South Africa’s sluggish economic growth is set for a shot in the arm with the digital economy poised to be a major driver.
This is according to Christopher Kistasamy, CEO of MakwaIT Technologies, who writes that the sector contributes up to 19% of GDP and is the fastest-growing component of most economies. Nurturing it could significantly accelerate South Africa’s growth.
South Africa’s fiscal recovery remains slow, with GDP inching up by only 0,1% in Q4 of 2023. While forecasts predict 1,6% growth over the next three years, this could be significantly hampered by the country’s ailing infrastructure, particularly the unreliability of its logistics and electricity supply.
These sentiments were echoed by Deputy President Paul Mashatile, who recently ignited a call for a digital revolution across Africa, urging all individuals, businesses, and governments to be “digitally enabled and ready” by 2030. This ambitious vision positions South Africa as a leader on the continent, at the forefront of a digital leapfrog strategy to overcome subdued economic growth.
To unlock the full potential of the digital economy, South Africa needs a four-pronged attack:
Shift #1: From consumption to creation
The country’s lacklustre growth demands a bold move: ditching the consumption mindset and embracing a production-driven digital economy. By adopting a “digital-first” approach, we can develop innovative goods, services, and business models that tackle local challenges.
But the potential doesn’t stop there. These homegrown solutions, which are set to unlock an estimated R5-trillion in value across key sectors like agriculture, infrastructure, and manufacturing domestically over the next decade, can be exported globally.
This shift reframes our narrative. Instead of passively waiting for external catalysts, South Africa can become a hub for innovation and job creation, leading the digital revolution across Africa.
Shift #2: Building a thriving ecosystem
A thriving digital economy needs fertile ground. Government leadership is paramount to create this enabling environment. Inspired by successful initiatives like India’s National Deep Tech Startup Policy, South Africa must develop targeted policies that foster a conducive digital ecosystem. This could involve:
* Specialised funding programs to fuel innovation;
* Promoting the adoption of local technologies through favourable procurement rules for both public and private sectors; and
* Sharing infrastructure and resources to accelerate product development.
By taking these steps, we can cultivate an environment where digital businesses flourish.
Shift #3: Private sector muscle needed
While government support is vital, sustained growth in the digital economy hinges on the active participation of the private sector. The success story of South Africa’s “Silicon Cape” demonstrates the transformative power of collaboration between local government and private investors.
It’s no wonder then that Cape Town has been ranked as one of the world’s fastest-growing regions for foreign direct investment. Further incentivising private investment is essential to fuel innovation and propel the country out of its economic stagnation.
Shift #4: Going global for growth
South Africa’s ambitions must, however, extend beyond domestic borders. By leveraging the African Continental Free Trade Agreement and advocating for a common BRICS currency, we can unlock new markets and investment opportunities.
This not only empowers the country to export its tech solutions but also fosters enhanced economic cooperation with other countries, ultimately bolstering South Africa’s GDP and strengthening its position on the global stage.
The time for waiting is over. The country’s slow growth, despite surpassing pre-pandemic levels, remains far too low to generate the jobs, government revenue, and investment needed for essential services. Embracing a digital-first strategy presents a golden opportunity.
By implementing this four-pronged approach, South Africa can unlock its digital potential to transform itself into the continental leader in innovation and job creation. This digital leapfrog is not just possible, it’s imperative for a brighter economic future.