This article is excerpted from a special series on Africa-EU relations during the German EU presidency, produced by members of the European Think Tank Group (ETTG). The views expressed are those of the authors.
Digitalization will transform and revolutionize our economies and societies, and influence the way we work, live, and interact. Working together, the AU and EU can foster a digital partnership that will lead to greater human well-being on both continents.
Digitalization is the use of digital technologies and digitized data in enterprises and organizations, with far-reaching implications for how work gets done and how customers engage and interact with operations. There can be no doubt that digitalization is transforming business models, revolutionizing societies, and creating new revenue streams around the globe.
As in other parts of the world, digitalization is on the rise in Africa. Tech hubs are multiplying exponentially. The start-up and innovation scene is becoming increasingly anchored in societies, and demand for trained professionals is growing. The rise of financial technology enterprises, or fintechs, and mobile money have been particularly notable in Africa, though the digital revolution is transforming productive sectors too.
The strides being made are helping to grow economies, improve service delivery and generate jobs and incomes. Many organizations, businesses and governments have already moved, or are moving, their operations and processes to the digital space, using digital technologies to provide new products and services, expand existing services, increase revenues and exploit new value- producing opportunities.
Despite these trends and the rapid spread of the internet, the majority of Africa’s population is still offline. The digital transformation is hindered by continent-wide challenges linked to connectivity, capital, and regulation as well as people’s mobility. In 2019, Africa had the lowest internet usage rates in the world. Only 28.2 per cent of Africans used the internet, compared to 82.5 per cent of Europeans.
After years of slow progress, the European Union (EU) has committed to advance its own digital economy and improve its competitiveness by pooling resources and accelerating investments in high-performance computing, artificial intelligence, cybersecurity, and advanced digital skills. Europe is determined to strengthen its digital infrastructure and digital innovation hubs, while pursuing high societal and environmental impact. At the heart of this transition is the Digital Europe Programme, meant to drive Europe’s digital transformation. Through its Digital4Development (D4D) policy, the EU has also set out to mainstream digital technologies in its development policies and relations with third-partner countries.
In her opening statement at the February 2020 AU-EU Commission-to-Commission meeting in Addis Ababa, Ethiopia, European Commission President Ursula Von der Leyen referred to the “opportunities ahead of us” in regard to new technologies. “I know that there is a thirst for digital skills in young Africans and young Europeans,” she said. “Let us join forces there.”
Her statement highlights the belief that a reliable partnership can provide mutual benefit to the AU and EU in areas including digital technologies and skills, both of which are essential for economic growth.
Building on past dialogues and current plans
At their February meeting, the AU and EU agreed to maximize synergies between European and African private sectors in areas relating to sustainable growth, trade, investment, and digitalization. In addition, the European Data Strategy mentions EU-Africa cooperation on data, stating “the EU will support Africa in creating an African data economy for the benefit of its citizens and businesses”.
That meeting followed the establishment of the EU-AU Digital Economy Task Force (DETF) in 2019 as part of the Africa-Europe Alliance for Sustainable Investment and Jobs. The DETF was asked to provide recommendations for achieving inclusive digital economies and societies. Its vision rests on four pillars: access to affordable broadband connectivity and digital infrastructure; digital skills; digital entrepreneurship; and e-services, including e-government, smart cities, e-commerce and e-health.
In all, there have been numerous AU-EU dialogues relating to digitalization, resulting in more than a dozen agreements. These agreements can inform the next round of dialogues, which also can build on the significant progress that has been made towards digitalization in both Europe and Africa.
In Europe, for example, DG CONNECT is working with EU member states to develop digital innovation hubs to ensure that companies throughout Europe can take advantage of digital opportunities. More than €6.7 billion was proposed for the Digital Europe Programme as part of the EU’s 2021-2027 budget.
In Africa, the AU has clearly articulated a vision and proposed actions for digitalization on the continent, starting with the Digital Transformation Strategy for Africa (2020-2030). Among its objectives are building a digital single market in Africa by 2030 with digital economies that are networked and collaborative; implementing existing and future digital policies and strategies in ways that ensure coherence; and building inclusive digital skills.
Implementing existing AU-EU joint agreements, as well as the plans and activities proposed at the continental levels, will require further efforts by the AU and EU and their member states. Besides the current COVID-19 pandemic, factors that might slow the pace of implementation include knowledge gaps, funding shortfalls and capacity challenges, particularly on the part of the AU. That said, the commitment demonstrated so far indicates that, working together, the AU and EU are better placed than in the past to deliver on their ambitions of a digital partnership that is mutually beneficial and based on an engagement that is truly equal.
Their commitment to an Africa-EU digital economy partnership notwithstanding, the two regions face a series of challenges. For the EU, a primary challenge is the need to strengthen its own digital standing. For example, the EU’s share of the global digital market is less than that of the US or China. Europe in general needs to improve competitiveness and innovation to foster more technology leaders and reduce dependence on outside technologies. Other challenges include data protection, cybersecurity, and especially, finance.
Particularly in the age of COVID-19, the EU Commission will face difficulties in funding all the priorities in its next seven-year budget, including its digital aspirations. In July, the European Council agreed to allocate €143.4 billion to the single market, innovation and digitalization. Another €98.4 billion is earmarked for external action. Though the allocation fell short of desired amounts, the European Council still vowed to elevate digital transformation to a crosscutting theme in EU public policy.
Numerous challenges face the African continent: physical and digital infrastructure, system access and stability, and of course digital literacy and skills. Governance poses challenges too, in view of the fragility of some states, weak or non-existent policies, and the need to reform regulatory frameworks. Furthermore, fragmentation and “silo” mentalities persist within national governments, regional economic communities (RECs) and the AU. More broadly, there is a need for inclusive governance and leadership to push the frontiers of digitalization and innovation.
At the same time, resolution of finance, taxation and cross- border issues (such as the lack of harmonized policies and frameworks at the regional level) is necessary for improving interoperability and intra-African digital trade. These factors will also determine to a great extent, the success of the African Continental Free Trade Area (AfCFTA).
The AU is not well-resourced in comparison to the EU. To ensure the partnership’s success, there is an urgent need to boost strategic investment and mobilize finance, particularly for digital infrastructure, but also for capacity building, skills development, and policy design and implementation. In addition, investing in education and training, and establishing appropriate digital governance and regulatory frameworks, will be essential.
These issues all constitute a significant threat to the success of the AU-EU partnership on digitalization. There are many success stories, but we cannot forget the magnitude of the challenges in Africa. Despite the progress recorded in improving digital infrastructure in Africa, 700 million people in Africa still do not have access to the internet and some 300 million Africans live more than 50 kilometers from a fiber or cable broadband connection.
Connectivity, universal access, and skills development must be priorities in Africa to harness the full potential of the AU-EU partnership to their mutual advantage.
Opportunities and recommendations
Numerous areas of opportunity exist for the AU and EU on digitalization. The ones featured here were selected to build on areas of mutual interests, potential benefits, and possible collaborations between the AU and EU. They also reflect some of the challenges common to both partners. Some of the recommendations represent short to medium-term opportunities, while others constitute long-term goals.
Taken together, these recommendations can serve as a starting point. They can help position the AU and EU to deliver on their ambition of a digital partnership that is mutually beneficial and accelerates creation of a digital economy for improved competitiveness. They are structured around five themes: (1) D4D and innovation ecosystems, (2) digital single market, (3) digital capability and skills, (4) data and taxes, and (5) digitalization and COVID-19.
1. D4D and innovation ecosystems
Prioritization of Digital4Development (D4D) and thoughtful development of innovation ecosystems are prerequisites for success in the AU-EU digitalization partnership. If digitalization is not truly mainstreamed as part of the development agenda, it will continue to be fragmented and have limited impact. D4D must work to integrate the needs of innovation ecosystem development, bringing in the private sector, entrepreneurs, academia, research organizations, civil society, government, and development partners.
However, linkages among research and innovation organizations in Africa remain weak. These need to be strengthened and better harnessed. Similarly, there is a need for increased dialogue between governments and the private sector. Furthermore, in the current pandemic situation, entrepreneurs need access to finance that is tailored to the requirements of the fourth industrial revolution (4IR).
- Establish a special AU-EU dialogue on supporting the development of innovation ecosystems. These dialogues would help ensure regular engagement between AU and EU policymakers and should include individual member states in some instances, given the nature of EU development projects.
- Create special initiatives to engage the private sector and other stakeholders. These could improve on past public-private initiatives by including a wider range of key stakeholders to inform the dialogue.
- Explore avenues for more effective engagement with entrepreneurs. In particular, the AU and EU should seek to engage digital entrepreneurs who have created new business models, face unique financing constraints, and work as global collaborators. This may include mapping digital ecosystems in selected countries to better understand the landscape, interests, and opportunities.
2. Digital single market
A safe and secure digital single market is a goal of both the EU and AU. In Africa, it is the first objective of the AU Digital Transformation Strategy for Africa (2020-2030). Though most African markets are small, the continent can take advantage of cross-border trade and lower the cost of accessing digital technologies. Realizing a digital single market in Africa would allow for economies of scale currently unavailable in separate markets with their diverse regulations. This could attract increased investment from both African and external investors, fostering greater growth and job creation. It could also allow for stronger negotiating positions in relation to access to the EU single market.
Prior to establishing a continent-wide digital single market, Africa’s highly fragmented domestic markets need to be unified. For this, the EU is already providing technical assistance to the AU, for example, through the Policy and Regulation Initiative for Digital Africa (PRIDA). Other challenges include the continent’s digital divide, connectivity gaps, and the need for increased efforts to improve cross-border connectivity. Progress in addressing these challenges will determine the success of the AU-EU partnership.
- Identify, develop, and support cross-border digital infrastructure development throughout Africa. Efforts here may include improving and harmonizing the regulatory environment and providing financing instruments, such as guarantees and blended finance, for cross-border digital investments.
- Prioritize use of the AfCFTA to help create a digital single market and ensure appropriate links to the EU single market. This will provide mutual benefits for both partners and stimulate economic growth.
3. Digital capability and skills
Without the requisite capability, skills and human development, Africa will lag behind and miss out on the many opportunities that digital technologies and digitalization offer. Digital skills development is essential in primary, secondary and tertiary education, as well as within national governments, regional institutions, and the wider society.
Strengthening digitalization education and skills in the AU will create jobs and improve productivity even in non-tech sectors. It will also boost digital literacy overall. Tech start-ups and entrepreneurs in Africa struggle to find essential skills, such as high-end programming, and governments often lack the capability to effectively design the regulatory frameworks needed for a digital future. Currently, the AU and relevant stakeholders are engaged in several initiatives, such as the World Bank’s Digital Economy for Africa, in which digital skills and literacy are a core component.
- Strengthen innovation and digital capability and skills in the AU and RECs, followed by efforts at the country level.
- Increase investment in AU-EU research, innovation collaborations, and partnerships focused on digitalization. Partnerships linking African actors and initiatives should be supported, to help Africa develop its own critical mass of researchers in digital fields.
- Design and implement targeted interventions to reorient primary, secondary, and tertiary education for 4IR requirements. These interventions may include increasing access to the skills required for emerging innovations, integrating more general vocational and technical skills into secondary school curricula, and substantially increasing STEM (science, technology, engineering, and mathematics) participation, particularly among girls.
4. Data and taxes
There is an imperative to ensure data sovereignty in Africa and in Europe, but data governance, as a near-horizon challenge, requires urgent action. This includes many interrelated issues pertaining to regulation, sovereignty, privacy, standards, and costs. For example, until issues of regulation and taxes are adequately dealt with, investment in data infrastructure will continue to lag. Data sovereignty must be enshrined in the appropriate frameworks, regulations and governance structures in the AU and EU. Policymakers must also focus on data as a new commodity, considering its importance in areas such as health, education, research, industrial innovation, and agriculture.
- Establish a “coalition of the willing” to systematically identify and share global good practices, lessons, and new ideas on approaches to data. Such an initiative would be comprised of countries, international organizations, and the private sector and could be hosted by a think tank, a university, or an AU or EU organ.
- Develop an Africa-led initiative on data sovereignty, whereby the AU would convene stakeholders, including businesses, civil society and policymakers, with the EU helping to “crowd in” global stakeholders and investment where appropriate.
- Initiate new AU-EU dialogues and agreements on data, particularly related to taxation. Working together, the AU and EU can help develop tax rates that are beneficial to society, without hindering entrepreneurship. The two organizations should also consider digital taxation approaches based on a percentage of actual profit and other policy instruments that spur innovation, such as tax and financial incentives for entrepreneurs, start-ups, and small and medium-sized enterprises (SMEs).
5. Digitalization and COVID-19
The pandemic is changing all aspects of life, from education and learning to commerce and medicine. The AU and EU both should take advantage of lessons learned and innovations from the pandemic, including new approaches in governance and regulations, for example, to further the digitalization agenda. There is also an urgent need for the AU and EU to ensure that strategic investments have adequate financing to succeed. Access to finance, particularly during the post-pandemic recovery period, for tech start-ups and digital innovators in Africa, can lead to greater markets for EU products and services, while deepening industry linkages between Africa and Europe.
- Establish a joint initiative to capture lessons learned. This could include conducting a detailed analysis on how things worked (or did not work) and why and identifying the incentives that encouraged (or discouraged) beneficial outcomes.
- Focus strategic digitalization investments in target priority areas, such as deepening online commerce, supporting innovation and technology, and establishing norms and regulations on data privacy and security, particularly in relation to contact tracing.
- Promote high-impact investment and finance in D4D, digital single market development, and digital capability and skills. This could follow a model similar to the Programme for Infrastructure Development in Africa (PIDA), which identifies a strategic pipeline of investments and has been championed by African Heads of State.
About the article
The European Think Tanks Group (ETTG) is a network of European independent think tanks working on EU international cooperation for global sustainable development. This article is excerpted from the paper “Strengthening the Digital Partnership Between Africa and Europe”, which is part of a special series on Africa-EU relations produced by the following ETTG members: the German Development Institute (DIE), European Centre for Development Policy Management (ECDPM), and African Center for Economic Transformation (ACET). The paper was published with financial support from the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) Gmbh on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ).