Preparing for the African Digital Economy

It is a terrifying time for workers and business owners. A three-week shutdown starting 27 March of many traditional businesses, as part of South Africa’s attempts to combat COVID-19, has highlighted how vulnerable employment is to completely extraneous factors. But for many, the peril of unemployment has been long threatening, with automation and digitalisation of many jobs dominating discussion around the future of work.

Yet a sound digital economy may have offered some resilience in the face of this new COVID-19 threat, in particular. The idea of a digital economy centres digitalisation in our understanding of productivity: the digital expands not just how businesses operate, but also what they offer. UNCTAD explains that the digital economy is marked by:

“…an increased use of advanced robotics, AI, the Internet of things (IoT), cloud computing, big data analytics and three-dimensional (3D) printing. In addition, interoperable systems and digital platforms are essential elements of the digital economy”.

But these are just the technologies employed; it is also changing cultures of work, and the nature of what is valued as “productive”.

Inclusion, efficiency and innovation are cited as the fundamental benefits of this digital revolution. Discussions which seek to address how we might better access these benefits then tend to focus on adapting worker skills. But for African workers to benefit from a digital economy, there are a number of pertinent precursory issues we have to consider — conversations on the digital economy, spurred as they are by the World Economic Forum’s Fourth Industrial Revolution euphoria, must be grounded in the reality of our context.

So, what should be our more immediate priorities?

1. Do not forget to consider if people can actually access the internet

The internet, given its centrality to data transfer and communication as central components of the digital economy, is not a universal tool. Secondary benefits to the economy are said to only occur once a critical mass of at least 20% of people are online; and while 50% of South Africans have Internet access, many African countries are below that critical 20% percent threshold.

But having 50% of our population offline also means half of our population are excluded from both being a market for products within the digital economy; offering their own products for the digital economy; and engaging in news forms of online labour that are required in the gig economy.

We can’t have conversations about the digital economy, without continuing to address how to facilitate Internet access for all people. How to address that is a very context specific conversation, because it involves not just expanding penetration (particularly within rural areas), but also improving access to devices and reducing costs of data — and thus relies on us appreciating user-specific realities.

For instance, the first point of access to the Internet by most African Internet users is through mobile phones (more than 80% of individual users). If this is how people connect, figuring out ways of reducing the cost of devices (such as not taxing those items as luxury goods) become a priority. Affordability is cited as a key barrier to Internet uptake and, so too then, reducing the costs of data must be addressed through policy initiatives such as opening up unused spectrum, contesting “poverty premiums” through appropriate competition challenges, and dramatically improving coordination between Regulators, the public sector and the private sector.

You can also provide people with more direct forms of access — such as dramatically expanding access to free quality, public wifi. You can also zero-rate essential information provision or even forms of digital services that could directly contribute to the digital economy. And as will be reflected on below, it is not just about access, it is also about quality — this is why the recent intervention by South African ISPSs and fibre network operators to provide free speed upgrades to facilitate South Africans working from home during lockdown is so appropriately responsive, though of course a benefit only for the few.

2. Skills gaps are not just about employment

Low Internet penetration, expensive data prices and bandwidth quality also impact how people use the Internet and digital environment once they are online. There is not just an access gap, but a ‘utility’ gap which exists between those who have the technical and financial resources to use the Internet optimally, and those who are ‘barely’ online. The latter includes those who only have partial access to poor-quality or expensive data services that do not permit them to be ‘always on’ or to use data-intensive services. The gap between those who passively consume a limited number of basic services and those able to put technology to full and productive use, some even to enhance their prosperity, is widening — and has a very real impact on the development of a ‘good’ digital economy (i.e. a digital economy that benefits all in its domestic context, equally).

3. The current reality of the digital economy is that it is, well, not a reality

Digital beneficiation is still low in Africa. Despite a number of initiatives to enhance digital opportunities such as the creation of online jobs, e-commerce and digital financial instruments, from a labour perspective few Africans participate actively in the digital economy. The After Access survey shows that only a small proportion of economically active individuals in the 10 countries surveyed are online. This is hardly surprising considering the lower internet penetration rates. Mozambique and South Africa have the largest percentage of micro workers among economically active populations, at 8% and 7%, but Mozambique’s actual number is tiny, given that only 10% of the population was online in 2019 when the survey was undertaken.

More broadly too, the Internet contributes significantly lower to African GDPs than other developed, and even emerging, economies worldwide — with Internet-based companies being said to contribute only around 1,1% to the African economy. The ability of Internet-based companies to grow and begin developing the digital economy may be exponential, but the reality of the South African (and other African) markets must mean a realistic policy prioritisation founded first on improving access, rather than focusing on online conditions.

4. Regulation of the digital economy is really regulation of data

Industry 4.0 puts data and analytics as core capabilities — and certainly, the emergence of these industrial activities has implications for who the future labour market will be. However, this centralising of data — particularly when we shift our perspective from businesses to users — alerts us data governance as key policy lacuna requiring prioritisation.

Other areas of the digital economy such as e-commerce, intellectual property, labour protections, etc. will certainly need to be adapted, but data governance needs to be revolutionised. This is because in a globalised and digitalised economy, data flows are cross border requiring international cooperation for data governance, with consistent (but adaptive) domestic implementation in a way that we haven’t seen before (think of the kinds of impacts of the European General Data Protection Regulations).

And the need to balance personal data privacy with open data access; data security controls with free data flows; and many other complex relationships (including the preservation of data integrity), all needs to be done with a focus on fostering trust for a vibrant digital economy to flourish.

5. Policy needs equality by design

The policy interventions we can implement to improve growth of the digital economy, just like any broader conversation on economic growth, must address combatting inequality directly in their design. The digital inequalities expand beyond what we have even outlined here — inequalities offline are mirrored online, with rural and urban poor, and particularly the women who are concentrated there, experiencing access exclusion in marked ways.

As more people are connected, digital inequality is in fact increasing. Rising shifts of income from labour to capital and a drop in mid-level jobs in many countries, commonly referred to as wage polarisation by economists, suggest that the gains from greater use of technology will not be equitably shared without significant policy interventions.

Therefore, the policy solutions we want to design have to address inequality directly. But implementing these kinds of policy interventions means embracing complexity both in the nature of the solutions we draft, and in the nature of the relationships required to make these interventions real. Perhaps the most urgent shift we can do in the short term is changing the way we think, so that embracing complexity, inequality and context become the substance of our proposals, rather than mere caveats to the end of them.

The views expressed in this post are those of the author and do not necessarily reflect the position of the Atlantic Fellows for Social and Economic Equity programme, the International Inequalities Institute, or the London School of Economics and Political Science.