Africa needs smarter investment in digital infrastructure: Strategies for enticing the private sector

Weak infrastructure is widely accepted as a fundamental limitation to growth in Africa. Governments in the region struggle to meet the basic needs of residents, including access to food, education, health, and livelihoods, much less invest in critical, reusable infrastructure that could provide long-term solutions to social problems.

Philanthropy alone will not lead to the sustainable infrastructure and employment needed to secure long-term health and financial security for individuals and economic prosperity for all African nations. Yet, the development community tends to focus on funding shortfalls, calling for increased official development assistance (ODA), increased government spending despite Africa’s rising budget deficit problem, and calling for the private sector to “collaborate,” “partner,” and “step up”—often euphemisms for donations. Instead, we should focus on the operational, legal, and commercial barriers to deploying sustainable infrastructure, and how we can invest more wisely to overcome those challenges. We need sustainable commercial models that enable service delivery and provide employment at scale.

By design, private sector solutions must be commercially sustainable in order to deliver at scale and long-term. We would be better served as a global community to entice, encourage, and de-risk private sector engagement in the infrastructure challenge by channeling existing ODA, private philanthropy, and government resources towards creating an enabling environment for the private sector to innovate, deliver, and employ.

Philanthropy alone will not lead to the sustainable infrastructure and employment needed to secure long-term health and financial security for individuals and economic prosperity for all African nations.

One such example, where I have experience, is digital infrastructure. Digital infrastructure is not only a means to deliver aid and other critical services, but also enables commerce and, thus, the means for economic growth. Digital inclusion, particularly in the wake of the COVID-19 pandemic, has proven critical for filling gaps in physical infrastructure that leave the most rural and marginalized communities behind.

Developing and managing secure digital solutions requires extensive knowledge across issues like data privacy and security, interoperability standards, franchise management, biometric tokenization, device security, and more. This knowledge resides with the private sector companies that are investing billions to continually innovate, to prevent fraud, and to prevent bad actors from accessing personal data.

However, four fundamental challenges to private sector engagement in fragile contexts persist:

• There is too much reliance on sub-standard, expensive products: Too often multilateral institutions, governments, and donors spend billions on technologies, including internally-developed systems, which do not meet the highest standards of data privacy and security, putting the personal data of millions of users at risk. These are typically well-meaning yet misguided efforts to promote local innovation, or occur because public sector institutions believe they are saving money by developing in-house. For example, U.N. agencies have internally built data platforms that collect sensitive data, like religion, use beneficiaries’ data without informed consent, and may not meet best-in-class security standards. Yet, private sector companies already have secure, interoperable digital infrastructures with data privacy by design that can be rapidly deployed in fragile, offline contexts. The UN could benefit from leveraging the innovation of the private sector, which has the potential to be quicker, less expensive, more scalable, and more secure than solutions developed in the public sector alone. What if private sector capabilities were leveraged as they existed, and funding redirected to incentivize and de-risk private sector innovation for the gaps?
• There are too few entities at the last-mile servicing rural communities: Companies such as mine have built data secure ways for banks, AgTechs, healthcare providers, and the like to deliver services to rural communities. However, we struggle to find entities with large agent networks to service and provide cash management capabilities at the last mile. Agent networks are critical for enabling rural commerce, and they provide high-value jobs. What if donors and NGOs redirected funds towards building a last-mile capability that both local and global businesses could leverage?
• Sustainable commercial models are lacking: Today, requests for proposals (RFPs) are the primary commercial tool for governments, NGOs, and U.N. agencies to contract with the private sector. Yet the RFP is a blunt and poorly fashioned tool in digital areas where agencies do not know what they need, and multilateral institutions often preclude necessary upfront discussions with suppliers to avoid any appearance of impropriety. Moreover, qualifying processes are often market-by-market with a market potential of only a few thousand beneficiaries. This state of affairs precludes most large-scale actors from responding, as the opportunities are not commercially viable, and local actors often lack the capacity to respond to complex RFPs that are not written in the local language. What if private sector experts worked in concert with governments and development actors to develop a best-in-class solution architecture that private sector actors were paid to execute at an overall lower cost?
• The regulatory landscape for digital transactions in emerging markets is nascent, murky, and complex: Operating in these environments is unattractive to private sector companies that need to navigate limited yet rapidly evolving policies on data security and privacy, Know-Your-Customer (KYC) laws, and more. What’s more, many governments are enacting on-soil regulations in ill-conceived attempts at data security, even though replicating systems in small markets adds significant cost to an already low/no profit economic model. Still worse, many supranational humanitarian and development actors actively collect and store sensitive data on laptops and other manners vulnerable to attack. What if governments partnered with the private sector to develop regulations that created an enabling environment for innovation and deployment, while ensuring individual protections? (For a discussion on the future of data privacy in Africa, see the viewpoint by Lesly Goh and Buhle Goslar.)

Helping communities across Africa access the critical services they need would benefit the entire world. So much more can be done with existing aid flows to build sustainable infrastructure and create employment—if private investment is incentivized. We need to create an efficient and effective model to deploy the private sector resources we have now—and in the digital age that must begin with the construction of a more effective digital infrastructure that can leverage the capabilities of private industry.

The Brookings Africa Growth Initiative receives support from the Mastercard Foundation.

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