Internet set to transform Africa's economies, states new report

Internet usage AfricaInternet usage across Africa could add US$300bn a year to the continent's GDP by 2025. (Image source: Arne Hoel/World Bank)A new McKinsey report released at this year's ITU Telecom World in Bangkok has highlighted how the fast growth of Africa's Internet usage could add US$300bn a year to the continent's GDP by 2025, while transforming key sectors including agriculture, retail and health

The report, Lions go digital: The Internet's transformative potential in Africa, has examined the progress and potential of the Internet in 14 economies that together make up 90 per cent of Africa's GDP. It mapped the progress of each country on its digital journey, and highlighted steps that the public and private sectors could take to capture the Internet's full potential.

"The Internet is a catalyst for economic growth – in China, India, and Brazil, it has contributed more than 10 per cent of total GDP growth over the past five years. Its impact in Africa to date has been much smaller, but is likely to accelerate in the coming decade – and could have a transformative effect the continent's development," said Johannesburg-based McKinsey director and co-author of the report, Saf Yeboah-Amankwah.

Following a decade of economic expansion, Africa is going digital. Only 16 per cent of the continent's one billion people are online, but that share is rising rapidly as mobile networks are built out and the cost of Internet-capable devices continues to fall. More than 720mn Africans have mobile phones, while some 167mn already use the Internet, and 52mn are on Facebook.

There is a growing wave of innovation as entrepreneurs and large corporations alike launch web-based ventures, from e-commerce sites and digital entertainment platforms to mobile health technologies and online educational content. Governments have placed Internet-driven growth firmly on the agenda, with several countries pursuing ambitious plans to expand high-speed Internet access to most of their populations.

As a result, the Internet is likely to take hold on a much larger scale in the coming decade – and could generate magnified economic growth. Mobile voice has already had an outsized effect in Africa as it connected people who previously had little or no access to telecommunications. If the Internet produces a similar multiplier effect, it could contribute some US$300bn to Africa's GDP by 2025.

The impact could include e-commerce sales of US$75bn a year – sparking an e-tailing revolution that gives African consumers much wider choice at lower prices. It could also unlock significant productivity gains across business, government and social services.

The Internet will generate economic growth and social transformation in six sectors in particular: financial services, education, health, retail, agriculture, and government. In financial services, for example, M-Pesa's mobile money solutions have brought millions of Kenyans onto the financial grid for the first time. Remote diagnostics are expanding medical services to rural areas that have few health-care professionals. Students are beginning to learn with new digital education tools, and e-government initiatives are connecting citizens with services.

The report evaluated each country's 'iGDP', or the Internet's contribution to overall GDP. While they are not Africa's largest economies, Kenya and Senegal nevertheless emerge as its iGDP leaders, thanks to strong national ICT strategies that have stimulated Internet demand and private consumption.

Senegal's iGDP stands at 3.3 per cent of total GDP and Kenya's at 2.9 per cent – levels comparable to those of France and Germany. Kenya, in particular, is becoming known as the 'Silicon Savannah'. The country is developing KonzaTechnoCity to attract a critical mass of high-tech firms, while its iHub incubator has launched more than 100 start-ups.

To unlock the Internet's full economic potential, five pillars must be in place: national ICT strategy; infrastructure; a healthy business environment; financial capital; and a workforce with the requisite technology skills. The report assesses the strength of these pillars in each country, generating an overall score for 'Internet readiness'.

The results revealed that South Africa and Morocco could emerge as the continent's future digital leaders. Morocco has the highest Internet penetration in Africa and recently announced a 10-year plan to create universal broadband access, while South Africa's Internet adoption is rapidly accelerating. With thriving business process outsourcing sectors, both countries already have positive Internet-related trade balances.

"As Africa grows more connected, millions will tap into information and opportunities that were once beyond their reach. They will gain a greater voice in their communities and enrich the world's flow of commerce and ideas," said Yeboah-Amankwah.

"Given levels of pent-up demand and the current pace of innovation, Africa's Internet-driven growth has the potential to catch up very quickly with that of other regions. There is already a groundswell of activity paving the way toward a future in which digital payments displace cash, consumers shop online, students use personalised learning tools, and doctors connect with patients in rural villages," Yeboah-Amankwah added.

To sustain this momentum, however, governments and the private sector will need to ensure that the foundations are in place to support demand and continue this wave of innovation. The report noted that increasing access and infrastructure, developing a workforce with ICT skills, and improving digital literacy in the broader population would be critical for the future growth of the Internet. 

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