Report: Internet Use Could Inject $300 Billion To African Economies By 2025

Report: Internet Use Could Inject $300 Billion To African Economies By 2025

Internet use could contribute up to $300 billion a year to Africa’s economies by 2025 if governments and the private sector build the right infrastructures and increase its access to their people, a report by McKinsey Global Institute said.

The report, covering Africa’s 14 largest economies that make up to 90 percent of the continent’s gross domestic product (GDP), showed that access to affordable high speed internet could boost growth across key sectors like agriculture, retail and health.

“If governments and the private sector continue to build the right foundations, the Internet could transform sectors as diverse as agriculture, retail, and health care— and contribute as much as $300 billion a year to Africa’s GDP by 2025,” McKinsey said in the report.

“A majority of urban Africans own Internet-capable devices, go online regularly, and visit social networking sites. Many countries have rolled out 3G networks, and planned infrastructure investments are likely to increase bandwidth, reduce costs, and connect new corners of the continent,” it added.

With only 16 percent of Africa’s one billion people accessing the internet currently, their contribution to GDP (what the report terms as iGDP) lags behind other emerging market at less than one percent contribution.

But that share is rising. Already more than 720 million Africans have access to mobile phones and 167 million of them able to access internet on the devices. With increased use of smart phones on the continent in the next decade, Africa will be contributing about $75 billion a year to the global e-commerce by 2025, McKinsey reported.

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This will lead to an e-tailing revolution that will give African consumers a much wider variety and lower prices.

In other emerging markets such as China, India and Brazil the internet is already a big catalyst for economic growth and has been adding more than 10 percent of the total GDP growth over the past five years.

Africa is right on the track with mobile voice already having an outsized effect in connecting people who previously had little or no access to telecommunications. McKinsey predicts that the internet use could produce a similar, or greater, multiplier effect.

In several master plans across Africa, governments have placed internet-driven growth firmly on the agenda, with several countries pursuing ambitious strategies to expand high-speed internet access to most of their populations.

The report shows that Senegal and Kenya, though not the continent’s largest economies, have Africa’s highest iGDPs at 3.3 percent and 2.9 percent respectively, and governments in both countries have made concerted efforts to stimulate Internet demand.

However, the report reckons due to their position in on the continent, South Africa and Morocco could emerge as digital leaders by 2025.

“By 2025, Africa’s iGDP should grow to at least 5 to 6 percent, matching that of leading economies such as Sweden, Taiwan, and the United Kingdom,” McKinsey said. “However, if the Internet achieves the same kind of scale and impact as the spread of mobile phones in Africa, iGDP could account for as much as 10 percent.”

There is also a growing innovation wave among the African youth. Budding tech-preneurs and large corporations alike have launched web-based ventures, from e-commerce sites to mobile health technologies.

Faster and readily accessible internet is seen unlocking significant productivity gains in African business, government and social services. But to harness its full potential, governments and the private sector will need to invest in increasing access, developing a workforce with ICT skills and improving digital literacy.