Digitalization, the use of digital technologies and data, and the interconnection that results in changes to existing activities has emerged as a critical driver for the successful implementation of the African Continental Free Trade Area (AfCFTA). The trade agreement, one of the 13 initiatives by the African Union is focused on accelerating Africa’s economic growth and lifting at least 30 million Africans out of poverty and a 7% boost in Africa’s income by $450 billion by tapping into digital trade among other investment areas. As such, the time is neigh for African countries to adopt digital technologies in accelerating the implementation of the trade agreement and position their young workforce to take advantage of the digital economy.

Technologies such as mobile data networks, mobile payment, and financial products, the Internet of Things (IoT), blockchain, artificial intelligence (AI) big data analysis, and cloud computing are gaining traction in the continent. The impact of these technologies manifests in inputs, functions, and less digital-intensive sectors such as trade, construction, and agriculture highlighting the need for adapting in facilitating the success of the AfCFTA. Moreover, the adoption of these technologies can be expected to lower transaction costs, address information asymmetry, reshape the distribution of produce, and enhance value addition and economic rents. It must, however, be noted that these advantages are likely to accrue to workers and firms that possess the ability to control, own, and access this new mode of production.

Currently, Africa has significant obstacles that limit digital innovations and thus slow down the adoption of the technologies for development. The continent suffers a spatial divide in that only 27% of the population in rural areas uses technology compared to 47% in urban areas. There is a formality divide where only 16% of self-employed workers used the internet regularly compared to 58% of waged employees. Further, there is a firm size divide in which only 50% of small African firms use the Internet in interacting with clients compared to 87% of large firms. This points to the need for public policies to enhance productive transformation in the use of technology.

Thus, in accelerating economic development and poverty reduction under the AfCFTA, a continent-wide digital transformation strategy must be adopted by African nations and extend beyond the traditionally conceived information and communication technology (ICT) activities. Digitalization has to be embraced across all economic sectors for the majority of Africans to benefit and enhance balanced economic development and anticipate the evolution of less relevant sectors such as bio-economy, nanotechnology, and materials innovation in the African context. The concern for most nations, therefore, is how to adopt these digital technologies on a mass scale, support the implementation of the AfCFTA, achieve a digital single market by 2030, and effectively strengthen the continent’s role in the global digital economy.

Challenging Individual Nations

Moving forward, digitalization across Africa ought to focus on tapping into all sectors, company sizes, salaried and self-employed people, and both rural and urban areas. There is a need to focus on the development of broadband infrastructure in intermediary cities that play a critical role in connecting rural and urban areas to basic facilities and services. Only 22% of Africa is connected to the Internet with only 5% of intermediary cities located within ten kilometers of high-speed terrestrial fiber-optic networks in Central Africa and 20% in West Africa. Such, focusing on the digital transmission of these intermediary cities can act as a hub for reaching rural hinterlands and strengthening rural-urban linkages to drive rural transformation. This would be critical in tapping into the underutilized potential while spreading the costs of digital innovation to enhance overall intra-trade growth and competitiveness.

Kenya has been effective in partnering with mobile telecommunication companies among other equipment providers to provide cost-effective mobile broadband services to rural populations. Nations can adopt this mechanism by enhancing price affordability through policies that create increased public-private alliances to accelerate digitalization within urban and rural areas for increased development. Secondly, adopted policies can focus on providing universal service and access to funds (USAFs) which enhance investment into expanding information and communication technologies to currently underserved areas and populations across the continent. Equally, USAFs can be utilized to enhance skills acquisition programs for youths and women to position the African workforce to benefit from digitalization. For these policies to effectively be implemented, African nations will also need a renewed commitment to enhancing fair competition among telecommunication providers by decisively dealing with corruption and crony capitalism.

The firm size divide indicates that African enterprises have difficulty scaling up and innovating in the digital era. Collaboration between governments and the private sector is, therefore, necessary in empowering start-ups and small and medium-sized enterprises to compete and innovate in this digital era. Governments need to therefore focus on identifying and supporting promising digital innovations to allow them to take advantage of AfCFTA opportunities. In addition to upskilling and preparing the African labor markets for digitalization, the focus should be on increasing opportunities for lifelong learning and skill development in the public and private sectors.

Under the AfCFTA framework, there is a need for governments to support dynamic enterprises to tap into digital-enabled trade through policies to overcome bottlenecks in e-commerce which will allow the firm to ramp up their presence online for increased digital connectivity. Governments can also encourage entrepreneurs to pursue intellectual property rights by straining application processes, lowering the costs of registration, and developing robust enforcement mechanisms. Notably, these changes require increased continental coordination to achieve digital transformation for the successful implementation of the AfCFTA.