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Internet transformation potential in Africa

21 November 2013

Technological advancement in Africa has seen great strides over the decades from being known as the ‘Dark Continent’ to being one of the continents where the next digital penetration boom is most likely to occur. A recent report by McKinsey supports the view that the African continent has become a fertile ground for this boom. Over the years, African countries have made progress in their respective individual technology sectors with major variations between them, where countries with the most developed cities driven by urbanisation and consumers with a higher disposable income are leading in technological advancement and penetration.

In Africa’s major cities, significant infrastructure investment has taken place in increasing access to mobile broadband, fibre-optic cable connections to households, and power supply expansion-combined with the rapid spread of low-cost smartphones and tablets. Even with these developments only 16% of the continents one billion people are online. The continent’s ‘iGDP’ (which measures the internet’s contribution to overall GDP) remains low, at 1.1%,
which is just over half the levels seen in other emerging economies. However there is a concerted effort by governments to change this, where by 2025 Africa’s iGDP should grow to at least 5% to 6%, matching that of leading economies such as Sweden, Taiwan, and the United Kingdom. If the internet were to achieve the same kind of scale and impact as the spread of mobile phones in Africa, iGDP could account for as much as 10%(USD 300bn) of total GDP while producing a leap forward in economic and social development. The report identifies the six key sectors which would be transformed by the internet growth prospects as follows:

Financial services. The internet will reduce transaction costs and bring financial services to people who may live far from the nearest bank branch or ATM, example (Safaricom’s- Mpesa mobile money transfer). With digital technology, more than 60% of Africans could have access to banking services by 2025, with more than 90% using mobile wallets for daily transactions and remittances.

Education. Many schools that currently lack sufficient textbooks could soon access the world’s best educational content on affordable tablets or e-books; teachers, too, will benefit from more effective training. The technology-related productivity gains in education could reach USD 30bn – USD 70bn — enabling governments to achieve more with their education budgets and providing millions of students with the foundation for a better future.

Health. Today, Africa has only 1.1 doctors and 2.7 nurses per 1,000 people, and many people travel long distances for care. But the internet is enabling greater use of remote diagnosis, treatment, and education. Technology-related benefits in health care could range from USD 84bn to USD 188bn by 2025 — and the broader social and economic impact of improved health outcomes will be far greater.

Retail. E-commerce will open up a new shopping experience for Africa’s growing middle class. By 2025, it could account for 10% of retail sales in the continent’s largest economies, which will translate into some USD 75bn in annual revenue.

Agriculture. Farmers can access expertise and information on everything from weather, crop selection, and pest control to management and finance. It can also improve access to markets, generating better prices for produce.

Government. The internet is a powerful tool to improve transparency, streamline service delivery, and automate revenue collection, delivering productivity gains of USD 10bn to USD 25bn. Even though Africa has had a relatively slow start with regards to digital development, it still shows great potential and its ability to leapfrog which will help sustain its economic growth going forward.

More information on McK’s website