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 on the digital economy becomes critical to understanding the opportunities that technology brings to the fore. The term ‘digital economy’ has continued to evolve with an array of definitions, each attempting to capture the potential and impact of technologies to the economy.

While we shall not dwell so much on the definitions, there is one by Deloitte that I found rather exhaustive and simple to understand. They define the digital economy as “the economic activity that results from billions of everyday online connections between people, businesses, devices, data and processes”.

Basically, it is any economic activity that is generated as a result of human and technology connections online. This will range from a business that uses technology to deliver goods and services to customers, to customers making payments using technology-enabled platforms, to online shopping, to accessing educational material online, to content streaming platforms and even working from home using technology.

Given our highly digital lives, it is safe to say that the digital economy is becoming more ubiquitous than we could ever imagine, and soon, it might be the only way we know how to conduct business.

In Africa, the Internet economy is expected to significantly grow and impact 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 over $180 billion by 2025, contributing to 5.2 per cent of the continent’s GDP. It is also projected that the Internet economy will reach over $712 billion by 2050 and contribute 8.5 per cent of the continent’s GDP.

Financial stability

Further, digitisation is predicted to be one of the continent’s biggest drivers to leapfrog into financial stability. In a 2018 report by Prof Njuguna Ndung’u, digitisation is transforming African economies across four major themes: retail payment systems, financial inclusion, sustainable business models and revenue administration. With the world’s youngest population, increasing education levels and a vibrant start up sector, Africa is a prime candidate for reaping 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 map out specific plans for leveraging the digital economy.

Specifically, in Kenya, we have the Digital Economy Blueprint that 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 per cent of the country’s GDP, ranking the country alongside Nigeria, South Africa and Egypt.

Dr Chege is a media and technology researcher.