Could decades of underinvestment in infrastructure give Africa an edge in implementing new technological advances? Instead of trying to implement traditional infrastructure currently in place in “developed” countries, it makes far more sense to invest in innovation and leapfrog such infrastructure completely, creating a new way of doing things that is much more fit for the purpose of Africans and the world we’re all moving into.
The classical definition of being a “developed” nation is more akin to being “industrialized”, which evokes memories of our history teachers telling us about the industrial revolution and the rise of manufacturing as the way to increase economic growth. Such “development” requires certain kinds of infrastructure and behaviors which ultimately underpin economies. But here is the reality of where things are today: that kind of infrastructure is increasingly a barrier rather than a condition for success.
The fourth industrial revolution (4IR) looks really nothing like an “industrial” revolution at all, except if we’re talking about the rearranging of an economy. Emerging technology, in fact, presents a wonderful opportunity for Africa because the continent has the ability to leapfrog the traditional or entrenched infrastructure and adopt a completely new way of doing things. Sure, the Western world may continue to call Africa “developing” (which it is by definition) even when the continent has made better use of some emerging technologies (have you noticed that Americans still uses checks?), but this is increasingly an outdated mode of thinking.
This change of thinking is perhaps no more obvious than when it comes to the banking and finance sector. Take the above-mentioned check, for example. When I moved to the US, I was completely caught off guard when my landlord told me he only accepted payment via check. Checks were phased out in South Africa and Namibia (where I’m from) by the time I became an adult and as such I had never used them before. In the U.S., people write checks and these can be scanned in using an app provided by your bank. So there has been some kind of innovation (at least you don’t have to bank it in person) but one wonders why write a check in the first place? Why not just transfer the money? I don’t mean an electronic funds transfer, I mean just get a phone number and transfer it to someone else?
If you’re in Kenya, that would probably be the first thing you would do. If you’re in South Africa, you wouldn’t write a check, but you would probably hop onto your banking app to either do an electronic funds transfer or, if it’s a smaller amount, send a code to the recipient’ mobile number so they can draw the money from an ATM. Note that both the U.S. and South Africa, who are considered as “developed”, seem to make things more difficult compared to Kenya, which is considered “developing”.
According to the Central Bank of Kenya (CBK), mobile money — the ability to simply transfer money from one mobile phone to another — has grown exponentially since its inception. In the first 11 months of 2021, Kenyans made 1.9 trillion mobile money transactions worth more than US $55 million. This was up 20 percent from the previous year. Mobile money has simply become ubiquitous. You can pay for your groceries, send money to your friends and family, pay for services, school fees, and other bills. It’s faster, less expensive and more accessible as compared to more traditional financial services, making it a fantastic innovation for the approximately 1.6 billion people in the world who cannot access formal banking systems.
In Rwanda, MTN, a local telecommunications provider, has grown its market share very well, with a 64.6 percent share of mobile users in the country. Rwanda is much more open to mobile money and regulators are taking a “light touch” approach, allowing it to grow with demand. Contrast this with South Africa where 75 percent of the population aged 16 and older are banked and where mobile money has largely failed to gain traction. (This might be changing soon.)
The reality, however, is that mobile money is a fantastic tool for financial inclusion. According to Quartz, Africa accounts for 70 percent of the world’s US $1 trillion mobile money market. From a technology perspective, the benefits are clear and obvious. As McKinsey reported in 2018, mobile money systems still offer a dual promise, as an engine for financial inclusion, and as an emerging markets business opportunity for providers.
This clearly paints for us a picture that, while investment in traditional infrastructure may still bring good returns, the future is in different technologies and, ultimately, innovation. And given Africa’s stage of development, it is perfectly situated to leapfrog the old-school trajectory completely. It no longer makes sense to build out traditional banking systems — at least not for Kenyans and countless other Africans who now simply use mobile money.
