Digitisation is driving change in Africa. Thabo Makoko, Head of Cash Management and Transactional Banking at Absa CIB, explains how the pandemic has accelerated change.
The adversity borne from the pandemic has accelerated an interesting development in Africa. Characterised by mass mobile phone use, a young and ambitious population, and rapid urbanisation, the African continent has seen its digital sector boom. This development offers a unique opportunity for public and private companies, as well as governments, to capitalise on a new growth cycle in the aftermath of the pandemic.
Supply chains
The pandemic left borders closed and disrupted supply chains. Combined with periodic lockdowns, the mobility of goods in-country halted, and multinational corporates and SMEs throughout Africa recognised that existing supply chain links where they relied on just one or two suppliers were no longer fit for purpose. Digitalisation can help companies build resilient supply chains through combining data-driven solutions and AI to identify potential risks and underperformance. Using digital technology, many multinationals in Africa are mapping out their supply chains to understand the geographic location of suppliers and their potential vulnerabilities, helping to build defences against additional unexpected shocks.
The pandemic also challenged entrenched behaviours and attitudes by removing some of the cultural and financial barriers to digitalisation, such as treasury processes. Prior to the onset of the pandemic, treasury processes relied on a combination of digital and non-digital formats and manual inputs which can no longer support today’s real-time demand. The disruptions caused by the pandemic created a level of urgency as digitalising treasury processes makes it easy to adapt and reduces operational costs.
Countries like The Gambia, which were not as badly impacted by COVID-19 because of lower foot traffic, may not have the same incentives to digitalise treasury processes. In contrast, businesses in other regions realise the benefits of digitalisation like simplifying reconciliation, predicting liquidity requirements, and providing more data on customer behaviour, businesses are embedding digital processes and not looking back.
Challenges
Digitalisation remains at the whim of robust infrastructure such as reliable land, sea and air travel to facilitate the movement of goods in-country and around the continent. Not enough African governments are investing strategically in developing digital infrastructure, services, skills and entrepreneurship. Plugging the continent’s infrastructure funding gap through concessionary and blended finance will not only support general economic growth in Africa, but it will reduce the friction of adopting and applying digital processes.
Africa is still the least connected region compared to other regions of the world, with about 28% internet coverage and 34% mobile broadband. Few citizens have digital IDs and businesses adopting digital technologies remain the exception rather than the norm.
There is also a need to adapt and harmonise legislations on technology, including intellectual property and data privacy, to truly unleash Africa’s digital potential. Marrying together reliable infrastructure and effective policy implementation – like the African Continental Free Trade Area (AfCFTA) – would further break down barriers to adopting digitalisation. Aside from the obvious benefit of reducing tariff and non-tariff barriers to intra-African trade, the implementation of AfCFTA has identified red tape that exists in different markets throughout Africa which are currently thwarting growth and innovation. Identifying bottlenecks will enlighten the digital sector as it will create a healthy environment for innovation to thrive and disrupt the status-quo.
