Digitalization will not benefit Africa

To start off bluntly, my view is digitalization will not benefit Africa. Why do I say this? Because economically speaking Africa will always come a little behind the rest of the world. It is not for lack of talent in Africa but because, in my view, the result is ready rigged. Let me explain myself…

It is a well known fact that African countries are making good strides in the digital economy. Kenya for instance is lauded for adoption of mobile money payment seamlessly. Nigeria is a big market for many digital service providers. Suffice to say, a lot is happening in the digital economy of each African country. Equally, several foreign digital multinationals are operating massively within African markets. The foreign multinationals include, anything from social media sites, streaming services (like Youtube) and search engine services (like Google). Digital entities offering various other software like AI are also having a footprint in African countries.

Moreover, the returns from the digital economy are huge post covid. This is because most businesses had to upgrade their digital networks due to the pandemic and most have retained these networks. Additionally, the use of social media sites for business is quite high as at 2023. This being the case, we would logically expect that Africa should be bringing in millions of dollars through the digital economy with the hope that African countries will be seeing stronger economies. This is however not the case. Why do I say this? Let us look at the economy of Kenya as an example.

As at November 2023 in Kenya the cost of living continues to escalate. Moreover, the Kenya Shilling to the dollar is at its worst . Yet we have these ongoing talks about the hope that the digital economy bears. Why are there no actual benefits at least in tax revenues?

The best way to explain where we are at is that we are using platforms created outside of Africa that earn millions of dollars . All the revenues from Africa are then booked in other jurisdictions (countries) and very little if any of the revenue is taxed in Africa. You can follow the discussions on taxation of the digital economy from OECD and ATAF websites. This will open your eyes to the fact that the digital economy is not benefiting Africa.

Once you see the discussions going at OECD on you come to the sad realization that there is a new economic struggle. Africa is fighting to tax these large digital businesses earning income from Africa. However, the owners of these businesses and their governments will hear none of it. That is why in my view, while digitalization has potential to increase economic gains for Africa, digitalization will not benefit Africa.

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