Kathy Gibson is at Mobile World Congress 2022 – Africa’s digital economy, driven by mobile commerce, could be worth as much as $180-billion by 2025.
This is one of the conclusions from a new white paper, “Towards a Flourishing Digital Economy for all – a Spotlight on Africa”, commissioned by the UK’s Department for International Trade and conducted by GSMA’s Mobile World Live team of analysts and presented today on the sidelines of Mobile World Congress 2022.
Dr Mike Short, chief scientific adviser of the DIT UK, comments: “Our report triggers a much-needed discussion on how to advance the mobile commerce revolution in Africa, which will in the long-term lead to mutually beneficial digital trade between the continent and its trading partners, including the UK.”
Digital commerce is growing fast all over the world, removing physical barriers to trade and increasing choice for millions of people. It also frees up time to pursue other activities.
This is especially the case in developing economies, with the United Nations estimating that Internet business in Africa could add $180-billion to the continent’s GDP by 2025.
However, Africa is a mobile-first continent, with leading digital vendors estimating that 75% of their transactions are made via smartphone.
“So it’s clear that stakeholders must focus on mobile as the foundation for future growth,” the report concludes. “This means extending coverage to rural regions, continuing the rollout of 4G, making smartphones more affordable and improving digital literacy among marginal groups.
“These are real challenges but there are also very real opportunities. The UK government believes that the mobile industry and Africa’s vibrant tech and entrepreneurial community can work together with its partners to address these challenges.
“International collaboration between the private and public sector could be the key to unlocking the immense opportunity for mobile-driven digital trade on the continent.”
Mike Freer, minister for exports at the UK Department for International Trade, says this century will redefine Africa, and digital trade will be at the heart of this growth. Indeed, by 2050, half of global trade is expected to be digital.
The African Union estimates that about 58% of the population now live in areas covered by 4G networks.
Africa has over 480-million mobile money accounts, more than all other developing regions combined, and more than 500 African companies provide fintech services – with a collective valuation exceeding $1-billion. There are more than 640 tech hubs active across the continent.
Africa has a youthful population with a median age of 19,7 years in 2020, and 41% of the population under the age of 15.
While digital solutions are being created, these rarely trickle down to the real economy, and create too few jobs. A very real connectivity deficit means that only 26% of rural dwellers use the Internet regularly, compared with 47% of city-dwellers.
Affordability is a big issue: in 37 African countries, more than 50% of the population cannot afford 1GB of data per month, and just 31% of all African firms have a website.
Dr Short explains that the issue of identity is another fundamental challenge to realising the digital economy in Africa.
When commerce is digital, identity is a real barrier to making a purchase. It is estimated that 29% of adults in sub-Saharan Africa have no way of identifying themselves. And the percentage is much higher among women, youth, and the very poor.
To address this, many African countries are trialling digital ID programmes that are robust and workable despite the absence of bank accounts and even postal addresses.
Without an official postal address, delivery inevitably becomes an issue. Some efforts to overcome this include solutions like what3words and Google’s initiative to create an Open Buildings dataset.
Despite these challenges, there is a flourishing e-commerce market in Africa, with companies like Jumia and Takealot making huge inroads.
Already, 75% of all e-commerce in Africa is mobile commerce. So clearly Africa’s digital future depends on the reach and affordability of its cellular networks.
Enabling infrastructure is vital to the success of digital commerce. By 2025, it is expected that 615-million people on the continent will have a mobile subscription, but that will still mainly be 3G, with 5G expected to be available to only a very small number of users in South Africa.
This year, just one-third of people in sub-Saharan Africa will be using mobile internet, rising to nearly 40% by 2025.
In sub-Saharan Africa, smartphones account for fewer than half of total mobile connections, with the cost of an Internet-enabled handset an enduring problem. Sub-Saharan Africa has the least affordable handsets of any region. The global median cost of the cheapest Internet-enabled handset as a percentage of monthly GDP is 19%. In sub-Saharan Africa it is 26,5%.
Affordable data is a similar obstacle: the affordability of 1GB has remained relatively stable across all low to middle-income countries (LMICs) since 2018, and for 5GB it has improved significantly. Still, in 2021 the poorest 7% of people would expect to spend two-thirds of their monthly income on a data plan. In sub-Saharan Africa, this increases to 15%.
In addition, digital illiteracy and social factors prevent millions from using the mobile Internet – even if affordable network coverage is available.
“There’s plenty of evidence that being able to buy and sell online can transform lives,” according to the report. “So it’s incumbent on stakeholders to unlock the potential of this excluded population.
“The mobile industry has launched many initiatives to improve digital skills and also to make technology easier to use. It must continue this work and reach out to other stakeholders to help bring millions into the digital economy.”