Kathy Gibson reports – The digital platform economy could be a game-changer for South Africa, potentially adding R91,4-billion to the economy by 2035.
This growth would see the sector’s contribution expand from 0,02% of GDP in 2022 to a meaningful 1,38% by 2035.
These are among the findings of a new research report from Naspers and the Mapungubwe Institute for Strategic Reflection (MISTRA) that explores the untapped potential of the country’s digital platform economy – a sector which includes online platforms that facilitate economic transactions.
Key highlights of the report include:
* Collective action is needed to spur South Africa’s digital transformation journey. Business and government must work closely together to address growth hurdles and create an enabling environment for digital platforms to thrive.
* Digital transformation in South Africa is lagging, while the demand for digital skills is rapidly growing.
* Infrastructure is crucial for unlocking the potential of digital platforms and AI.
* Regulations need to evolve in line with the emerging digital platform sector.
* Digital platforms will play an increasing role in driving economic inclusion and enhancing social protection.
According to the report, addressing these findings and achieving consistent economic growth of 3% per year could enable a massive 20-times expansion in the digital platform market by enabling the growth of existing digital platforms and spurring the growth of new platforms.
In addition, they could boost the sector’s GDP contribution from 0,02% in 2022 to 1,38% by 2035, while injecting more than R90-billion into South Africa’s economy by 2035.
Phuthi Mahanyele-Dabengwa, CEO of Naspers South Africa, believes the digital horizon is no longer a distant future.
“But, while some users and businesses are thriving, some are still disconnected,” she adds. “The gap is not just a digital divide, but a gap in opportunity.
“We must unlock our full potential through widespread digital inclusion, and we can’t do this without addressing access.
Mahanyele-Dabengwa points out that mobile connectivity in South Africa has reached impressive penetration rates of more than 100%.
“But this hides a more concerning reality: 80% of South African households lack access to broadband connectivity, which is a barrier to participation in the digital economy – so mllions cannot access the opportunities of the digital economy.
“We believe the digital economy can become the flywheel of South Africa’s economy, driving sustained development and inclusion,” she says. “But, without decisive action, it will be nothing more than a pipedream, as we watch nations around the world harnessing the benefits of the digital economy. If we fail to address the gap, it will continue to widen.
“For this potential to be realised, collaboration is key,” Mahanyele-Dabengwa adds. “Public and private sectors must join forces to bridge the digital divide by expanding digital access, accelerating digital skills to underserved communities and ensuring regulations fuel innovation and create a level playing field.
“By doing so, we will ensure that no individual or community is left behind. If we get this right, it will be a game changer for inclusive growth and propelling South Africa into a prosperous digital future.”
Around the world, successful economies are fast transforming into digital economies while the pace of digital transformation in South Africa is relatively slow.
Globally, there has been a significant shift towards digital dominance among the world’s top companies over the past decade. In contrast, South Africa’s leading companies have seen little change in composition during the same period, reflecting a more gradual pace of digital transformation which is still in its early stages.
The report highlights key opportunities, including how South can drive digital transformation and attract new entrants in sectors like e-commerce and fintech, fostering innovation and greater inclusion.
Case studies from Kenya and Nigeria showcase how startups are addressing local needs and driving digital growth across Africa.
Additionally, the report emphasises the critical need for increased venture capital investment to unlock the full potential of South Africa’s digital economy, especially in underfunded sectors like fintech and healthtech.
Joel Netshitenzhe. executive director of Mistra, says: “At its core, the digital platform economy has the potential to drive inclusive and transformative growth, unlocking opportunities for millions of South Africans eager to engage in this dynamic sector.
” There are vast opportunities before us and it is clear that a thriving digital platform economy could bring enormous value to South Africa. While the foundational elements are in place, significant barriers remain that hinder society from realising this potential.
“The encouraging central message of the report is that solutions are within reach, but they require urgent collaboration and bold actions from all stakeholders.”
Digital platforms cut across all sectors, says Shamiela Letsoalo, director corporate affairs at Naspers and board member of the E-Commerce Forum SA.
To this end, the research included multiple stakeholders from industry and business associations, government institution, digital skills providers, start-ups, SMMEs, DFIs and media.
Only 4% of South Africa’s top 20 companies are involved in digital technology – way behind our peers in the rest of the world. “So we need to look at more digital transformation to unlock the potential.”
Worldwide, the most valuable companies are tech giants, and the countries that are cresting wealth for their citizens are those with good technology access.
“But South Africa has huge unemployment, massive inequality, and poor spatial planning combined with infrastructure challenges that need to be taken not account,” Letsoalo says.
The numbers show that only 10% of the population has access to Internet through fibre or fixed wireless access, and 80% of homes remain unconnected to broadband connectivity.”
South Africa is only fifth in digital literacy on the continent, and is behind in take-up among poor communities compared to countries like Nigeria and Kenya.
To unlock the full potential of the digital platform economy, the research makes recommendations to address key findings:
Finding 1: The pace of digital transformation in South Africa is slow. Between 2010 and 2022, the world’s top 20 companies shifted from being resource-driven (36% to 70%) to be dominated by digital platforms (16% to 56%).
* Drive collective action among business, government, and civil society for faster digitalisation.
* Develop a national digital transformation dashboard to track progress.
* Accelerate digital adoption and improve data privacy and cybersecurity.
* Broaden marketplace opportunities to spur local industrialisation.
Finding 2: The demand for digital skills is growing rapidly – STEM graduates in South Africa account for just 18% of the total, compared to over 30% in innovation leaders like India, the UAE, and South Korea.
* Boost STEM education from the basic level.
* Coordinate digital skills training programmes nationally.
* Align training with high-demand occupations and industry needs.
“We are going to have to better, and double, the number of STEM graduates we produce,” says Letsoalo.
Finding 3: Infrastructure is key to unlocking the promise of the digital platform economy and AI. At an average of $1.81 (R33.21) per GB, mobile data costs in South Africa are among the highest in Africa, surpassing those in markets like Nigeria, Namibia, and Kenya.
* Fast-track high-speed Internet and digital infrastructure expansion.
* Prioritise digital platform infrastructure in national development plans.
* Improve energy and logistics reliability for digital services.
“This is not just about the digital infrastructure,” Letsoalo points out.
Finding 4: Regulations must be alive to the nascent nature of the South African digital platform sector. It can take up to 180 working days to process certain regulatory approvals which hampers timely access to digital infrastructure and services.
* Introduce regulatory sandboxes to encourage innovation.
* Support hyperlocal platforms to foster digital inclusion.
* Include the digital platform sector in national economic tracking systems for better regulation.
Finding 5: Digital platforms will play a bigger role in economic inclusion and social protection. SMEs contribute 30% to 40% of GDP, but in townships and rural areas they are mostly informal and lack focus on competitive products or digital services.
* Enhance SME participation and market access.
* Develop incentives for local producers in e-commerce.
* Promote social protections for gig workers.
* Expand digital access in rural and underserved areas.
“If platform businesses can create vast numbers of jobs, we should enable that,” Letsoalo says.
“There can be no doubt that the digital platform economy is a catalyst to inclusive economic growth,” Netshitenzhe concludes.
He points out that overall economic performance is the lifeblood of digital platforms, as it relates to matters of ICT and broader infrastructure, and disposable income.
Importantly, we need to appreciate how these platforms change our lives in fundamental ways – and how the way people and businesses interact is being defined and redefined.
The bottom line, that digital platforms can add R91,4-billion to the economy, won’t happen without some critical enablers, Letsoalo says.
These include a 20x growth of digital platforms’ value-added contribution to South Africa over the next 10 years, an economic growth of at least 3% per annum, and a concerted focus from all stakeholders.
“By collaborating across sectors and being committed to this shared vision, we can ensure that South Africa doesn’t just participate in the digital economy, but leads it – creating a prosperous and inclusive future for the country,” Letsoalo concludes.