The use of Internet is rising in Africa and is having a “transformative effect” on the continent’s development and could add $300 billion a year to its gross domestic product (GDP) by 2025, says global consulting firm McKinsey.
The use of Internet is rising in Africa and is having a “transformative effect” on the continent’s development and could add $300 billion a year to its gross domestic product (GDP) by 2025, says global consulting firm McKinsey.
“Lions go Digital: The Internet’s transformative potential in Africa”, a new report by McKinsey & Company, surveys the progress of the Internet in 14 economies that make up 90 percent of Africa’s GDP: Angola, Algeria, Cameroon, Cote d’Ivoire, Ethiopia, Egypt, Ghana, Kenya, Mozambique, Morocco, Nigeria, Senegal, South Africa and Tanzania.
According to the report, out of Africa’s one billion population, only 16 percent are online — 167 million use the Internet and 52 million are on Facebook — but that figure is rising rapidly thanks to the expansion of mobile networks and as the cost of Internet-capable devices continues to drop.
“Mobile telephony has already had an outsized effect in Africa as it connected people who previously had little or no access to telecommunications due to the scarcity of fixed-line infrastructure.”
The report, released at the ongoing ITU World Telecom 2013 Summit here, says that the Internet is likely to take hold on a much larger scale in the coming decade.
The Internet’s contribution to Africa’s GDP is currently at a low 1.1 percent, a figure that is half the amount of other emerging markets, and well below the average of 3.7 percent in developed economies.
If the Internet matches or exceeds that level of impact, the result could be a leap forward in Africa’s economic growth and development, and assuming a similar multiplier effect, the Internet could contribute about $300 billion to Africa’s GDP by 2025, it says.
A concept developed by McKinsey, called “iGDP”, measures the Internet’s contribution to the overall economy as a share of the total GDP. It takes into account the use of the Internet across four major categories: private consumption, public expenditure, private investment and trade balance.
Of the 14 countries assessed, Senegal and Kenya’s iGDP stood at 3.3 and 2.9 percent, respectively, which is comparable to France and Germany. In contrast, the continent’s largest economies, South Africa and Nigeria, have iGDPs of 1.4 and 0.8 percent, respectively.
“This suggests that there are major untapped opportunities to harness the power of the Internet to drive growth and development.”
McKinsey estimates that Africa’s iGDP is currently $18 billion, and attributes two-thirds of this total to private consumption of Internet-related services and equipment, including smartphones.
It estimates that public expenditure including the digitisation of education and health services contributes $2 billion, while private investment in infrastructure and digitisation accounts for $1.5 billion, with the remainder being a positive trade balance created by business process outsourcing.
According to the report, the largest economic and social impact of the Internet is likely to be determined by the financial services, education, health, retail, agriculture and government sectors, as these sectors face service delivery challenges and “information asymmetries”, which could be bridged through the use of Internet technologies.
McKinsey estimates that technology-related productivity gains in these sectors could reach $318 billion by 2025.
Here are some of the report’s main findings:
— The Internet is a catalyst for economic growth: In China, India and Brazil it has contributed more than 10 percent of total GDP growth over the past five years. Africa is catching up quickly.
— Mobile voice has already had an outsized effect in Africa as it connected people who previously had little or no access to telecommunications. The Internet could produce a similar, or greater, multiplier effect.
— Only 16 percent of Africa’s 1 billion people are currently online, but that share is rising. More than 720 million Africans have mobile phones, 167 million already use the Internet, and 52 million are on Facebook.
— Governments have placed Internet-driven growth firmly on the agenda, with several countries pursuing ambitious plans to expand high-speed internet access to most of their populations.
— There is a growing wave of innovation as entrepreneurs and large corporations alike launch web-based ventures, from e-commerce sites to mobile health technologies.
— Africa could generate e-commerce sales of $75 billion a year by 2025, sparking an e-tailing revolution that gives African consumers much wider choice at lower prices.
— Internet could unlock significant productivity gains in African business, government and social services.
— To realise the Internet’s full potential, governments and the private sector will need to invest in increasing access, developing a workforce with ICT skills and improving digital literacy.
-IANS
