A look into the World Bank’s Report on Empowering Africa’s Workforce and Economy through digital technologies
Africa’s working-age population is projected to triple by 2100, reaching over 2.5 billion. Addressing the need for “sustainable employment” – stable income and growth opportunities without the constant risk of poverty – is crucial. World Bank’s report, “Digital Africa: Technological Transformation for Jobs,” provides an in-depth analysis of the policies and strategies needed for African policymakers to tackle the challenges of developing inclusive employment through digital growth.
The report highlights that digital technologies (DTs) can be instrumental in accelerating economic growth and creating jobs, emphasizing the importance of investing in digital infrastructure and skills development. In Nigeria, the ICT sector’s contribution to GDP grew from 9.8% in 2015 to 17.8% in 2020. Similarly, in Kenya, the ICT sector contributed to an estimated 8% of GDP growth in 2019.
DTs can enable economy-wide productivity gains and job creation. However, productive technologies designed in higher-income countries are rarely used by smaller African firms and generate few additional jobs if adopted by larger firms. In addition, these technologies are often not appropriate for more productive use by lower-skilled owners, managers, and workers in Africa’s labor-abundant countries.
Harnessing DTs to create good jobs in Africa requires long-term investment, including developing and improving skills to match the level at which the digital technologies solutions have been designed. In the meantime, digital and complementary technologies that align with Africa’s current context (skill profile and economic productivity) need to be generated. Furthermore, these technologies need to evolve with workers as they increase capabilities and change their focus.
Two empirical studies highlighted in the report explore the direct impact of mobile internet availability on jobs and welfare in Nigeria and Tanzania. The study concluded that internet availability improved jobs and welfare outcomes in both countries.
According to the report, the availability of high-quality internet (3G or 4G) for a minimum of three years led to a significant increase in labor force participation in Nigeria and Tanzania. In Nigeria, there was a 3 percentage point increase, while in Tanzania, the increase was 8 percentage points. Additionally, poverty rates saw a decline of 7 percentage points in both countries. The report further points out that these welfare benefits were more pronounced in households with lower income and education levels.
Other empirical studies reviewed in the report illustrate the indirect impacts of internet availability on access to more and better jobs. The impact is shown through effects on improving firm–worker matching and productivity by fostering entrepreneurship, innovation, and foreign direct investment. A study on the rollout of 3G internet networks in Ethiopia suggests that internet availability can boost jobs by closing gaps in information between buyers and sellers. Enterprises operating in 3G network covered areas experienced 29% decline in markups, an 18% rise in productivity, and a 28% increase in jobs.
After analyzing similar cross-country assessments of the importance of connectivity, the report concludes that Internet use has a significant effect on poverty reduction and mobile connections have a significant effect on income inequality reduction.
Despite the rapidly growing evidence of the positive impact of digital technologies (DTs) on employment in Africa, digital technologies are not sufficiently used in the region. The insufficient use of DTs by enterprises and households in Africa is underlined by the following four factors and constraints to technology adoption.
1) Availability of affordable digital technologies and complementary infrastructure
For households, the ability to pay involves mainly the availability and price of quality digital services. It is also important to have access to affordable devices, data plans, and apps.
For enterprises, affordability is proxied by whether larger firms have loans to purchase machinery and equipment and whether micro-size firms have access to finance. Larger businesses are more likely to use computers if they have access to electricity and are located in an urban area, while smaller businesses are more likely to use smartphones.
2) Willingness to use DTs
The willingness to use DTs is related to users’ capabilities, such as their level of education, language proficiency, occupation, skills, and vocational training, and the DTs’ appeal to them.
The attractiveness of digital technology is related to both the availability of information about DTs and whether they meet the productive needs of users. For enterprises, it is likely driven by requirements to adopt specific technologies to serve customers.
The two main barriers to enterprise use of new technologies among African firms are lack of capabilities and lack of demand and uncertainty (I.e., lack of attractiveness).
More than 70% of African firms that don’t use DTs indicated that lack of use case is the main constraint to adoption. This is presumably caused by:
– Absence of apps that are useful and available in their local languages
– Lack of skills required to understand how they could productively use available apps.
– Poor quality of service
3) Business and socioeconomic factors: linked to specific elements of the business environment (market access and competition-related incentives) as well as the presence of social norms/rules that make ownership of devices difficult for women.
4) Factors related to network effects
The value of digital technologies increases with the number of users. This network effect creates additional factors that affect the uptake of digital technologies, including coordination and trust issues.
Addressing the above factors with specific public policies and investments is integral to providing “good jobs” for the increasing African workforce with digital technologies. The report recommends the implementation of country-specific, complementary, and mutually reinforcing policy measures.
Policies that ensure the ability to pay for DTs include internet affordability policies, policies for equitable internet availability, policies for affordable availability of data infrastructure, policies to support affordable access to complementary analog technologies, and policies that facilitate enterprise financing.
Policies that elicit willingness to use DTs for productive purposes include data policies, innovation policies, and capability support programs could be implemented. It is important to note that managing the downside risks of these policies is also critical. Having national strategies that support familiarity with and use of DTs to support higher earnings can contribute to the success of these policies. Furthermore, thinking big in terms of regional integration can lead to increased productivity and growth.
Read the full report here.