My column this week is the first part of my recent paper for the NTU-SBF Centre for African Studies at Nanyang Business School, Singapore, where I am a research fellow. References are in the original article.
The nexus between internet adoption and infrastructure, foreign direct investment, financial development, economic growth and job creation in African countries and elsewhere is well established. The internet is a net job creator. For every one job lost to the internet, about three new jobs are created. The internet is creating new jobs, transforming existing jobs, or enabling outsourcing of jobs to cheaper but more productive locations. It is also making some jobs redundant.
Access to the internet via mobile phones is having a huge economic impact around the world. Because of the ubiquity of mobile phones and their relative affordability, more and more citizens of poor countries are using the internet to avail themselves of the myriad opportunities on the global communication platform. Human capital development, ease of access to finance, robust infrastructure, and a conducive business environment underpin the job creation thesis of the internet, however.
Small and medium-sized enterprises (SMEs) record increases in productivity of at least 10 percent from using the internet. Research also finds that SMEs that are aggressively using web technologies grow and export twice as much as their counterparts which do not. It has also been found that 75 percent of the internet’s impact is in traditional industries. Apart from boosting legacy industries, fast internet infrastructure is also creating new ones. Social media platforms like YouTube and Instagram are creating millionaires and billion dollar businesses. New industries are being created, business models are being disrupted and labour markets are being reconfigured.
Digital payments are already huge in many African countries. M-Pesa, a Kenyan mobile money service, is a prominent example. Africans also already trade and make purchases with crypto-currencies like Bitcoin. Facebook is about to disrupt even this laudable progress in digital payments with its soon-to-be-launched digital currency called Libra.
The internet is creating new ecosystems. New employment forms, like in the “gig economy”, are also emerging. Unsurprisingly, African governments are beginning to realise the potential of internet technology and its associated ecosystems for boosting economic growth, creating jobs and thus alleviating poverty. Interestingly, even for supposedly advanced spheres of information technology like artificial intelligence, Africa is increasingly seen as the new frontier.
Subsequent sections of the paper highlight the internet-driven opportunities, the factors driving them, and the challenges and constraints that weigh on them. The paper then concludes with recommendations on how Africans, their governments and key local and global stakeholders, can manage all these variables effectively and sustainably for economic growth and job creation.
Cheaper internet & smartphones underpin new job opportunities
According to the International Telecommunication Union (ITU), only about a quarter of Africans currently use the internet. While relatively low, it is twice the number of African internet users five years ago. With 76 percent of Africans currently having a mobile cellular phone subscription, the likelihood of greater internet use of about the same rate in the not too distant future seems feasible. It makes sense then that mobile phones are increasingly used as a means to deliver services. Mobile data remains relatively expensive, though (see table 1).
Africans can now do most of their non-physical banking transactions online via their mobile phones. They are able to stream videos on Netflix, a streaming service. Online shopping is certainly now no longer a novelty in many African countries. African firms are also increasingly using the internet to improve their productivity. Adoption varies by country. Kenya is ahead of most in the use of the internet for managing inventory, online sales and purchases and marketing. Ghana and Zambia come second and third respectively. And this applies to both manufacturing and service firms.
| Table 1: Average cost of 1GB of mobile data (2019) | |
| India | $0.26 |
| Russia | $0.91 |
| Nigeria | $2.22 |
| United Kingdom | $6.66 |
| Canada | $12.02 |
| United States | $12.37 |
| Switzerland | $20.22 |
| Source: Forbes | |
Mobile telephony is engendering the formalisation of the informal economy in many African countries. Informal economic agents need to get documented and acquire some formal identification to secure mobile phone lines. With a mobile phone line, they are able to use mobile money for business transactions and remittances; thus increasing financial inclusion. Kenya and Uganda are prominent examples. Africans are increasingly able to do so because the cost of acquiring a smartphone and using the internet, though still expensive, is declining. In 2012-17, the average selling price of smartphones in Kenya, Nigeria and Tanzania declined by 44%, 35%, and 52% to US$118, US$121, and US$117 respectively.
Smartphone adoption in sub-Saharan Africa, which was 39 percent in 2018, is expected to reach 66 percent by 2025. Still, while cheaper smartphones and increasingly less expensive internet access for social networking offer new and constantly evolving opportunities for Africans, a digital divide with developed countries clearly remains. For massive economic and jobs impact, more Africans have to use the internet.
And if that is to be the case, smartphones and mobile data have to become much cheaper. There are already several cheap smartphone initiatives in a number of African countries. In June 2019, Google announced it was building a subsea cable connecting Africa to Europe. Subsea cables carry 99 percent of the world’s internet data traffic. Facebook, another global tech firm, is working on a low-cost to free African internet access initiative of its own. So, in a couple of years, African internet data rates could become much cheaper as well.
Rafiq Raji, PhD
Twitter: @DrRafiqRaji
21 Jul 2019
