How Internet is changing African economies

Posted on August 3, 2017 12:08 am

Infamously, Economist magazine at the turn of this century described Africa as a hopeless continent, now the same publication hosts multiple of events across the continent and has been instrumental in the so called ‘Africa Rising’ narrative. Am not a firm believer of the narrative ingredients but i strongly believe in Africans and Africa potential. One of the ingredients that makes me hold the region high is Internet and the benefits aren’t limited to the people who operate it like ISP providers. Instead, like minerals, like electricity, it is shifting every industry into a different gear. Measuring that move, however, isn’t hard. The internet growth has provided statistics agencies to track the contribution of the industry as they do for others in the growth of African economy. And all too often critics and haters cite self-serving statistics that are impressively large but hard to compare with what happens in other industries with South Africa being a prime example. To this date, few are convinced that Internet will provide more jobs to South African population as mining industry has been.In my view, what’s needed is a figure that everyone agrees on as a benchmark for communities, governments and businesses to measure the internet by. Gross domestic product provides that measure. It is hard for others especially the common man, but it doesn’t leave much room for disagreement. Kenya, for example care about the things the internet advocates, such as freedom of information, time efficiency, or new models of sharing all of which may create economic value, however difficult they are to measure. In simpler terms, GDP simply wants to know, in the end, how much money people, businesses and the government spent on the internet and with more than 30 million internet users, Kenya has been trying over the last few years to come up with some figures.A South African economist who was involved in commissioned research to measure the internet’s contribution to GDP in Africa, told your blogger recently that he took the economic pulse of Africa’s internet. Before the final results came in, he wasn’t sure where they would land. Africa has a growing tech sector and a remarkably rapid embrace of smartphones. But it lacks access to the cheap, fast internet you find in developed countries, where the internet contributes about close to ten per cent of GDP. Countries such as Kenya, have broadband penetration rates below the global average, have an internet economy at about 2 per cent to 5 per cent of GDP. It turns out the internet contributed close to $3 billion to the Kenyan economy last year. That’s about the same level as the internet contributes to South Africa’s economy, even though South Africa’s internet penetration is higher. More surprisingly, it matches the contribution from Tourism, coffee, Tea exports.

How did the internet grow to be as large as Kenya’s main commodity export? The answer lies in using a different definition of what counts as an internet business from the one African countries have been using for the last ten years. The data availed to your blogger basically abolishes the idea of an internet business in this day and age being somehow special and distinct. Every business in Africa is an internet business or will be in the next three years.That’s not to say that this particular transformation has been easy for every business in Kenya or any other African country. No technological change comes for free. The important thing is for African companies to understand that the change has occurred. Whether they like it or not, African consumers are building their lives around the internet. And even the most traditional African business uses the internet to some extent be it email or mobile banking.When African traditional businesses realize how much they have to gain by embracing the internet rather than assuming it’s something that only tech companies can exploit, they really embrace it. What’s true of such companies is true across the economy. A business survey conducted in Ghana and Nigeria as part of the research shows the two countries main industries are rewiring themselves around the internet. The primary businesses reported some of the greatest benefits from using the internet. It’s also important to note the value to Africa households of the shift in the economy from offline to online. The GDP figures show how much Africans pay for the internet, but not necessarily the benefits they get from it. Each one of us know the internet saves time. But what most people don’t calculate is how much is that time worth.Data available to your blogger reckons it’s worth USD$60bn a year to Africa. Similarly, it’s obvious the internet brings greater variety of goods to Africans doors and the variety worth according to the data is $28 bn a year.Adding up all these kinds of benefits, greater convenience and recreation among them, data estimates Africa households are getting $120bn in value from the internet. Overall, African households and businesses are seeing a big return on their investments on the internet, although the investment levels have yet to reach the levels you’ve seen in developed economies. The amount of activity on Africa’s internet has doubled over the past three years but its still the laggard compared to other continents in the world. With that much room to expand, the value of the internet’s contribution is set to grow at about 12 per cent a year over the next three years, triple the rate economists have pegged for the African economy as a whole. That’s a boom that every African firms should be enjoying because every business is contributing to it.

Contador Harrison