Digital transformation in Africa through the lens of COVID-19
Author: Riette Engels-van Zyl – Director & Zaakira Haffejee – Associate
“Whether as a tool to fight the spread of the virus, or as a means to ensure continuity in business, education, and everyday life in the midst of lockdown, information and communication technologies have been at the forefront worldwide since the beginning of the crisis.”
- Tatianna Lukama Binda
Social distancing orders and trade restrictions introduced by governments across the world in an effort to curb the spread of the Covid-19 pandemic have forced African enterprises and organisations to take a dramatic leap and adopt technology-intensive operating models. This shift not only adapts industries to the Fourth Industrial Revolution (4IR) but, more importantly, aligns to the African Union’s Digital Transformation Strategy for Africa 2020-2030 (Africa DTS). The onset of Covid-19 has placed digital transformation, driven by the 4IR prior to the pandemic, at the forefront in mitigating the economic and legislative impacts of the pandemic.
Digital transformation, or the adoption of innovative technologies to replace or enhance traditional operational processes and transform services or businesses, has emerged as a profound global trend offering opportunities and challenges within every industry. Harnessing the power of digital transformation through the implementation of digital platforms and strategic investments in innovative digital solutions can improve consumer reach and enhance economic productivity and growth.
Industries, organisations and governments that invested in and implemented a robust digital transformation agenda pre-Covid were able to weather the storm far better than those who had delayed preparations. This was evident in governments and industries that prioritised having the necessary digital tools to transition to remote trading and communication in a seamless manner through an online platform.
Digital transformation can be harnessed in various ways, the most significant methods being through e-commerce (i.e. the use of digital platforms to facilitate trade in goods and services capable of both physical and digital delivery) or through innovative technologies which enhance the organisation’s overall efficiency and productivity. Technology has the ability to take on a transformational role. Remote working, tele-conferencing, distance learning, e-commerce and even an increased reliance on tele-medicine all play a role in what is now commonly known as the “new normal”.
According to the International Data Corporation (IDC) Worldwide Semi-annual Digital Transformation Spending Guide, global spending on technologies and services that enable the digital transformation of business practices, products, and organisations is forecast to reach $2.3 trillion in 2023 (approximately ZAR34.44 trillion). According to the spending guide, worldwide digital transformation growth rates assessed pre- and post-Covid-19 for 2020 increased by approximately 8.8% in the distribution and services sector, approximately 7.7% in the manufacturing and resources sector and approximately 6.5% in the financial sector.
The United Nations Economic Commission for Africa (UNECA) and Portulans Institute collaborated on the 2020 Network Readiness Index (NRI 2020) report titled “Accelerating Digital Transformation in a Post-Covid Global Economy” in a bid to assess how countries are leveraging information technologies for future readiness. The Network Readiness Index ranks a total of 134 jurisdictional economies collectively accounting for approximately 98% of the global GDP. The ranked economies are made up of 50 high-income countries, 35 upper-middle-income countries, 34 lower-middle-income countries and 15 low-income countries. The Network Readiness Index assesses four pillars, namely technology, people, governance and impact. The technology pillar assesses the level of technology that is essential for a country’s participation in the global economy. The people pillar is concerned with the application of information and communications technology by individuals, businesses and governments. The governance pillar captures how conducive the national environment is for a country’s participation in the network economy[LA1] , based on issues of trust, regulation and inclusion. The impact pillar assesses the economic, social and human impact of participation in the digital economy. According to the report, Africa trails all regions and is the least network-ready region with its highest ranked economies being Mauritius (61st), South Africa (76th) and Kenya (82nd). However, according to UNECA, the analysis shows that “digital innovation and entrepreneurship have increased within Africa, with more than 400 digital hubs in 93 cities, including over 130 new hubs opening in the last two years, collectively generating more than $1.1 billion”, (approximately ZAR16.47 billion).
There has been a considerable rise in the use of digital solutions across Africa. Firstly, to support efforts by governments and private bodies to contain the spread of the virus, and secondly to ensure sustainable business continuity and recovery. As many countries recover from a second wave of Covid-19 infections and experts warn of a potential third wave, it is critical for local organisations to use the pandemic as a gateway to understand and seize digital transformation opportunities presented by the digital economy.
The reality of this new digital age is that the link between technological inclusion and economic development is well recognised. The result is that digital transformation is now seen as a critical concern by governments, businesses large and small, and even individual citizens. The opportunities for digital transformation within Africa and the enhancement of intra-African investment and trade are further enabled by the launch of the African Continental Free Trade Area (AfCFTA) as well as the Africa DTS.
The AfCFTA, which came into force on 30 May 2019 and officially launched on 1 January 2021, provides a wider scope and platform to pursue regional strategies to develop Africa’s digital economy. The progressive elimination of import duties and other charges on trade in goods allows AfCFTA to serve as a potential enabler of digital transformation through increased digital trade and e-commerce.
On 9 February 2020, the African Union adopted the Africa DTS which aims to “harness digital technologies and innovation to transform African societies and economies to promote Africa's integration, generate inclusive economic growth, stimulate job creation, break the digital divide, and eradicate poverty for the continent’s socio-economic development and ensure Africa’s ownership of modern tools of digital management”. The Africa DTS gives African countries the choice of their own digital pathway to socio-economic development by envisioning an “integrated and inclusive digital society and economy in Africa”. The Africa DTS will further build on existing initiatives and frameworks, including the AfCFTA, to support the development of a Digital Single Market for Africa as part of the African Union’s integration priorities.
According to the Africa DTS: “(A)chieving digital transformation in Africa will require political commitment at the highest level, aligning of policies and sector regulation and a massive scaling-up of investment and dedication of resources towards the foundation pillars and critical sectors for digital transformation. It will take leadership and a vision to push the frontiers of innovation, regional integration and public-private coordination so that the 21st century will be Africa’s digital transformation century.”
Industry organisations and government authorities should recognise the pervasiveness of digital technologies and participate in growth opportunities associated with the shift from physical to digital. Digital technology opens vast untapped potential for investors and entrepreneurs across various sectors, bringing about major economic and social development. Businesses and governments worldwide can benefit from digital transformation investment and projects to improve consumer/citizen experience and boost operational efficiency. It is time for governments and businesses to think beyond Covid and prepare for a world reshaped by digital transformation.
 USD to ZAR exchange rate as at 2 February 2021.  Digital Transformation in a post-Covid world: Africa continues to trail other regions says new report. United Nations Economic Commission for Africa. https://au.int/sites/default/files/documents/38507-doc-dts-english.pdf  USD to ZAR exchange rate as at 2 February 2021.  https://au.int/sites/default/files/documents/38507-doc-dts-english.pdf
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