How High Cost Of Internet Is Impeding The Growth of Africa’s Digital Economy

Today, the internet has become as important as oxygen! Individuals, businesses, banks, economies, governments, etc., all depend on the internet in one way or the other, to survive. Two decades ago, the internet was not as important as it is now for individuals and organizations of various interests in Africa. People, businesses, and even governments depended on manual and time-consuming methods to go about their daily operations.

The rise of the internet in use, application, and advancement has led to what is now referred to as the “Digital Economy.” According to Wikipedia, the digital economy is a portmanteau of digital computing and economy and is an umbrella term that describes how traditional brick-and-mortar economic activities (production, distribution, trade) are being transformed by the Internet, World Wide Web, and blockchain technologies.

What does the term Digital Economy mean?

The term “Digital Economy” has been used interchangeably with Internet Economy, Web Economy, Crypto Economy, New Economy, etc. According to Investopedia, the digital economy refers to “new, high-growth industries that are on the cutting edge of technology and are believed to be the driving force of economic growth and productivity.” “The new economy was seen as a shift from a manufacturing and commodity-based economy to one that used technology to create new products and services at a rate that the traditional manufacturing economy could not match,” it adds.

The digital economy is a term that signifies or represents the economy as it relies on and/or works hand-in-hand with technology. Therefore, as technology evolves, so does the economy. The wave of technology has brought about several changes to virtually everything and the economy wasn’t left out. According to a Harvard paper, “it is widely accepted that technology is the key driver of economic growth of countries, regions, and cities. Technological progress allows for the more efficient production of more and better goods and services, which is what prosperity depends on.” Technological progress means a lot for a country. A country is made up of individuals, businesses, corporate bodies, etc., who all make up its economy in their own way. The aggregated activities of all these “strands” are what make the economy and if they experience an improvement, so does the economy. Technology has proven to increase the sales and profits of businesses, the operations of corporate bodies, and even governments. Today, the digital economy across several African countries is a major contributor to their Gross Domestic Product (GDP).

Where Is Africa In Terms Of Digital Development?

Africa remains at its early phase of digital development irrespective of the presence of many factors that can make this growth meteoric. According to the World Bank, “Access to the internet remains out of reach for most people in the continent, with only 22% reporting having access in 2017. Too few citizens have digital IDs or transaction accounts – locking them out of access to critical services and e-commerce. Digital startups struggle to attract funding and ‘traditional’ businesses are only slowly adopting digital technologies and platforms to boost productivity and sales. Few governments are investing strategically and systematically in developing digital infrastructure, services, skills, and entrepreneurship.” This highlights various problems with digital development in Africa but we’ll be looking at one of the most alarming ones – access to the internet.

In Africa, access to the internet is still low, and one of the reasons for this is how expensive it is to get on the internet. While smartphone adoption has increased over the years, there is still a huge gap to be filled in the continent. Mobile phone adoption aside, the high cost of the internet is a major impediment to access to the internet. Africa, especially the sub-Saharan parts, ranks as one of the most expensive regions with a high cost of internet per 1GB of data, a Business Insider 2021 report said.

A more recent report by Cable Co. UK, titled “Worldwide Mobile Data Pricing 2022,” surveyed 233 countries and territories and sub-Saharan Africa, and five of the 10 most expensive countries to buy mobile data in the world are in sub-Saharan Africa. The high cost of data has hindered the development of Africa’s digital economy. Africa has the opportunity to harness the digital economy as a driver of growth and innovation, but if it fails to bridge the digital divide its economies risk isolation and stagnation, the World Bank said. Let’s look at some of the ways the high cost of the internet impedes the growth of Africa’s digital economy.

How High Cost Of The Internet Is Impeding The Growth Of Africa’s Digital Economy

The high cost of the internet slows down the transformative effect on social and economic development. Technology and the internet reduce the cost involves in doing business and reduces the gap between businesses and their customers. Let’s look at an example. Today, Amazon is one of the biggest platforms to access goods and services and while the company has few physical stores, its online business is its core business. Buyers and sellers are connected over the internet and business are conducted without having to meet. This saves several costs; the cost of owning and operating a physical location, the cost of advertising, the cost of maintaining employees at your physical location, etc. The high cost of internet, therefore, reduces access which in turn cuts down on the transformation an economy can experience.

Today, various individuals and businesses connect with their loved ones and customers over the internet. Collectively, a lot of money is spent. This affects the country’s GDP (taxes are collected by the government), employment opportunities are created and businesses can maintain a long-term relationships with their customers. Greater access to the internet translates to greater gains for an economy and vice versa.

The internet has proved to increase labor productivity, competitive advantage, efficiency, and growth for businesses. For government bodies, the internet has helped with increasing management, efficiency, decision-making processes, the interaction between governments and their citizens, etc. The high cost of the internet is just a setback for all of these benefits.

Additionally, the internet and technological advancement have proved to help to improve the socio-economic development of small and large enterprises. Today we have seen many businesses either fully evolve to e-commerce or adopt e-commerce practices alongside their core operations. Experts believe that the shift to e-commerce or adoption of e-commerce practices is very important for businesses in Africa to be able to compete efficiently.

While factors such as the availability of infrastructure, smartphone adoption, government policies, etc., can make or mar a country’s digital economy, the cost of access to the internet is one important factor to always consider. Last week, Nigeria’s federal government announced a new 5 percent tax for GSM calls, SMS, and data usage – Nigerians will now pay a 12.5 percent tax on telecommunication services. With Nigeria already one of the countries in Africa with the most expensive internet, this decision would have a dire effect on not only businesses but also consumers who will bear most of the burden.

What Can The Government Do?

Since it can be concluded that the high cost of the internet affects a nation’s digital transformation and economy, the importance of keeping internet access cannot be overemphasized. The Word Bank argues that “to become tomorrow’s innovators, entrepreneurs, and leaders, Africa’s youth need to be empowered with the digital skills and access to technology and markets that are essential to thrive in an increasingly digitized global economy.” The role of the government in building her digital economy is dire. The government has to provide the necessary infrastructure, and enabling environment, and take on the right policies and recommendations and the tables could turn for that country’s digital economy. “Governments need to find more nimble and effective means of delivering services and interacting with citizens. Businesses need to utilize digitally-centered business models to connect with the hundreds of millions of customers previously out of reach due to geography or low income,” the World Bank adds.

Key development trends across the world, especially in more advanced countries, can be studied by African countries and findings can be used to make informed decisions. Due to many factors, mobile phones are really expensive in Africa. The government can work, either through partnerships or by reviewing hovering factors, to ensure that the rate of smartphone adoption increases in their country. African governments may also need to review their stance on cryptocurrencies. Today, cryptocurrencies have become a driving force for growth. Governments could leverage this. What is, however, apparent in Africa is a strong aversion to cryptocurrencies. Governments believe that cryptocurrencies are a threat to their financial systems as well as a way to fuel crimes such as terrorism and money laundering. The Central African Republic thinks differently of cryptocurrencies. Not only is Bitcoin legal in the country, but the country has also launched an indigenous cryptocurrency called Sango Coin.

In conclusion, the importance of increasing access to the internet by lowering the cost of access cannot be overemphasized. For individuals, businesses, and even the government, the high cost of internet access impedes their operations, which also determines how far a nation’s digital economy can go in terms of growth.