African Lions need to ride digital wave

Rising Internet usage could rejuvenate key sectors like agriculture, retail and health in Africa

Following a decade of economic expansion, Africa is now going digital. Only 16 percent of the continent's 1 billion people are online, but that share is increasing rapidly as more mobile networks are built and prices of Internet-capable devices continue to fall.

More than 650 million Africans have mobile phones, some 167 million already use the Internet, and 52 million are on Facebook. The Internet is already a major catalyst for economic growth in China, India and Brazil, having contributed more than 10 percent of total GDP growth over the past five years. Its impact in Africa to date has been much smaller, but is likely to accelerate in the coming decade and could have a transformative effect on the continent's development.

There is a growing wave of innovation as entrepreneurs and large corporations alike launch web-based ventures, from e-commerce sites and digital entertainment platforms to mobile health technologies and online educational content.

Governments have placed Internet-driven growth firmly on their agenda, with several countries pursuing ambitious plans to expand high-speed Internet access. As a result, the Internet is likely to have a much bigger influence in the coming decade and could generate increased economic growth.

Mobile telephony has already had an outsized effect in Africa through its ability to connect people who previously had little or no access to telecommunication services. If the Internet produces a similar multiplier effect, it could contribute some $300 billion to Africa's GDP by 2025.

The impact could include e-commerce sales of $75 billion a year, sparking an e-tailing revolution that gives African consumers much wider choice at lower prices. It could also unlock significant productivity gains across business, government and social services.

The Internet will also generate economic growth and social transformation in six sectors: financial services, education, health, retail, agriculture and government.

In financial services, for example, M-Pesa's mobile money solutions have brought millions of Kenyans onto the financial grid for the first time. Remote diagnostics are expanding medical services to rural areas that have few healthcare professionals. Students are beginning to learn with new digital education tools, and e-government initiatives are connecting citizens with services.

Lions go Digital: The Internet's Transformative Potential in Africa, a report by McKinsey, evaluates each country's "iGDP", or the Internet's contribution to overall GDP. While they are not Africa's largest economies, Kenya and Senegal nevertheless emerge as its iGDP leaders, thanks to strong national ICT strategies that have stimulated Internet demand and private consumption. Senegal's iGDP stands at 3.3 percent of total GDP and Kenya's at 2.9 percent, levels comparable to those of France and Germany.

Kenya, in particular, is becoming known as the "Silicon Savannah". The country is developing Konza Techno City to attract a critical mass of high-tech firms, while its iHub incubator has launched more than 100 start-ups.

To unlock the Internet's full economic potential, five pillars must be in place: a national ICT strategy, infrastructure, a healthy business environment, financial capital and a workforce with the requisite technological skills.

The report assesses the strength of these pillars in each country, generating an overall score for Internet "readiness". The results reveal that South Africa and Morocco could emerge as the continent's future digital leaders. Morocco has the highest Internet penetration in Africa and recently announced a 10-year plan to create universal broadband access, while South Africa's Internet adoption is rapidly accelerating. With thriving business process outsourcing sectors, both countries already have positive Internet-related trade balances.

As Africa grows more connected, millions will tap into information and opportunities that were once beyond their reach. They will gain a greater voice in their communities and enrich the world's flow of commerce and ideas. Given levels of pent-up demand and the current pace of innovation, Africa's Internet-driven growth has the potential to catch up very quickly with that of other regions.

There is already a groundswell of activity paving the way toward a future in which digital payments displace cash, consumers shop online, students use personalized learning tools, and doctors connect with patients in rural villages.

To sustain this momentum, however, governments and the private sector will need to ensure that the foundations are in place to support demand and continue this wave of innovation. The report notes that increasing access and infrastructure, developing a workforce with ICT skills, and improving digital literacy in the broader population will be critical for the future growth of the Internet in Africa.

The author is director in McKinsey's Johannesburg office. He co-authored the report Lions go Digital and leads McKinsey's Telecoms and Business Technology Practices in Africa. The views do not necessarily reflect those of China Daily.

(China Daily Africa Weekly 05/23/2014 page9)