Digital Innovation: The Next Wave of Africa’s Development

By Pumela Salela

 

A new wave of energy and innovation coming from Africa is mainly driven by young people. When interviewing the young people about their innovation drivers, most will tell you that it is ‘’ for fun”. However, looking beneath the ‘’fun’’ is the revelation that young people are solving everyday real problems: social, economic, and political. The key enabler for the young Africans to participate in areas that they never had an opportunity to participate in, say 20 years ago, is technology, particularly Information Communications Technology (ICT). In the past the growth of the African economies was fuelled by commodities. To date, however, Telecommunications is set to surpass commodities as a source of revenue and trade.  Across Africa, Telecommunications is fast replacing mining as the most lucrative sector.

Incubators are springing up across the continent, from Kenya’s iHub to South Africa’s Innovation Hub to Cameroon’s ActivSpaces. Nigeria has produced two notable examples: the Co-Creation Hub (or CcHub) and the Wennovation Hub. Microsoft recently announced a partnership with three leading African incubators to support start-ups. Many of Africa’s start-ups are not just focused on local opportunities but are “micro-multinationals”.  (Small businesses utilising technology and the Internet to access customers and suppliers globally are micro-multinationals). The big multinationals are also seeing Africa’s potential in Information Communications Technology. In 2013 Microsoft bought Nokia for $7.2 billion and announced the ‘Microsoft 4 Afrika’ project which is an initiative aimed at accelerating growth in the African continent.

A number of the innovations coming from Africa tend to focus on the following sectors of the economy: Retail, Education and Financial Services.

Innovations from the Ground

Retail

As the Internet expands across Africa, it has become a launching pad for a new generation of digital entrepreneurs. In Nigeria alone, Konga and Jumia have become major online retailers. In Mozambique, a startup called moWoza has created a more efficient supply chain by using text messaging and a smartphone app to deploy available taxi drivers to deliver parcels from wholesalers to informal traders. Elsewhere, Mi-Fone has sold more than a million low-cost mobile phones across the continent.

Education

ReKindle Learning, a South African start-up, is developing personalised, interactive learning tools that work on simple mobile devices. For the first time, there could be effective content aggregation on the continent, driven by the likes of iROKOtv, a digital delivery platform for locally produced content. Success stories like these are attracting global investors and spurring the formation of local angel investor and venture capital networks.

Financial Services

In the Financial Services sector the growth of mobile applications has led to an opportunity to ‘’bank the unbanked through mobile ICT applications’’. As a result a whole new generation of ICT applications will be coming out of Africa, including mobile applications that utilize the Web.

M-PESA in Kenya has become the most widely adopted mobile-money scheme in the world.  In simple terms, M means Mobile and PESA means Money.  In Zambia there is Celpay, in South Africa Wizzit. The mobile operator MTN and the African bank called Stanbic work in collaboration in Uganda, and the mobile operator Zain is working on a mobile application called Zap across the continent of Africa. In Nigeria, Paga is emerging as a key player in mobile payments.

International Trade in Services Set to Continue in Africa

A number of years ago Africa was introduced in the Global Services space as a continent which is capable of servicing Business Process Outsourcing (BPO). Africa has a number of pillars that  allow it to be a key player in this economy sector. To name but a few: Africa has a vast availability of talented human capital that is able to service global companies at a professional level;  Governments across Africa have recognised the need for incentives and have tailored their policies to suit the needs of the investors; there are specific and targeted marketing initiatives to market the different countries across Africa together with their value propositions; industry bodies to represent private sector interests are being formed across the continent and finally, some countries, such as South Africa have pioneered the development of Standards for the Business Process Outsourcing sector.

Business process outsourcing, software development, and local hardware manufacturing could all contribute to increasing Africa’s trade balance, which is currently positive and could grow to $13 billion.  In South Africa, BPO already generates more than $1.5 billion in revenue and accounts for 54,000 direct jobs, while Morocco’s BPO sector is at similar scale. Ghana, Kenya, Nigeria, and Senegal are among the countries with plans and potential to grow their own BPO sectors. Some low-cost devices are already being manufactured on the continent, particularly in Nigeria and South Africa, and there are a number of software development hubs.

Fast Facts

Current

By 2025

Internet Penetration

16%

~ 50%

% Internet Contribution to GDP

$18 billion

$300 billion

Internet Users

167 million

600 million

Smartphones

67 million

360 million

Urban Residents online

>50% of urban users

Facebook users

51.6 million

Annual e-commerce sales

$75 billion in annual e-commerce sales

Productivity gains in key sectors

~$300 billion productivity gains in key sectors

*Table created with facts and figures from the McKinsey Report: Internet’s Transformative Potential in Africa

 

Regional Cooperation and International Business Partnership

African digital space development presents opportunities for collaboration at regional and international levels. As evidenced on the ground, there are opportunities for banks to team up with mobile operators to launch mobile money services allowing them to reach more customers. The key across all sectors of the economy is to identify the problems experienced by the people on the ground and tailor make solutions through innovative products and services.  This would result in the provision of tailor made solutions and ICT applications for local market needs which could be scaled up at a global level. Private sector could assist government with innovative service delivery models.  Different organizations should fund and collaborate with startups which have a focus on ICT based applications.

Conclusion

Africa has the fastest-growing mobile phone market worldwide. Entrepreneurs and development organizations are eagerly seizing the opportunity presented by such growth.  They are creating mobile phone applications for profitable and nonprofit ventures across the continent. Millions of Africans, for example, now use their mobile phones to transfer money, turn on water wells, learn soccer game scores and buy and sell goods. The penetration of the mobile phone is far greater than that of the Internet in Africa, especially in rural areas, making it the most accessible communication tool.

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