Africa's Digital Economy
As the world’s digital economy expands at an exponential rate, it continues to be a vital component in raising the world’s impoverished nations and people out of poverty. By the end of the decade, 70% of new value in the global economy will transpire from digitally-enabled businesses. There is a great opportunity for impoverished and developing countries to boost their own economies and raise their people out of poverty by having access to these emergent digital markets.

However, Africa has been lagging behind in its digital economic growth. That is why Visa, a large multinational financial services corporation based in the United States, has pledged to invest $1 billion in Africa’s digital economy by 2027, helping create opportunities for more Africans to engage in the digital market, as well as have access to safe, reliable financial services and technologies. 

Identifying the Problem

The growth of Africa’s digital economy has been stunted and uneven. As of 2015, almost 500 million adults in Africa or nearly 40% of Africa’s total population lack access to formal financial services including banking services and access to digital purchase platforms. Compounding this issue is the fact that things like digital payment methods are not readily available. More than 40 million merchants (i.e, stores, vendors, etc.) in Africa do not accept digital payments and less than 50% of the entire adult population have made or received digital payments of any sort as of December 2022. 

Digital economic inequality is not only present when comparing Africa to developed nations, but also within its own borders as well. For example, in Central Africa, only 11% of adults have a bank account, compared to 51% in the far more developed region of South Africa. This stark divide is especially present in access to financial technologies. For example, while there are 50 ATMs per 100,000 individuals in South Africa, there are only 11 per 100,000 individuals in North Africa and less than five per 100,000 individuals in all other African sub-regions.

Visa’s Pledge

This lack of access to financial resources and technologies, especially in the global digital market, is a large issue facing the impoverished populations of Africa. It is not insurmountable, however. Visa believes that Africa can overcome its issues, which is why the company has pledged to invest $1 billion in Africa by 2027 to accelerate the growth of the continent’s digital economy. Visa, one of the largest financial companies in the world, has established a plan to upscale the company’s African operations on all fronts, including the deployment of new technologies and providing opportunities to educate locals in digital economics.

Over the next five years, Visa will establish local operations for the first time in several impoverished African countries, including the Democratic Republic of Congo (DRC), Ethiopia and Sudan. Part of this growth involves the implementation of new technologies that make it easier for both consumers and merchants to make digital payments, like Tap to Phone, a technology that allows people to make purchases with a simple tap on one’s smartphone. Such innovative solutions will not only encourage more consumers and vendors to make digital payments but will also make it easier and safer for them to do so.

Visa has also pledged to invest in education and empowerment for those especially struggling to enter the digital economy. For example, the company has teamed up with She’s Next, a global advocacy program for women-owned small businesses, which brings funding, mentoring and networking opportunities to female entrepreneurs across sub-Saharan Africa. Visa’s plan to increase financial literacy also focuses on crossing language barriers; for example, it is working on the first-ever Arabic version of its financial education program, Practical Money Skills.

Visa’s Pledge to Develop Africa’s Digital Economy

There is still a long way to go to connect Africa’s impoverished people with the world’s digital economy. However, thanks to the work of Visa and other organizations, and to increasing awareness of their need, there will be great progress in accelerating Africa’s entrance into the global digital economy.

Elijah Beglyakov
Photo: Flickr

Since the beginning of the digital age, there have been several advances in the world of digital currency. From mobile banking apps to mining for cryptocurrency, the use of physical bills and coins is becoming less common. The potential of this new technology in developing countries, particularly for those in Africa, cannot be ignored. Here are four ways digital currency in Africa can improve the economy.

4 Ways Digital Currency in Africa Can Improve the Economy

  1. Transferring money is easier and faster when combined with technology. For those who cannot waste time waiting for money to travel from one location to another, digital currency in Africa would allow for conveniently instantaneous transfers. Additionally, more companies are taking notice of the strong potential market for digital currency in Africa and the positive impact it could have on citizens and businesses. Airtel Africa, a telecommunications company serving East, West and Central Africa, has recently partnered with Mukuru, an online remittance company, allowing Mukuru customers to instantly send money transfers directly to Airtel Money customers across 12 African countries. This means that people can make intra-Africa payments from Southern Africa, where Mukuru has a major presence, to other nations in Africa. Users would also benefit from no longer going to an agent to receive international payments physically. Once Airtel Money customers receive the money, they can use it to pay bills, purchase goods and services or even cash out at one of Airtel Africa’s branches or kiosks. This will allow African citizens to get the most out of their money.
  2. Managing personal income leads to greater financial literacy. As the use of digital currency spreads, people are increasingly exposed to the language of business as well as standard banking practices. For those living in countries with low financial literacy rates, this could be the difference between economic stability and poverty. The implications of digital technology in Africa are astronomical due to the previous lack of education on these financial principles across the continent. In Somalia, the current rate of financial literacy is estimated to be 15%. On the other side of the spectrum, Botswana has a rate of over 51%—the highest in all of Africa. With this first-hand knowledge, more people will be able to learn how to manage their finances properly.
  3. Digital currency allows for more connections between African citizens and the rest of the world. The use of digital money transfers not only allows those living in Africa to pay and request money from people within their continent but also those around the world. With the recent partnership between Airtel Africa and Mukuru, small business owners in Africa can now establish business relationships with people in Europe, Asia and the United States, among others. As these relationships continue to grow, the digital currency can flow freely between Africa and the rest of the world, opening the continent up to high-dollar investments from more developed regions and, in time, lead to a potential rise in the African economy.
  4. More women have access to their finances. Only 37% of women in Sub-Saharan Africa have a bank account compared to 48% of men—a gap that has only widened in the past few years. The numbers are worse in North Africa, with around two-thirds of the adult population remaining unbanked and the gender gap for access to financial education standing at an 18% difference, the largest in the world. However, with the rise of digital technology in Africa, more women can become empowered and take control of their finances. Female entrepreneurs rarely apply for loans as a result of low financial literacy, risk aversion and fear of losing their businesses. If these women were to utilize digital banking technology, they would be able to pay employees, investors and, most importantly, themselves more efficiently. As more and more women manage their finances, they will be able to lift themselves out of poverty and strengthen their local economies.

As digital currency in Africa continues to flourish, more entrepreneurs, families and willing investors will be able to witness the rise of the African economy. Money transfers and online banking will likely support the growing economy as it joins the rest of the world in the technology age. With continued global support, African citizens will be able to lift their economy to new heights.

Daniela Canales
Photo: Flickr