The competition among African countries to become the next digital frontier

Competition among African countries for becoming the next world’s Silicon Valley is becoming intense. In East Africa, nations such as Kenya and Rwanda are striving to position themselves as digital powerhouses in the continent, by launching projects aimed at attracting investment in tech parks such as Konza or Kigali Innovation City (KIC). A new report from the Overseas Development Institute (ODI) tries this time to look to West Africa to identify other countries that can unleash their technological potential, by leveraging the African Continental Free Trade Area (AfCFTA) to further expand their digital economy, boost international trade and create new jobs. The ODI report notes that Ghana is another nation that has a thriving digital economy, driven by a vibrant fintech industry with mobile money transactions that have been continually on the rise. This sector was valued at $2.5 billion in 2022 and represents a significant size of its GDP. Government initiatives such as the Ghana Digital Agenda 2018 and the Ghana Beyond Aid Charter and Strategy 2019, as well as robust regulatory frameworks for e-commerce and digital transactions (including the Electronic Transactions Act 2012, the Electronic Communications Act 2008, and, more recently, the Cyber Security Act 2020), further contribute to boost the sector.

Nonetheless, several challenges persist that need to be urgently addressed. The ODI proposal is to leverage on the momentum created by the AfCFTA (and specifically, the Protocol on Digital Trade), to introduce the reforms that are needed to unlock the sector. These challenges are the following:

1)    the legal and regulatory frameworks on digital trade are complex. They need to be simplified and improved to create a more conducive environment for digital transactions.

2)    There is an absence of comprehensive data protection legislation aligned with African and international standards. This poses significant challenges to user privacy and regulatory compliance.

3)    Differences in broadband internet availability and accessibility, as well as proficiency in digital skills and infrastructure, exacerbate inequalities that can hinder participation in digital commerce. Huge gaps in internet access exist between the northern (maximum 50% access) and the middle and coastal areas (50–90% access).

4)    The digital infrastructure landscape requires more investment. In particular, there is a need to establish new data centres and cloud systems. This will enable Ghanaian companies to scale up and expand.

5)    Following a survey conducted on private companies engaged in digital economic activities, it has been noted that there is limited awareness of the Protocol on Digital Trade (a situation not uncommon also in other AfCFTA State Parties), as well as of the legal and regulatory frameworks governing digital activities and usage of digital platforms or opportunities.

Measures that can be adopted to increase the economic benefits of this Protocol include: a) the development of a comprehensive e-commerce and digital trade act aligned with international best practices and AfCFTA provisions; b) the implementation of robust data protection and privacy laws; c) investment in digital infrastructure and skills development and d) the provision of support to micro, small and medium enterprises (MSMEs) to participate effectively in the digital economy.

By addressing these challenges and effectively implementing a robust digital trade strategy, Ghana can unlock significant economic benefits. The ODI report estimates that full implementation of the AfCFTA Digital Trade Protocol could boost Ghana's GDP to $71.74 billion and increase exports to $25.83 billion. A potential that also other African countries could harness by pointing on one of the most dynamic sectors of the modern economy.

Read another version of this post on The Habari Network.