The African economy has been negatively impacted by COVID-19. Some industries may be completely wiped out. At the same time, the African continent has the largest overlooked investment opportunity, the internet economy, with the potential for a profound impact on development. A report published by Google and IFC, the e-Conomy Africa 2020 Report has indicated that there’s a potential to add up to $180 billion to Africa’s gross domestic product (GDP) by 2025.
The projected potential contribution could reach $712 billion by 2050.
Driving this growth is a combination of increased access to faster and better quality Internet connectivity, a rapidly expanding urban population, a growing tech talent pool, a vibrant startup ecosystem, and Africa’s commitment to creating the world’s largest single market under the African Continental Free Trade Area.
Currently, Africa is home to 700,000 developers and venture capital funding for startups has increased year-on-year for the past five years, with a record of $2.02 billion in equity funding raised in 2019, according to Partech Ventures Africa.
“The digital economy can and should change the course of Africa's history. This is an opportune moment to tap into the power of the continent’s tech startups for much-needed solutions to increase access to education, healthcare, and finance, and ensure a more resilient recovery, making Africa a world leader in digital innovation and beyond,” says Stephanie von Friedeburg, Interim Managing Director, Executive Vice President and Chief Operating Officer of IFC.
Digital startups in Africa are driving innovation in fast-growing sectors, including fintech, healthtech, media and entertainment, e-commerce, e-mobility, and e-logistics, contributing to Africa’s growing Internet gross domestic product (iGDP) — defined as the Internet’s contribution to the GDP.
“Google and IFC have created this report to highlight the role the digital startup sector is playing and other factors driving the continent’s growth, to showcase and support the opportunities the continent presents,” says Google Africa director Nitin Gajria.
An analysis within the report, conducted by Accenture, found that in 2020, the continent’s GDP may contribute approximately $115 billion to Africa’s $2.554 trillion GDP (4.5% of total GDP). This is up from $99.7 billion (3.9% of total GDP) in 2019, with the potential to grow as the continent's economies develop.
Investments in infrastructure, consumption of digital services, public and private investment, and new government policies and regulations will play an important role in supporting Africa’s digital growth. The report notes that investment in digital skills will also need to increase in order to help drive technology usage and continue to grow the continent’s talent pool.
The report also highlights the potential of the internet economy in South Africa. It’s estimated that by 2050 the internet economy will contribute $125 billion. Already there are signs in South Africa that are showing the importance and value of the internet economy.
For example, South Africa has one of the largest markets for online food delivery on the continent, with revenue amounts estimated to be $965 million in 2020 (+35.4% YoY). The market volume is expected to grow at a CAGR of 9.7%, bringing the total market value to $1.37 billion by 2024.1.
In terms of skills, the report indicates that South Africa is leading the continent with 120 000 developers who are a very important component in developing the local internet economy. Skills however have been highlighted as one of the few areas that require serious attention if Africa is to achieve its full internet economy potential.
The report points out that the number of African developers is still small when compared with more mature ecosystems around the world. It indicates that Latin America had 2,162,461 developers in 2019, with Brazil (573,400), Mexico (315,300), and Argentina (304,600) leading the region in total numbers.123 And in the state of California alone, the number of software developers is 628,414.
The African internet economy requires African leaders to consider it as an important contributor to the economy. Failure to recognise this important industry will lead to a serious loss of investments and negatively impact the African GDP in the future .
