How Africa is heading towards a $180 billion internet economy

Professional investors are anticipating rapid growth in the value of Africa’s digital economy, benefiting from the strong adoption of smartphones and the COVID-19-induced transformation of the retail space.

Seth Onyango/Bird Story Agency contributed to TechCabal

Africa’s internet economy is expected to swell 56% to $180 billion of total merchandise value by 2025 as paperless retail transactions on the continent continue to rise in the post-pandemic era.

Figures from World Mobile, a Blockchain-based mobile network operator, show that Nigeria, Kenya, South Africa and Egypt will fuel the mobile commerce boom on the continent.

According to World Mobile CEO Mickey Watkins, professional investors see opportunities in this sector and expect mobile to drive growth.

“Affordability is key to the increasing adoption of mobile phones but none of it can be achieved without connectivity,” he said at the launch of the report.

Professional investors surveyed believe that healthcare is the sector that will benefit the most from increased connectivity.

About 53% highlighted healthcare opportunities, before e-commerce (42%) and media and entertainment (40%).

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In the period under review, there will be significant growth in smartphone penetration in Africa and a concurrent growth in digital retail transactions.

The World Mobile report shows that there will be around 120 million new mobile subscribers by 2025 on the continent, bringing the total to 615 million, up from 495 million in 2020.

“But that’s just subscriptions. The most useful number for this analysis is mobile internet connection. In general, connectivity has increased sharply across Africa in recent years — although connection speed varies widely from country to country, says the Partial report.

“In more developed regions, the majority of these connections are on 3G. For example, GSMA Intelligence data for 2020 shows that 61% of mobile internet users in Nigeria use 3G, and 57% of internet users in Egypt” .

Speaking at the launch of the research paper, Mike Short, Senior Scientific Adviser to Britain’s Department for International Trade (DIT), stated that Africa is “the mobile world’s number one continent” in every aspect.

“Our report launches a much-needed discussion on how to drive the mobile commerce revolution in Africa, which in the long run will lead to mutually beneficial digital commerce between the continent and its trading partners, including the UK,” he said.

Also driving the growth of Africa’s digital economy is the proliferation of entry-level internet-enabled mobile phones that cost $28 or less.

The growth of the internet economy also comes amid the rapid adoption of mobile money systems on the continent.

Nearly 144 mobile money service providers operate in Africa, with two companies such as M-Pesa, MoMo and Orange Money accounting for a large share of the market.

M-Pesa, which is operated by Vodafone and Safaricom and operates in 7 countries, has experienced significant growth in recent years. The service attracted an additional 12 million users from 2017 to 2020, reaching 41.5 million users by 2020, according to Statista.

M-Pesa users performed 12.2 billion transactions in 2020, generating $784 million in revenue for parent company Safaricom. MoMo – MTN Group’s mobile money transfer offering – achieved similar growth, reaching 35.1 million active customers in March 2020.

The International Monetary Fund (IMF) estimates that Africa has more digital financial services users than any other region in the world, accounting for nearly half of the 700 million individual users globally.

In 2011, the level of financial inclusion in Africa was just over 23% and jumped to nearly 43% in 2017, buoyed by the growth of digital financial services. The number is expected to be much higher today.

Last year, telecom operator MTN, MTN, signed a partnership agreement with Flutterwave to enable companies in Cameroon, Côte d’Ivoire, Rwanda, Uganda and Zambia to make cash transfers via MTN Mobile Money (MoMo).

This digital move is also set up to introduce millions of unbanked people in those countries into mainstream financial services and support businesses especially those in remote areas.

Africa is expected to attract billions of dollars in investment to its data center market on the back of the continent’s growing internet economy.

The new figures show that the data center market in Africa and the Middle East registered an investment of $6.55 billion in 2021 and will attract an additional $12.19 billion by 2027, half of which will be spent on the continent.

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