How emerging technologies and digital transformations can accelerate economic and societal growth in 6 African countries.
Africa’s vast untapped potential has been the subject of numerous studies, including McKinsey’s 2010 Lions on the Move report, which was among the more widely cited reports on this potential.1
Africa will be home to some of the youngest populations in the world. The median age on the continent today stands at 19.4 years. By 2050, a third of the global youth is projected to be in Sub-Saharan Africa (SSA) with a median age of 23.9 years.
Africa’s will be a major consumption market over the next three decades – and it is going to be digitally enabled. According to a recent Pew Research Center study of six major SSA countries, mobile phone penetration is between 75% and 91%.5 The youth are among the earliest adopters and most frequent users.
With nearly 200 million young people added to the labor force in the next 12 years, most of whom will fall somewhere on a spectrum between digitally sentient and digitally sophisticated, the digital economy is poised to be not just the driver of consumption but also livelihoods. Fostering inclusive digital economies is therefore not a choice, but an imperative for Africa’s future.
The actual growth throughout Africa was as low as 2.3% in 2018.
10 of the 19 most unequal countries in the world are in SSA4 and it remains one of the world’s most unequal regions.
Of the world’s extreme poor, 437 million are in SSA.
Over two-thirds of the continent lacks mobile internet subscriptions, according to GSMA Intelligence data from 2017-2018.
Apart from Kenya and South Africa, the relatively more advanced payment markets, use of digital payments remains low.
There is plenty of evidence that despite the challenges, the region still has “robust long-term economic fundamentals. There is a wider belief that the true acceleration potential for the region lies in the rapid spread of mobile digital technology, which would help the region “leapfrog”: compress the process of economic development by harnessing technological innovation to overcome its many challenges.
Getting lions to leapfrog—or even to stir—may seem like a tall order. However, as The Economist notes in a special report, wondering whether Africa can leapfrog and beat the pace of change of developed regions may be the wrong question to ask. A more nuanced question may be: Can technology help overcome the primary barriers that have long held back Africa’s economies and people? And can they narrow their digital gaps vis-à-vis external benchmarks?
The African Leapfrog Index (ALI) is a novel framework that draws upon the primary levers that facilitate the translation of digital technologies into development and inclusive growth.
These levers exist in three categories: jobs enabled by digital platforms; institutional drivers necessary for digital success; and the foundational digital potential of the country. The framework evaluates six African countries against a continent-wide “best-performance” benchmark to identify strengths to build upon and the opportunities to close gaps.
We examined the potential of digital transformations using six key countries drawn from different sub-regions of the continent representing distinct archetypes of size (of economy and population), economic growth, median age, quality of governance, and digital momentum – Egypt, Ethiopia, Kenya, Nigeria, Rwanda, and South Africa – to draw meaningful inferences on the region’s leapfrog potential and identify implications for action. Using this framework, we examined the primary levers for harnessing digital technologies to facilitate development and inclusive growth, from the ease of creating digital jobs, to the resilience of governance and infrastructure, to overall foundations of digital potential.
The six African countries studied display distinctly different profiles in leapfrogging. Each has a different combination of leapfrog strengths and opportunities for growth.Their relative standing along each of the essential dimensions are summarized in Exhibit 2 below. The outer boundary represents the benchmark and each country’s footprint is shown within the figure. The closer the footprint is to the outer boundary, the higher the leapfrog potential in the country.
The regional leaders represent different areas of strength and opportunities to grow. To get to the benchmark and develop a more balanced, well-rounded leapfrog profile, Kenya’s priority would be to improve its Ease of Creating Digital Jobs – i.e., nurturing jobs in the digital economy, such as online freelance, ridesharing, and in e-commerce – while South Africa’s priority needs to be to improve on Foundational Digital Potential – i.e., expanding the integration and use of digital technologies across society. While Kenya has the seen the greatest amount of digital change over the past decade of all African countries studied and has over 80% Internet penetration, it can, for example, improve its education and skill-building capacity to enhance its ability to grow higher-skilled digital services jobs. South Africa, on the other hand, can improve its payments capabilities; it made 65% of payments in cash, as compared to 40% in Rwanda – and this is despite the fact that Rwanda has only 30% of its population on the Internet compared to South Africa’s 54%. South Africa’s strength in creating high skilled digital jobs – through a balanced repertoire of strengths in available human capital, market sophistication and facilitating institutions – is impressive when compared to similar baskets of developing world nations from ASEAN and Latin America; it is competitive in a global marketplace for such high-skilled jobs, such as digital freelancing.
Rwanda has several core strengths in Governance (providing digital government services), Digital Evolution (its overall state of digital development) and Mobile Money (use of mobile money accounts, and other forms of digital money). These are solid foundations to build upon to facilitate digital leapfrogging. It needs to invest in the other capabilities – such as infrastructure, Internet penetration and online freedoms to fully leverage its core strengths.
Nigeria’s route to capturing more digital opportunities runs through improving the reliability of basic infrastructure. While Nigeria is strong in internet affordability, investments in reducing power outages and other unintentional disruptions to the internet will be key to enhancing its digital potential. Of the six countries studied, Nigeria has the biggest gap to close in this area.
When compared with the six other African countries, Egypt’s primary strengths are in the potential ease of creating medium and high skilled digital jobs, due in part to its high number of skilled graduates. Egypt’s tertiary unemployment rate is high: ILO estimates from 2014 place it at 34 percent. Tapping into its digital potential and continuing to drive efforts to digitize payments will enable the country to more fully capitalize on these strengths.
Ethiopia, with its high rate of GDP growth, has the most to gain from creating strong digital foundations and basic infrastructure, improving on its low momentum, and moving away from its near total reliance on cash payments towards digital payment rails.
1 Roxburgh, Charles; Norbert Dörr, Acha Leke, Amine Tazi-Riffi, Arend van Wamelen, Susan Lund, Mutsa Chironga, Tarik Alatovik, Charles Atkins, Nadia Terfous, and Till Zeino-Mahmalat. McKinsey Global Institute. Lions on the move : The progress and potential of African economies. 2010.
2 African Population (live). Worldometers. Accessed 3 September 2019. <<https://www.worldometers.info/world-population/africa-population/>>
4 Median age of the total population (years), Sub-Saharan Africa, 2015. UN Population Prospects 2019. Accessed 4 September 2019. << https://population.un.org/wpp/DataQuery/ >>
13Calderon, Cesar, Gerard Kambou, Vijdan Korman, Megumi Kubota and Catalina Cantu Canales. Africa’s Pulse, No. 19, April 2019: An Analysis of Issues Shaping Africa’s Economic Future. 2019. World Bank. doi:10.1596/978-1-4648-1421-1
15 Roxburgh, Charles; Norbert Dörr, Acha Leke, Amine Tazi-Riffi, Arend van Wamelen, Susan Lund, Mutsa Chironga, Tarik Alatovik, Charles Atkins, Nadia Terfous, and Till Zeino-Mahmalat. McKinsey Global Institute. Lions on the move : The progress and potential of African economies. 2010.
18ITU Database 2019
21Power outages in firms in a typical month (number), World Bank Enterprise Surveys, latest available year
22Freedom on the Net, Freedom House, 2018
26Tertiary graduates by level of education, UNESCO, 2016
27Unemployment, total (% of total labor force) (ILO Estimate): ILO 2018
36World Beyond Cash, The Fletcher School, 2018
39World Bank 2018