Inside the World Bank's gamble on 'digital economies' in Africa

Inside the World Bank's gamble on 'digital economies' in Africa
Source: Devex.com | JAD
Date: 15-05-2018 Time: 05:05:12:pm

As the proliferation of technologies risks leaving Africa further behind, the World Bank is betting on “digital economies” as a way for the continent to leapfrog over old development pathways.

But as the world grapples with the potential consequences of rapid technological change, even insiders say the strategy is a gamble.

Launched by the World Bank and International Finance Corporation last month, the new strategy seeks to help African governments follow in the footsteps of countries such as India and China, by capitalizing on the billions of online interactions that take place every day.

While investment in the area has historically been weak, a Devex analysis found that as of March 2018, approximately $2 billion worth of projects awaiting approval in the World Bank’s pipeline could fall into the category of Africa’s digital economy, including projects focused on public policy, service delivery, and skills development.

Discussions are already underway with a number of African governments — and pilot projects are set to be announced at the World Bank meetings in October.

“Fundamental change is taking place in virtually every industry … [and] supply chains are being disrupted,” Atul Mehta, director at IFC, told Devex.

“The traditional path to development is probably going to get disrupted … But the digital economy potentially offers an alternative.”

The strategy kicked off during the bank’s Spring Meetings in Washington, D.C., with a high-profile event that brought together African entrepreneurs and investors, as well as LinkedIn Chief Executive Officer Jeff Weiner, and Nigerian businessman and philanthropist Tony Elumelu.

Bank insiders admit the approach is shrouded in uncertainty, but say it could be the continent’s best chance for success.

“The stakes are high,” stressed IFC chief Philippe Le Houérou, speaking at the event.

“We cannot afford to wait and see how the new model [of development] evolves and then join the gang, because you may fall behind — and then it will be much harder to catch up.”

The problem

As the traditional development trajectory from agriculture to manufacturing to services is disrupted, experts warned that African countries will need to find an alternative pathway.

Technology is part of the problem, as the shift toward automation threatens to cut low-skilled manufacturing jobs. But it could also be part of the solution: A study by Deloitte predicted that expanding internet access in Africa to match levels in high-income countries could enhance productivity by as much as 25 percent, generating $2.2 trillion in gross domestic product and more than 140 million new jobs.

India is often held up as the poster child for the digital economy, which IFC defines as “the economic activity arising from billions of online interactions every day between people, businesses, governments, machines, and processes.” Indian Prime Minister Narendra Modi has set his sights on a trillion dollar digital economy capable of generating jobs and economic growth both within India and for export.

However, while Africa currently has the fastest growing proportion of internet users, it still has the lowest levels of internet access in the world, with 75 percent of the region’s population offline, according to the International Telecommunications Union. Of those online, the majority connect via their mobile phones and do not have access to high-speed services.  

The lack of connectivity infrastructure, including reliable electricity, is a major barrier to internet expansion, along with protectionist government policies and issues of affordability which make the sector unattractive to investors.

The World Bank has been working to address these issues for a while, but the new digital economy strategy marks a greater and more holistic push to get African governments to embrace the digital boom — or risk being left behind, IFC’s Mehta said.

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