Bits and Bytes: Riding the Digital Wave to The African Continental Free Trade Area Success!
Part 2
From Surfing to Serving
The African Continental Free Trade Area and its promise to liberate and lift 30 million people from extreme poverty and boost incomes by $450 billion by 2035. However, as shown through past regional trade agreements, having a trade agreement is one thing, while the political will to balance the continent’s and national interests is another. The AfCFTA is successful based on a vibrant digital economy emphasizing e-commerce to create employment, more open borders, labor mobility, and pace and efficiency in trade and transactions. However, Africa has a partly 22% internet connectivity rate with a deficiency of 500,000 km in fiber optic cables estimated to cost $15 billion. Therefore, realizing the AfCFTA digital protocol aspirations lies in the ability of member states and the Africa Union to mobilize on mechanisms to degrease the digital divide. Notably, internet connectivity and access will go beyond broadband expansion in Africa by bringing Internet connections inland from underwater submarine cables through fiber-optic networks. As the continent emerges from the devastation of the Covid-19 pandemic, under the AfCFTA, the challenge for nations is not to merely repair their economies but rather to remake them with digitalization emphasized.
A Tale of Two Clicks!
Perhaps the obsession with the digitalization of African markets is based on International Finance Corporation’s assessment that, as more people connect to the market and access financing through the internet, a 10% increase in mobile broadband penetration increases GDP per capita by 0.7%. Estimations by the World Bank indicate that a 10% increase in mobile penetration in Africa could potentially contribute to a 2.5% increase in the gross domestic product. This underlines an enormous economic potential for the continent, with mobile technologies already generating 1.7 million jobs and $144 billion into the economy, translating to 8.5% of the collective GDP. in Countries such as Kenya. The East African region has become the center of mobile and peer-to-peer finance through M-pesa, indicating the potential of digitalization for the continent. In contrast, over half of the world’s mobile money accounts are registered in Africa. Still, even with these promises, the AfCFTA faces a market with over 300 million African living over 50 kilometers from fiber and cable broadband connections. Over US$100 billion is needed to establish and maintain broadband connections across Africa for an internet-based economy and digital connectivity to thrive. The estimation by the world bank includes 805 expenditures on establishing core infrastructure, over 250,000 new 4G base stations, 250,000 km in fiber optic to migrate to 5G, and significant demand for data centers. Coupled with a predominantly youthful population and rapid urbanization, digitalization is a priority for the AfCFTA to thrive. What does the AfCFTA implementation secretariat focus on doing, in cooperation with the private sector, governments, and other stakeholders, in delivering better connectivity and bridging the digital divide?
Amp Up the Voltage
In 2020, 4G connectivity in Africa accounted for 12% of mobile phone connections. It was expected to hit 28% by 2025, although this is significantly below the global average of 57%, with only seven 5G commercial networks established in five African markets as of 2021. While the average African mobile traffic could quadruple to just over 7 gigabytes per month per subscriber, and 5G connections approach 30 million African users by 2025, a significant infrastructural deficit is a glaring factor contributing to the current digital divide among nations. Three African states – the Central African Republic, Eritrea, and South Sudan- lack fiver-optic connection to submarine cables. The availability of high-speed (broadband) internet through fiber-to-premises connections remains scarce, limiting homes, offices, and individuals’ access to the internet in the continent. Nations must therefore prioritize investment in internet connectivity and support infrastructure if the promise of the AfCFTA is to be realized.
“Having a trade agreement is one thing, the political will to balance the continent’s and national interests is another.”
A balance between debt financing and equity investments that characterize the current landscape must further be explored to bridge the existing gap. Under the African Union and individual member states, the engagement of multinationals such as Kenya’s Safaricom, Facebook, MTN, Google, and Vodafone must continue to fund digital infrastructure development. Moreover, limited recourse and non-recourse funding for infrastructure must be explored further as digital infrastructure demands more significant capital expenditures that need more structured financing solutions. The infrastructure building to support the AfCFTA has to focus on energy as its availability impacts the costs and efficiency of staying connected to the internet. Expanding access to affordable, high-speed Internet makes it easier to do business across state borders for better economic integration. Let the African nations, therefore, capitalize on the fact that Africa’s internet economy is one of the overlooked investment opportunities to cooperate and collaborate with other stakeholders to bring it to fruition. Moreover, governments need to address regulatory barriers that hinder the growth of the digital economy. This includes creating policies that protect privacy and data security while at the same time encouraging innovation and growth.
Digitally Up-Skilling Africa
Developing human and institutional capacity for increased digitalization is crucial for implementing the AfCFTA. It is not lost on policy shapers that infrastructural endowment thrives on capable human capital for better economic and trade outcomes. Public and private institutions alike must be encouraged to invest in education and training programs on digital skills, including coding, data, analytics, cybersecurity, and other emerging technologies. A skilled workforce is necessary for African states to drive a digital economy under the AfCFTA logistical support. This has to be coupled with collaboration to develop a digital talent pipeline that identifies and nurtures young talent in the digital sector through internships, apprenticeships, and mentorship programs.
Individual nations should focus on creating digital innovation hubs that bring together entrepreneurs, startups, and investors to collaborate and develop digital solutions for increased innovation and digital-based entrepreneurship. Public-private partnerships can be valuable in developing human and institutional capacity for increased digitalization. Governments can work with private sector organizations to fund training programs, develop curricula, and provide mentorship opportunities for more equipped human capital. Funding and resources to support new ideas are urgently needed for the AfCFTA digital protocol to bridge the existing digital divide and foster a culture of innovation that encourages experimentation, risk-taking, and collaboration. Equally, youth and women should be increasingly encouraged to participate in digital skills training and provide mentorship and networking opportunities. African countries need to prioritize inclusivity in their digital economy and society. This means ensuring everyone has access to digital services, and no one is left behind.
This is part 2 of a 2-part series on the AfCFTA and the Urgency of digitalization among member states.
Muoki Musila is a Kenyan-based economist. He is the marketing and Communications Associate at Liberty Sparks.
