Africa can bridge digital divide if it scales innovations in e-commerce and agritech
Tuesday January 04 2022
Almost two years into the pandemic, Covid-19 has rapidly accelerated the digital transformation of economies globally. For businesses in some parts of the world, such as Pacific Asia, Covid-19 has fast-forwarded digitalisation by more than 10 years.
However, not all countries have seen a boost to their digitisation efforts during the pandemic. Many countries in the developing world, including Africa, continue to be challenged by the severe digital divide largely due to infrastructure and cost barriers.
Thankfully, it is not all grim. While the digital divide persists, African countries have an opportunity to scale the innovations in the agriculture and e-commerce sectors from the past two years. Scaling these innovations, which are often driven by private sector initiatives, will require policy efforts that focus on regional integration and targeted support towards digital adoption.
These silver linings have the potential to boost economies, transform the respective sectors beyond the pandemic, and power new possibilities for the continent in terms of wealth creation and employment.
Innovation in agriculture
Agriculture is a pillar of Africa’s economy, contributing 23 per cent of the continent’s GDP and 49 per cent of employment. The sector, estimated to be operating at only 40 per cent of its potential, has long called for technological innovation to unlock its full capacity. While the pandemic saw the sector challenged by disruptions to access to labour, agricultural inputs, advisory services, and output markets, it also saw increased adoption of digital technologies in some parts of the continent.
Over one million farmers in Uganda, for example, have used apps to connect with customers, purchase farming inputs, and receive advisory services as well as real-time price and weather information to circumvent the mobility and accessibility restrictions of the Covid-19 world. Applications have aided productivity as well as encouraged diversification, particularly into new markets.
This rising digitalisation is also fuelling investments in the sector. According to Tech Disrupt Africa, agri-tech startups raised $60 million in 2020, representing 8.6 per cent of the total funding secured by tech startups in the continent last year. The growing investments in the agritech sector contribute to transforming agricultural into a wealth-generating sector. However, these gains need to be maximised through government efforts to support tech developers and farmers, which is often minimal.
By promoting the digital transformation of the agriculture sector, policymakers also have the opportunity to attract the more tech-savvy African youth to what has long been viewed as a traditional sector, thus creating opportunities for self-employment and changing the narrative around agriculture
Regional integration of e-commerce
A key intersection within the technological adoption phenomenon in agriculture has been the rise of the e-commerce industry. As physical shopping became restricted due to the pandemic, consumers turned to e-commerce platforms to meet their needs. A survey by Nielsen reports that in Egypt, Nigeria, South Africa, and Kenya, consumers were 40 per cent more likely to either maintain the same shopping levels or increase them from the pre-pandemic levels, translating into a boon for African e-commerce companies.
A major e-commerce player on the continent, Jumia Technologies, recorded one of its best financial performances in recent years driven, mostly by marketplace revenues as gross merchandise volume grew by 30.4 per cent year-over-year for the first six months of 2020.
For the e-commerce industry, it is not necessarily the lack of political will to promote it that is the concern. Countries such as Rwanda, Senegal, and Kenya have taken various measures to promote e-commerce platforms among consumers, especially during the pandemic, and as of 2019, the continent had 631 online marketplaces managing 1,900 websites in 58 countries and territories, according to the African Development Bank.
However, it is the lack of ability to scale the apps beyond the borders that are a concern – 98 per cent of all digital platforms in East Africa exist only within national boundaries, often due to cost-ineffective cross-border trade regulations. For small traders on these platforms, it severely hampers their ability to tap into economies of scale as access to these platforms is restricted from many potential consumers due to the wide digital divide on the continent. Creating more comprehensive e-commerce regulations, with complementary actions on regional ICT skilling, could boost the e-commerce trade.
AfCFTA to remove trade barriers
Among the deterrents to expanding e-commerce trade beyond borders, firms and entrepreneurs have indicated tax regulations, customs procedures, high logistics and delivery-related costs, and lack of integrated payment mechanisms as key barriers to cross-border e-commerce in Africa. Luckily for the continent, the African Continental Free Trade Area (AfCFTA) is setting the ball rolling to remove trade barriers and promote intra-African trade, creating an avenue for policymakers to capitalise on the e-commerce gains made during the pandemic and bolster trade.
With the Africa-wide free trade pact fast-tracking e-commerce regulations from Phase 3 to Phase 2 due to the pandemic, African countries can collectively establish common positions on e-commerce, harmonise digital economy regulations, and leverage the benefits that have emerged during the pandemic.
Policymakers have a great opportunity to compensate for the economic slowdown caused by Covid-19's many lockdown measures by leveraging advances earned during the pandemic, particularly in the agritech and e-commerce sectors. Tapping the opportunity can spell an increase in investments, employment opportunities, as well as the acceleration of the continent’s digital transformation.
Isaac Kwaku Fokuo is the Founder of Botho Emerging Markets Group