Frontier Markets

The Implications Of The Digital Revolution For Africa

By Anzetse Were

Africa DigitalLast week the World Bank released their World Development Report (WDR) that focused on the digital revolution and how it has allowed some to reap digital dividends. These dividends are growth for businesses, job creation for people and better service delivery by government. Further digital technologies have supported development by promoting innovation, efficiency and inclusion.

However, the report argues that there is a growing digital divide as 60 percent of the world’s population is still offline and 2 billion people do not own a mobile phone. In addition the spread of digital technologies have spread unevenly; men are more likely to be connected than women, those in urban areas are more connected than rural areas and the young are more integrated than the old. In short, young males in urban areas are far better poised to reap digital dividends than old women in rural areas. Further, as digital technologies have spread, there are new risks that mitigate the spread of the benefits. These new risks include the fact that digital technologies are used by autocratic governments to control access to information in a manner deepens control rather than empowerment and inclusion. Digital technologies also create new regulatory uncertainties as new apps and tools are created that cross sectors. For example, should Uber, which is active in Kenya, be regulated as a transport service or as an ICT tool? Further, if the business environment is not open and competitive, digital technologies can create a concentration of market power and monopolies.

The report speaks of analogue components that have to be focussed on as the digital revolution continues to unfold to ensure dividends rather than detriments preponderate. These are rules and regulations that promote competition and entry, skills that allow populations to leverage technology rather than be replaced by it, and institutions that are accountable to citizens.

Given this background, there key questions to be asked. The first is that jobs are being automated into extinction and this has two-fold negative implications for countries such as Kenya. The first is Kenya has a serious problem with unemployment, thus automation may exacerbate the unemployment problem. It must be asked whether the jobs created by digital technologies will grow at a rate faster than the job attrition it causes. Secondly, the types of jobs being replaced are low skilled jobs often occupied by the least educated members of society. If such people are to lose their jobs due to digital technologies, their future looks grim as they typically will not have the skills sets required for ‘white collar’ jobs less threatened by digital technologies. The low skilled segment of the population may find themselves competing for fewer jobs without the opportunity to re-skill and take on new roles.

Further, will the rise of digital technologies cause agrarian economies such as Kenya to by-pass industry all together? Advanced economies benefitted from the Industrial Revolution which employed millions of people and created the robust foundation of manufacturing and the export of goods. Africa has been undergoing premature deindustrialisation due to globalisation and trade which have hollowed out industry on the continent as other countries supply finished goods for African consumers. The uptake of digital technologies may exacerbate this as human labour cannot compete with cheaper technologies in terms of cost and efficiency. In fact some western companies have brought production back to automated factories by-passing the need to hunt for cheap labour. Will digital technologies therefore exacerbate the premature industrialisation Africa is already experiencing? The Financial Times surmises that in the absence of industrialisation as a path towards economic development, the best hope for developing and emerging economies is to train workers that are more highly skilled. Is this feasible in Kenya and Africa?

Therefore although there are great benefits to be reaped by the digital revolution, new risks have to be managed. Momentum for the digital revolution is substantial. Therefore, governments ought to create policies that ensure an equitable spread of digital dividends, effort should be made to ensure all levels of private sector reap the benefits, and finally Kenya needs to rethink its education system to ensure labour is being skilled in a manner that functions effectively in the context of a digital economy.

This article first appeared in my weekly column with the Business Daily on February 14, 2016.

Anzetse Were is a development economist based in Kenya and a weekly columnist for the Business Daily.  Twitter: @anzetse, email: anzetsew@gmail.com

About Anzetse Were

I'm an optimistic cynic. Born in Africa, raised all over the world, I have a passion to see Africa take its rightful place in the world. Long weary of the Africa bashing, continental character assassination and negative branding I am determined to ask: What can Africa do right particularly with regards to economic development? Most of my pieces will be on Africa's economies. Some pieces will be more formal than others but the guiding thrust is to become one of the growing voices that believe in Africa...We're here to stay. Follow me on twitter: @anzetse

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