Over the past 15 years, most of the African countries experienced sustained economic growth, with facts showing growth rates exceeding 5 % per year. This has inspired much optimism about the future prospects of the African regions which will eventually leave poverty and under- development behind. However, studies show that the general economic context is now turning less favourable, with a fall in overall growth, especially in oil and mineral exporting countries. In general, overall growth is expected to continue, but not at a faster pace. Hence, in this climate changing, it is important to consider the drivers of growth to be able to distinguish those that can sustain further growth.
After tepid annual growth of 2.2 % in 2016, average real GDP rebounded, reaching 3.6 % in 2017. It is estimated to grow 4.1% a year in 2018 and 2019. Looking back to the years of sustained growth, it is clear that many factors have contributed to this; their configuration ultimately depended on the local economic situation in each country. Favourable external conditions such as, high commodity prices and the availability of investment money have played a crucial role at global level. At the domestic level, the improvement of the macroeconomic climate – especially the reduction of external debt and of current account and fiscal deficits- as well as a fall in the number of conflicts and improvements in political and economic governance have also been, without doubt, the main factors contributing to growth. Africa has witnessed a boom in the telecommunications sector. There has been a huge increase in the use of mobile phone and now rapidly expanding on internet penetration. This sector has played a central role in the contribution of the African GDP. Financial services are developing quickly often in the tandem with ICT uptake. The manufacturing sector is lagging behind compared to the other sectors of the economy. Sub- Saharan Africa remains incapable to join the ranks of those developing countries that base their growth on the export of competitive manufactured products.
Consequently, Africa still has a lot to do in order to catch up with other regions of the world as there has been growth but at a slow pace. Despite the excitement raised by the fast economic growth whereby people believed that Africa could become the next Asia, African countries lag behind other developing countries in terms of development pace. Growth in GDP per capita is still significantly lower than in Asia; economic diversification and sophistication remain at a low level in most African countries.
The African continent has the potential to benefit from digital revolution which could ensure sustained growth; thereby providing much-needed jobs to millions of youngsters joining the workforce each year. According to a study done by the World Bank, it has been claimed that in the developing world, about 90% of all the jobs are generated by the private sector. In this context, the region needs to encourage entrepreneurship- especially digital entrepreneurship. This will help deepen the private sector development and accelerate job creation. The public sector plays a crucial role in the new environment. In other words, it uses digital technologies to deliver key products and services and also regulates the functions and activities associated with the digital economy. There could be significant gains from plugging the continent into the digital revolution agenda and bringing together governments, the private sector, civil society, and development partners to put in place a bold vision for the African nations. The digital revolution promises to deliver output and productivity gains, but also poses new challenges. For instance, governments will need to implement policies to narrow the digital divide between the connected and unconnected and coordinate actions to quell increased cyber risks and threats to privacy.
Digital Transformation offers a chance to unlock new pathways to experience a rapid economic growth and reduce poverty. Digital technologies have the potential to create more jobs, innovation, increase farmers’ productivity and also bring more women into labour force. Reaching the Digital Economy Moonshot initiative- a policy set by the World Bank, would raise growth per capita by 1.5% points per year; thereby reducing poverty headcount by 0.7% point per year. The potential growth benefits and poverty reduction effects are larger in Sub-Saharan Africa, and especially among fragile countries. When complemented with appropriate human capital investments, these effects could experience an exponential growth.
Collaborating with NanoBNK
Digital Innovation represents a great opportunity to boost up the economy of Africa. To capture this opportunity, NanoBNK can provide Financial Technology solutions to the African entities which will consequently lead to improvements in productivity level, creation of jobs and foster digital entrepreneurship.