In order to unleash the Internet’s potential to drive economic growth and social outcomes in Africa, the public and private sector are required to set policies that encourage innovation.
The internet can prove a major force for economic development, providing a platform for new forms of connectivity, innovation and entrepreneurship. The World Bank reports that a 10% increase in broadband correlates to a 1.38% increase in GDP growth. Moreover, the internet can be used to embark on social change. In developing countries, the internet has contributed to enhanced efficiency in service delivery within the health, education and finance sectors, and has assisted individuals living in remote areas in gaining access to government services. Effectively, the internet offers the promise of increased civilian freedoms and improved quality of life.
However, in developing countries, there is much greater scope for utilisation of the internet to affect change. Broadband penetration in Sub-Saharan Africa is relatively low when compared to regions of similar average income. Only 6% of the world’s Internet users live in Sub-Saharan Africa, despite the fact that this region hosts 15% of the world’s population. While many Africans are aware that the internet is useful for conducting business, most organisations continue to use the Internet primarily for simple research and communication purposes, as opposed to the delivery of products, the selling of services, or even recruitment. Potential explanations for this behaviour include lack of access to reliable Internet connections and unaffordable devices.
Dalberg’s report finds that Internet applications are increasingly offering solutions for more effective service delivery and information management. SMEs indicate that the Internet is most useful in addressing management challenges such as payroll, information management and backend systems. This suggests that investment prioritisation in these types of applications could generate substantial growth. Furthermore, more than half the firms surveyed suggest online services offering supply chain management are beneficial to their businesses.
Certain socioeconomic sectors have made further progress with utilising the Internet as a tool than others. More than 40% of Internet solutions currently target the education, governance or health sectors, but most of these continue to remain in the initial stages of their development. In contrast, agriculture promises a variety of solutions that have to date generated successful scale. Such solutions offer access to information including market prices and weather, as well as improved supply chain management to minimise leakage. It appears therefore that there is scope to refocus investment priorities between sectors to target growth in new areas.
“[C]ountries that wish to reap the Internet’s potential for social and economic gains must continue to invest in infrastructure and the broader ecosystem for innovation.“
Policymakers play a fundamental role in creating an environment that is conducive to Internet-based solutions. Dalberg identifies two key pillars for a well-functioning Internet economy: core infrastructure and conditions for usage. Core infrastructure relates to both physical infrastructure and business conditions, including mobile coverage, Internet coverage, electricity, skill availability, education levels and perception of stability and corruption. Conditions for usage relate to those conditions determining Internet access, awareness, availability and attractiveness. This is driven by the cost of devices, the price of broadband packages, the relevance of services, and much more. A key finding is that without a minimum investment in infrastructure, conditions of usage will not rise above a certain level. Hence countries in Sub-Saharan Africa are encouraged to invest simultaneously in core infrastructure and usage conditions to reap the Internet’s full potential for growth.