Innovation keeps Africa afloat

Johannesburg, 27 Jul 2009

Despite low penetration rates for new technologies, the innovative application of ICT has grown as Africa searches for ways to lessen the effect of the global economic downturn.

This is according to the 2009 African Economic Outlook, which covers 47 African countries and includes information on innovation and ICT.

The research is conducted by the Organisation for Economic Co-operation and Development, the African Development Bank and the United Nations Economic Commission for Africa, and provides an analysis of developments on the continent.

Adoption of solutions such as e-banking, e-payments, e-agriculture, e-trade, e-government and e-education is growing, and the increased innovation in ICT has also helped ensure the continent is better positioned to weather the crisis, the report says.

"Many of these new tools are helping to shape an improved business environment by contributing to market development, overcoming traditional infrastructure constraints and reducing business costs," the report states.

The report notes that, following five years of economic growth levels above 5%, the continent can expect only 2.8% in 2009, which is less than half of the 5.7% expected before the crisis. The report adds that growth is expected to rebound to 4.5% in 2010, as many countries have undergone reforms in the past few years which have strengthened their economies.

Increased innovation

Innovative use of ICT is vital as it is breaking down long-standing barriers to market development, the report says. Four out of 10 Africans have a mobile phone line and mobile-banking solutions are quickly scaling up on a continent with low levels of bank users. The report notes that high levels of access to ICT make it possible for businesses to deliver sophisticated services to the continent`s population for the first time.

"In Kenya, where only 26% of the population has a bank account, mobile-payment services have attracted over five million users in less than two years. In agriculture, ICTs have brought together farmers and buyers by enabling timely and affordable access to prices and quantities. In Senegal, farmers can check market prices in real-time on their mobiles to obtain the best prices for their crops."

Regional integration is being reinforced as more inland broadband links are built and Pan-African operators are already offering free roaming services across 12 countries - a business model which only exists in Africa, the report reveals.

Building infrastructure

The study also points out that governments need to work with businesses to remove the hurdles to ICT infrastructure development. More needs to be done to nurture an environment that is conducive to private-sector development, especially in further reducing corruption, the report states.

The study encourages structural reforms, saying they could lead to an improved business environment both for domestic and foreign operators, and notes the continent needs assistance.

"African countries need donor support to continue investing in infrastructure and structural reforms. To abandon such reforms would mean jeopardising gains in poverty reduction and future growth prospects. A prolonged international crisis, however, could pose a risk to these advances, making 2010 crucial for medium-term prospects," the report states.