Aid Has Not Lifted Africa Out of Poverty, But Technology Will

Joseph Dana

AFP photo: Tony Karumba

Africa has the world’s lowest share of people using the internet, because of poor infrastructure and the rural nature of many communities. This stark statistic is often cited by Western aid agencies to justify investment in rural communities. The problem facing Africa, so the thinking goes, is fundamentally a rural one. While this might be true for the present, Africa’s challenges are on the verge of becoming decidedly urban. The future is not rural, it’s urban.

The Western perception of Africa centers on the trajectory of development in other parts of the world, on the presumption that the arc of development in North America, Europe and Asia should and would be replicated in Africa. Today, even with the utter failure of what the consensus says is the right economic plan for the continent, the West persists in its refusal to accept that models from elsewhere don’t necessarily work in Africa. For example, Africa has overturned the notion that consumption cannot take off as a major driver of GDP unless a certain proportion of the population has a bank account. How? Because there is technology available at this particular point in Africa’s development that did not exist when other parts of the world were at the same juncture. Africa is “disrupting” the old model.

Although many may think of Africa as technologically poor, it is in fact tech that has helped raise its wealth quotient in the past decade and it will be technology that will help grow Africa’s middle class in the next generation or so. But it will, of course, need help – and of the right kind, not aid.

This is where statistics about internet penetration and smartphone usage are key for charting the future of the continent. While Africa’s share of the internet might be low right now, the continent is one of the fastest-growing internet markets in the world. With overwhelmingly young populations whose numbers are expected to soar, the cities of Africa are about to explode.

The World Bank says urbanization is the most important transformation taking place in Africa, with more than 450 million new city residents expected by 2040. Bloomberg estimates Africa will be home to more than nine megacities with populations of more than 10 million each by 2050. These cities are far beyond the established metropolis of Cairo, Lagos and Johannesburg. N’Djamena in Chad, and Antananarivo, capital of Madagascar, are just two examples of soon-to-be megacities.

This shift brings enormous opportunity for the continent and for outside investors. Africa’s impressive urban growth opens a range of possibilities, the first of which involves tackling its uneven development with technological innovation. Again, the smartphone is vital here. Local telecom operators such as the MTN Group of South Africa and France’s Orange are now selling smartphones for as little as $20 that use a lightweight operating system called KaiOS. Made of cheap plastic and using an operating system designed for the slower 3G networks that cover large parts of the continent, these phones allow Africans to jump right into the digital economy.

And to return to the matter of bank accounts, an over-reliance on cash and an under-developed finance sector in many countries mean millions do not have access to banks. With the explosion of smartphones, however, people are able to move away from cash and use their smartphones for digital currencies. Startup companies such as Mama Money in South Africa enable remittance payments over cell phone networks. With Mama Money, Zimbabwean migrant workers can send money home for a fraction of the cost of normal remittance services and smartphone users can keep the money in a secure digital form.

The knock-on effects of “banking” on smartphones are profound. With digital currencies, many people are able to sign up for health insurance, savings plans and other types of products and services. As urban growth explodes and internet infrastructure improves, these developments will accelerate dramatically. While it won’t solve poverty or lack of housing, the smartphone-powered transformation will enable an entirely new class of customers to emerge.

Who is going to tap this potential? China has already made an aggressive push into several African markets. Through its policy of debt-trap diplomacy – extending massive credit and extracting political and/or economic concessions when the debtor can’t pay – China has secured massive amounts of land and resources across the continent. Chinese technology is also popular; KaiOS, for example, is owned by a Chinese company. But when it comes to investing in Africa’s booming cities and the budding knowledge economy on the continent, the Chinese strategy, with its focus on infrastructure and resource extraction, has one big flaw: China has failed to capture the hearts and minds of young Africans.

This is an opportunity for states like the UAE, Singapore and Estonia. They may be small, but they have invested substantially in their own knowledge economies. Given the reach these countries have via their aviation networks and strong economies, they should be on the forefront of Africa’s new urban century. Companies such as the UAE’s telecom operator, Etisalat, already have footprints in major African markets like Egypt and Nigeria. The next step is to invest in knowledge-based startups and ecosystems that are harnessing the power of African youth in Kigali and Nairobi and beyond.

One way that Africa is going to craft its own solutions is by partnering with countries that do not harbor neo-imperial agendas or cling to outdated models of thinking. The old idiom is applicable here: value creation over exploitation. Africa needs eager partners who are investing in the future by empowering young people with the technological tools necessary to innovate for the present. As the population moves into cities, these tools will be key to unlocking the continent’s true potential and entrepreneurial edge.

Joseph Dana, based between South Africa and the Middle East, is editor-in-chief of emerge85, a lab that explores change in emerging markets and its global impact.