This is according to the report released in December by the Fletcher School at Tufts University in the United States of America, entitled Digital in the time of COVID.
According to the report, the economies of Sub-Saharan Africa are amid a mobile revolution, where mobile connections and mobile payments have surged across the African continent.
“Over 135 million mobile money accounts were opened by Sub-Saharan African consumers between 2010 and 2018 alone, and the region accounts for more than a third of global mobile payments,” the report says.
Mobile internet access only first step
The report argues that mobile internet access and the mobile phone are merely the first step in unlocking the benefits of digitalization. One key lesson the pandemic has offered is how the quality of access.
Superior access, such as reliable terrestrial broadband and better devices – for example, laptops and tablets are better suited for learning and working- is a key input to economic resilience in a time of heavy reliance on digital technologies.
“Economies in the Digital South would do well to focus on improving access, affordability, and quality of mobile internet and not lose sight of the need to invest in more even broadband access and better devices to unlock the full potential of digitalization driven economic growth,” it says.
Another piece of good news is that the mobile internet gap has contributed to the high momentum demonstrated by Break Out economies, which are economies that are lower scoring in their present states of digitalization but are evolving rapidly. Examples of Break Out economies in Africa are Kenya, Cameroon, Ivory Coast, Rwanda, Tanzania and Ghana.
The strong momentum of Break Out economies and their significant headroom for growth would make them highly attractive to innovators and investors, it says. Break Out economies also exhibit some of the most optimistic attitudes towards digitalization and technology.
Held back often by relatively weak infrastructure and poor institutional quality, Break Out economies would do well to foster better institutions that can help nurture and sustain innovation and invest in improving the quality and depth of access.
“Break Out economies have the potential to become the Stand Out economies of the future with economies such as China, India, Indonesia, Saudi Arabia, Kenya, and Russia leading the pack,” the report says.
The report notes that several midsized nations, including Kenya, Bangladesh and Rwanda have been using digital technologies to leapfrog and transform their economies.
These leapfrogs make for ideal role models and benchmarks for other Watch Out economies on how to use the digital economy as a lever to create a step change in their growth trajectory, it says. Examples of Watch Out Economies in Africa are South Africa, Nigeria, Uganda, Ethiopia and Namibia.
The report also highlights another noteworthy pattern, which is how large, populous economies in the Digital South such as Nigeria, Indonesia and Brazil continue to attract investor interest despite their many institutional and infrastructural gaps.
“The combination of innovation emerging from constraints and their sheer size makes them the linchpins of the global digital economy’s overall growth and its future,” the report says.
It adds that some of these linchpin economies, such as Brazil and Nigeria, have a lot of catching up to do even as all of these economies have unrealized evolution potential suggests that there is enormous headroom for digital growth ahead, the report says.
The report says that the Digital South economies were at a disadvantage during COVID-19, facing a particularly tough choice on the timing, depth, and duration of lockdowns and social distancing measures.
While the digital economies of fast movers in the Digital South, like Rwanda were not quite evolved enough to be a major source of resilience during lockdowns, they do provide a light at the end of the tunnel for policymakers navigating their way out of COVID-19.
These fast-moving economies tend to have quite a bit in common: a youthful demographic bulge, a surge in digital uptake, and an increasingly digitally-savvy and engaged public. Policymakers in the Digital South would do well to harness this enthusiasm and look to digital as a way to jumpstart economic growth moving into 2021 and beyond, the report says.
The writers say that the digital evolution scorecard used for their research analyses the underlying drivers that govern an economy’s digitalization: supply conditions, demand conditions, institutional environment, and innovation and change.
To gain a comprehensive view of digital readiness and competitiveness of countries, the researchers further divided these drivers into 13 components measured using a total of 160 indicators.
The report looks at digital evolution, digital trust, with categories in environment, experience, behaviour and attitudes.
Digital evolution also includes momentum, where scores are generated using the compound annual growth rate formula (CAGR). “The CAGR method, by smoothing out changes in the growth rates over the years, allows us to describe the rate at which the index score is changing for a particular economy over time,” the report says.