Reports indicate that facilitating Macro, Small and Medium Enterprise (MSME) transition from offline into the digital economy will drive economic growth and jobs creation in Africa.
In addition, the Continent requires the right policy framework and narratives for the digital economy to thrive.
The Chairwoman, Jumia Nigeria and Head Institutional Affairs Jumia Group, Juliet Anammah (Mrs.) made the remarks during the Company’s end of the year press conference on Tuesday, December 22, 2020, stressing that Africa needs jobs and MSMEs.
Setting the background, Anammah, reminded the Continent’s leaders that by 2050, 2 in every 5 children will be born in Africa.
In her words, “The average age is 19 and getting younger77% of the population is under the age of 35 and according to Brookings Institute 70% live below the global poverty line. Africa is also experiencing rapid urbanization with rural dwellers moving to the few megacities and placing enormous pressure on the physical, political, economic and societal infrastructure of these cities.
“Africa thus needs millions of jobs that will provide meaningful work, livelihoods and provide people with a pathway out of poverty”.
She added that due to the impact of CoVID, GDP is expected to contract to -2.5% in 2020 from 3.4% in 2019, the first recession in 25 years.
“Jobs in Africa today come from MSMEs. Of the 418 million people employed on the continent, 83% are employed by MSMEs. Africa has 85 – 95 million MSMEs and of these 96% are micro enterprises and half of them are engaged in Trade.
“87% of African MSMEs are in 10 countries with 77% of the total African GDP – Nigeria, Kenya, Tanzania, Egypt, Morocco, South Africa, Ethiopia, Algeria, Ghana and Angola”, she said.
Africa has an advanced digital infrastructure
Despite the challenges, Anammah, foresees a lot of opportunities for and on the Continent.
She said that average Internet penetration in Africa is 39.5%; 525 million people have access to the internet.
“In 6 countries, Kenya, Libya, Seychelles, Morocco, Mauritius and Tunisia, mobile internet penetration is above 65%. 80% of Africans have mobile subscriptions. Smartphone adoption is 40% and projected to be 67% by 2025. This digital infrastructure is an asset which Africa can leverage to leapfrog development, create jobs and accelerate economic recovery post-CoVID”, the Chairperson said.
Facilitating MSME transition from offline into the digital economy will drive economic growth and jobs in Africa
“A March 2019 study published by Boston Consulting Group projects that digital marketplaces operating in Africa like Jumia can create an additional 3 million jobs in Africa by 2025.
“This is far more than manufacturing can achieve. Given the impact of the pandemic, the World Bank projects an increase in the number of people who fall into extreme poverty in 2020.
“World Bank Group President, David Malpass says ‘In order to reverse this serious setback to development progress and poverty reduction, countries will need to prepare for a different economy post-COVID, by allowing capital, labor, skills, and innovation to move into new businesses and sectors” For Africa the digital economy is a critical new business sector to focus on going forward’”.
To this end, Anammah said that for this to succeed Africa also needs the supporting environment for the digital economy to thrive and these include Policy framework and the Right narrative
She advised governments across the Continent to use fiscal measures to incentivize African Trade and MSME trade in particular to shift from largely offline/ cash based informal economy to formal and traceable digital platforms.
“Traceability drives better planning, attracts capital and drives growth. A good example is rebates or reduced VAT / Sales tax for digital transactions made via mobile money or card payments. Such a shift also expands the taxable base in Africa.
“Digital business models such as eCommerce have long lead times to break-even (circa +10 years) and till eCommerce fully matures in Africa (attains up to 15-20% of total Retail on the continent), Policies can support by ensuring there are no roadblocks such:
- Additional taxation that applies to eCommerce only and not other channels of commerce
- Direct / indirect foreign equity caps that impede the ability of resident eCommerce platforms to attract long term equity to grow.
“Since a smartphone is part of digital infrastructure that enables digital business models, African countries can remove tariffs on low end smartphones till countries attain desirable levels of smartphone penetration. The target penetration level could be set at 70%”. She said.
The Right Narrative
Anammah added that African media needs to support the digital economy and companies operating in that space in order to see successful outcomes and achieve the development needed.
“This can come in the right narratives that will encourage investment into the sector”, she said.