Reaching for the future, searching for a vision for Africa’s digital economy
Reaching for the future, searching for a vision for Africa’s digital economyOctober 7, 2019 •
Digitalisation is disrupting markets and economic structures globally, and even advanced economies do not have a clear view of the new economy and the rules that will govern it. While it is clear that we’re going through a period of disruption and change, it’s not yet clear which of the disrupters will end up being part of the new economic hierarchy rather than mere agents of change, or for that matter, who will govern it.
Set against this background, Cenfri was invited to attend the World Economic Forum (WEF) on Africa in Cape Town earlier in September to discuss the African Union draft of their Digital Transformation Strategy.
Our take from the discussion is that tough and deliberate choices need to be made to give Africans the best ability to leverage technology for their own future. Leaving outcomes to play out by default will most likely hold negative consequences for Africa and its people. Many decisions made outside of Africa (policy or business strategy) will also drive developments on the continent. It is, therefore, not just about the choices we discuss and perceive on the continent.
Some of the choices may surprise us. For instance, we may need to slow down in order to go faster. For example, locally owned and operated digital platforms are emerging across different countries in Africa, but they are competing against foreign-owned and operated platforms that have deep pockets and often better services. While the local platforms are creating opportunities for young people and microenterprises, there remains a massive shortage of skills across Africa to fully capitalise on their opportunities. This not only requires investing in domestic skills but also enabling the importing of skills to support our domestic digital businesses. Such skills have a multiplier effect on domestic economy and enable us to keep up with the rapidly evolving digital world.
Finding this balance between foreign and local will be extremely tricky for governments across Africa.
For instance, much of our economic activity is locked up in the informal sector. If we are justifying tax exemptions for foreign investors, should we not do so for domestic tech start-ups and the business value chains and workers that they enable and aggregate? While bolstering the fiscus is a critical objective for all African countries, rushing to tax all-things-digital poses risks of displacing or undermining new digital businesses. How do we structure tax policies that encourage business development and balance country and regional trade-offs?
Making this problem even harder will be the extent to which governments can influence these outcomes anyway.
For instance, the EU’s GDPR policy, apart from being copied into emerging market regulations, is already being implemented in Africa through subsidiaries of EU-domiciled firms. The new America-first policy in the US is forcing governments to choose between their technology infrastructure and data privacy, which they govern, and those of their competitors. Countries in Africa are already making decisions in response to this.
This raises concerns for us around who will ultimately govern outcomes in Africa’s digital economy?
We think the answer to this question matters greatly and will determine the outcomes we can expect. While it was clear in the analogue world that governments should play this role, it is not clear that they will be able to do so in the digital world.
It is also not clear that digital citizens can trust governments to act in their interest, particularly where the digital world spans across traditional geographic boundaries.
Admittedly, we find ourselves still thinking about digital governance in a very analogue and terrestrial manner. We may need to give our imagination and the digital economy some more space to come up with more imaginative solutions to ensure governance enables positive consumer outcomes.
As we accelerate towards this digital Africa, what is clear is that the sheer scale and pervasiveness of digital business need to be shaped by a collective effort from all actors across Africa to ensure positive developmental outcomes for Africans.
We believe there is much room and imagination across Africa to achieve this. The diverse set of actors, including innovation hubs, tech associations, investors, African think tanks, digital platforms, local governments, that we already see coming together across Africa is forming a collective vision for a digital inclusive Africa that could allow businesses and individuals to flourish and scale.
They recognise that, while each country has an average population of 24 million people, collectively Africa is more than a billion people. If we can make progress on cross-border regulation and policy and wider market access, we can turn unattractive markets into great opportunities to scale digital businesses that reflect the outcomes we want to see.
It is encouraging to see this already being addressed through the African Continental Free Trade Area (AfCFTA) agreement, and we heard several political leaders at the WEF on Africa advocate for free movement of labour and skills. This is a bold discussion and a critical step towards enabling the collective future.
As we evolve our own work in this digital space, we’re watching this development with a careful and forward-looking eye.
We hope more discussions like those at WEF are being held across the continent, and we can hopefully have a role in helping to convene, connect or shape these discussions.