Will Digital Technology Help Africa’s Economies Thrive?
In Africa, more people have access to cell phones than to toilets or clean drinking water, according to Bhaskar Chakravorti, dean of global business at The Fletcher School. That widespread adoption of digital technology supports new ways of doing business, such as mobile payments, that could help struggling African economies “leapfrog” from poverty to economic growth and stability. But is the technology fueling a turnaround?
The answer depends, at least in part, on national policies, Chakravorti said. Tech-friendly governments helped Kenya and South Africa emerge as digital economy leaders in the African Leapfrog Index, a ranking created by Chakravorti and his team at Fletcher’s Institute for Business in the Global Context (IBGC). The index was developed to examine how countries in Africa are harnessing digital technologies to boost their economies. It ranks the digital economic ecosystems of six countries selected to provide a representative cross-section of the continent.
The index is meant to spark healthy competition among nations, providing an incentive for bureaucrats to make change. In a new initiative called Imagining a Digital Economy for All: IDEA 2030, the IBGC will create leapfrog indexes for countries around the world “to put that pressure on the decision-makers in the policy establishment,” Chakravorti said. “We’re trying to understand how the mobile phone can potentially reduce inequalities.”
Kenya and South Africa topped the ranking published by the IBGC in September. Kenya is a hive of mobile payments and digital enterprise supported by a tech-positive government, the researchers said, and South Africa benefits from a reliable energy grid and transportation infrastructure, a citizenry eager to try digital business, and favorable digital regulations.
Next were Rwanda, lauded for “Punching above its weight”; Egypt and Nigeria, with “Untapped opportunities for growth;” and Ethiopia, described as having the “Potential for greatest digital gains.”
The researchers considered factors such as jobs enabled by digital platforms; institutional drivers for digital success, including infrastructure and regulations; and each country’s digital potential, indicated by its progress over the last decade and its citizens’ access to digital money.
“It was hard to find one country that was uniformly strong across all the different parameters that we used for our study,” Chakravorti said. The differences could not be explained entirely by a country’s wealth; other factors, such as political leadership, affected how much a nation’s economy benefited from digital technology, he said.
A report accompanying the rankings suggests ways that countries could improve their scores. For example, South Africa could make digital payment capabilities more inclusive and widespread; Kenya would benefit from policies promoting education, digital skills, and health care; and Egypt would rise in the ranks if it reduced Internet censorship.
Chakravorti expressed optimism about Africa’s economies. The continent’s young population, low starting point, and several countries’ emerging middle classes suggest it is poised for growth, he said, despite increasing poverty in sub-Saharan Africa and entrenched inequalities that led the IMF and the World Bank to cut their 2019 economic growth projections for the region.
The African Continental Free Trade area, which went into effect in the spring of 2019, opened a possible market of more than one billion consumers and a collective GDP of more than $3.4 trillion. While that alone won’t catalyze change, “if the policymakers and the governments of these countries could really make the Continental Free Trade Area a reality, we could see Africa truly leapfrog,” Chakravorti said.