The third and last article of a three part series in which Nzube Ufodike and Jack Diamond of Amoo Venture Capital Advisory examine and analyse Africa’s path towards digitalization. Also see the first and second part.
Effects of digitalization will no doubt be profound with particular benefits to be felt in the following sectors…
Finance
The success of companies such as M-Pesa and the growing penetration of Internet & technology will have an unprecedented effect on financial inclusion, given that in sub-Saharan Africa three quarters of the adult population are without bank accounts. Digitalization will apply a downward pressure on transaction costs, encouraging micro trades and stimulating growth.
If forecasts are realized and technological advances continue at the current trend, by 2025, 60% of Africans could have access to banking services and more than 90% could be using e-wallets for daily transactions. Financial inclusion will be a driving force behind economic development and could facilitate a boom in e-commerce on the continent. . For instance, m-Shwari and m-Kesho, both of the M-Pesa suite of products, provide access to savings and insurance & micro-credit facilities respectively, via mobile phones.
Education
Put simply, digitalization will make education more accessible by removing physical barriers (such as distance). Digital tools will also empower users to take charge of their own educational needs, thereby delivering instant access to educational resources, enhancement of teacher training and enhanced learning outcomes.
Health
The sheer size of the continent and nations within it have often been cited as hindering effective delivery of health services. With only 1.1 doctors per 1000 patients and 2.7 nurses per 1000 patients, (aggregate across the continent) health provision is an immense problem.
It is envisaged that technology will allow users to interact with healthcare service providers online, so that centralized services become more efficient and effective in their delivery. Some benefits can currently been seen in reducing counterfeiting, for instance by using mPedigree technology.
Consumers in West Africa can now send an SMS to verify if the medicines they are about to purchase are fake. It is estimated that a technology driven healthcare system on the continent could save Africa between $84bn and $188bn per year.
Retail
The continent as a whole has suffered from undeveloped traditional forms of retail (physical). E-commerce (bolstered by financial inclusion) can replace traditional retail shops, offering a new shopping experience in terms of choice, quality and cost. It is generally accepted that online retailers can make cost savings of approximately 10%, compared to traditional stores.
Agriculture
Digital tools will provide this industry with the necessary data to drive growth, efficiencies and economies of scale. The Internet will provide access to data on weather, crop selection and pest control and enable users to make informed decisions on land management. Furthermore, it is likely to lead to access to new markets and reduce food prices within the continent.
The African Development Bank Group has calculated that growth in the agricultural sector is twice as effective at reducing poverty, than growth in any other sector. A leader in this sector is the Ethiopia Commodity Exchange (ECX) which has leveraged technology to create an efficient modern trading system. The ECX, set up five years ago, is now the largest commodity exchange in Africa.
Macro benefits
MGI research found that the maturity of the internet correlates with higher living standards having positive effects on health care, education and social mobility.
The digital economy will also result in increases in productivity. As costs come down access to cloud computing, secure storage enhanced software, email and enterprise systems (such as payroll and billing) will become common place. Consequently, this will reduce costs for both business and consumer.
The future
The economic prospects outlined above will no doubt inspire confidence. However, this should be considered within the landscape of inherent uncertainty risks. Although forecasts of economic growth are based on relevant data and empirical evidence, they are by no means guaranteed.
In order for predictions to be achieved the following assumptions must be met:
1. Network Infrastructure continues to develop and the cost of devices continues to fall or remain stable;
2. Increased access to capital;
3. ICT strategies are developed to accommodate security of servers and online transactions;
4. Development of a strong ecosystem;
5. Government initiatives- coherent vision and political foresight.
Something to add to this story? Please post it in the comments. Moving forward, what do you see as opportunities and challenges?
