Digital Opportunities in African Businesses

Adoption of digital technologies is widely acknowledged to boost productivity and employment, stimulate investment, and promote growth and development. Africa has already benefited from a rapid diffusion of information and communications technology, characterized by widespread adoption of mobile telephony. But access and use of digital technology among firms is uneven in the region, varying between countries as well as within them. This means African businesses may not reap the full potential benefits offered by ongoing improvements in digital infrastructure. Using rich datasets, this study offers a new understanding of the region's incomplete digitalization - namely shortfalls in the use and uptake by firms of the internet and other digital tools such as computers and specialist software to perform business functions. While internet use among large firms is widespread in the region, amounting to at least 90 percent of businesses according to World Bank research, for small firms the rate drops to 40 percent. For micro enterprises and in the informal sector, the gap is even wider. There are similar shortfalls in the use of sophisticated digital technologies such as specialized apps and software, or even more basic tools such as computers or mobile phones, to perform administrative tasks. Incomplete digitalization in Africa presents a market opportunity for the private sector. The region has already achieved impressive gains in digital infrastructure and connectivity in recent decades and has good prospects for attracting further investments to help close the remaining gaps. Nevertheless, this study also outlines the challenges in addressing incomplete digitalization, finding that the cost of machinery, equipment and software, as well as the cost of connectivity to the internet, is significantly more expensive in Africa than elsewhere. Hight costs amount to barriers to further digital diffusion. But the report outlines ways in which the private sector, with support from policy makers, international institutions, and regulators, can help bring down these costs, stimulating more widespread digitalization of the region's firms, thereby boosting productivity and, by extension, economic development.