“The digital economy can and should change the course of Africa’s history. This is an opportune moment to tap into the power of the continent’s tech startups for much-needed solutions to increase access to education, healthcare, and finance, and ensure a more resilient recovery, making Africa a world leader in digital innovation and beyond,” -Stephanie von Friedeburg, Interim Managing Director, Executive Vice President and Chief Operating Officer of IFC.
e-Conomy Africa 2020, a new report released on November 11, 2020, by Google and the International Finance Corporation (IFC), estimates that Africa’s Internet economy has the potential to reach 5.2 percent of the continent’s gross domestic product (GDP) by 2025, contributing nearly $180 billion to its economy. This will depend greatly on the usage level of digital technologies by businesses and the right mix of policy actions. The projected potential contribution could reach $712 billion by 2050.
A combination of increased access to faster and better quality Internet connectivity, a rapidly expanding urban population, a growing tech talent pool, a vibrant startup ecosystem, and Africa’s commitment to creating the world’s largest single market under the African Continental Free Trade Area are some of the key factors driving this growth.
Currently, Africa is home to 700,000 developers and venture capital funding for startups has increased year-on-year for the past five years, with a record $2.02 billion in equity funding raised in 2019, according to Partech Ventures Africa. Nineteen of the top 20 fastest-growing countries in the world are in Africa. Urbanization is on the rise, and an increasingly young and educated population is driving higher consumption of online services
Digital startups in Africa are driving innovation in fast-growing sectors, including fintech, healthtech, media and entertainment, e-commerce, e-mobility, and e-logistics, contributing to Africa’s growing Internet gross domestic product (iGDP) — defined as the Internet’s contribution to the GDP.
“Google and IFC have created this report to highlight the role the digital startup sector is playing and other factors driving the continent’s growth, in order to showcase and support the opportunities the continent presents,” said Google Africa director Nitin Gajria.
An analysis within the report, conducted by Accenture, found that in 2020, the continent’s iGDP may contribute approximately $115 billion to Africa’s $2.554 trillion GDP (4.5 percent of total GDP). This is up from $99.7 billion (3.9 percent of total GDP) in 2019, with the potential to grow as the continent’s economies develop.
Investments in infrastructure, consumption of digital services, public and private investment, and new government policies and regulations will play an important role in supporting Africa’s digital growth. The report notes that investment in digital skills will also need to increase in order to help drive technology usage and continue to grow the continent’s talent pool.
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IFC—a member of the World Bank Group—is the largest global development institution focused on the private sector in emerging markets. We work in more than 100 countries, using our capital, expertise, and influence to create markets and opportunities in developing countries. In the fiscal year 2020, we invested $22 billion in private companies and financial institutions in developing countries, leveraging the power of the private sector to end extreme poverty and boost shared prosperity. For more information, visit www.ifc.org.