How Africa’s Digital Economies Can Deliver Inclusive Development
African governments and policymakers have a key role to play in facilitating the growth of digital economies through digital governance.
by Gugu Resha, Machel-Mandela Fellow
7 December 2021
For many people across the world, services like e-hailing, online and mobile banking, social media, web streaming, cloud storage and online shopping are now indispensable to daily life. These services have formed the building blocks of the networks of digital products, services, and techniques that we now know as the digital economy.
Like natural resources, new technologies and digitalisation have been hailed for their potential to accelerate economic growth and improve people’s lives all over the world. The progress made by digital products and services has been accompanied by promises of mass job creation, financial inclusion and greater economic participation which we have seen in some contexts like China, Japan and the US.
Digital economies have shown the ability to disrupt established industries and add value by improving technological efficiency, cutting costs and increasing the speed of services and broadening the reach of businesses beyond their traditional markets. Data experts are anticipating digitalisation to play an even bigger role in growing economies in the coming years — accounting for up to $6.8-trillion in direct investments between 2020-2030 globally.
However, we should be concerned about the distribution of the benefits from digital economies, especially in countries that already have high levels of social and economic inequality. In order for digitalisation to meaningfully transform economies, these opportunities must be available to smaller and medium-sized businesses and citizens from all socioeconomic backgrounds.
In Africa, particularly, digital economies must be developed in response to countries’ specific challenges and needs, such as poor infrastructure, low literacy levels and digital skills, widespread unemployment, low broadband access and poverty, among others. Thus, African governments and policymakers have a key role to play in facilitating the growth of digital economies through digital governance. Digital governance is a framework for setting the priorities of digital transformation, establishing policies, regulations and institutions to ensure development occurs in a consistent, inclusive and coordinated environment that is in line with national developmental goals.
The importance of digital governance has also been highlighted by the emerging challenges and threats witnessed across the world that come with increased digitalisation. These include the frequency of internet shutdowns by governments, thus compromising crucial internet access for everyday life and economic activities; the rise of cybercrime and its threats to key national infrastructure, security, and businesses; the exploitation of personal data through surveillance by governments and businesses; and the increase of substantial tax avoidance by digital and big tech businesses due to outdated tax policies that did not cater to the unique features of digital businesses.
While countries globally have been finding ways to update their policies and legislations to keep up with the digital era, Africa has been largely left behind as many African countries still do not have legislation on e-commerce, cybercrime, and other key digital and data protections. Some countries have few provisions and others have been lax in rigour and enforcement, providing piecemeal solutions rather than policies with multi-sectoral considerations and strategic aims.
The existence of a clear governance framework for digital services, products and access in Africa is fundamental for inspiring consumers’ confidence to participate in digital platforms and services, and for boosting the confidence of investors and entrepreneurs to establish digital businesses in a stable and predictable environment.
Priorities for digital governance
Prioritising inclusive development requires digital governance to address the structural and social challenges that hinder digital transformation, such as poor infrastructure, low broadband/internet penetration, unemployment and low economic participation, by setting clearer priorities and well-coordinated strategies to leverage digital opportunities to accelerate progress in these areas.
I have identified three thematic areas that are key for facilitating inclusive development: rules, rights and revenues. These themes focus on the regulations surrounding digital economic activities, the protections that guarantee affordable and secure internet access, and digital consumers’ and workers’ rights, as well as strategic ways to sustainably create revenues from the digital economy, boost economic growth, and create digital jobs for the continent’s sizeable youth demographic.
In my discussion paper, “Assessing the Potential for African Digital Governance to Facilitate Inclusive Development: Rights, Rules & Revenues” I discuss the importance of these thematic areas in detail and use it as a framework to compare the potential of Africa’s four leading digital economies (Kenya, Morocco, Nigeria and South Africa) to deliver inclusive development from their existing policies and institutions regarding digitalisation.
First, the analysis looks at the provisions of each of these countries on key policy regulatory issues such as data ownership, cross-border data flows and personal data protections. These rules determine the permissible ways that data handlers and agencies (businesses, social media, government etc) can store, use, and share people’s personal data, and sets out standards for safe, ethical and productive data management.
Second, it explores the scope of protections that are available for online consumers to shield them from exploitation and anti-competitive business behaviours, and for platform-based workers who have been battling for fair wages and contracts, working conditions and access to social benefits. It highlights the high-profile class action suit against Uber SA as a key case study of the challenges of workers on platform industries and how lack of labour protections for these workers adds to their precarity rather than empowering them.
Third, the analysis compares the provisions aimed at promoting and protecting revenues from the digital economy such as tax and investment incentives, and job creation schemes.
Key lessons: What African digital economies need to take off
1. Countries need clear policies, laws, regulations, and institutions to coordinate digital transformation in a well-defined digital governance framework.
2. Digital development must be inclusive and must facilitate widespread participation by funding universal access to the internet, promoting digital skills in schools and creating digital jobs.
3. Countries must incorporate digital rights in national policies and protect access by making internet shutdowns illegal and legislating personal information protections.
4. Countries must introduce consumer protections for harmful digital marketing and sales practices and incorporate digital/platform-based workers in existing labour laws.
5. Countries must ensure the digital economy is fair and competitive by mandating competition authorities and regulations to curb digital business practices that allow abuses of dominance.
6. Countries must scale-up their digital economies by forming public-private partnerships to improve digital infrastructure (broadband, reliable energy, data centres); provide funding for local digital entrepreneurs.
7. African countries must share digital policy best practices, coordinate policies multilaterally, and harness African Continental Free Trade Agreement (AfCFTA) as a vehicle.
Finally, the aim of this discussion is to interrogate the big claims that have been made about digitalisation and what it is expected to deliver all over the world. It prompts us to look at the facilitating conditions that either concentrate the gains of digitalisation among a few versus those that spread them to the majority of the population.
This comes down to policy choices, accountability measures, and how ready people of a country are to participate in the waves of innovation in terms of having skills, access and resources to do so. It is also meant to reflect on the progress that has been made in the digital space, and how we can position ourselves as Africa to not merely be spectators but active players in the local and global digital economy, and more importantly, to ensure that its benefits are equitably distributed.
Gugu Resha is the outgoing Machel-Mandela fellow at The Brenthurst Foundation