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How Africa’s Digital Economy Contributes to SDGs

Africa's Digital Economy ContributesDigitalization is not new to the African economy. However, with the COVID-19 pandemic, the need to improve and expand Africa’s digital economy has become evident. With intentions to minimize the health and economic risks of the pandemic, African businesses are implementing strategies that will lead to the rise in digital transformation. Economic sectors such as banking, transportation, agriculture and telecommunication have already digitally evolved to adjust to the economic climate and health crisis. Most importantly, Africa’s digital economy contributes to the U.N. Sustainable Development Goals (SDGs).

Developing Africa’s Digital Economy

The World Bank started the Digital Economy Initiative for Africa (DE4A) in mid-2019 to accelerate digital enabling achievements as part of the 2030 SDGs. As the COVID-19 pandemic transpired, the rise in digitalization laid expectations for more transformations in the coming years. With investments being made, Africa’s booming digital economy contributes greatly to the SDGs.

A digital economy would create more jobs, promote entrepreneurship and introduce new markets. Reaching DE4A’s targets would raise growth per capita by 1.5 percentage points annually and poverty would be reduced by 0.7 percentage points per year. In addition, this approach takes into account that only 27% of the African population has access to the internet. Increasing access to digital resources will be the focus of the five pillars of the DE4A. This includes digital infrastructure, digital public platforms, digital financial services, digital businesses and skills.

Growing the Economy by Promoting Digital Transformation

The African Union (AU) has launched the Digital Transformation Strategy for Africa (2020-2030). The initiative strives for a collaborative digital single market, building on the recent trade initiative, Africa’s Continental Free Trade Area (AfCFTA). This would facilitate the movement of digitized services and propel the expansion of internet access across the continent.

Notably, the initiative also promotes innovation and digital upskilling with development programs. The e-skills vocational program will reach 100 million Africans a year by 2021 and 300 million annually by 2025. This would not only integrate Africa into the digital era but create new opportunities for startup businesses.

An important tool to achieve the initiative’s objectives is collaboration with policymakers. The government plays an important role in the promotion of market transformation. As a result, the AU will propose actions to equip educational institutions with renovated technology, promote digital rights and security awareness.

Significant growth will occur when stable infrastructure is built for the 200 million people currently without internet access. Addressing this digital divide is how Africa’s digital economy contributes to the SDGs as it plans to build resilient infrastructure, create sustainable industrialization and foster innovation.

Investing in Digital Resources

There are many investment opportunities in Africa’s digital economy as a myriad of sectors start transitions. For example, banking in Africa is experiencing major changes. Mobile-based digital banks provide access to transaction activity, savings, loans and other financial services. Banking in Africa is expected to increase to $53 billion by 2022 so long as digitalization continues, contributing to the DE4A’s digital financial service objective.

Additionally, large international corporations have set foot in Africa, which will further increase investment flow. In 2019, Amazon Web Service launched its first data center in Africa. Likewise, Microsoft expanded its cloud services and opened its first data centers in South Africa. With two of the biggest players in the global digital economy in Africa, increased access to methods for digital transformation for businesses becomes more feasible. Digital transformation in Africa has the potential to significantly reduce poverty on the continent.

– Malala Raharisoa Lin
Photo:Flickr

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The Benefits of the AfCFTA for the African Economy

the AfCFTATrading within the African Continental Free Trade Area (AfCFTA) finally took effect on January 1, 2021. The AfCFTA is the world’s largest trading area since the establishment of the World Trade Organization with 54 of the 55 countries of the African Union (AU). The AfCFTA was established by the African Continental Free Trade Agreement signed in March 2018 by 44 AU countries. Over time, other AU countries signed on as the official start of trading under the provisions of the agreement approached. The AfCTFA is projected to create opportunities and boost the African economy. By facilitating this intra-African trade area, the international community expects sustainable growth and increased economic development.

The Implementation and Benefits of the AfCFTA

  1. Creating a Single Market. The main objective is to create a single market for goods and services to increase trading among African nations. The AfCFTA is tasked to implement protocols to eliminate trade barriers and cooperate with member states on investment and competition policies, intellectual property rights, settlement of disputes and other trade-liberating strategies.
  1. Expected Economic Boost and Trade Diversity. UNECA estimates that AfCFTA will boost intra-African trade by 52.3% once import duties and non-tariff barriers are eliminated. The AfCFTA will cover a GDP of $2.5 trillion of the market. The trade initiative will also diversify intra-African trade as it would encourage more industrial goods as opposed to extractive goods and natural resources. Historically, more than 75% of African exports outside of the continent consisted of extractive commodities whereas only 40% of intra-African trade were extractive.
  1. Collaborative Structure and Enforcement. All decisions of the AfCFTA institutions are reached by a simple majority vote. There are several key AfCFTA institutions. The AU Assembly provides oversight, guidance and interpretations of the Agreement. The Council of Ministers is designated by state parties and report to the Assembly. The Council makes the decisions that pertain to the Agreement. The Committee of Senior Trade Officials implements the decisions of the Council and monitors the development of the provisions of the AfCFTA. The Secretariat is established as an autonomous institution whose roles and responsibilities are determined by the Council.
  1. Eliminating Tariffs. State parties will progressively eliminate import duties and apply preferential tariffs to imports from other state parties. If state parties are a part of regional trade arrangements that have preferential tariffs already in place, state parties must maintain and improve on them.
  1. Settling Trade Disputes. Multilateral trading systems can bring about disputes when a state party implements a trade policy that another state party considers a breach of the Agreement. The AfCFTA has the Dispute Settlement Mechanism in place for such occasions which offers mediated consultations between disputing parties. The mechanism is only available to state parties, not private enterprises.
  1. Protecting Women Traders. According to UNECA and the African Trade Policy Centre, women are estimated to account for around 70% of informal cross-border traders. Informal trading can make women vulnerable to harassment and violence. With the reduced tariffs, it will be more affordable for women to trade through formal channels where women traders will not have to put themselves in dangerous situations.
  1. Growing Small and Medium-Sized Businesses. The elimination of import duties also opens up trading activities to small businesses in the regional markets. Small and medium-sized businesses make up 80% of the region’s businesses. Increased trading also facilitates small business products to be traded as inputs for larger enterprises in the region.
  1. Encouraging Industrialization. The AfCFTA fosters competitive manufacturing. With a successful implementation of this new trade initiative, there is potential for Africa’s manufacturing sector to double in size from $500 billion in 2015 to $1 trillion in 2025, creating 14 million stable jobs.
  1. Contributing to Sustainable Growth. The United Nations 2030 Agenda for Sustainable Development includes goals that the AfCFTA contributes to. For example, Goal 8 of the Agenda is decent work and economic growth and Goal 9 is the promotion of industry. The AfCFTA initiative also contributes to Goal 17 of the Agenda as it reduces the continent’s reliance on external resources, encouraging independent financing and development.

AfCFTA: A Trade Milestone for Reducing Poverty in Africa

The establishment of the AfCFTA marks a key milestone for Africa’s continental trade system. The size of the trade area presents promising economic development and sustainable growth that reaches all market sectors and participants. Additionally, the timing of the initiative launch is expected to contribute to the alleviation of the pandemic’s economic damages.

– Malala Raharisoa Lin
Photo: Flickr

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Solar Energy in Morocco: Lighting Up the Continent

Solar Energy in MoroccoIn 2018 and 2019, Morocco became a powerhouse in renewable energy, exporting an increased 670% of energy and decreasing imports by 93.5%. This can be attributed to the nation constructing the largest concentrated solar farm in the world. The solar plant, known as the Noor Complex, has the capability to power one million homes and greatly reduce the use of fossil fuel.

Solar Energy in Morocco

Prior to this renewable attitude, 97% of Morocco’s energy was produced by fossil fuels. The construction of solar farms is able to offset the nation’s energy usage, lessening the demand for energy imports and creating opportunities for more exports, ensuring a self-sufficient nation.

The decrease in energy consumption in the country has saved funds on energy costs. In 2018, the Moroccan Government decided to move to the GMT+1 timezone resulting in less electricity consumption by citizens. This shift toward sunnier days allows Morocco to overproduce energy and afford to export energy.

The advantages of solar energy in Morocco extend into multiple areas, creating a positive impact for not only Morocco but the African continent as a whole.

Poverty Eradication Benefits

In past years, poverty in Morocco has seen a significant decrease. While an optimistic stride for the nation, the decline in poverty was disproportionate between rural and urban areas.

This disparity between the living areas is often attributed to the difficulty in distributing energy to the rural regions. The hope is that the efficiency of solar energy in Morocco will allow for energy distribution to residents living outside the city to be feasible.

In 2016, poverty in Morocco was reduced to 23% from 45% in 2014. As solar energy in Morocco becomes more efficient, the living conditions of the average resident should improve as solar power makes electricity more affordable and easier to access. The solar farms popping up across the country also create jobs for the population to earn a living wage.

Economic Benefits

Solar energy in Morocco helps the nation be less reliant on energy imports and capable of exporting more energy, boosting the economy and relationships with other nations.

As Morocco’s economy strengthens with its excess of energy, it looks to make connections with European countries. In 2016, the construction of the Morocco-Nigeria gas pipeline project was announced. This pipeline perfectly positions Morocco to become an energy hub for the Mediterranean, African and European nations.

These connections to other nations allow Morocco access to flourishing markets and new business opportunities. As Morocco forms these foreign connections, it is becoming a greater political power in Africa.

Political Benefits

The continent of Africa currently has a leadership vacuum that Morocco is preparing to fill. As it produces more energy and builds stronger relationships with European nations, it is seen as a serious economic and political figure for the continent.

In 1984, Morocco left the African Union (AU) because of a disagreement over the recognition of the Sahrawi Arab Democratic Republic (SADR). After many years, Morocco now seeks to rejoin the AU and strives to make the continent of Africa a robust, independent continent.

Now, the country is setting an example for the other nations of Africa to become self-sufficient and gain economic ground with foreign countries. Morocco has invested 85% of its foreign funds to other countries in Africa in an attempt to boost its leadership role as well as improve the struggling African economies.

The current Moroccan King, King Mohammed VI, has confidence in the continent’s abilities and wishes to lead Africa to success. He has made Morocco the second largest investor in African affairs.

Environmental Benefits

The positive environmental impact is often considered when looking at renewable energy. Morocco is heavily invested in combatting climate change and the environmental crisis the world is facing. Along with many green policies, Morocco is implementing the Green Generation 2020-2030 plan to help farmers conserve water and energy and grow crops more efficiently.

In addition to its pivot toward solar energy, Morocco is developing an environmental code to reduce pollution and work toward a greener society.

A Brighter Future

Morocco’s turn to solar energy is improving the living standards of its residents and empowering the country in the political arena all while reducing the harmful effects fossil fuels have on the planet. While Morocco has seen hard times, it is propelling forward and bringing the continent of Africa along with it. As Morocco constructs more solar resources and spreads its influence to other African nations, it plays a significant role in poverty reduction.

– Veronica Booth
Photo: Flickr