African Businesses Lag Behind in Digitalization, IFC Report Reveals
A recent report by the International Finance Corporation (IFC) has highlighted the slow pace of digitalization among African businesses, despite the widespread use of mobile phones and digital payment systems.
Limited Digital Adoption
While 86% of businesses use mobile phones for commercial operations, and 61% have adopted advanced digital technologies for payments, these are the most common uses of digital technology among African businesses. However, businesses are slow to digitalize beyond mobile phones and digital payments.
Barriers to Digitalization
The report notes that nearly two-thirds of businesses that have adopted advanced digital payment systems have not adopted a second digital technology to execute commercial functions. Furthermore, the widespread adoption of digital payments does not translate to intensive use as the most frequent payment method. Only 7% of businesses that have adopted digital payment methods report using them intensively.
Digital Technologies for Business Operations
The report highlights that 39% of businesses adopt digital technologies for administrative tasks, planning, sales, and payments, but not intensively, i.e., as the most frequently used technology for performing a task.
Country-Specific Trends
In countries like Ghana, Kenya, and Senegal, 57% of businesses with five employees or more use computers and the internet, while in low-income countries like Burkina Faso, Ethiopia, and Malawi, this percentage drops to 44%. Large businesses are more likely to adopt digital technologies, while small and informal businesses in low-income areas face obstacles.
Challenges to Digitalization
The report identifies the lack of digital and electrical infrastructure, high costs of technologies, inadequate human capital, and limited access to financial resources as major obstacles to complete digitalization. Additionally, digital equipment and software are more expensive in Africa than in other regions, hindering their widespread adoption.
Recommendations
To address these challenges, the report recommends increasing private sector investments to stimulate digital infrastructure, support young tech startups, and improve financial accessibility. Implementing regulatory changes and investing in digital infrastructure, such as new undersea cables, could reduce internet costs and improve connectivity. The report also emphasizes the importance of implementing policies to reduce tariffs on digital products and encourage market integration.