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Youth and the digital economy in Africa

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Youth and the digital economy in Africa

John Karuitha

31 Jul 2020

5min min read
  • Information technology

This article is a part of a series on youth innovation during COVID-19 developed by the African Centre for the Study of the US at Wits University, the Youth Bridge Trust, and the Africa Portal.

Globally, the measures to curb COVID-19 are having unintended effects on the digital economy by encouraging the sourcing of goods and services online, while also highlighting persistent digital inequalities. Africa has significant digital infrastructure and skills gaps – with between 5% and 50% of the population having consistent access to the internet compared to 80% and above in Europe and North America. The gap replicates in other sectors of the economy due to the bottlenecks in digital infrastructure. Within education, for example, 39% of university students in Africa report enrolling for online classes during the pandemic, with significant regional variations: 17% in West Africa, 43% in East Africa and 41% in Southern Africa. The gaps imply that digital technology has a vast potential to generate job opportunities in Africa, especially for the youth.

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In this article, I examine the place of the digital economy in creating jobs for the youth, considering the COVID-19 pandemic and economic informality in Africa. By digital economy, I refer to (i) the digital enabling infrastructure needed for computer networks to exist and operate, (ii) the digital transactions that take place over the platform, and (iii) the content that digital economy users create and access. Specifically, the article addresses the opportunities that the digital economy presents to Africa’s youth, while also highlighting the limitations.

As the world’s most youthful and second most-populous continent, job creation is a priority for Africa. Consequently, measures aimed at generating jobs in Africa will disproportionately benefit the youth. Most Africans make a living in agriculture which, on average accounts for 15% of GDP; however, increasing urbanisation means that the industrial and service sectors will become prominent sources of employment in the coming decades. As such, a viable strategy is to create jobs in the more productive industrial and services sectors and release more land for large scale farming. Given the shaky industrial base, the services sector looks promising, and more so the digital economy sector.

Tapping into the digital economy sector

To make the best out of these digital opportunities, Africa should, without disregarding the external market, first look inwards and develop digital technologies that serve local needs. In this regard, digital entrepreneurs should target small, medium and micro enterprises (SMMEs) as these firms form 99% of businesses in Africa and generate 60% of jobs without counting subsistence agriculture. Substantial research also shows that SMMEs are central to creating youth employment. Notably, 85% of these SMMEs typically operate informally or semi-formally. As such, they face some level of digital exclusion in terms of access to digital hardware, data analytics, and digital enhancement tools. There are several studies that suggest viable policy measures to enhance the participation of the youth in this regard given the limited job opportunities in the rest of the economy.

Beyond the direct employment opportunities that SMMEs avail, the youth could leverage the opportunity to facilitate SMMEs in Africa to embrace a data-driven business model. There are two prime opportunities here. First, most SMMEs lack access to the necessary hardware, such as POS terminals, without which data capture, storage and management are challenging. Even where the tools exist, they are not suited for African SMMEs on account of accessibility, ease of use, and cost considering the small scale and informality of businesses on the continent. Secondly, for most SMMES, there is lack of awareness of the benefits of data-driven business intelligence and Information Technology in general. The youth is in a prime position to bridge these knowledge gaps.

"The external market for digital services is another vast and growing sector – increasing at an estimated 15% per annum."

For example, the youth could get involved in harnessing indigenous knowledge for various economic activities. While there exists abundant literature on the potential of indigenous knowledge systems in resolving local problems, little of it has seen light of day and much of it remains undocumented causing it to vanish once the custodians die.

To illustrate the potential of indigenous knowledge, researchers in Kenya have used digital technology and local knowledge systems regarding the weather to forecast weather patterns, a critical ingredient in rain-fed smallholder agriculture that is prevalent in Africa. Digital technology allows for the documentation of this vast pool of local knowledge, creating work opportunities for the youth while allowing for the advancement of contemporary knowledge through research built on the foundations of this indigenous knowledge.

Digital services can also create employment opportunities for the youth through replicative entrepreneurship. As an example, cab-hailing firms like Uber have disrupted meter cab businesses in major African cities. In smaller cities where they do not find it feasible to operate, entrepreneurs, primarily the youth, have developed similar cab-hailing apps, creating demand for drivers in the process. While it is not possible to replicate all business models, the cab-hailing example shows that it is possible to tailor existing digital technology to meet local needs, especially in rural areas and small towns where most Africans live while creating employment for young people.

The external market for digital services is another vast and growing sector – increasing at an estimated 15% per annum. While Asia leads the way in the outsourcing of business processes, the digital hubs in Africa, from Accra to Nairobi to Cape Town, demonstrate the continent’s potential in this regard. In South Africa’s Western Cape province, jobs in BPO grew tenfold between 2016 and 2017. The revolution is possible due to increasing internet availability and the presence of affordable digital devices, chiefly, mobile phones. These hubs highlight the need for transparent leadership in order to attract investment in digital technology and contribute to youth employment, given that most of the digital firms follow a public-private partnership model.

Apart from handling outsourced work from western countries, these firms also contribute to addressing local challenges. Two initiatives by Google stand out. The first is a programme in Ghana that targets the detection of diseases and the creation of an early warning system on droughts and the second is the Project Loon that aims at providing internet connection to remote locations in Eastern Africa using floating balloons. Apart from providing direct employment opportunities, the loon initiative will bridge the digital infrastructure gap, allowing more youth in rural areas to take part in the digital economy. In addition, the former directly impacts productivity in agriculture, the major source of employment for the youth in Africa.

Concluding remarks

Even where opportunities exist, the path towards successful participation in the digital economy for the youth in Africa is not without hurdles. The barriers include capability, access, and networks on the demand side, and knowledge and trust on the supply side. To overcome these obstacles Africa should set a conducive macro-environment to enable the youth to reap from digital technology. The framework should set a regulatory framework that protects digital intellectual property and establishes sufficient social security systems for digital workers. Also, better public governance and tax policies will help attract investments in the digital industry while addressing the biggest obstacle to SMME growth, access to finance.

In addition, Africa must regularly update curricula to equip its youth with the relevant skills. Over and above soft skills like honesty and empathy, the youth must embrace continuous learning, and numerous learning opportunities exist under the Massive Open Online Classes (MOOCs) and initiatives led by local universities and business firms. Sought after skills relate to domain expertise, computer programming and applications development, data analytics, and information security. Mentorship and coaching can, to an extent, also assist in this regard.

(Main image: Africa's silicon valley Ikeja in Nigeria. A man fixes a computer at the 'Computer Village', the bazaar where electronic products such as mobile phones, computer hardware and accessories are sold, in the Ikeja suburb of Lagos, Nigeria on 24 February 2015 - Mohammed Elshamy/Anadolu Agency/Getty Images)

The opinions expressed in these article(s) are those of the author(s) and do not necessarily reflect the views of SAIIA or CIGI.