Africa is wide-open for business opportunities if companies can move fast and decisively, and the most exciting possibilities for using the Internet to transform lives lie in education, health, and other public services, according to a McKinsey report.
The Internet’s contribution to overall gross domestic product (iGDP) remains low in Africa. At 1.1 percent, it’s just more than half of other emerging economies. But there is significant variation among individual African countries, according to McKinsey. Senegal and Kenya are not Africa’s largest economies, but they have Africa’s highest iGDPs. Governments in both countries stimulate Internet demand.
The McKinsey report ranks 34 countries around the world for iGDP, including 13 in Africa. The Internet’s contribution to gross domestic product for the listed African countries are: Senegal (3.3 percent), Kenya (2.9 percent), Morocco (2.3 percent), Mozambique (1.6 percent), South Africa (1.4 percent), Cote D’Ivoire (1.3 percent), Tanzania (1.3 percent), Cameroon (1.2 percent), Ghana (1.1 percent), Algeria (1.1 percent), Nigeria (1.5 percent), Ethiopia (0.6 percent) and Angola (1.2 percent).
By 2025, Africa’s iGDP is expected to grow to at least 5 to 6 percent, matching economies in developed countries such as Sweden, Taiwan, and the U.K. If the Internet achieves the same kind of scale and impact as mobile phones in Africa, iGDP could account for as much as 10 percent, or $300 billion, of total GDP while producing a leap ahead in economic and social development, McKinsey reports.
Internet penetration and use could produce private consumption 13 times greater than current levels, according to the report. Demographic trends—including urbanization, rising incomes, and a huge generation of young, tech-savvy Africans—will drive this growth, according to the report.
The Internet’s greatest impact in Africa is likely to be in six main areas: financial services, education, health, retail, agriculture, and government. Technology-related productivity gains in these industries could reach $148 billion to $318 billion by 2025, and large populations stand to benefit, according to McKinsey.
The Internet is a powerful tool to improve transparency, streamline service delivery, and automate revenue collection, delivering productivity gains of $10 billion to $25 billion.
The Internet will reduce transaction costs and bring financial services to people who may live far from the nearest bank or ATM. With digital technology, more than 60 percent of Africans could have access to banking services by 2025, with more than 90 percent using mobile wallets for daily transactions and remittances.
Farmers can access expertise and information on everything from weather, crop selection, and pest control to management and finance. It can also improve access to markets, generating better prices for produce.
Many schools that currently lack sufficient textbooks could soon access the world’s best educational content on affordable tablets or e‑books; teachers, too, will benefit from more effective training. The technology-related productivity gains in education could reach $30 billion to almost $70 billion—enabling governments to achieve more with their education budgets and providing millions of students with the foundation for a better future.
E‑commerce will open up a new shopping experience for Africa’s growing middle class. By 2025, it could account for 10 percent of retail sales in the continent’s largest economies, which will translate into some $75 billion in annual revenue.
Today, Africa has only 1.1 doctors and 2.7 nurses per 1,000 people, and many people travel long distances for care. But the Internet is enabling greater use of remote diagnosis, treatment, and education. Technology-related benefits in health care could range from $84 billion to $188 billion by 2025—and the broader social and economic impact of improved health outcomes will be far greater, McKinsey reports.
