East Africa’s need for a unified digital economy 

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  • The unified digitisation of the East African economy is estimated to generate up to a US$2.6 billion boost in GDP and 4.5 million new jobs
  • Burgeoning tech start-up clusters in Nairobi, Dar es Salaam, Kampala, and Kigali provide inspiration for what the future could hold
  • Data by GSMA reveals that by the end of 2020, 495 million people subscribed to mobile services in Sub-Saharan Africa, representing 46 percent of the region’s population, an increase of almost 20 million on 2019

The rise of digital technologies offers a chance to disrupt East Africa’s economic growth, unlocking new pathways for rapid innovation, job creation, and access to services that would have been unimaginable only a decade ago. 

The burgeoning tech start-up clusters in Nairobi, Dar es Salaam, Kampala, and Kigali provide inspiration for what the future could hold. 

By working together and seizing opportunities to ‘leapfrog’ outdated infrastructure, technology, and business models, East African countries stand to position the region as a top digital investment and innovation destination. 

According to a report by the World Bank, rising mobile phone penetration, improving broadband internet connectivity, and widespread adoption of mobile money across East Africa are changing the way the region communicates, collaborates, and transacts. 

“This digital evolution has spurred the development of a small, but rapidly growing tech sector, particularly in urban hubs, with innovative entrepreneurs launching new digitally enabled services and creating 21st-century jobs. More significantly, the adoption of digital technology is gradually driving productivity gains in traditional brick and mortar industries,” the report stated. 

Additionally, the World Bank noted that East African governments have also begun to take advantage of these trends by moving public services online, utilizing data to improve policymaking and digital platforms to increase the efficiency of public service administration. 

“While this digital evolution shows significant promise, it is not yet amounting to a revolution. Access to the internet is still very low by international standards,” the report highlighted. 

World Bank further notes that the unified digitisation of the East African economy is estimated to generate up to a US$2.6 billion boost in GDP and 4.5 million new jobs that will largely benefit those at the bottom of the pyramid.

Data by GSMA reveals that by the end of 2020, 495 million people subscribed to mobile services in Sub-Saharan Africa, representing 46 percent of the region’s population, an increase of almost 20 million on 2019.

GSMA revealed that smartphone connections will more than double by 2025 in Sub-Saharan Africa with the East African Community registering the largest incremental growth, led by Rwanda and Tanzania. 

EABC logo/ EABC

Challenges facing the growth of EA’s digital economy. 

While mobile voice services have grown rapidly, internet access is still very low in most parts of East Africa. 

This is evident as landlocked countries such as Uganda, Rwanda and Burundi are still paying higher premiums to access bandwidth of lower quality, compared to their coastal neighbours. 

The region’s data infrastructure remains underdeveloped, in part due to the lack of a clear legal and regulatory regime to support free flow, storage, and processing of data across borders and a harmonized data protection and privacy regime to ensure the security of personal data. 

Additionally, while innovative online services and content are emerging across East Africa, barriers to cross-border expansion and access by users and impediments to investment are holding back the region’s potential for digital economic growth. 

“Most online services originate from outside the region, dominated by large firms that have the resources to navigate the web of procedures, licenses, taxation, and other barriers which require businesses to set up relatively independent operations in each country rather than seamlessly expanding across borders,” the report by World Bank states.  

While East Africa is a world leader in digital financial services, the region lacks interoperability and the imposition of high fees for cross-border digital transactions discourages regional e-commerce.

Similarly, as logistics infrastructure, services and access to energy continue to improve, there is still a constrain on demand for digital services and productivity of firms. 

“Uncoordinated taxation policy and high tax burdens across all layers of the digital value chain are likewise raising costs and discouraging investment. Support for innovation and entrepreneurship are helping generate promising new ideas and start-ups but these firms still struggle to access capital and scale,” the report added. 

What needs to be done

According to the World Bank, the region needs to develop a single digital market (SDM) based on promoting the development of the digital ecosystem while removing cross-border barriers to integration.  

“SDM will ensure that e-commerce, digital services and the functions that support them all work across borders. It will also remove trade and customs barriers for all goods purchased online. The rise of digital technologies could unlock more rapid economic growth, innovation, job creation and access to additional services,” the report further states. 

This will work towards strengthening industrial development through education, innovation and technological progress with an emphasis on the role of ICT in the East African region. 

A unified system will allow businesses and consumers across the EAC region to access better and cheaper internet, enabling the use of mobile phones and mobile money accounts in any country of the region to buy goods and services from sellers across the region, who will be able to deliver efficiently to their doorstep. 

According to the report, the implementation of such a system will allow the private sector access to a larger market, support the emergence of digital entrepreneurship, and provide new sources of investment. 

“To become tomorrow’s innovators, entrepreneurs, and leaders, East Africa’s youth need to be empowered with the digital skills and access to technology, ideas, and markets that are essential to thrive in an increasingly digitized global economy,” the report stated. 

According to World Bank, those countries currently lagging in connectivity will enjoy the most significant boost from an integrated digital market.

Read: EAC member states urged to scrap non-tariff Barriers

Kanyali Cynthia is a Kenyan-based financial journalist with key specialisation in data and tech reporting and over eight years of experience.

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