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4 boxes African governments must tick to unleash digital economies during coronavirus

eNitiate | Africa Unleashing digital economies | South Africa | Egypt | Nigeria | Morocco | Kenya informal market Contributions | feature | 14 Mar 2020

This is the second eNsight in a series on the benefits of coronavirus on Africa’s digital economy.

In this eNsight I explore the role African governments need to play to unleash digital economies of the continent.

FIRST ENSIGHT IN THIS SERIES:

How Africa’s businesses can benefit from growth in digital economy caused by coronavirus

Table of Contents

Brief summary from the first eNsight in Africa's digital economy series

The key findings

Africa’s ecommerce is valued at $19 billion, and it is 0.6% of Africa’s total GDP.

The continent’s ecommerce growth rate is 4 times higher than total GDP growth, and it is projected to double in the next 4 years.

Up to half of the continent’s ecommerce comes from travel and accommodation.

The top 5 African countries by monthly active Facebook users – South Africa, Egypt, Nigeria, Kenya and Morocco – contribute over 60% to the continent’s ecommerce. 

South Africa has the highest eccomerce contribution to the country’s total GDP (2%).

Coronavirus lockdowns have driven consumers online. Research shows this trend is not likely to be reversed at the end of coronavirus lockdowns. 

My conclusion from the first eNsight's key findings:

Under normal circumstances, the size of ecommerce in Africa would be too small to mitigate the decimation of the continent’s overall economy owing to coronavirus lockdowns.

However, these are desperate times. Africa must grab every economic growth opportunity that comes her way, or risk unfathomable levels of unemployment and untold suffering.

THE EXPECTED GROWTH IN DIGITAL ECONOMY WILL PROVIDE SOME RESPITE. THUS, IT MUST BE CONSIDERED.

The rest of this post will address the question: what role can African governments play to unleash digital economies during coronavirus?

4 boxes to tick to unleash digital economies in Africa

The world’s health scientists cannot agree on how long coronavirus is going to be with us, because they simply do not know.

One thing is clear, the current coronavirus-induced digital economy wave is not going to last forever.

African governments need to move with speed to strike the iron while it is hot, by enabling their economies to tap into this energy that sets the stage for full-blown 4th industrial revolution, or risk being left behind yet again

Here below are the 4 fundamentals that African governments have to put in place in order to unleash digital economies across the continent, with associated timeframes that emphasize the point that this window of opportunity is temporary.

Immediate – Digitise the cash economies

Short-term – Increase digital spectrum

Mid-term – Protect privacy of online consumers

Mid-term – Make ecommerce data open and easily accessible 

Granted, different African countries are at different digital maturity stages. Therefore, each nation will have to interpret the associated timeframes to suit its circumstances.

It is my wish that the role of African governments in the unleashing of digital economies is not subjected to political wrangling that has become part of Africa’s  tapestry, and which has lead to indecision and the resulting lost opportunities in the past. 

Time to dive into each of the tick boxes.

Digitise the cash economies

Using the top 5 African countries by monthly active Facebook users as a proxy, here are the payment methods for consumer ecommerce purchases, according to the Digital 2020 country reports:

eNitiate | Digital 2020 Report | South Africa | Egypt | Nigeria | Morocco | Kenya | Ecommerce Payment Methods | 14-Mar-2020
Graph 1

On average, 35% of ecommerce purchases are paid for in cash in the top 5 African countries. 

Egypt has the largest share of consumer ecommerce purchases paid for in cash, while this method has the lowest contribution in South Africa.

The share of Kenya’s consumer ecommerce being paid for by cash is a surprise for me, given that this is the birth country of M-Pesa, Africa’s most well-known mobile money success. 

According to this article, half of Kenya’s GDP is processed through M-Pesa. 

Uber customers paid more than $6 billion in cash last year, and accounting for it isn’t easy

Bearing in mind the small size of ecommerce in Africa (0.6% of GDP), I am deducing from the finding above that cash payment contribution for consumer non-ecommerce transactions is even higher.

In the previous eNsight in this series, I quoted Techcrunch’s article that indicated African governments were encouraging the informal markets to move to digital payments based on a claim, apparently attributed to WHO, that the cash method of payment could be adding to the spread of the coronavirus. 

I noted that WHO has subsequently distanced itself from the apparent claim

But the view that cash exchanges could contribute to the transmission of coronavirus is also not unlikely given how this disease spreads. 

The likely transmission of the coronavirus during cash transactions must be made the key rallying point by African governments to get all sectors of their economies to move to already well-developed and widely available digital payment options in many of the countries, lead by reliable and trusted mobile payment solutions.

Verdict on ability of African governments to digital cash economies

Of the 4 tick boxes for African governments to unleash digital econmies, digitisation of cash economies is the lowest hanging fruit.

In many major parts of the African continent, forms of mobile money solutions are already available and are in use. 

Thus, moving business to digital platforms is achievable, and can be done in the short-term. 

Momentum from governments is needed to fast-track this process.

RELATED ENSIGHT:

4 stats that show how South Africa's digital adoption rates are growing ahead of global trends

Increase digital spectrum

Coronavirus lockdowns have resulted in unprecedented online traffic surges across the world.

As people stayed at home, they spent time gaming, Netflixing, Youtubing, social networking, Zooming, schooling, shopping and working online; and on many occasions with multiple users all online at the same time within homesteads.

The table of mobile Internet traffic surges in the top 5 African countries paints the picture: 

Top 5 African CountriesInternet Penetration (IWS Dec '19)Mobile Internet Traffic Surge (Mar/Apr)Surge Sources (rebrand.ly)
South Africa55%15%/mybroadband/
Egypt48%18%/ahram-eg/
Nigeria61%15%/guardian-ng/
Morcco64%30%/times-maroc/
Kenya87%70%/tc-ke/

I sourced the mobile Internet surge stats from different published sources.

As best I could, I used the reputable sources.

Surge dates varied between March and April 2020.

For some of the top 5 countries, finding the stats was like looking for a needle in a haystack. This is the fun part of writing about my continent.

The quoted average Internet surge for Kenya looked too high at 200%, and I could not verify this before publishing this eNsight, instead I decided to use the Internet traffic increase reported by Safaricom – the country’s largest mobile operator with more than 70% market shares across airtime, data and mobile money.

What about Internet speeds?

The subject of Internet download speeds at home has never been more important, given the collision of work and entertainment purposes for which we have been using this newly crowned essential service during the lockdowns.

 According to broadbandnow.com, a modern household needs to have Internet with download speed of minimum 25mbps to accommodate online activities that include HD video streaming. 

Although, there could be an argument that the recommended download speed above needs to be higher during lockdowns.

Let me share with you my own mobile broadband speed report that I drew on 17 May at 2am CAT, the time I was expecting Internet traffic to be at its lowest trough in South Africa.

My report is compared with 2 others – average mobile Internet speeds for South Africa (my country) and global, for the month of April, using Speedtest.

Here are the 3 reports:

My mobile broadband Speedtest, performed on 17 May at 2am CAT 

eNitiate | Unleashing-digital economies in Africa | Cell C's Broadband Speedtest Results | 15 May 2020

South Africa’s mobile  Internet Speedtest for April 2020:

eNitiate | Unleashing-digital economies in Africa | South Africa's Mobile Speedtest Results for April 2020

Global average mobile Internet Speedtest report for April 2020:

eNitiate | Unleashing-digital economies in Africa | Global Average's Mobile Speedtest Results for April 2020

My mobile broadband download speed is shocking when compared to that of South Africa. 

South Africa’s report shows that the country is ranked 63rd in the world for mobile Internet speeds in April. The country’s download and upload speeds are below, but not too far off, the global average speeds.

To avoid being too technical, I shall not explain the other elements of the Speedtest report, such as latency.

I am aware that my own mobile broadband report, and those of South Africa and global averages, are half a month apart. Unfortunately the reports for the latter 2 are published only monthly, something out of my control.

Understandably, the comparison could be invalid. As an example, South Africa’s download speeds could have improved or deteriorated in May to date.

Is my slow mobile Internet speed directly attributable to the coronavirus pandemic? Is this indicative of the mobile data infrastructure issues on the part of Cell C or the whole country?

Here are the April month mobile Internet Speedtest reports for the other top 4 African countries:

Morocco leads the top 5 list with the highest ranking and mobile Internet speeds that are the same or better than global averages. Nigeria comes last in the top 5 list with both global ranking and speeds.

Mobile Internet download speeds of only 2 of the top 5 countries are above the recommended threshold of 25 mbps. These are Morocco and South Africa. 

I wonder how Nigeria, Africa’s most populous nation, has been coping with the demands of working from home during the lockdown with such slow mobile Internet speeds.

The top 3 countries in the world with the highest mobile download speeds are South Korea (88mbps), Qatar (85mbps) and China (85mbps). 

Can any of the African countries achieve the phenomenal mobile Internet speeds too? 

I believe Morocco South Africa can. In time. But Mzansi‘s political leaders really need to get their act together. I provide explanation in the next sub-section.

RELATED ENSIGHT:

Africa’s top 10 countries contribute a combined 76% to the continent’s Facebook active users

And digital spectrum capacity?

One thing is clear from the coronavirus-induced Internet traffic surges – any country without the ability to increase the Internet highways and byways (called digital spectrum) to deal with the extra traffic experienced congestions.

Reports say Nigerian Internet users have been complaining about the slow speeds

Different African countries handled the sudden Internet traffic surges differently. 

In the case of South Africa, the country’s communication regulator ICASA temporarily allocated additional digital spectrum to the mobile operators so as to accommodate the extra traffic.

On this subject of availability of spectrum in South Africa, I want to focus for a bit on a digital hot potato – migration of the country’s analogue television to digital television (also referred to as the digital switchover), which project has been on the government’s agenda for more than a decade, and has been delayed multiple times due to political dithering, while 16 other African countries went ahead and got the migration process completed, including Lesotho and eSwatini that are neighbours and whose economies largely depend on South Africa for survival.

In 2006, SA, along with other countries, committed to the International Telecommunication Union's (ITU's) June 2015 deadline for all countries to switch from analogue to DTT. The ITU has called on nations to migrate to digital to allow radio frequency spectrum to be freed up for mobile broadband services. However, the country missed the ITU's deadline, and is now playing catch-up.

Here is a global digital migration map that shows Africa is dragging her feet:

eNitiate | Denelson83 | Night Lantern | Worldmap digital terrestrial television transition | 18 May 2020
Figure 1: Worldmap digital terrestrial television transition | By Denelson83, Night Lantern

Why is this topic relevant in this eNsight? As experts best explain, digital broadcasting technologies allow for compression of data, which then frees up radio frequencies that can be allocated to Internet service providers for provision of fixed and mobile data services. 

If there is more spectrum, this will lead to provision of data services at a reduced cost

As things stand, South Africa’s data costs are among the highest on the continent. More on this issue later.

In addition, the endless delays in the completion of digital migration in South Africa have effectively lead to the delay in the rollout of 5G, as the quote below attests.

Vodacom was recently assigned temporary additional spectrum by South Africa’s telecoms regulator for the duration of a national state of disaster to tackle the coronavirus pandemic, which has been used to fast track its 5G launch, the company said in a statement.

Is the recent launch of 5G by Vodacom – South Africa’s largest mobile operator – using a “temporary” spectrum that the Minister of Communications specifically said will have to be returned at the end of the coronavirus state of disaster, its way of sending a signal to the government?

I certainly think it is. 

I hope the South African government has now learnt its lessons from the recent Internet traffic surge about the need to have additional digital spectrum and allow for rapid implementation of latest technologies. 

The clear sign of lessons learnt will be the Communications ministry sticking to the latest promised digital migration deadline of 2021, which will be 6 years after it was supposed to have been completed.

Verdict on ability of African governments to increase digital spectrum

Indications are that, overall, Africa came through the Internet traffic surge unscathed.

A number of African governments have already ticked this box through completion of digital migration, and many others have already started the process, with different completion dates.

The likelihood that the remaining countries will complete the migration process is high.

However, it does not seem likely that the outstanding migration process will be completed in the short-term for some of the countries, if South Africa’s experience is anything to go by.

Digital spectrum lies at the root of African governments’ ability to unleash digital economies in their countries. Thus, at best, the coronavirus window period will not be fully leveraged.

Protect privacy of online consumers

The Internet was supposed to be the key that unlocks the door to the world’s information – the platform that democratizes access. 

The statement above is correct, but only partly.

Increasingly, ownership of data that is used to generate information is in the hands of the very few, and the competition for the ownership of especially personal data is becoming ever fiercer.

Data is the new gold for the world’s big tech companies that can be counted with one hand: Google, Facebook, Apple, Amazon and lately Microsoft; all of which are American.

I have excluded China’s Alibaba, Tencent and Baidu. These tech companies are still predominantly 1-market horses that are restricted to their country of origin.

I suspect though that the Chinese tech companies exhibit the same characteristics as their American counterparts when it comes to the fierce competition for data ownership. 

Why should Africa do more to protect the privacy of her netizens?

While the big 5 tech companies keep ramping up efforts to increase users’ addiction to their product offerings, Africa lacks a coordinated approach to developing, or effective ways of enforcing, the regulations that ensure rights over her citizens’ data are protected, that the data stays in the continent, or at the least, that information generated from the collected data is shared with the continent for productivity purposes.

One of the major risks for African’s personal data, Raymond Onuhoa adds, is the “increasing adoption of cloud computing services across the region in both public and private domains: people data are stored in servers out of our countries, with doubts over the ownership of this data and their protection”.

And the relationship between digital economy and data?

Increase in online purchases will lead to increase in collection of personal data.

The bulk of the backbone for ecommerce’s digital technology infrastructure, including, payment gateways and cloud storage facilites, is not owned by Africans. Nor, is it located in Africa.

So yet again, an increasing volume of Africa’s online consumers’ personal data will be processed and housed away from her shores, with a good chance that it will be not properly regulated. 

Is there hope that Africa will hold the big 5 tech companies to account?

Can Africa do anything at this late stage to address the data protection and ownership issues, or has the horse already bolted?

My personal view? Not much can be done to address the issue of data privacy and ownership rights in the immediate term, but the continent needs to come together as one and move with required urgency to put effective measures in place in the medium term, which can be applied retrospectively where needed. 

The African Union must step up to the plate and drive the continent’s data protection process on behalf of all the African governments, and ensure the developed regulations have teeth, so they can bite when necessary, learning from the recent encounters that the European governments had with Facebook.

eNitiate | Politico Europe | Zuck's no-show at European Governments' Hearing on Facebook and Misinformation | 27-11-2018
Zuckerberg is a no-show at European Governments Hearing | Nov 2018 | Source: Politico Europe

Facebook is the world's most populous new power platform with increasingly dominant hold on global audiences. On a micro scale, it presents a challenge for the local local nonprofit or school that wants to reach potential students or donors but must pay Facebook to "boost" its post reach.

Timms & Heimans | #newpower (2018) | P. 115 Tweet

Note on existing country privacy protection laws

I am aware that a number of African countries have privacy protection laws in place, including 4 of the top 5, with Egyptian lawmakers in the advanced stages of the enactment of such laws.

I am doubtful though if such laws can stand firm against transgressions by the world’s big tech companies that have already been in hot water in more powerful territories and got away with a slap on the wrist in many of the publicly reported cases.

RELATED ENSIGHT:

Coronavirus - can African countries afford lockdowns?

Verdict on the capability of African countries to protect privacy of their citizens

Africa’s bargaining power resides in her combined population size of 1.341 billion citizens.

According to Worldometer, Africa is the second largest continent by population size, with a contribution of 17.2% to the world’s population. 

The big tech companies are aware of this power, and they are already falling all over themselves to get their hands on the largest share of predominantly consumerist market.

Individually, African governments’ bargaining powers against the world’s big tech companies are weak.

If this tick box is to be ticked successfully, development and implementation of the privacy protection regulations must be handled at the AU level.

However, the continent’s track record when it comes to especially the big economic powers and regional blocks working together has not been great.

Most recently, this was demonstrated by the the Africa intra-trade agreement, which everyone agrees is the best economic opportunity for the continent, but the political machinations keep getting in the way of its implementation.

Make ecommerce data open and easily accessible 

I left this tick box for last on purpose, and it will become clear why as you go through it.

In the previous section, I expressed a wish that African governments implement data privacy protection regulations under the AU, and force the big tech companies to share the information coming out of the processing of data collected from the continent, for productivity purposes.

Here is one little example.

eNitiate launched an annual Digital Skills in Africa Audit in late November 2019. 

What we found as we were doing research for the project, was that Google had a suite of digital courses called Google Digital Skills for Africa.

So, the question the cynical me asked was: hmm, what does Google know about digital skills in Africa that I don’t?

Why I asked the question?

My common sense tells me Google did not randomly include ‘Africa’ in the title of its digital courses.

I know that decision-making in this tech company is data driven. My conclusion then is that this decision was also informed by data insights.

However, Africans themselves do not have access to this information that is ABOUT THEM.

Demonstrating the value of open data

Using South Africa’s open data portal, I am going to show stats that will help frame the debate that has been a pain in the backside of the country’s mobile operators. 

For years, including earlier this year, there has been a public outcry about South Africa’s high mobile data costs.

I have also been part of the #datamustfall brigade, understandably so because I am a heavy user of this now essential service. 

In my view, mobile operators have failed to win a public debate against this strongly held view, using hard data fused with an emotional argument (whatever this could be, because facts alone will not sway the current view).

This has left the whole industry bruised as the court of public opinion continues to come up with the same ruling, year in and year out.  

As I came to find out while doing online research for this post – there is one point that mobile operators must advance in their defense.

Using freely available CPI data, mobile operators can demonstrate how the cost of data, whose baseline was high in 2010, has been almost flat for the past 10 years, while costs of ALL the other 8 essential services have been seeing steep increases.

See the two CPI graphs below that were extracted from the South Africa Open Data Portal.  

SA CPI vs Postal Services & Telecom Services 10-Year Trends

eNitiate | Open Data Portal | South Africa | CPI vs Telecoms 10-Yer Trends | 18 May 2020
Graph 2

Top 9 Essential Services 10-Year CPI Trends

eNitiate | Open Data Portal | South Africa | Top 9 Essential Services 10-Year CPI Trends | 18 May 2020
Graph 3

Quick analysis:

Graph 2:

10-year trends of Postal and Telecommunication Services, and overall consumer price index (CPI) are compared.

In 2010, the CPI was 69.10, and in March 2020 it was 115.30, that is an increase of 66.86%. 

In the case of Postal and Telecommunication Service, which include data services, comparative indexes for the same period were 98.70 (2010) and 102.50 (2020), with an increase of 3.85%.

Essentially, the Postal and telecommunication Service trend was almost flat over the 10-year period.

Graph 3: 

CPI trends of the top 9 essential services – using the Lockdown speak – are compared.

When I saw the trends for the top 4 essential services – primary education, water and other services, financial services and electricity and other fuels; it was clear to me that the court of public opinion needs to change its gaze.

#PrivateEducationFeesMustFall #TapMustFall #BankRatesMustFall #PowerMustFall 

I know that the CPI increase argument is not enough on its own for mobile networks operating in South Africa to persuade cash-strapped data consumers that they [mobile networks] have kept price increases almost flat for a decade, but every piece of arsenal will do in this current negative sentiment, right? Use it. Don’t use it…

Back to the subject

Open data can spur innovation, which Africa sorely needs in order to unleash digital economies for a sustainable period.

Africa boasts some of the most innovative tech solutions, notably IROKOTV (Nigeria), M-Pesa (Kenya) and Yoco (South Africa). 

More can be achieved across many areas such as health and education with availability of large amounts of open and accessible data that can be used for insights and modeling.

Unfortunately, adoption of the open data policy varies widely across Africa

The latest report by World Wide Web Foundation shows that only one African country has adopted the Open Data Charter, and it is Sierra Leon.

By implication, none of the top 5 countries by active monthly Facebook users is a signatory. 

Here is the stated mission of the Open Data Charter:

The Open Data Charter is a collaboration between over 100 governments and organisations working to open up data based on a shared set of principles. We push for policies and practices that enable governments to collect, share, and use well-governed data, to respond effectively and accountably to our most pressing social, economic, and environmental challenges.

How are the top 5 African countries performing on the Open Data Barometer?

South Africa, Egypt, Nigeria, Morocco and Kenya;  all have open data portals. This is a good start. 

But more needs to be done, and it starts with adopting the Open Data Charter.

The Open Data Barometer is “a global measure of how governments are publishing and using open data for accountability, innovation and social impact“. 

Here below is the 4th edition’s Open Data Barometer (2016) on the world map, on which I plotted the top 5 African countries’ open data scores (out of 100, called Values) and their respective global rankings:

eNitiate | Open Data Barometer | 4th Edition Report (2016) | 18 May 2020

As stated on the Open Data Barometer Website, open data scores are based on 3 criteria: 

  • READINESS of states, citizens and entrepreneurs to benefit from open data.
  • IMPLEMENTATION: the extent to which accessible, timely and open data is published by the country government on a selection of 15 key fields.
  • EMERGING IMPACT: the extent to which there is any evidence that open data release by the country government has had positive impacts in a variety of different domains in the country.

Kenya has the best ranking of the top 5. Detailed assessment of its performance across the 3 criteria above can be found here.

Egypt has the worse ranking. Detailed assessment of its performance across the 3 criteria can be found here.

There are African countries that fall outside the Open Data Barometer (ODB), as shown by the white patches on the African map. Such countries either do not have any open data policy, or their open data efforts are not making any discernible impact.

Verdict on ability of African countries to make ecommerce data open and accessible

It is likely that the top 5 African countries will be able to give access to open ecommerce data. To some extent, this is already happening as witnessed by associated ecommerce stats in the Digital 2020 country reports.

Rwanda received a special mention in the Sub-Saharan Africa ODB Regional Report for the progress the country has been making in improving its open data rankings. 

This East African country looks set to be able to have its ecommerce data open and accessible.

Indications are that many other African governments will not be able to make ecommerce data open and accessible, as judged by their Open Data Barometer scores. 

Reality check on African governments' ability to unleash digital economies during coronavirus

The Africa-wide picture for unleashing digital economies during the coronavirus is not all that clear.

  • Based on the first 2 tick boxes – digitisation of cash economies and having digital spectrum, the top 5 countries, Rwanda and the other countries that have completed digital migration have the highest potential to unleash their digital economies. 
  • Add open data tick box, and the top 5 countries and Rwanda stand out again.
  • Despite there being country privacy protection laws for a few of the African countries, this tick box is going to pose the most challenge for all of Africa when it comes to dealing with the big tech companies, at least in the medium-term.  

The content we generate creates enormous value for powerful intermediaries that gobble up our data, opaquely decide what content we get to view, and claim the lion's share of the riches that result.

Timms & Heimans | #newpower (2018) | P244 Tweet

In my assessment, African governments’ aggregated state of readiness will not enable them to fully leverage the coronavirus-induced Internet traffic increase to unleash digital economies for their countries.

The comforting thought is that the shift to online by consumers has started a culture that even African governments cannot ignore. 

They [the governments] are now under pressure to fast-track digital economic policies and implementation plans, or face catastrophic consequences that the coronavirus has brought to their shores.

On a closing note...

Regrettably, the South African government is not getting with the ecommerce program at the moment, as this Daily Maverick headline that was published 20 days ago shows:

E-commerce is flourishing all over the world, even during lockdown, but in South Africa, online retailers are still not being allowed to operate despite increased demand for their services.

I am personally distressed by the South African government’s approach to ecommerce, especially considering that the country’s economy is already on the brink.

Common sense tells me that Ebrahim Patel – the current Minister of Trade and Industry – should be opening the ecommerce floodgates to mitigate the disaster that is already on our doorstep. 

But hey, what do I know? 

I predict that this is not the last we hear about this ecommerce debacle, if this article is anything to go by. 

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