sThe COVID-19 pandemic has rapidly accelerated the digital economy globally, with an estimated 30% increase in internet traffic in 2020. With businesses shifting to online and remote work, internet access has proved critical. Countries which had higher internet penetration in 2019 were able to impose stricter policies to curtail the spread of the virus. Education technology (edtech) and health technology (healthtech) have also emerged as important digital solutions to manage the effects of the crisis.
However, the global digital divide is quite stark. In 2019, 82.5% of Europeans had access to the internet, while only 28.2% of Africans used the internet. According to the World Development Indicators database, the number of fixed broadband subscriptions per 100 people is 35.72 in the EU but less than 1 in sub-Saharan Africa. On average, 54% of the world population below the age of 15 and 86% of the population between the age of 15 and 24 have access to the internet. In Kenya, this is as low as 1.3% and 29.7% respectively. Shortcomings in digital infrastructure have been exacerbated by a sudden and increased reliance on digital tools during the pandemic. If no appropriate action is taken, COVID-19 risks aggravating the existing digital divide.
Here is how the African Union (AU) and the European Union (EU) can work together to develop digital infrastructure in Africa and support digitalisation in key areas such as e-commerce logistics and agriculture.
Boosting digital readiness in Africa
To cope with the pandemic-induced internet demand surge, many developing countries have initiated programs to expand internet coverage. However, in several African countries this has come at the cost of internet speed, which can have adverse implications for GDP growth. For instance, during the lockdown period, the average download speed fell by more than 20% in Ghana, Tunisia and Nigeria. African countries, regional organisations and the EU-AU partnership therefore need to devote stronger support towards development of telecommunication infrastructure – broadband infrastructure in particular – in African countries, and towards accelerating existing regional initiatives for digital connectivity, such as the One Network Area in the East African Community. Implementation support should also aim to provide capacity building and technical support to develop digital skills, which is one of the key barriers to digital development in Africa.
Supporting the African private sector in leveraging e-commerce
The EU’s Digital4Development (D4D) policy aims at mainstreaming digital technologies and services in its relations with developing countries. Both the AU and the EU will benefit from a better understanding of what the private sector needs to deliver services to those not currently connected.
ODI has examined the implications for the African private sector of e-commerce proposals being tabled at the multilateral level, including by the EU, the United States and China. The study consists of a survey among – and follow-up interviews with – 31 African e-commerce businesses, which indicates that over 62% of firms witnessed an increase in e-commerce since the start of the pandemic. However, over 60% of the firms surveyed are selling through their own e-commerce websites. Third-party e-commerce platforms charge 10 to 15% of commission on product sales, discouraging African sellers. In this light, the EU-AU partnership can seek to improve access to third-party e-commerce platforms, particularly for African micro, small and medium enterprises.
The study also highlights key challenges constraining e-commerce, which include poor postal competence, unclear taxation rules, double taxation, VAT regulations, lack of reliable payment solutions, unawareness regarding national and regional rules, lack of consumer protection and cyber-security issues. The AU therefore needs to leverage the African Continental Free Trade Area (AfCFTA) for harmonisation of taxations laws and development of consumer protection regulations to boost cross-border e-commerce.
Several EU member states have committed to supporting the growth of e-commerce in Africa, as noted in their D4D strategies. For instance, Germany and the Netherlands are supporting UNCTAD’s Rapid eTrade Readiness Assessments of Least Developed Countries programme, which aims to help countries in identifying barriers to e-commerce development and proposes tailored solutions. The EU and its member states, in partnership with other public and private actors, can further strengthen their engagement to support inclusive e-commerce developments in African countries and regions.
Sectoral but targeted support towards digital transformation in agriculture
Africa’s agricultural exports are dominated by a few product categories, mostly cash crops. To tackle COVID-19, numerous African countries put in place containment measures, including quarantines, lockdowns and travel bans. These measures have negatively affected agribusinesses and export demand. For instance, around 71% of Ugandan agricultural firms have reported a severe decline in demand and disruptions in Ugandan regional and domestic food value chains.
Digital platforms can enable farmers to diversify and increase resilience of agricultural value chains for economic recovery. A survey of platform use conducted among over 800 Ugandan farmers indicates higher access to productivity-enhancing services on platforms. Over 70% of surveyed platform users have access to agricultural training on planting, fertiliser use, post-harvest maintenance and health and safety, compared to less than 45% of non-platform users, with women and youth also faring better on platforms. Participation on digital platforms is also found to facilitate access to new markets, but a gendered-digital divide exists even on these platforms. This is linked to lower digital literacy in women.
There is much scope for effective cooperation between Africa and Europe in digitally transforming the agricultural sector in Africa. But this will require targeted investments informed by careful analysis of policy and regulatory readiness, of bottlenecks for platform sustainability and of challenges to proliferation and effective and inclusive engagement of farmers. EU-AU support needs to be directed towards digital apps that provide logistical support to reduce transaction costs in finding buyers and offer opportunities for farmers to diversify production.
Moreover, specific attention needs to be given to ensuring that platforms in the agricultural sector and beyond do not exacerbate, or even reproduce, existing gendered digital divides. The EU and other development partners therefore need to extend support to expansion of skills-development initiatives, such as the Partnership for skills in applied Sciences, Engineering and Technology (PASET), and re-orient them towards increasing supply of digital skills. Make-IT in Africa, funded by the German Federal Ministry for Economic Cooperation and Development (BMZ), is a good example of a tech entrepreneurship initiative promoting digital innovation for sustainable and inclusive development in Africa by facilitating better access to finance, markets and skills. Directing investments towards those initiatives that implement gender mainstreaming in ICT skills, access to digital products and financing for women entrepreneurs, and those that involve women in the design, development and production stages, is key.
Overall, there is much potential for digital development cooperation to boost digital readiness in Africa. The recent launch of the EU’s D4D Hub and its regional component – the AU-EU D4D Hub – is timely, as it can provide a useful platform for European and African public and private actors to collaborate and coordinate their digitalisation initiatives. It is vital for the EU-AU partnership to improve digital infrastructure development in Africa, particularly expanding fixed broadband coverage and access, as well as to improve African firms and consumers’ access to e-commerce platforms and provide targeted support for digital transformation in key sectors such as agriculture.
Authors: Dr. Karishma Banga, Research Fellow (ODI), Jeske van Seters, Head of Programme Private Sector Engagement (ECDPM), Nadia Ashraf, Policy Officer Private Sector Engagement (ECDPM).
The authors are grateful for the feedback and support provided by Benedikt Erforth (DIE) and Daniele Fattibene (IAI) and Nina Thijssen (ECDPM).
Image courtesy of CTA ACP-EU via Flickr.
The views are those of the authors and not necessarily those of ETTG.
Pls allow me to bring to your attention that my 45 yrs ‘digital’ experience from Helsinki to Douala and Bujumbura over Taiwan, Seoul and Silicon Valley has demonstrated that the digital sector (D4D Hubs, e-commerce, digital platforms, digital apps, eTrade, e-market places, mobile money, …) is only able to create an adequate number of decent jobs if implemented as an enabler for “old fashioned” international industrial value chain partnerships.
I miss this observation in your commentary
African SMEs unfortunately are still reluctant to engage in value chain partnerships with more advanced industrial partners. Hence we should be careful not putting the cart before the horse and boosting, as a priority, digital readiness in Africa. That is why more and more African authorities and think thanks make their SMEs aware why and how to forge physical partnerships with more advanced industrial partners. And yes there is a need for more reliable broadband connectivity.
Therefore here a plea for first of all a mentality switch for thousands of win-win industrial partnerships between African SMEs and SMEs actives in countries confronted with the hyper-competitive global economy. Only digital enabled international industrial value chains in agribusiness, discrete manufacturing and associated services will be able to produce competitive products and services for the international markets. Only when active in advanced industrial value chains African SMEs will learn, in practise, the trade of modern entrepreneurship. By itself, the digital sector will be of little help to massively create the needed 20 mio jobs per year to contain poverty in Sub-Sahara Africa. Only a modern, advanced industrialisation of Africa, in the most diverse economical sectors, but of course first of all in agribusiness, will need all the to-days highly trained, but unemployed, African digital specialists (50% both genders).
A nice blog, dear Banga.
Very good points by Dear Karel Uyttendaele, both on the links to job creation and on SMEs participation in the value chains. In case of interest, our new flagship report “Africa’s development dynamics 2021: Digital Transformation for Quality Jobs” , jointly published by the African Union Commission and the OECD development Centre, has documented these points.
The report put forward 4 policies levellers African countries can mobilise to create more jobs (Read more here https://oe.cd/AFDD-2021).
Thanks, Karel, for your insightful comment. I agree that development cooperation needs to boost linkages of the African private sector in global value chains in a more gainful and and targeted manner. Outside the scope of this blog, we have indeed done some work on this; https://www.odi.org/publications/11073-digitalisation-and-future-manufacturing-africa examines prospects for manufacturing-led development in Africa, while https://www.odi.org/publications/11240-how-grow-manufacturing-and-create-jobs-digital-economy-10-policy-priorities-kenya presents a Kenya case-study , examining how digital technologies are impacting manufacturing tasks along the value chain. Another paper https://set.odi.org/wp-content/uploads/2019/05/MSMEs-Big-4-Kenya-Background-Document-May-2019.pdf examines how SMEs can be supported in linking into Kenyan leather value chains, including through support towards building digital capabilities and digital skills. Much more research needed on this, so thank you for flagging it.
Many thanks for both of you Karishma and Bakary for re-enforcing the need for massive digitized industrial value chains between African SMEs and industrial SMEs operating in more advanced economies. email@example.com – Circular Know-How Economy Africa-Europe: ‘Deglobalisation’ of Manufacturing, ‘Globalisation’ of Know-How