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Digitalization and Business Growth
Fofou Fanny 11 Aug. 2023
When we talk about digitalization, most of us think that it is a phenomenon that is 20 to 30 years old. We believe this because the phenomenon started taking noticeable proportions in the dotcom era. However, it is not true. Digitalization has its root in digitization which started with the advent of computers in the 1950s. For digitalization to take place, digitization ( the process of turning physical data into digital data) needs to take place. So, what is digitalization and why is it important for business growth?
Digitalization is the process of integrating digital technologies into processes in order to improve them. In a world where competition is fierce, good customer service is key in order to keep customers satisfied and loyal to your product/services. That is where digitalization plays an important role. When a company digitalizes it:
Increases its knowledge about its customers’ tastes and expectations thanks to the data gathered on them throughout sales. Therefore, the company can offer services/ products more attuned to consumers tastes and trends consequently increasing sales.
Improves its service execution thanks to the efficiency and consistency leading to more sales.
Has a clear understanding of its expenditure and thus, a better management of costs. This has a direct impact on the cash flow.
Has clear information to better plan and seize market opportunities.
Prevents revenue leakage
Etc…
The impact of digitalization on businesses is undeniable! Not embracing it will prevent your business from growing fast.
Digitalization in Frontier Markets
Fofou Fanny 14 Aug. 2023
When it comes to digitalization, Frontier Markets are still decades away from Developed Countries and Emerging Markets level. One can argue that Frontier Markets faces challenges that the previous did not necessarily had to endure such as for lack of infrastructure, lack of funds to build the necessary infrastructure, predatory practices from company providing network services allowing the final consumer to access internet, etc.…
However, of all the reasons given stopping Frontier Markets from digitalizing at a fast speed, there is one that is never mentioned: the lack of willingness. This is not political but rather taking a pure business perspective. Have you ever wondered how many businesses located in areas with the right infrastructure have digitalized? How many still run their operations manually? What is stopping them from doing that? Is it that they don’t trust their data to be handled by strangers? Is it that they are not willing to get out of their comfort zone? Or is it about not finding the right technological partner to help and assist them throughout this journey?
Businesses not embracing digitalization are missing out on some great advantages of digitalizing (See our post ‘Digitalization and Business Growth’). Nevertheless, in Frontier Markets, it is up to the companies that have digitalized and technology companies to lead the way in order to increase the rate of digitalization within companies. Show those that are reluctant to why and how they did it and the fruits they are ripping from it.
Africa Digitalization Landscape
Fofou Fanny 17 Aug. 2023
In previous posts; Digitalization and Business Growth and Digitalization in Frontier Markets; it was highlighted why digitalisation is necessary although challenging to implement. Taking into consideration these challenges, a review will be carried out on the Africa Continent digitalisation in this series called Africa Digitalisation Landscape. The series will kick-off with the Central Africa region followed by East Africa, then West Africa. North Africa will then take suite and South Africa region will close out this series. The parameters we will be looking at are:
Internet Penetration
Data affordability
Qualified ICT manpower
Equipment affordability
Going through all these parameters will give a clearer picture of each region to allow an objective comparison of regions and suggest from our standpoint what should be done for improvement.
Africa Digitalisation Landscape: Central Africa (ECCAS)
Fofou Fanny 22 Aug. 2023
When it comes to digitalisation especially in Emerging and frontiers markets, not all countries do it at the same pace. In this series, we will explore digitalisation in Africa from one region to the other starting with the Central Africa. When we talk about regions we mean Regional Economic Communities as they generally aim to harmonize their objectives across the regions to foster economic growth. In the post we will explore the ECCAS (Economic Community of Central African States), grouping as countries Angola, Burundi, Cameroon, Central African Republic, Chad, Congo, Democratic Republic of the Congo, Equatorial Guinea, Gabon, Rwanda and Sao Tome and Principe.
There are 4 key aspects we will look at when talking about digitalisation: Internet Penetration in the area, Data affordability, Qualified ICT Manpower and Equipment Affordability.
Internet Penetration
By internet penetration it is understood the share of users as per the country population.
Source: https://www.statista.com/statistics/1124283/internet-penetration-in-africa-by-country/
With a population of 158.3 millions, and 80.87m internet users, ECCAS internet penetration is roughly 50.96%. This implies that barely half of its population uses the internet. May this have something to do with the cost of data?
Data Affordability
Source: https://www.statista.com/statistics/1180939/average-price-for-mobile-data-in-africa/
Taking into consideration 10 countries out of the 11 of the ECCAS, the average cost of 1GB of internet is 6.5USD which is costly and has a direct impact on the use of the internet. This cost alone can make MSMEs (Micro, Small and Medium Enterprises) reluctant to embrace digitalisation as that will increase their operating costs.
Qualified ICT Manpower
When it comes to digitalisation, it is not only about internet affordability or infrastructures. Local Qualified ICT manpower is also key. In this respect, developing technology solutions locally render its access and price lower than using overseas technology. Thus it is key for local Universities and educational institutions to provide quality and competitive Computer Science Training courses that will equip the future ICT worker with skills and the hands-on knowledge to tackle challenges in their environment.
According to SCImago Institutions Rankings (SIR), based on their ranking methodology framework whereby 50% is allocated to Research, 30% to Innovation and 20% to Societal, below is how some education institutions of ECCAS rank in Computer Science in 2023 amongst 143 universities in Africa in this field.
Source: https://www.scimagoir.com/rankings.php?country=Africa&area=1700&ranking=Overall§or=Higher%20educ.
Only 2 countries in the ECCAS have universities fitting the SCImago ranking criterias to be ranked against other universities in Africa proposing competitive Computer Science training courses. Moreover, these 2 countries provide only 3 universities that were part of the 143 universities list which is very poor for a region of 158m population.
Equipment affordability.
When talking about digitalisation, the right equipment is also needed. The ECCAS internet use is mainly driven by Mobile, and most of the smartphones sold in ECCAS come from China or Dubai as they are supposed to be ‘cheap’ compared to the EU or US market. However, how affordable are they?
According to Alliance for Affordable Internet (Source: https://a4ai.org/wp-content/uploads/2020/08/Alliance-for-Affordable-Internet_Device-Pricing_PUBLIC.pdf) , they define smartphone affordability in 2020 as the “price in relation to the income”. Keeping phone cost equal as per 2020 and using recent monthly income, below is the phone affordability for ECCAS countries.
Although information about smartphone affordability could not be found for all countries of the ECCAS region, of the 6 countries where information was gathered, smartphones are still a luxury product in this region. When a smartphone cost represents the same weight in the income as the rent or even more, it means that they are not affordable.
Conclusion
Looking at the Internet Penetration, Data Affordability, Qualified ICT Manpower and Equipment Affordability driving digitalisation it can be noted that they are poor and it explains why digitalisation in ECCAS countries is slow. To increase digitalisation amongst MSMEs in Africa as a whole and in ECCAS in particular, it is not a one sided problem. The Final consumers as well need to embrace it. The more the final consumer gets tuned to it, the more it will push the MSMEs to digitalize as it will increasingly become a standard. Unfortunately as it stands neither equipment or data are affordable for the final consumer and by extension to the MSMEs that are owned by some of these consumers. The growth forecast can be increased if there is an improvement in the 4 first parameters. Nevertheless it shall be interesting to find out how good or bad is the Digitalisation Landscape in other regions of Africa.
Africa Digitalisation Landscape: West Africa (ECOWAS)
Fofou Fanny 3 Oct. 2023
We explored the digitalisation Landscape in Central Africa (ECCAS) where discrepancies amongst states were quite high. In this post, our attention is on West Africa, especially the ECOWAS (Economic Community of West African States). The ECOWAS comprises 15 countries which are Benin, Burkina Faso, Cabo Verde, Côte d’Ivoire, The Gambia, Ghana, Guinea, Guinea Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone and Togo. For an objective comparison between regions later on, we will use the 4 key parameters defining digitalisation state.
Internet Penetration
Source: https://www.statista.com/statistics/1124283/internet-penetration-in-africa-by-country/
With a population of 424.34 millions, and 170.33m internet users, ECOWAS internet penetration is roughly 40.14%. This implies that not even half of its population uses the internet. It is not surprising to have such low internet penetration in ECOWAS. The biggest Economy of the Region; Nigeria, with more than 200m people representing 50% of the ECOWAS population, only has 55.4% of Internet Penetration. Is this low internet penetration also data cost related as in the ECCAS Region?
Data Affordability
Data is considered affordable when the cost of 1GB is less than 2% of the user's monthly income.
Source: https://www.statista.com/statistics/1180939/average-price-for-mobile-data-in-africa/ |
The Internet is affordable in 8 countries over 15 countries of ECOWAS with 4 countries slightly above the 2% affordability threshold. Moreover, Nigeria with the highest population has an internet affordability that is not even up to 1%. Therefore, if internet affordability is not the parameter hampering internet penetration in the ECOWAS region as in the ECCAS region, what is then? What parameter can explain this low internet penetration?
Qualified ICT Manpower
When it comes to digitalisation, Qualified ICT manpower matters. Using the SCImago Institutions Rankings (SIR), let us figure out how well ECOWAS is doing in terms of training its population.
Source: https://www.scimagoir.com/rankings.php?country=Africa&area=1700&ranking=Overall§or=Higher%20educ.
Following SCImago Institutions Rankings (SIR) ranking methodology framework whereby 50% is allocated to Research, 30% to Innovation and 20% to Societal, 3 countries in the ECOWAS have universities fitting SIR parameters. Those 3 countries combined offer up to 13 universities training qualified ICT manpower of which Nigeria has up to 9 universities. Is this enough to speed up digitalisation? Compared to the ECCAS region, one is tempted to say yes. However, given that not all countries might benefit from it, then it is not enough. The ideal case scenario will be for each country to have at least 2 universities offering quality programs as per the SIR framework.
Equipment affordability.
There is no digitalisation without equipment. The ECOWAS internet use is mainly driven by Mobile. Most of the smartphones sold in ECOWAS either come from China, Dubai or are manufactured in Nigeria. They are supposed to be ‘cheap’ compared to the EU or US market. However, how affordable are they?
According to Alliance for Affordable Internet (Source: https://a4ai.org/wp-content/uploads/2020/08/Alliance-for-Affordable-Internet_Device-Pricing_PUBLIC.pdf) , they define smartphone affordability in 2020 as the “price in relation to the income”. Going under the hypothesis that the phone prices have not changed much since 2020 thus keeping its cost the same compared to the monthly income that fluctuates highly every year, we will find out the phone affordability per country as per the end of Q3 2023.
In most ECOWAS countries, phone costs represent 30% and above of the average monthly income. This makes the phone stand as a luxury product and not as an affordable item indispensable for digitalisation. This high smartphone cost can explain the low internet penetration as most people will not have the means to purchase it or it will not be a priority for them. In this sense, ECOWAS is not that different from the ECCAS region.
Conclusion
Given the growth speed of ECOWAS economies, it was expected that digitalisation can be faster in this region compared to the previously reviewed region of ECCAS. Nevertheless, after looking closely into the Internet Penetration, Data Affordability, Qualified ICT Manpower and Equipment Affordability noted that although data is cheaper in most countries in ECOWAS than in countries in ECCAS, Internet penetration is hindered because of the high cost of equipment. Additionally there are not enough universities to train qualified ICT Manpower. Qualified ICT Manpower and Equipment Affordability are problematic parameters both in the ECOWAS and ECCAS regions. Countries need to address these issues if they aim at speeding up digitalisation of their MSMEs. Is it likely that these same issues appear in the remaining 3 regions still to be reviewed?
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