Low uptake of digital tools hindering African businesses — IFC

A report from the International Finance Corporation has revealed that only one in four African businesses use sophisticated digital technology in their operations.

This is despite evidence that using digital technology is associated with business productivity. The IFC disclosed that 86 percent of firms with five or more workers have access to digital enablers, like mobile phones, computers, and the internet.

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However, 23 percent of these digitally enabled firms have yet to adopt advanced digital technologies for productive tasks such as business administration, planning, sales, and payments. In comparison, 39 percent of firms adopt digital technologies for these functions but do not use them intensively.

According to the global development institution, barriers to this digital integration include machinery and equipment, both digital and analogue, which are 35–39 percent more expensive in Sub-Saharan Africa than in the United States.

Other factors, such as electricity, digital infrastructure, and specialised high-skilled workers, are also scarce and expensive in Africa compared to other regions of the world.

Importantly, digital literacy and infrastructure have also posed a problem to digital advancement. “In Africa, we need software engineers, IT specialists, maths and science graduates. There is a scarcity of people in these industries which constrains development,” said, Susan Lund, IFC’s vice president for economics and private sector development.

IFC estimates suggest that this expansion of connectivity could lead to a 10–11 percent annual drop in the price of broadband internet below the historical trend. About $6 billion worth of investment in middle and last-mile infrastructure is required annually to reduce prices and increase the number of connections among new users.

IFC further suggested that governments in Africa have a crucial role to play in addressing these problems. One way to do this is to implement regulatory reforms promoting competition and a level playing field for businesses so they can attract investments and encourage foreign participation.

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Ultimately, the developmental organisation highlighted that over 600,000 formal businesses and 40 million microbusinesses in Africa could substantially benefit from digital processes and services, highlighting a vast market for digital services, platforms, and infrastructure development.

“We find that at every step of digital integration, businesses become more productive, revenues grow faster, the business employs more people, pays higher wages, so when you think about long-term growth and bringing people out of poverty, digital adoption is really important,” Lund added.