Current Development of the Digital Economy in Africa

The digital economy not only grows rapidly in Europe, America and East Asia, but also extends to Africa. Especially with the gradual popularization of the internet, many forms of the digital economy are increasingly accepted by local governments and people in Africa. With the rapid growth of internet infrastructure in Africa and the spread of smartphones, more and more people can fully enjoy the benefits of the online world. There are a number of positive factors which have promoted the swift development of the digital economy in Africa.

First, the development of communication networks has shown initial results. Most African countries have achieved a basic coverage of their urban areas with 3G networks, with 4G networks covering some core areas. Statistics show that Africa has about 330 million internet users, accounting for 27% of the total population and 9.2% of global internet users. Kenya, Nigeria, and South Africa are the top three countries in terms of the number of internet users, accounting for 69.6%, 51.1% and 49% of the total population respectively. Besides, sub-saharan Africa is expected to achieve a 20-fold increase in the number of internet users.4 As early as in November 2013, a report by the Us-based consulting firm Mckinsey stated that the number of internet users in Africa had reached 167 million in that year. With the continued improvement of internet infrastructure and the declining cost of internet access, the report concluded, Africa had entered the era of digital economy.5

Second, the development of the smartphone market is accelerating. Africa has the fastest growing smartphone market in the world. An

increasing number of African citizens are using smartphones to access the internet, as affordable smartphones have become more widespread and the cost of internet access is falling. With the gradually increasing potential of the mobile communication market, relevant infrastructure has witnessed significant improvement, and the demand for mobile communication services among Africa’s young population has been continuously growing. Africa has been widely recognized as one region with the most apparent growth of smartphone users in the world. As stated by the Global System of Mobile Communication (GSM), there had been 250 million smartphone users in sub-saharan Africa by the end of 2017, about a third of the region’s population.6

Third, e-commerce platforms are on the rise. With the rapid development of a global e-commerce system, Africa, as an emerging market, has considerable potential and huge user demand. At present, an increasing number of African suppliers and purchasers are abandoning the traditional way of face-to-face transactions, while the new mode of e-commerce transaction is quietly gaining more and more prevalence. At the national level, e-commerce develops rapidly in Nigeria, Egypt, Kenya and South Africa. Successful e-commerce platforms, such as Jumia, Souq, Kilimall and Takealot, were newly established about three to four years ago on average, while other local e-commerce platforms are still in the incubation stage. Africa’s emerging e-commerce industry is already showing incredible potential. For example, Jumia, a popular Nigerian e-commerce platform operated in 14 African countries, debuted on the New York Stock Exchange on April 12, 2019 with a market value of $3.9 billion.7

Fourth, the mobile payment market has been increasingly buoyant. The promotion of the internet at a global level has created a broad space for African countries to develop mobile banking and other financial

services, consequently making mobile payment a new option of financial services in Africa. Represented by M-PESA, mobile payment is developing rapidly in Kenya, Tanzania and other East African countries. Statistics show that 1.7 billion payment transactions have been conducted via M-PESA by East African users between June 2016 and June 2017. In the same period, M-PESA’S contribution to Kenya’s GDP growth accounted for 48.76%.8 Meanwhile, Jumia Pay and Konga Pay are popular in Nigeria as options for online shopping payment. According to report by Comms MEA, Africa has become a new market of mobile payment, generating more than 10% of major African mobile operators’ total revenue. Moreover, mobile transactions in Africa are expected to reach US$14.27 billion by 2020.9

Despite the huge growth potential of the digital economy in Africa, its development also faces a myriad of substantial challenges. Since the overall internet penetration rate in Africa is still at a comparatively low level, only a group of urban residents have digital transaction accounts. Digital economic services such as mobile payment, online shopping and e-commerce have not yet reached the majority of the population.10 At the same time, the digital economic development in Africa is confronted with the severe task of achieving good governance, since only a few African governments are strategically and systematically investing into digital infrastructure, services and skills. Therefore, financial technology start-ups are going through funding shortfalls, consumers are encountering internet fraud, while governments face a lack of qualified IT professionals. The digital development divide between Africa and the developed world, as well as between African and emerging economies, still remains stark. The same is true between various regions on the African continent.