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Africa, a resilient economy bolstered by technological innovation and Big data

December 16, 2020 | Interview
Published on

By Kerry van der Mescht

Published on Kapital Afrik.

By leveraging technological innovation and Big data, Africa’s economy has remained resilient in the face of the Covid-19 pandemic, while driving an inclusive economy for its citizens. To ensure sustainability of the continent’s initiatives, digital monitoring, tax transparency, and innovative funds for development, have become pivotal. Daryl Bhana, VP of Commercial Sales and Strategy at Global Voice Group, details how the use of Big data analytics mitigates governments revenue losses and contributes to the continent’s resilience.

How would you assess the impact of the Covid-19 pandemic on African economies?

As a result of the global Covid-19 pandemic, Africa will go into recession for the first time in 25 years. According to the World Bank, Sub-Saharan Africa will experience a projected decline in economic activity of 3.3% in 2020. In Kenya, projected GDP growth in 2020 has declined to 1.5% (from 5.7%) due to the gravity of the pandemic, with the economy seeing a decline in tourism activity, export revenues, and a disruption in supply chains. In Ethiopia, the country is expected to grapple with high unemployment, and GDP growth has been revised to 2.3% from a previous 9%. The outlooks in Tanzania and Uganda show a similar trend with GDP growth being revised to 2.5% and 1.7% respectively (decline in 3.5% and 3.9% percentage points). Among the other consequences of the pandemic in 2020: Africa could lose up to 20-30% of its fiscal revenues, which will drastically hamper public development projects and see governments turning to more foreign aid. In Sub-Saharan Africa, remittances are projected to fall by 9%, and in North Africa by 8%, according to the World Bank.

From a global point of view, does this pandemic reveal the fragility of the continent’s economies or their resilience?

Over the last eight months, Africa has shown great resilience in the face of the pandemic, responding swiftly to safeguard citizens’ health while managing the impact on the economy. Across the continent, mobile money usage has been boosted by physical distancing measures with incentives to prioritize digital transactions above physical cash. This shift has had a positive impact on citizens, driving a more financial inclusive economy while supporting Africa’s strategy for a cashless society. While the economic implications of the pandemic are evident, African countries have turned to technological innovation and digitization to improve the effectiveness of governments and stakeholders. This has improved their responsiveness to the health effects of COVID-19, and the continued development of these technological advancements will also offset the pandemic’s negative economic impact. As a result , the long-term outlook on Africa’s economy is positive, bolstered by an innovative mindset. According to the World Bank, Sub-Saharan Africa will rebound in 2021 with the Eastern and Southern Africa region expected to grow by an average of 2.7%, and Western and Central Africa region by an average of 1.4%.

In this context, what is the role of digital payment systems in public policies?

It will be interesting to see governments’ continued efforts with social and health measures to soften the impact of the pandemic, but also what fiscal and monetary interventions they will introduce to reinvigorate their economies. In the current economic context, securing dematerialized flows is a key tactic to limit financial and to reinforce governments’ essential contribution to the development of the continent.

With Africa already exceeding 500 million mobile users this year, digital monitoring of dematerialized transactions appears to be a resilience tool for African economies. Digital payment systems have been part of public policy to avoid the spread of COVID-19 via the handling of cash. However, these are also increasingly beyond the visibility of Government transaction compliance monitoring capabilities. Only digital tools can provide a clear view on market trends and ensure – through the continuous collection and analysis of key data – the application of regulation related to mobile money transactions. Real-time mobile money flow monitoring also enables detection of potential money laundering transactions.

As an expert, how do you see the evolution of digital regulation and, in particular, of digital payment systems in African countries?

Technology is always evolving and we see increasingly more governments pushing for fast adoption of solutions for a digital nation to remain competitive as a country. There are three key challenges that countries are in the process of addressing: digital national ID that can be used with a mobile phone; interoperability framework between different data stores and registries; access to anonymized, aggregated, trusted data to propel data driven decision making.

Regulators play a key role in promoting the digital economy, and through regulation, create a trusted and enabling environment, which that is robust enough to foster compliance, but also flexible enough to promote, the growth of a dynamic digital industry. Digital regulation thus relies on the availability of trusted data, and the effective analysis of such data to accurately inform policy and regulatory decisions. Regarding digital payment systems, these will continue to evolve as dematerialized transactions become more mainstream, and as they increasingly span formal and informal economies. Consequently, governments will require advanced compliance technologies to maintain pace, a trend which has been clearly highlighted in our business, as we witness a surge of interest towards our solutions.

What is the contribution of Big data to tax transparency at a time when the G20 is talking about taxing GAFA?

According to a report in Fortune (December 6, 2019), tax paid by the six biggest Internet giants (Amazon, Apple, Facebook, Google, Microsoft, and Netflix) was $155.3 billion lower than what was owed to governments between 2010 and 2019. Such a gap poses an even greater challenge to countries where the telecom industry has traditionally been a significant contributor to the tax base, as well as an important driver of socio-economic development.  In Africa, some countries are looking for solutions to “redomicile” these revenues, such as OTT taxes that were implemented in countries as a way to generate revenue in the age of digital economy. Such taxes make it possible to compensate for a double shortfall for government fiscal authorities resulting from the absence of GAFAM taxation and the decline in telephone calls. However, tax policy is only effective when supported by accurate data to drive such policy-making, as well as accurate data collected in support of and in compliance with tax legislation. Big data tools and analytics allow governments to achieve both.

In your opinion, which African countries have a better profile in terms of big data and digital regulation?

Referred to as ‘Silicon Savanah’, Kenya is at the forefront of technology innovations. As illustrated by a World Bank report, Kenya’s ICT sector’s growth has outperformed every other sector, expanding by over 23% annually during the last decade only. Turning to Big Data, Kenya’s Government is utilising big data to drive data-driven decisions to inform policymaking for the benefit of the citizens, the economy, and the country.

The Governments of Uganda and Rwanda have invested heavily in the ICT sector in recent years, bringing forth a mindset of innovation and adaptability across these countries. A study conducted in 2019 by Martin Prosperity Institute, Uganda ranked second in Africa regarding advanced technological and innovation capabilities, demonstrating its innovativeness by leveraging mobile money financial transactions’ big data to provide poor and rural communities with microfinancing services allowing these communities to run profitable and self-sustaining small businesses. In early 2020, Rwanda signed a memorandum of understanding with the United Nations to host the only big data regional hub for Africa. This hub will execute and deliver key projects, such as satellite imagery and other remote-sensing data using drones in the environment and agricultural statistics such as crop acreage and crop yield. In addition to this, Rwanda has been leveraging big data in various industries, such as Healthcare and Telecommunication, with great success.

By implementing technology and analysing big data sources, Ghana has been able to successfully develop critical strategies to manage the Covid-19 pandemic, which has greatly benefitted citizens and the economy as a whole. With a fast-growing culture for innovation, Ghana is in a unique position to cement itself as a regional hub for big data and analytics management. In 2019, Ghana successfully held its first Data Science Summit (IndabaX Ghana), which focused on creating awareness and capacity around data science, including data mining, as well as providing a platform for collaboration and networking.

Various other African countries, such as Nigeria, Egypt, Zimbabwe, Botswana, Tanzania, and Madagascar have utilised big data to formulate strategies, initiatives, and projects to solve economic and socio-economic challenges and to inform policy to, ultimately, improve citizens’ livelihood and to advance economies.