Foresight Africa viewpoint: Growth of African SMEs and jobs will depend on technology uptake

Information and communication technologies (ICTs) are transforming Africa. Across the continent, new startup digital enterprises are emerging, while existing small and medium enterprises (SMEs) are increasingly leveraging ICTs to expand. Intensified use of ICTs presents Africa’s SMEs with opportunities in virtually every sector as well as room to create jobs.

The pace of transformation across Africa, however, is slow and one of the major barriers is poor ICT infrastructure. A number of countries are reaping the benefits of greater digital penetration but others are watching from the sidelines. In Kenya for example, the M-Pesa mobile money disruption has enabled many SMEs to be more efficient.

According to the 2016 Global Systems for Mobile Association (GSMA) report,¹ however, the rest of Africa is still the world’s most under-penetrated region in terms of mobile connectivity in spite of the fact that it recorded an annual subscriber growth over the same period of more than 13 percent. Improved universal infrastructure that is affordable and a flexible policy and regulatory environment would go a long way in realizing Africa’s digital potential. With improved access to the internet and a more open policy environment, African enterprises could be better equipped to leapfrog and create innovative solutions.

At the same time, the adoption of 4G in sub-Saharan Africa is dismal owing to the fact that the relevant spectrum is still tied up in analog broadcast. Implementation of digital migration in some countries is slow. As a result, many countries in the region have allocated far less spectrum to mobile services than their counterparts in other parts of the world, even though the region is heavily dependent on mobile networks for internet access. This trend undermines SME expansion, especially those that operate in remote areas.

Right now, Africa’s youth should be a catalyst for creating digital jobs in virtually every sector including business processing outsourcing (BPO) both from external and internal sources.

Right now, Africa’s youth should be a catalyst for creating digital jobs in virtually every sector including business processing outsourcing (BPO) both from external and internal sources. They have a fairly good education and can take advantage of the fiber connectivity in major urban centers. SMEs that have ventured into the BPO industry and other digital-dependent enterprises experience many challenges including excessive taxation on both ICT equipment and broadband use. Capacity building, too, is a problem in many countries as governments are often reluctant to spend in ICT especially on areas where they have no understanding. Just like other digital jobs destinations in India and the Philippines, there is need for a deliberate policy and effective implementation to support this emerging sector to provide much-needed employment.

In the future, the Internet of Things (IoT) and Big Data analytics will bring new digital jobs to the continent’s young job seekers. African governments should, therefore, prepare by modernizing the education and training system to better prepare the workforce for the influx of these new types of jobs.

Further, as we look ahead, global dynamics indicate that China is losing its competitiveness in low-end manufacturing of ICT hardware. India is stepping into this one-trillion-dollar industry, but there is an opportunity for African countries to take advantage too. Perhaps there are lessons to be learned from Ethiopia, the African country already competing with India in this emerging space. This will require massive, practical capacity building in Africa’s SMEs through makerspaces or incubation centers.

For SMEs to succeed and exploit emerging opportunities that create jobs for Africa’s youth bulge, governments—in 2017 and beyond— must adopt supportive policies—such as targeted tax incentives and updated laws—that realize practical capacity building and flexible regulatory frameworks to enable innovation.

1 Global Systems for Mobile Association (GSMA). The Mobile Economy. 2016. Available at: https://www.gsmaintelligence.com/ research/?file=97928efe09cdba2864cdcf1ad1a2f58c&download.