Digitalization Could Transform Africa’s Poorest Countries, Says World Bank
Digitalization has the potential to enhance fiscal policy, improve public administration, and bolster the private sector in some of Africa’s poorest countries, according to a recent World Bank report.
The annual Country Policy and Institutional Assessment (CPIA) report, which evaluates International Development Association (IDA) eligible nations based on their policy and institutional frameworks, highlights that high-speed internet in Sub-Saharan Africa could increase employment probabilities by 6.9% to 13.2%. Additionally, it could boost output per worker and reduce poverty.
The report emphasizes that the expansion of information technology could be transformative for the region, potentially leading to significant structural changes across economic activities.
IDA-eligible countries are defined as those with a gross national income per capita below a specified threshold, which was $1,315 for fiscal year 2024.
According to the report, digital technology could drive job creation through various channels. These include improving the matching of firms and workers, enhancing productivity, expanding market access, and reducing informational barriers.
Further, increased digitalization could streamline customs procedures across multiple authorities, facilitate knowledge sharing, and enhance intraregional trade—a significant opportunity for IDA-eligible countries.
The report notes that trade integration, exemplified by one-stop border crossings, has expanded considerably in recent years. Digital technologies have played a crucial role in facilitating rapid processing and coordination of trade administration.
Enhancing Fiscal Policies and Administrative Quality
Digitalization also has the potential to positively impact several CPIA criteria, including fiscal policy. Automating revenue collection can minimize human intervention, reducing opportunities for bribery and enabling extensive data collection. This, in turn, leads to better analysis and detection of tax irregularities.
Digital infrastructure offers a chance to address policy constraints, such as reducing corruption and boosting domestic revenue. For instance, Sub-Saharan African countries could potentially raise an additional $60 billion annually by improving property tax collection, similar to levels seen in industrialized nations. Togo, for example, has implemented a digital fiscal cadaster and reduced land registration fees, along with a communication strategy promoting the benefits of property taxes.
Digitalization can also enhance public administration. Countries like Ghana and Nigeria have introduced electronic procurement systems, while Kenya and Tanzania are integrating technology into the justice system. Burundi has digitalized approximately 80% of public sector personnel files, and the Central African Republic has launched mobile payments for government services.
The report underscores that technological advancements can significantly improve public administration by strengthening property and contract rights, enhancing public sector performance, and increasing executive accountability through robust civil society engagement.
However, a lack of supportive infrastructure remains a significant challenge. Half of Africa’s population faces issues with electrification, and despite representing one-fifth of the world’s population, Africa attracts only 3% of global energy investments, according to the International Energy Agency (IEA).
The report highlights that successful digital transformation will depend on widespread access to affordable energy. Frequent electricity outages hinder both domestic and foreign investments and adversely affect the productivity of existing firms.
Economic and Social Reforms
The report also notes that Sub-Saharan Africa managed relatively well in 2023, thanks to credible economic and social policy reforms. CPIA scores remained consistent with the previous two years, with more countries showing improvements compared to those experiencing downgrades.
Nonetheless, not all improvements are uniform. Governments facing budget constraints due to high debt service costs will need to work harder to attract private sector investments to drive economic growth. The report suggests that debt has become a more pressing threat to economic stability than international shocks.
Nicholas Woolley, the report’s main author, emphasizes that private sector investments need to increase following years of public sector-driven investment growth. With high interest rates and public debt limiting the public sector’s capacity, significant opportunities exist in trade and the digital economy.