1、DIGITAL OPPORTUNITIESin African BusinessesEdited by Marcio CruzINTERNATIONAL FINANCE CORPORATION RESEARCH SERIESDigital Opportunities in African BusinessesInternational Finance Corporation Research SeriesThe International Finance Corporation(IFC)Research Series explores the mobilization of private s

2、ector capital in support of development and the elimination of poverty in a livable world.Publications are subject to review meetings chaired by the IFC managing director and the vice president of economics.Relevant regional or industry vice presi-dents and directors also participate.The peer review

3、ers include experts from outside the World Bank Group.Digital Opportunities in African Businesses is the inaugural book in this series.All books in the International Finance Corporation Research Series are available for free at https:/ Opportunities in African BusinessesEdited by Marcio CruzINTERNAT

4、IONAL FINANCE CORPORATION RESEARCH SERIES 2024 The World Bank Group1818 H Street NW,Washington,DC 20433Telephone:202-473-1000;Internet:www.worldbank.orgSome rights reserved 1 2 3 4 27 26 25 24This volume is a product of the staff of the World Bank Group with external contributions.“The World Bank Gr

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19、ntrol Number has been requested.vCONTENTSForeword xiiiAcknowledgments xvOverview xviiAbbreviations xxvIntroduction 1Background 1Turning Global Trends into Opportunities 4What Are the Main Contributions of ThisBook?5Notes 7References 7Part 1 Digitalization of BusinessesinAfrica 9Chapter 1.Making Full

20、 Use of Digitalization:Where Do Businesses inAfrica Stand?11Xavier Cirera,Marcio Cruz,and Santiago Reyes OrtegaKey Messages 11Introduction 12Setting the Stage:What Is Firm DigitalizationAbout?12Measuring Incomplete Digitalization 13Three Layers of Digital Gaps across Firms 18Digital Payments as Entr

21、y and End Points 25Low Digital Use among Microbusinesses and Informal Businesses 29Digitalization of Sector-Specific Technologies 32Summing Up 35Notes 36References 37vi ContentS Chapter 2.economywide effects ofDigitalization 39Marcio Cruz,Edgar Salgado,and Trang Thu TranKey Messages 39Introduction 4

22、0Economic Impact of Digitalization:What Are the Channels?40Potential Effects of Digital Upgrading in Africa 46Summing Up 60Notes 60References 61Chapter 3.Drivers of Adoption and theCost of technology 65Marcio Cruz,Yannick Djoumessi,Samuel Edet,Maty Konte,and Megan LangKey Messages 65Introduction 65D

23、rivers of Digital Adoption by Firms 66Digital Infrastructure and Electricity 68Cost of Technology Upgrade in Africa 71Human Capital and Access to Finance 76Competition,Demand,and Trade Costs 83Firm Capabilities 85Summing Up 87Notes 88References 88Part 2 Mobilizing Private Investment to Boost Digital

24、ization and Development 91Chapter 4.Investment opportunities in Digital Infrastructure 93Georges Houngbonon,Tarna Silue,and Davide StrusaniKey Messages 93Introduction 93Addressing Gaps in Digital InfrastructureinAfrica 94Strengthening Digital Infrastructure Can Improve Service Affordability for End

25、Users 97Investment Opportunities in Middle-and Last-Mile Digital Infrastructure 100Regulatory Reforms Can Maximize the Impact of Digital Infrastructure Expansion 107Summing Up 110ContentS viiNotes 110References 111Chapter 5.tech Start-Ups and Digital Platforms 113Marcio Cruz,Beliyou Haile,and Marian

26、a Pereira-LpezKey Messages 113Introduction 114Role of Digital Tech Firms in the Success of Mobile Payments in Africa 114Landscape of Digital Entrepreneurship in Africa 116Are Digital Tech Firms Enabling the Use of Disruptive Technologies?121Boosting the Pipeline of Meaningful Projects in Digital Tec

27、h 130Summing Up 135Notes 135References 136Chapter 6.Financing Digitalization of Businesses in Africa 141Marcio Cruz,Florian Mlders,and Mariana Pereira-LpezKey Messages 141Introduction 141Financing the Digital Transformation in Africa 142Investment in Digital Infrastructure 144Funding of Disruptive T

28、ech Start-Ups 145Financing Firms Digital Upgrade 153Reducing the Cost of Financial Capital 155Notes 159References 159Chapter 7.Policies to Unlock Digital Private Investment 163Zineb Benkirane,Marcio Cruz,and Mariana Pereira-LpezKey Messages 163Introduction 164The Role of Policies 164Trade and Market

29、 Integration Policies 166Broader Regulatory Reforms and Public Programs 170Priority Actions for Countries and DFIs 175Concluding Remarks 176Notes 177References 177viii ContentS Appendix A:Firm-level Adoption oftechnology and ResearchICt Africa Surveys 181Boxes1.1 The Digital Gap among Rural Microbus

30、inesses 312.1 How Does Digitalization Occur in the Firm When Internet Access Improves?422.2 Digitalization Spillovers from Formal to Informal Firms 452.3 How Many Firms Are There in Africa?472.4 Estimating the Potential Market for Digital Adoption across African Firms 522.5 Estimating Firm and Worke

31、r Access to Technology in Africa 593.1 Is Digital Upgrading by Firms in Africa an Optimal Decision?683.2 Digitalization and Access to Electricity 703.3 Digital Investment Escalator in Kenya 753.4 Barriers to Technology Adoption in Agriculture 773.5 Tech Talent Migration 803.6 Digital Technology Adop

32、tion:Subsidizing Learning Costs for Firms in India 864.1 Methodology of the Study on the Impact of Submarine Cables on Internet Access Price 994.2 Selected Success Stories of Digital Infrastructure Expansion in Africa 1014.3 Total Investment NeedsWhy Do Estimates Vary?1044.4 Cloud Computing and Ente

33、rprise Technology SolutionsinAfrica 1065.1 What Are Disruptive Technologies?1225.2 How Can African Firms Best Leverage Artificial Intelligence for Their Success?1235.3 Turning Market Gaps into Opportunities:E-commerce 1306.1 Mobilizing Finance for Digitalization 1436.2 What Do Start-Ups in Africa Wa

34、nt and Need?1506.3 Combining Mobile Money with Traditional Financial Services Boosts Productivity 1577.1 Policy Priorities:Diagnostic Checklist to Facilitate Technology Adoption 1657.2 Will the African Continental Free Trade Area Reduce Prices and Increase Trade of Digital Goods in Africa?168Content

35、S ixFiguresO.1 Degrees of Incomplete Digitalization xviiiO.2 Prices of Digital and Nondigital Products,by Region,Relative to the United States xxiO.3 Incomplete Digitalization,Investment Opportunities,and Policies xxiiI.1 Mobile Telephony Diffusion in AfricaA Rare Example of Leapfrogging 1I.2 Reapin

36、g the Digital DividendFrom Availability to Productive Use 31.1 Digitalization Is a Continuous Process across Business Functions 131.2 Degrees of Incomplete Digitalization 151.3 Completing Digitalization and Productivity 161.4 Degrees of Incomplete Digitalization,by Country Group 171.5 Percentage of

37、Firms Adopting Digital Enablers 191.6 African Firms Mobile Phone,Computer,and Internet Uptake Gap as Compared to Other Regions 201.7 Adoption of Digital Technologies Varies across Business Functions 211.8 Intensive Use of Digital Technologies Varies across Business Functions 231.9 Incomplete Digital

38、ization in Productive Use of Advanced Digital Technologies 241.10 Digitalization Classification by Adoption of Advanced Digital Technologies in Each GBF 251.11 Digital Payments as the Entry and End Points for Digitalization 261.12 Use of Digital Technologies by Business Function across Size Groups i

39、n African Businesses 271.13 Intensive Use of Digital Technologies by Business Function across Size Groups in African Businesses 281.14 Adoption of Digital Technologies in GBFs by Informal and Microbusinesses 30B1.1.1 Use of Digital Enablers and Digital Technologies by African Microbusinesses 311.15

40、Digital Diffusion across Large Firms in Africa,by Sector 331.16 Sector-Specific Digital Technologies Adopted in Agriculture and Food Processing 341.17 Sector-Specific Digital Technologies Adopted in Services 35x ContentS 2.1 Firm-Level Digitalization Is Associated with Higher Productivity 412.2 Arri

41、val of Fast Internet Improves Firm Entry and Greenfield FDI 44B2.2.1 Closer Proximity to Formal Firms Increases Digital Adoption among Informal Firms 45B2.3.1 Correlation of Firm Density and GDP per Capita 48B2.3.2 Market Size:The Universe of Businesses in Africa 49B2.4.1 Estimated Propensity Scores

42、 for Adoption and Intensive Use of Digital Technology 532.3 Market Potential for Digital Upgrading and More Intensive Use for Business Administration Technology 542.4 Estimated Gains in Workers Access to Digital Technology for Business Administration in Africa,through Upgrading ofPotential Firms 572

43、.5 Estimated Gains in Worker Access to Advanced Business Administration Technology,Burkina Faso 583.1 Drivers of Technology Adoption 673.2 Cost of Mobile and Broadband Internet as a Percentage of PerCapita Gross National Income 69B3.2.1 Internet Use and Access to Electricity in Africa 703.3 Price-Le

44、vel Indices for Goods and Services,in Sub-Saharan Africaand North Africa,Relative to the World Average 723.4 Prices of Digital and Nondigital Products,by Region,Relative to the United States 733.5 Correlation between Per Capita GDP and Price for Standard Software 74B3.4.1 Agricultural Technologies A

45、re More Expensive for Firms in Sub-Saharan Africa 783.6 Access to Finance and Digitalization 823.7 Competition Is a Key Driver of Technology Upgrading 833.8 Digitalization and Firm Capabilities in Africa 854.1 Digital Infrastructure 954.2 Digital Infrastructure Gaps and Trends in Africa 964.3 Averag

46、e Revenue and Capital Expenditure per User in the TelecomSector,2022 994.4 Capex Needs Associated with Growth in International InternetBandwidth 105ContentS xi4.5 State of Telecom Regulation in Africa,2020 1084.6 Enhancing Effects of Regulatory Reforms on Mobile Broadband 1095.1 Mobile Money Account

47、s and Mobile Subscriptions 1165.2 The Tech Start-Up Ecosystem in Africa Is Booming 1175.3 Almost Half of Africas Tech Firms Focus on IT Services 1205.4 Use of Disruptive Technologies in Africa,Latin America,and Frontier Locations 1255.5 Age Profile of Disruptive Technologies 1265.6 Being Disruptive

48、Attracts 40 Percent More Funds for African Firms 1275.7 Probability of Obtaining Funding on the Basis of Founder and Firm-Level Characteristics in Africa 1295.8 Number of Agtech Services in Low-and Middle-Income Countries,by Use Case,200919 1346.1 Private Investment in ICT Projects 1446.2 Investment

49、 Levels in ICT Projects,by Region 1456.3 Funding of African Tech Firms,by Funding Type 1466.4 Early-Stage African Tech Firms Are Less Well Funded Than Their Peers in Other Regions 1476.5 Funding in Africa Is Fueled from Abroad 148B6.2.1 Funding Preferences of Start-Ups 1516.6 African Firms Find It H

50、arder to Get Loans for Tech Upgrades 1536.7 Financing Gap for Formal Firms Digitalization 1546.8 Average Sector-Specific Risk across Emerging Markets and Developing Economies Using Industry Betas 156B6.3.1 Effects of Finance and Mobile Money on Productivity 158B7.2.1 Expected Change in Tariffs after

51、 Implementation of the AfCFTA by 2030 169Maps2.1 Current Market Size of Technology Adoption for Business Administration 512.2 Percentage of Firms Using One Type of Business Administration Technology That Could Upgrade to the Next Level 553.1 High-Skill Human Capital in Sub-Saharan Africa Is Expensiv

52、e 795.1 Geographical Concentration of Tech Firms 119xii ContentS tablesB3.5.1 Migration of Tech Skills 814.1 International Internet Bandwidth Projections 1024.2 Geographical Disparities in Investment Opportunities 103A.1 FAT Survey:Number of Observations per Country,by Firm Size and Sector 182A.2 RI

53、A Survey:Number of Observations per Country 182xiiiFOREWORDDigital technologies are a fundamental enabler for most business activities.Research shows digitalization can foster growth in productivity,jobs,exports,and incomes,as well as help reduce poverty.However,productive use of digital technologie

54、s by firms in Africa remains modest and uneven,leaving a chasm between those who are connected and those who are disconnected.As we stand on the cusp of an era in which artificial intelligence and other advanced digital technologies will become increasingly crucial,it is imperative to gauge the digi

55、tal readiness of African businesses and to examine how they can fully participate in this technological transition.This book presents new data and analysis aimed at helping African businesses make fuller use of digital technologies.It presents a wealth of new evidence,illuminating the disparities in

56、 digital use by firms and the opportunities arising from the current state of digitalization across African businesses.The book provides granular detail on digitali-zation in Africa,delving into adoption of digital technologies,their productive use,and the intensity of such use by various types of b

57、usinesses.It also identifies potential mar-ket opportunities for profitable investments in digital infrastructure,digital platforms,and novel applications adapted to local contexts.Recent research across the World Bank Group has delivered important policy lessons for developing countries when buildi

58、ng their digital infrastructure and economies.Building on those past efforts,and in collab-oration with academics,industry experts,and International Finance Corporation(IFC)practitioners,this research breaks new ground in understanding the opportunities and barriers that African firms face when adop

59、ting and productively using digital technolo-gies.It will also inform further dialogue between the private and public sectors in this crucial area.Reaping digital opportunities in African businesses can help foster inclusive growth and reduce poverty.A multitude of firms can become more profitable b

60、y using digi-tal tools more productively and more intensively.In addition,a few innovators may uncover profitable ways to provide African businesses with needed and affordable digi-tal products.As digitalization progresses,healthier and more modern businesses will generate jobs and incomes.At IFC,we

61、 are committed to supporting Africas vision to connect every individual,business,and government by 2030.We recognize the trans-formative impact of the digital economy to generate incomes and jobs for the regions growing population,to empower women,and to improve governance and transparency.We arekee

62、n to contribute to this process by providing knowledge,policy advice,and xiv FoReWoRD financial support for businesses in developing countries.We are an active investor in the full digital value chain,from infrastructure to start-ups,providing financing and advi-sory services.Many of the insights in

63、 this book will shape IFCs future digital strategy.Alongside researchers,academics,and institutions,IFC can answer the most press-ing questions and design better solutions for meaningful impact.I am confident that our stakeholders,including entrepreneurs,policy makers,and development practitio-ners,

64、will further engage in and benefit from these valuable interactions.We hope this book will contribute to this constructive process.Makhtar DiopManaging Director International Finance CorporationxvACKNOWLEDGMENTSThis book was prepared under the guidance of Susan Lund,International Finance Corporation

65、(IFC)vice president for Economics and Private Sector Development,and Paolo Mauro,director of IFCs Economic and Market Research Department.In addi-tion,Srgio Pimenta,IFC regional vice president for Africa;Roumeen Islam,senior eco-nomic adviser to the managing director;and Denis Medvedev,senior econom

66、ic adviser,provided support and guidance.This research was carried out by an IFC team led by Marcio Cruz,principal econo-mist,in collaboration with World Bank colleagues and external researchers and aca-demics.The core team of coauthors comprised Zineb Benkirane,Xavier Cirera,Yannick Djoumessi,Samue

67、l Edet,Beliyou Haile,Georges Houngbonon,Maty Konte,Megan Lang,Florian Mlders,Mariana Pereira-Lpez,Santiago Reyes Ortega,Edgar Salgado,Tarna Silue,Davide Strusani,and Trang Thu Tran.Furthermore,Izak Atiyas,Paulo Bastos,Joel Cariolle,Lucio Castro,Mark Dutz,Leo Holtz,Murendi Madzhie,Sanghamitra Warrier

68、 Mukherjee,Florian Mnch,Andrew Partridge,Ariane Volk,and Verena Wiedemann also made valuable contributions.Lucien Ahouangbe,Pablo Gordillo,Aman Mahajan,and Dimas Setyonugroho provided research assistance for specific chapters.Rui Costa,Kyung Min Lee,Justice Tei Mensah,Marko Rissanen,Antonio Soares M

69、artins,and Nouhoum Traore provided support on data used in the analysis.Mark Dutz gave technical and editorial advice.Paolo Mauro and Denis Medvedev provided detailed suggestions on drafts.The authoring team benefited from numerous interactions with academic researchers.Eric Verhoogen from Columbia

70、University provided comments as an adviser.Emanuele Colonnelli from the University of Chicago,Diego Comin from Dartmouth College,and Jonas Hjort from University College London collaborated on background research for specific chapters and gave overall feedback.Mary Hallward-Driemeier from Georgetown

71、University peer reviewed the book.Vivien Foster from Imperial College London reviewed the concept note.Juanita Gonzlez-Uribe from the London School of Economics reviewed background papers.The book also benefited from discussions with participants in IFCs 2nd Annual Research Conference on Digitalizat

72、ion and Development,hosted by Sciences Po.Tavneet Suri from the Massachusetts Institute of Technology,Folu Okunade from Hello Tractor,and Alison Gillwald from Research ICT Africa provided helpful comments and discussions as panelists in a session focused on digitalization of businesses in Africa.xvi

73、 ACknoWleDgMentS Peer reviewers from IFC included German Cufre,Dahlia Khalifa,and Sarvesh Suri,with additional comments from Emmanuel Nyirinkindi.Mohamed Eissa and Linda Munyengeterwa reviewed the concept note.Shruti Chandrasekhar,Ami Dalal,Marieme Diop,Pablo Fajnzylber,Charlotte Kaheru,Elom Lassey,

74、Ralf Martin,Cesaire Meh,Zeinab Partow,Carlo Rossotto,Matthew Saal,and Hoi Ying So contributed with additional discussions.Peer reviewers from the World Bank included Gaurav Nayyar and Michel Rogy,with additional comments from Andrew Dabalen and Indermit Gill.Robert Cull,Mona Haddad,Mark Williams,and

75、 Albert Zeufack reviewed the initial concept note.Asya Akhlaque,Sebastien Dessus,Martha Martinez Licetti,and Christine Zhenwei Qiang also helped with additional discussions.Roberto Fattal,Leonardo Iacovone,and Marc Schiffbauer provided feedback on specific chapters.We thank Brian Beary and Chris Vel

76、lacott from IFCs publications team for their editorial contributions,as well as Irina Sarchenko for help with graphic design.William Shaw contributed with detailed editorial suggestions.We are also grateful to the World Bank Groups editorial production team,including Jewel McFadden,acquisitions edit

77、or;Caroline Polk,production editor;and Melina Rose Yingling,designer,for the marketing,production,and design of this book,and to the IFC communications team,including Monica De Leon and Erik Churchill,for their creative energy in promoting the book.We also thank Adama Badji,Gleice De Marrocos,Sabrin

78、a Islam,Linette Malago,and Irina Tolstaia for their exceptional administrative support.This book is a product of IFCs Economics and Private Sector Development Vice Presidency,with financial support from the Government of Japan through the Comprehensive Japan Trust Fund.xviiOVERVIEWDigitalization pre

79、sents investment opportunities for African firms and those who con-duct business with them.Digital technologies are being adopted at a faster pace than previous waves of technological innovation.People and firms in Africa have embraced this transformation.By making fuller use of digitalization,Afric

80、an firms across all economic activities can become more productive,profitable,and integrated in global,regional,and local value chains.Likewise,people can benefit from the lower costs and learning that digital technologies can facilitate.Existing or new businesses can serve this rapidly expanding ma

81、rketfor example,by building digital infrastructure or pro-viding appropriate software solutions.Previous studies suggest that digitalization can create opportunities for investment,growth,and jobs.1 However,access to and utiliza-tion of digital technologies are uneven,with many firms in Africa being

82、 left behind.This book analyzes the opportunities to increase productive use of digital technolo-gies by businesses across Africa.Building on ongoing World Bank Group research ini-tiatives,2 it provides a novel analysis of the extent of digitalization across businesses.The analysis goes beyond count

83、ry-level uptake gaps to understand the opportunities arising from using specific digital technologies more intensively.It also analyzes the cost and investments needed for digital upgrading by firms and the opportunities for digital busi-ness providers in Africa.The book consists of two parts.Part 1

84、 measures various aspects of incomplete digitali-zation of firms in Africa;assesses the main barriers to,and costs of,adoption;and analyzes the potential economic impact of digitalization.Part 2 explores what can be done to mobi-lize more private sector investment to boost digitalization and develop

85、ment.It focuses on three areas in which the World Bank Group,particularly the International Finance Corporation,has actively supported businesses in developing countries:infrastructure,tech start-ups and disruptive technologies,and access to finance.It concludes with a dis-cussion of policies to unl

86、ock private investments.The books findings can be summarized in the following main messages,organized by key topics addressed in thisbook.State of Digitalization in African BusinessesAfrican firms can reap opportunities by making fuller use of digitalization.Fewer than one in three firms that have a

87、dopted digital technologies make inten-sive use of them for business purposes,a phenomenon defined in this book as xviii oveRvIeW incompletedigitalization(refer to figure O.1).This new evidence,based on nationally representative data from Burkina Faso,Ethiopia,Ghana,Kenya,Malawi,and Senegal,shows th

88、at 86 percent of firms with five or more workers have access to one or more digital enablers(mobile phone,computers,or internet).Even so,23 percent of firms are digitally enabled but do not adopt digital technologies for productive tasks,such as business administration,planning,sales,and payments.Mo

89、reover,39 percent of firms adopt digital technologies for those functions,but not intensivelythat is,as the most frequent technology used to perform a task.On average,only 24 percent of firms make intensive use of the most sophisticated digital technology they adopted in a business function.Only 11

90、percent make intensive use of advanced digital technologies for gen-eral business functions(such as enterprise resource planning).3 The bulk of firms con-tinue to regularly rely on manual methods.Additional novel data from Ethiopia,Ghana,Kenya,Nigeria,South Africa,Tanzania,and Uganda show that this

91、gap follows similar patterns and is wider among microbusinesses(those with fewer than five employees).FIgURe o.1Degrees of Incomplete DigitalizationProductive use of digital technologiesAccessBasic 34%No enablers 14%Adoption ofdigital enablers Advanced 52%24%63%86%Advanced 37%No adoption 23%Adoption

92、 ofdigital technologiesin business functionsBasic 26%No intensive use 39%Intensive use ofdigital technologiesin business functionsAdvanced 11%Basic 13%Share of firms(%)Source:World Bank,Firm-level Adoption of Technology survey data;Cirera et al.(2024).Note:The left bar classifies adoption of enabler

93、s,namely the percentage of African firms with access to at least one digital enabler(mobile phone,computer,or internet).Computers with internet con-nection are classified as advanced enablers.The middle bar shows the average share of firms with digital enablers that adopt digital technologies across

94、 GBFs.Basic digital technologies refer to gen-eral applications(e.g.,standard software,email).Advanced digital technologies refer to integrated systems or specialized software designed to perform specific functions(e.g.,enterprise resource planning).The right bar shows the average share of firms tha

95、t intensively use their most sophisticated digital technologies across GBFs.“No intensive use”estimates include 6 percent of firms that adopt advanced digital technologies but intensively use basic digital.GBFs=general business functions.oveRvIeW xixAfrica is a diverse region with variation in adopt

96、ion and use of digitalization across countries,mostly driven by differences in size of firms.In a group of middle-income countries(Ghana,Kenya,and Senegal),57 percent(on average)of firms with five or more workers adopt computers and internet versus 44 percent of such firms in low-income countries(Bu

97、rkina Faso,Ethiopia,and Malawi).Large and medium-size firms tend to make fuller use of digitalization and are more prevalent,relative to the working-age population,in the first group of countries.Firms in low-income countries are less likely to have access to digital enablers and to productively use

98、 digital technol-ogies,but cross-country differences in business digitalization are driven mostlybythe composition of firms,with a high prevalence of micro-and informal businesses in low-income countries.Cross-country differences also mask regional variations.For example,lower-income subnational reg

99、ions in middle-income countries still face siz-able gaps in uptake of digital enablers.Gaps in intensive use are especially relevant for middle-income countries in regions with better digital infrastructure.Mobile phones and digital payments are important entry points to digitaliza-tion,but they do

100、not necessarily lead to digitalization of other business functions performed by firms.As many as 86 percent of firms use mobile phones for business operations,and 61 percent have adopted advanced digital technologies for payment.These are by far the most common uses of digital technology by African

101、firms.However,these firms are slow to digitalize beyond mobile and digital payments.Almost two-thirds of firms that adopted advanced digital payment systems in the region have not yet adopted a second advanced digital technology to perform business functions.Moreover,widespread adoption of digital p

102、ayments does not translate into its intensive use as the most frequent payment method.Only 7 percent of firms that have adopted digital pay-ment methods report using them intensively.economic effects and the Potential for Digital Upgrading across BusinessesDigitalization of businesses can boost prod

103、uctivity,jobs,and growth.The arrival of high-speed internet in Africa has led to productivity gains in incumbent firms and further growth in output and employment,driven by both entry of domestic firms and greenfield foreign direct investment.Yet,further gains may be limited if internet avail-abilit

104、y does not translate into intensive use of digital technologies.Research presented in this book shows that each step in the process of digitalization matters.Firm-level productivity gains led by high-speed internet have hitherto been driven by adoption of digital technologies to perform general busi

105、ness functions(for example,administra-tion,sales,or payment).The gains are potentially greater if such adoption is translated into more intensive use.More than 600,000 formal firms with five or more workers and up to 40 million microbusinesses in Africa have high potential to benefit from digital up

106、grades.To shed light on the potential for digitalization across the continent,this book pro-vides new estimates of the universe of firms and own-account businesses across all xx oveRvIeW 54countries in Sub-Saharan and North Africa,including characteristics such as the number of workers,registration

107、status,and sector.Using statistical models to identify the type of firms that are more likely to adopt digital technologies,the analysis then identifies more than 600,000 formal firms with five or more workers(24 percent of all such firms)with high probability to adopt basic or advanced digital tech

108、nologies for key business functions,based on similar characteristics of firms already using these technologies.4 Similarly,about 10 percent of firms that have already adopted these tech-nologies have the potential to use them more intensively.Among 230 million informal microfirms and owneroperator b

109、usinesses,as many as 40 million could start using some form of digital technology for functions such as accounting,planning,sales,mar-keting,supply management,or payments.The overall economic effects of firm digitalization might be limited if not expanded to microbusinesses and informal businesses,w

110、hich account for most employment in Africa.Large formal firms play a disproportional role in moving work-ers to use more productive digital technologies.However,7 in 10 African workers are self-employed,and the bulk of employment is informal.If all formal firms with the pre-dicted market potential t

111、o upgrade to advanced digital technologies were to do so,this gain would be limited to 7 percent of all formal workers in Africa.If micro and informal businesses with high probability also were to upgrade,about 15 percent of all work-ers could gain access to some form of digital technology for produ

112、ctive tasks,switch-ing from manual to digital technologies.This potential highlights the importance of expanding all workers access to digital technologies,as well as facilitating entry of new formal firms and reallocating workers to larger,more digitally enabled firms.Barriers to Digital AdoptionIn

113、complete digitalization results from several factors,including the following:Poor digital and complementary electricity infrastructure High prices of technology(high tariffs,lack of competition,insufficient continent-wide regulations supportive of market integration)Low levels of human capital and f

114、irm capabilities(which constrains the development of digital solutions and their adoption by firms)Limited access to finance(hindering investments in digitalization and innovations by digital adopters and providers).These elements cover both demand and supply sides of digitalization.African coun-tri

115、es lag other regions and developing countries of similar per capita income in most of theseareas.Digital equipment and software cost more,in terms of US dollars,in Africa than in other regions,thereby deterring firms from adoption.Using novel datasets with item-level information,this research finds

116、that machinery and equipment,both digi-tal and analog,are 3539 percent more expensive in Sub-Saharan Africa,in absolute terms,than in the United States,and 1315 percent more expensive in North Africa.oveRvIeW xxiThis research also finds that standard software is more expensive in Africa(refer to Fig

117、ureO.2).Other factors that complement technology adoption,such as digital infra-structure,electricity,and specialized high-skilled workers,are also relatively scarce and expensive in Africa,compared to other regions in the world.Trade frictionsincluding high tariffs on imported digital goods,lack of

118、 infrastructure,and market concentrationhamper technology affordability and diffusion in the continent.opportunities and Policies to Unlock Private InvestmentsHigh costs of digital adoption can lead to opportunities for digital business pro-viders and the financial sector.Part 2 of this book highlig

119、hts the private investment opportunities that arise from the diagnostics presented in part 1 and points to policy FIgURe o.2Prices of Digital and Nondigital Products,by Region,Relative to the United StatesSources:International Comparison Program(database),World Bank;Cruz et al.(2024).Note:Percentage

120、 difference in the average price of digital versus nondigital products in the catego-ries of machinery and equipment and other products from the International Comparison Program,relative to prices in the United States.Prices of digital and nondigital technologies are in US dollars at market price.Th

121、e analysis is done on a sample of 160 countries,including 49 African countries.There are 107 products,of which 46 are digital,including software,and the remaining 61 are nondigi-tal.Prices for machinery and equipment include the import duties and other taxes actually paid by the purchaser,the costs

122、of transporting the asset to the place where it will be used,and any charges for installing the asset so that it will be ready for use in production.The coefficients reported are the percentage differences relative to the United States computed using the results of the ordinary least squares estimat

123、ions,where we estimate the logarithm price of the products on region dummies and product dummies.The results are robust,with a sample restricted to products for which price data is available for more than 40percent of countries and at least 25 percent of African countries.*Significant at the 10%leve

124、l.*Significant at the 5%level.*Significant at the 1%level.8227*515*3114*0253035404535*39*Sub-Saharan AfricaSouth Asia13*15*North AfricaMiddle EastLatin America and CaribbeanEurope and Central AsiaEast Asia and PacificNondigital productDigital productDifference in price relative to the Uni

125、ted States(%)xxii oveRvIeW areas to unlock these investments(refer to figure O.3).First,improving the coverage of digital infrastructure can enhance the quality of digital enablers(for example,inter-net connection,use of cloud computing)and facilitate access to advanced applications(for example,busi

126、ness administration software with a lower cost of implementation and maintenance).This can also increase the expected value of adopting comput-ers and other devices.Second,digital tech providers,especially start-ups,can design novel applications and digital platforms that offer affordable,user-frien

127、dly solutions for performing specific business functions.Third,financial sector providers can expand their markets to fund these new digital solutions,as well as finance digital technolo-gies that leverage information on businesses and reduce risks and transaction costs for their operations,improvin

128、g coverage and reducing the cost of capital involved in digital upgrading.The arrival of new submarine cables in Africa can reduce the price of connectiv-ity,if regulatory reforms boost investment in middle-and last-mile digital infra-structure.The arrival of new submarine cables is projected to gen

129、erate a sixfold increase in international internet bandwidth by 2027(compared with 2022).Estimates in this book suggest that this expansion of connectivity could lead to a 1011 percent annual drop in the price of broadband internet below the historical trend.Yet,to reduce prices and increase the num

130、ber of connections among new users,more investment in middle-and last-mile infrastructure(up to$6 billion annually)is required.Regulatory reforms FIgURe o.3Incomplete Digitalization,Investment Opportunities,and PoliciesSource:Original figure for this publication.Note:MSMEs=micro-,small,and medium-si

131、ze enterprises.Use of digital technologies for business functionLack of infrastructureCost of capital and technologyCompetition and demand2.Digital business solutions(innovations through tech start-upsand digital platforms)1.Digital infrastructure(middle-and last-mile)3.Access to finance(start-ups a

132、nd MSMEs)Policies to unlock investment opportunities(trade and regulatory environment)PolicyprioritiesPrivate sectoropportunitiesBarriersto digitaladoptionSkillsFirm capabilities(management,information,consulting)Digital enablersAdoptionIntensive useoveRvIeW xxiiito facilitate private investments in

133、 middle-and last-mile infrastructure include allow-ing foreign participation in digital infrastructure and providing connectivity services,liberalizing incumbents in broadband markets,facilitating competition in international gateways and leased-lines markets,and supporting or mandating infrastructu

134、re sharing.Additional funding for tech start-ups can enable further innovation and diffu-sion of digital technologies.Disruptive start-ups can turn problems such as informal-ity or lack of financial inclusion into profitable business opportunities,thereby enabling digitalization of micro-,small,or m

135、edium-size firms.The success of mobile payments in Africa shows the importance of innovation led by tech companies.Local digital solu-tions can be tailored to local needs,such as the use of artificial intelligence(AI)driven speech recognition software to address communication costs in the presence o

136、f illit-eracy or many local dialects,or user-friendly applications to improve accounting sys-tems and reduce matching cost with suppliers and customers.Satellite imagery with AI-powered weather forecasts can improve the quality,timeliness,and productive use of data for agriculture and many other app

137、lications,with the promise of transforming rural livelihoods.Digital tech start-ups incorporating such disruptive technologies are more likely to succeed in terms of exit price or valuation growth,but they often struggle to attract fundingeven more so in Africa,where these firms are younger and smal

138、ler and grow at a slower pace than in other regions.In Latin America,ventures with disrup-tive potential receive twice as much funding as nondisruptive ones,whereas in Africa they receive 40 percent more.Addressing market failures to facilitate financing of inno-vative early-stage disruptive busines

139、ses can strengthen the design and scaling of apps to boost firm digitalization and help low-income,low-skilled owners and workers to learn and meet their productive needs.More private finance is needed to enable the generation and productive use of digital technologies addressing local demands.Digit

140、al infrastructure investments in Africa reached more than$32 billion between 2010 and 2021(cumulative),with large participation of the private sector.Yet,to enable the productive use of digital tech-nologies,it is critical to increase access to finance both for digital tech start-ups to pro-vide inn

141、ovative applications and for enterprises across all sectors,aiming to digitalize day-to-day operations.Firms in Africa experience a greater rejection when applying for loans to carry out technology upgrades than those in other regions.The financing gap for the digitalization of business administrati

142、on among existing formal firms is$1.4$2.7 billion,based on different scenarios.Moreover,the funding pipeline for digital tech firms in Africa is smaller and takes longer than in other regions,particularly for young firms,with only one-quarter of the funded firms receiving their first venture capital

143、 deal within the first five years.Reducing tariffs on digital goods and facilitating market integration of digital business solutions would make technology more affordable.African countries have consistently imported nearly 70 percent fewer digital goods relative to other manufac-turing imports than

144、 the rest of the world.Tariffs on digital goods are higher in Africa than elsewhere.The African Continental Free Trade Area(AfCFTA)is set to reduce tariffs on technology goods imported from member countries,but its impact might be xxiv oveRvIeW limited because most imports of digital goods come from

145、 outside the region.Import-weighted tariffs on these products would decrease by only 0.3 percentage point,on average,across countries.Simulation exercises suggest the AfCFTA negotiations should consider including tariff concessions on digital goods imported from nonmember coun-tries,potentially curb

146、ing costs more significantly,especially in countries that currently have the highest tariffs.Regional market integration may also provide opportunities for complementary policies to facilitate exports and intraregional trade on digital business solutions.notes1.For example,using the time of and geog

147、raphical variation in the rollout of submarine cables across the African continent,studies have shown that the arrival of high-speed internet has led to an increase in firm entry,greenfield foreign direct investment,employment,and productivity(refer to Hjort and Tian,forthcoming).Additional evidence

148、 indicates that the spread of mobile phones and banking have led to poverty reduction(refer to Suri and Jack 2016).2.See Begazo,Blimpo,and Dutz(2023)on digitalization in Africa and Cirera,Comin,and Cruz(2022)for a broader discussion on firm adoption of technology,including the description of the met

149、hodology and data used in this book.3.Chapter 1 provides the detailed classification of basic and advanced digital technologies across business functions.Basic refers to general-purpose digital technologies that are not specifically designed to perform a particular task(e.g.,standard software,email)

150、.Advanced refers to digital integrated systems that rely on specialized software,applications,or platforms designed to per-form specific business functions.4.These estimates suggest that 28 percent of formal firms with five or more workers already adopt basic digital technologies,and 22 percent of t

151、hem adopt advanced digital technologies for administration.ReferencesBegazo,Tania,Moussa P.Blimpo,and Mark A.Dutz.2023.Digital Africa:Technological Transformation for Jobs.Washington,DC:World Bank.https:/doi.org/10.1596/978-1-4648-1737-3.Cirera,Xavier,Diego Comin,and Marcio Cruz.2022.Bridging the Te

152、chnological Divide:Technology Adoption by Firms in Developing Countries.Washington,DC:World Bank.https:/doi.org/10.1596/978-1-4648-1826-4.Cirera,Xavier,Diego Comin,Marcio Cruz,and Santiago Reyes.2024.“The Incomplete Digitalization of Firms in Africa.”Background paper,World Bank,Washington,DC.Cruz,Ma

153、rcio,Samuel Edet,Maty Konte,and Mega Lang.2024.“The Cost of Technology in Africa.”Unpublished manuscript,International Finance Corporation,Washington,DC.Hjort,Jonas,and Lin Tian.Forthcoming.“The Economic Impact of Internet Connectivity in Developing Countries.”Annual Review of Economics.Suri,Tavneet

154、,and William Jack.2016.“The Long-Run Poverty and Gender Impacts of Mobile Money.”Science 354(6317):128892.https:/doi.org/10.1126/science.aah5309.xxvABBREVIATIONSAfCFTA African Continental Free Trade Area AFR Africaagtech agricultural technologyAI artificial intelligenceARPU average revenue per user

155、AWS Amazon Web ServicesCAGR compound annual growth ratecapex capital expenditurecleantech clean technologyCRM customer relationship managementDFI development finance institutionEAP East Asia and PacificECA Europe and Central AsiaERP enterprise resource planningFAT Firm-level Adoption of TechnologyFD

156、I foreign direct investmentfintech financial technologyFMCG fast-moving consumer goodsGBF general business functionGDP gross domestic productGPS Global Positioning SystemGSMA Global System for Mobile Communications AssociationHR human resourcesICP International Comparison Program(World Bank)ICT info

157、rmation and communication technologyIFC International Finance CorporationIoT Internet of ThingsIPO initial public offeringIT information technologyITU International Telecommunication UnionLAC Latin America and the Caribbean MENA Middle East and North AfricaML machine learningxxvi ABBRevIAtIonS MSMEs

158、 micro-,small,and medium-size enterprisesPE private equityRFID radio-frequency identificationRIA Research ICT AfricaSAR South Asia SMEs small and medium enterprisesSRM supplier relationship managementtech technologytelecom telecommunicationsUNCTAD United Nations Conference on Trade and DevelopmentUS

159、F Universal Service FundVC venture capitalWBES World Bank Enterprise SurveysAll dollar amounts are US dollars unless otherwise indicated.1IntroductionBackgroundThe rapid diffusion of information and communication technology in Africa,particularly through mobile devices,has been remarkable.The spread

160、 of mobile phones across African countries,where many users bypassed the landline stage,is among the best examples of so-called leapfrogging in economic development.In 2000,North America reached the peak of 68 fixed telephone subscriptions per 100 people,whereas Sub-Saharan Africa still had 1.4(refe

161、r to figure I.1,panel a).Yet,in that year,the number of mobile cellular subscriptions in Sub-Saharan Africa surpassed the FIGURE I.1Mobile Telephony Diffusion in AfricaA Rare Example of LeapfroggingSource:World Bank(2023).East Asia and PacificNorth AmericaLatin America and the CaribbeanSouth AsiaMid

162、dle East and North AfricaSub-Saharan Africa80a.Fixed telephone subscriptionsb.Mobile cellular subscriptions7060504030Number of subscriptionsper 100 peopleNumber of subscriptionsper 100 people2002005204002000520 DIGITAL OPPO

163、RTUNITIES IN AFRICAN BUSINESSES number of landlines and continued to increase at a rapid speed,reaching 84subscrip-tions per 100 people in 2022(figure I.1,panel b),whereas landline subscriptions never exceeded 2per 100 people.Mobile money(payment)has been another rare case of leapfrogging,with innov

164、ative solutions brought by digital tech firms in Africa.Many users make payment trans-actions through digital platforms before they have access to a bank account,but similar disruptions are not observed across the economy.Technology upgrading by firms has,for the most part,been gradual.Many African

165、firms still face large gaps in accessing,adopting,and productively using digital technologies.Most countries in Africa have a historic opportunity to narrow their digital gaps and boost investments,productivity,and jobs.On the international connectivity side,for example,the cable consortia 2Africa a

166、nd Equiano will provide new high-capacity cables with multiple landing sites on the African continent.A wide range of complementary internet and data infrastructure investments are being made within and across coun-tries.International internet bandwidth in the region is projected to increase sixfold

167、 between 2022 and 2027,the fastest growth in the world(TeleGeography 2023).In addi-tion,a vibrant digital entrepreneurship ecosystem is emerging across Africa.As of 2021(latest available data),the continent hosted more than 1,000 active tech hubs,defined as“organizations currently active with a phys

168、ical local address,offering facilities and support for tech and digital entrepreneurs”(Briter Bridges 2023).These entrepreneurs provide digital services and applications,such as financial tech services,e-logistics,or connecting smallholder farmers to markets.Africas venture capital landscape has exp

169、anded at an unprecedented rate.In 2022,it attracted more than$3billion in venture capital investment,a steep increase from the$185 million observed in 2015.1To reap the digital dividend from these investments,however,African firms need to turn improvements in digital infrastructure into productive u

170、se.Access to reliable and high-quality internet service,electricity,and other infrastructure is necessary but not sufficient for technology upgrading and its full productive use.Constraints may include finance,capabilities,or other barriers to complementary private investments needed to fully benefi

171、t from digitalization.Several steps are involved in turning adoption of digital technologies into economic impact(refer to figure I.2).These include not only access to digital enablers,such as mobile devices,computers,and internet connectivity,but also productive use of these technologies.A full ana

172、lysis requires understanding the business function in which technologies are adopted,the level of sophistication of the technology,and the intensity(or frequency)of its use.This framework is applied in the following chapters,drawing on granular information on the productive use of digital technologi

173、es from a new sur-vey instrument and dataset put together by the World Bank.2Most firms in Africa still rely on older,analog-based technologies to perform key tasks that can be digitalized,such as business administration and planning.New evidence from the World Banks Firm-level Adoption of Technolog

174、y survey for several countries in Africa,presented in this book,suggests that most formal businesses in Africa already benefit from the availability and use of a mobile phone,but the use of computers and internet varies dramatically across firm size groups.Among microbusinesses,fewer INTRODUCTION 3t

175、han 10 percent have adopted computers or internet for business.Sophisticated digital technologies such as specialized apps,specialized software,or enterprise resource plan-ning are used for business administration tasks by about only 35 percent of formal firms with five or more workers.This share dr

176、ops to 14 percent of such firms when consider-ing intensive use,defined as the most frequently used technology for a task.Indeed,for more than half of these firms,“handwritten process”is the most frequently used method to perform business administration.Three levels of firm digitalization are discus

177、sed in this book.First,a sizable share of firms are not digitally enabled,defined as lacking internet,computers,and mobile phones.Second,among digitally enabled businesses,a large share do not use these tech-nologies to perform productive functions,such as business administration,planning,sales,and

178、payments.Third,among firms already using digital technologies to perform these functions,only a small share intensively use them as the most frequent method to perform these tasks.These gaps between rapid expansion of digital connectivity and gradual conversion into the most productive uses lead to

179、different levels of what we refer to as incomplete digitalization.Incomplete digitalization is a market opportunity for the private sector in Africa.The region has dramatically improved connectivity in recent decades and has good prospects for attracting further investments in the future.However,the

180、re is still a large gap in the process of adoption and intensive use of more advanced digital technologies for busi-ness purposes,those that are likely to have the most significant impact in productivity,FIGURE I.2Reaping the Digital DividendFrom Availability to Productive UseSources:Adapted from Ci

181、rera,Comin,and Cruz(2022)and Begazo,Blimpo,and Dutz(2023).Note:AI=artificial intelligence;CRM=customer relationship management;ERP=enterprise resource planning;SRM=supplier relationship management.AccessMobileComputerInternetBusinessfunctionManualBusinessfunctionHandwritten ormanual processesStandar

182、d software,email,social media,spreadsheets,textERP,CRM,SRMsystems,specializedsoftware,Al,appsAdopted?Yes/NoIntensively used?Yes/NoProductivityJobsGrowthperformanceBasicdigitalAdvanceddigitalSophisticationIntensive useProductive useImpact4 DIGITAL OPPORTUNITIES IN AFRICAN BUSINESSES profit,and job cr

183、eation.Incomplete digitalization can be seen as a business opportunity,namely,to close the remaining digital gaps through a process of adopting and making more productive use of these technologies to perform specific business functions.Digital technology upgrading is currently expensive for African

184、firms,making this market attractive for innovation and disruption led by the private sector.New evidence presented in this book shows that machinery,equipment,and software are,on aver-age,significantly more expensive in Africa than elsewhere.Internet connectivity is also expensive,but its cost has b

185、een declining over time,with improvements in digital and electricity infrastructure.There is also evidence that lack of affordability of entry-level devices(for example,mobile phones,computers)is a barrier to further digital diffusion in developing economies,particularly at the household level.Howev

186、er,the use of digital technologies for business purposes can be embedded in different types of equipment and have diverse purposes for productive use.Further understanding the local ecosys-tem and the potential for digital entrepreneurs to create solutions that disrupt these markets would enable a p

187、ipeline of bankable projects that could channel more private capital toward the productive use of digitalization,which can scale up the economic and social returns on investments in digital infrastructure.The potential,challenges,and limitations of productive use of digitalization on the continent d

188、epend on whether innovative solutions are developed to meet the needs of African firms and workers.Only 6 percent of workers are estimated to be employed by large firms(100 or more workers),and 9 percent are employed by small and medium-size enterprises(between 5 and 100 workers),with the remainder

189、employed by micro-businesses,mostly informal own-account firms(many of which are“entrepreneurs by necessity”).To varying degrees,these firms face high costs from digital technology upgrades,beyond other constraints from lack of scale,lack of apps to meet local needs,managerial capabilities,or access

190、 to finance.To enhance the productive use of digital technologies across the continent,it is critical to enable innovative solutions from the private sector.These solutions are most likely to originate from tech entrepreneurs or start-ups offering products and services that address specific demands

191、from local busi-nessesand provide them at affordable prices.Turning Global Trends into OpportunitiesSeveral factors have implications for the potential benefits of digitalization in the region:Demographics.With Africa poised to have the largest workforce in the world by 2100,investments in digital t

192、echnologies offer opportunities both to upgrade the skill levels of its workforce and to generate the jobs needed to boost prosperity and living standards.This pattern is already evident through the increasing number of Africa-based digital tech developers.Market integration.African countries have s

193、tarted to open their markets under the African Continental Free Trade Area(AfCFTA),which took effect in 2021,and reductions in trade tariffs of goods and services across borders are now under way.The AfCFTA,coupled with the opportunities brought forth by submarine cables and INTRODUCTION 5complement

194、ary investments,harnesses the potential for further regional integration that can be spurred by digitalization.It provides the necessary scale for viable private sector investments in regional tech hubs that have spillover potential for users across neighboring economies.Services growth.With the rat

195、io of trade in services to world output continuing to rise,African firms can participate virtually in a diverse range of services.In addition,the ongoing reshaping of existing supply chains creates opportunities for participation by African firms across sectors,supported by digital services.Green gr

196、owth.As consumers worldwide shift their buying habits toward greener products,opportunities emerge to make profitable investments in greener power to support the types of production that rely on digital services as well as more energy-efficient and sustainable production across Africa.Investments in

197、 digitalization channeled to productive use can leverage potential economic gains from these trends.To support their realization,the channels through which investments in digital infrastructure,along with other complementary invest-ments,can enhance productive use need to be expanded.To do so,it wil

198、l be important to understand both the purposes for which digital technologies are used by businesses across sectors and the extent of incomplete digitalization across businesses.What Are the Main Contributions of ThisBook?Previous studies by researchers in academia and organizations,including the Wo

199、rldBank Group,have analyzed various aspects of digitalization,including access,productive use,and impact.This agenda has been especially relevant to Africa,with specific targets for improving coverage and affordability of digital technology.3 Mostof the recent research has investigated specific laye

200、rs of the digital economy,especially broadband infrastructure,with limited analysis of the potential for additional private investments by businesses across sectors.4 Overall,rigorous evidence has pointed to digitalizations potential economic benefits,from an increasing volume of investments and ent

201、repreneurship to job growth,depending on the enabling environment.This book addresses a knowledge gap in the level of incomplete digitalization and how to mobilize private capital to increase productive use of digital technologies by businesses across Africa.It is organized in two parts.Part 1 focus

202、es on where firms stand on digitalization and the main barriers they face to digital adoption.Itaddresses the following core questions:Chapter 1.Where do businesses in Africa stand on digitalization?Chapter 2.What are the economic effects and the potential for digital upgrade?Chapter 3.What are the

203、main barriers to adoption,including the cost of technology?To address these questions,this book relies on a comprehensive list of novel and rich datasets providing new evidence on the status of and prospects for firm digitalization 6 DIGITAL OPPORTUNITIES IN AFRICAN BUSINESSES in Africa.The analysis

204、 in chapter 1 relies on the World Bank Firm-level Adoption of Technology survey,based on nationally representative data at the establishment level for Burkina Faso,Ethiopia,Ghana,Kenya,Malawi,and Senegal.It also includes data from countries outside the Africa region,including Bangladesh,Brazil,India

205、,the Republic of Korea,and Viet Nam,used for comparison purposes.In addition,it also uses new data from Research ICT Africa,covering micro-and informal businesses from Ethiopia,Ghana,Kenya,Nigeria,South Africa,Tanzania,and Uganda.5 To further understand the level of firm digitalization and to gauge

206、the potential for digital upgrade and impli-cations for workers across the continent,chapter 2 provides new estimates of the total number of firms and own-account businesses across all countries in Africa,including Sub-Saharan and North Africa.It uses firm characteristics such as number of workers,f

207、ormal status,and sector to estimate the potential market for and implications of digital upgrade.This approach builds on the finding that most variations in digitalization pat-terns across countries are driven by the size composition of firms.Chapter 3 presents new evidence on the cost of technology

208、 and other complementary factors for adoption,such as human capital.The analysis relies on novel datasets combining item-level prices from the World Banks International Comparison Program dataset with global coverage and web-scraped data from e-commerce platforms,along with primary data collection l

209、ed by the International Finance Corporation(IFC)on digital solution providers from Kenya.Part 2 analyzes what can be done to mobilize more private sector investment to boost digitalization of businesses.It addresses the following questions:Chapter 4.What are the investment prospects and opportunitie

210、s in digital infrastructure?Chapter 5.How can the productive use of digital technologies be boosted through tech start-ups,and how can the pipeline of meaningful entrepreneurs in the region be increased?Chapter 6.How can access to finance be improved and private capital investments be fostered?Chapt

211、er 7.What policies can unlock private sector investments in digitalization?The analysis of infrastructure(chapter 4)is based on novel data on submarine cable attributes and internet prices assembled for this book,based on several sources,including TeleGeography,the International Telecommunication Un

212、ion,and the Global System for Mobile Communications Association.The analysis of tech start-ups (chapter5)relies on new methods and data sources,combining information from several platforms,including PitchBook,Crunchbase,Preqin,Refinitiv,and LinkedIn for all countries in Africa and drawing on new pri

213、mary data collected by IFC from about 3,200 start-ups and more than 300 supporting organizations(for example,incubators,accelerators,and investors)across all Africancountries.The analysis of finance in chapter 6 combines the data sources used in chapters1 and 5,including new evidence on the demand f

214、or finance from start-ups.Chapter 7 uses a novel approach to identify digital goods and assess INTRODUCTION 7the potential impact of the AfCFTA on the basis of trade data from World Integrated Trade Solution,as well as relying on an extensive literature review of the effect of cross-sectoral policie

215、s to unlock investment opportunities.Notes1.This figure from Disrupt Africa(2022)focuses only on venture capital.Partech(2022),which includes equity and debt,estimates around$6.5 billion in total(venture capital,equity,and debt)for 2022.2.The World Banks Firm-level Adoption of Technology survey cove

216、rs more than 300 technologies across almost 60 business functions,including general tasks that are common to all firms and sector-specific functions.The survey was designed in consultation with industry experts,iden-tifying the sophistication of technologies used in specific business functions and t

217、he intensity of use.The dataset includes nationally representative samples,totaling more than 20,000 firms,in 15 countries,with various levels of income across Africa,Latin America,Europe,and Asia.Further details about the survey and the data are provided by Cirera,Comin,and Cruz(2022).3.The Broadba

218、nd Commission for Sustainable Development(2019)summarizes the strategy tar-geting“A Digital Infrastructure Moonshot for Africa.”Under the Digital Economy for Africa initiative,almost 40 country-level diagnostics providing analytical foundations and policy rec-ommendations have been completed.4.The 2

219、023 World Bank report Digital Africa:Technological Transformation for Jobs(Begazo,Blimpo,and Dutz 2023)emphasizes the impact of digital and complementary technologies on jobs and poverty reduction.Rami and Gallegos(2023)discuss the importance of affordable devices for all and analyze the drivers of

220、costs in the supply and demand for internet-enabled mobile devices for individuals in developing countries.Nayyar,Hallward-Driemeier,and Davies(2021)also emphasize the opportunities of service-led development,with a prominent role for digitalization.Hjort and Tian(forthcoming)provide a comprehensive

221、 review of this literature,focusing on the implications of internet for developing countries.5.Further details on the Firm-level Adoption of Technology survey and Research ICT Africa data sources are available in the appendix.For other data sources,additional information is provided in the respectiv

222、e chapters.ReferencesBegazo,Tania,Moussa P.Blimpo,and Mark A.Dutz.2023.Digital Africa:Technological Transformation for Jobs.Washington,DC:World Bank.https:/doi.org/10.1596/978-1-4648-1737-3.Briter Bridges.2023.“Africas Regional Innovation Ecosystem Mappings.”https:/ Commission for Sustainable Develo

223、pment.2019.Connecting Africa through Broadband:A Strategy for Doubling Connectivity by 2021 and Reaching Universal Access by 2030.Geneva:Broadband Commission.https:/broadbandcommission.org/wp-content/uploads/2021/09/WG Digital MoonshotforAfrica_Report2020-1.pdf.Cirera,Xavier,Diego Comin,and Marcio C

224、ruz.2022.Bridging the Technological Divide:Technology Adoption by Firms in Developing Countries.Washington,DC:World Bank.https:/doi.org/10.1596/978-1-4648-1826-4.Disrupt Africa.2022.African Tech Startups Funding Report 2022.Nairobi,Kenya:Disrupt Africa.https:/disrupt- DIGITAL OPPORTUNITIES IN AFRICA

225、N BUSINESSES Hjort,Jonas,and Lin Tian.Forthcoming.“The Economic Impact of Internet Connectivity in Developing Countries:An Overview of the Evidence.”Annual Review of Economics.Nayyar,Gaurav,Mary C.Hallward-Driemeier,and Elwyn Davies.2021.At Your Service?The Promise of Services-Led Development.Washin

226、gton,DC:World Bank.Partech.2022.“2022 Partech Africa Report.”Partech Partners,Paris.https:/ Doyle Gallegos.2023.Affordable Devices for All:Innovative Financing Solutions and Policy Options to Bridge Global Digital Divides.Washington,DC:World Bank.TeleGeography(database).“Transport Networks,”“GlobalC

227、omms,”and“Data Centers”modules,Washington,DC(accessed 202223),https:/ Bank.2023.World Development Indicators(dataset).World Bank,Washington,DC.https:/databank.worldbank.org/source/world-development-indicators.Digitalization of BusinessesinAfricaPART 111Making Full Use of DigitalizationWhere Do Busin

228、esses in AfricaStand?Xavier Cirera,Marcio Cruz,and Santiago Reyes OrtegaCHAPTER 1Key Messages Businesses in Africa have made significant progress in digital uptake,but more needs to be done to adopt and make full use of digitalization in productive tasks.New evidence based on nationally representati

229、ve data from Burkina Faso,Ethiopia,Ghana,Kenya,Malawi,and Senegal shows that 86 percent of firms have access to one or more digi-tal enablers(mobile phone,computers,or internet),but only 52 percent of firms have computers with internet.In addition,novel data from Ethiopia,Ghana,Kenya,Nigeria,South A

230、frica,and Uganda indicate that the gap is even larger for microbusinesses(those with fewer than five workers),with 5 percent having adopted computers.About 60 percent of firms face some level of incomplete digitalization.Twenty-three percent have not adopted digital technologies for productive use w

231、hile having digital enablers,and 39 percent do not use their technologies intensively as the most frequent technology to perform a task,despite having adopted them.On average,only 37 percent of firms have adopted an advanced digital technology to perform a specific business function,and only 11 perc

232、ent use them intensively.Mobile phones and digital payments are important entry points for firm digitalization in Africa,but they do not necessarily lead to digitalization across other business functions.Although 61 percent of firms have adopted digital payment options,they are the main pay-ment met

233、hod in only 7 percent of firms.Moreover,2 out of 3 firms that use digital payments have not adopted a second digital technology for other uses within the firm.Service-sector firms rely on digital technologies more often than firms in other sectors,and a wide gap exists across firm size.For firms in

234、manufacturing and agriculture,the use of digital technologies to perform sector-specific tasks usually requires a large tech-nological leap,one beyond the current capabilities of most firms in Africa.12 DIGITAL OPPORTUNITIES IN AFRICAN BUSINESSES IntroductionUnderstanding firm digitalization entails

235、 examining not only the uptake of internet and devices,but also the specific purpose for and intensity with which firms use different types of digital technologies to perform productive tasks.This chapter examines the digitalization gaps in African firms at the business function level.This analysis

236、supports subsequent chapters to identify investment opportunities and estimate the potential demand for innovative solutions and infrastructure that can help close those gaps.This chapter addresses the following questions:What are the patterns of firm digitalization in Africa?What are the digitaliza

237、tion gaps across different types of firms?How do sectoral differences shape digitalization potential?To address these questions,the analysis builds on new evidence on the use of digital technologies by businesses in Africa,disaggregated by size,sector,and formal status.1 For firms with five or more

238、workers,the chapter relies on the World Banks Firm-level Adoption of Technology(FAT)survey,2 which covers more than 6,000 firms in Africa using nationally representative samples for Burkina Faso,Ethiopia,Ghana,Kenya,Malawi,and Senegal,as well as other developing countries,including Bangladesh,Brazil

239、,India,and Viet Nam.For microbusinesses,including own-account workers(busi-nesses with one person),the chapter draws on data from the Research ICT Africa(RIA)thinktank,covering more than 3,000 businesses in Ethiopia,Ghana,Kenya,Nigeria,South Africa,Tanzania,and Uganda.Setting the Stage:What Is Firm

240、DigitalizationAbout?Firm digitalization is a continuous process that varies across business functions.Whereas some firms may digitalize only payment methods,others digitalize their pro-cesses across all general business functions(GBFs)(refer to figure 1.1),and a few others digitalize their entire op

241、eration,including sector-specific functions,in a sophisticated and integrated way.Cirera,Comin,and Cruz(2024)show that such granular measures help in understanding what technologies are used,how they are used,and why they were chosen by firmsa critical step to understanding the process of technology

242、 diffu-sion and the overall technological progress of an economy.Building on that work,this chapter outlines new measures of digitalization by firms.Digitalization varies in terms of technological sophistication,adoption across differ-ent business functions,and intensity of use by firms.Different so

243、phistication levels of technology can be used to perform similar tasks,ranging from manual to advanced dig-ital technologies.Basic digital technologies have general applications and can be used for digitizing information in a standard manner,whereas advanced digital technolo-gies are more specialize

244、d to specific tasks and facilitate data integration into the firms MAKING FULL USE OF DIGITALIzATION 13operation and decision-making processes.Figure 1.1 summarizes the key technologies used for performing GBFs,defined as tasks common across all firms,grouped into man-ual,basic,and advanced technolo

245、gies.3 The novel FAT dataset allows us to distinguish among a digital technology available at a firm,the purpose for which a business func-tion is used,and the intensity of such use,based on the most frequent method used to perform a task.This unique feature of the data makes it possible to estimate

246、 the various stages of digitalization among African firms.The following sections rely on the FAT dataset,except the“Low Digital Use among Microbusinesses and Informal Businesses”section,which is based on the RIA dataset.4 Measuring Incomplete DigitalizationAfrican firms have advanced significantly i

247、n the adoption of digital enablers,especially mobile phones,but they still lag in the adoption of computers with an internet connection.Most firms in the sample have some sort of digital enablermobile phones,FIGURE 1.1Digitalization Is a Continuous Process across Business FunctionsSource:Adapted fro

248、m Cirera,Comin,and Cruz(2024).Note:Administration refers to tasks related to HR,finance,and accounting.Manual or visual technol-ogies refers to processes that do not depend on digital technologies in any instance.Basic digital technologies refers to general-purpose digital technologies that are not

249、specifically designed for a par-ticular business function or rely indirectly on digital technologies.Advanced digital technologies refers to integrated systems that rely on specialized software,applications,or platforms to perform specific business functions.This category includes technologies in th

250、e technological frontier.AI=artificial intel-ligence;CRM=customer relationship management;ERP=enterprise resource planning;HR=human resources;SRM=supplier relationship management.Business functionsTechnologies1.Administration(HR processes,finance,accounting)Hand-writtenprocessesStandardsoftwareERP s

251、ystems,specialized software,or mobile apps2.Productionor serviceoperationsplanningHand-writtenprocessesStandardsoftwareERP systems,specialized software,or mobile apps3.SourcingandprocurementManualsearchStandardsoftwareSRM systems,specialized apps,or digital platforms4.Marketingor customerinformation

252、Face-to-face chatOnline chator emailCRM systems,big data analytics,or machine learning algorithms(AI)5.SalesDirectsales at theestablishmentDirect salesby phoneor emailE-orders,online sales(website,external platforms,apps)6.PaymentmethodsCash,bartering,checkPrepaid,credit,ordebit cardOnline or electr

253、onic payments(direct or through platform)Manual or visual technologiesBasic digital technologiesAdvanced digital technologies14 DIGITAL OPPORTUNITIES IN AFRICAN BUSINESSES computer,or internet connectivity.Many of these firms have not adopted computers with an internet connection,which are important

254、 enablers for the use of more advanced technologies,such as enterprise resource planning(ERP)or customer relationship management(CRM)software systems.In addition to this uptake gap,a large share of firms that have already accessed digital enablers are not adopting digital technologies or intensively

255、 using them as the most frequent technology to perform productive tasks,a phenomenon defined in this book as incomplete digitalization.This chapter provides new measures of incomplete digitalization along two dimensions beyond having no access to digital technologies(no digitalization):adoption(acro

256、ss specific business functions)and intensive use for productive pur-poses(among technologies adopted in specific functions).As a prerequisite,firms must have access to digital infrastructure and must use a digital enabler in the form of a digital device such as a mobile phone or computer,or have con

257、nectivity to the internet.Firms that do not take up one or more digital enablers are characterized as not having any degree of digitalization.Digitally enabled firms that are not adopting digital technologies for a productive purpose,such as using computers with standard software(for example,spreads

258、heet software)or ERP systems for administrative tasks(for example,accounting),are characterized by a first level of incomplete digitaliza-tionnamely,having an adoption gap.In addition,firms that have already adopted these technologies to perform specific business functions may not use them as the mo

259、st frequent technology to perform these tasks and thus have an intensive-use gap.These differences can lead to variation in the levels of digital sophistication and the specific productive purpose for which the technology is being used.Figure 1.2 sum-marizes the level of incomplete digitalization am

260、ong African firms across GBFs and across these different dimensions.Most formal firms with five or more workers are digitally enabled,but there is large variation across types of firms.On average,86 percent of African firms covered by the FAT survey have access to one or more digital enablers(mobile

261、 phones,computers,or internet).Only 52 percent have access to computers with an internet connection,which would allow the use of more advanced digital technologies for business func-tions.The other 34 percent tend to rely only on mobile phones,a more common char-acteristic among small businesses.Fou

262、rteen percent of firms are not digitalized at all,a feature that is more common among smaller firms and those in low-income countries or regions outside the capital cities.About 60 percent of African firms in the sample face some level of incomplete digitali-zation.Twenty-three percent do not make p

263、roductive use of digital technologies despite having digital enablers,and 39 percent do not intensively use their most advanced digi-tal technologies they have already adopted to perform specific business functions.5 This means that 2 in 3 firms adopting any digital technologies for productive purpo

264、ses do not use their most sophisticated technology intensively,relying instead on manual or basic digital technologies.Regarding advanced digital technologies,37 percent of firms adopt them for a certain GBF,but only 11 percent use them intensively.The lack of intensive use of advanced digital techn

265、ologies,among businesses that have adopted them,shows MAKING FULL USE OF DIGITALIzATION 15that solutions for the region need to go beyond addressing barriers to adoption and help to facilitate their usage.Completing digitalization is associated with higher levels of firm productiv-ity.Firms with hig

266、her levels of advanced and intensive use of digital technologies have higher levels of productivity even after controlling for size,sector,and location differences.Figure1.3 shows a gradual increase in productivity levels among African firms associated with the use of digital technologies for busine

267、ss administration,from no access to digital enablers,to intensive use of advanced digital technologies.This association does not necessarily mean that increasing the use of digital technologies would increase productivitythe figure does not infer a causal relationshipbut pre-vious studies have shown

268、 that improving access to digitalization can lead to higher levels of productivity.6FIGURE 1.2Degrees of Incomplete DigitalizationSources:World Bank,Firm-level Adoption of Technology survey data;Cirera et al.(2024).Note:The left bar classifies adoption of enablers,namely the percentage of African fi

269、rms with access to at least one digital enabler(mobile phone,computer,or internet).Computers with internet con-nection are classified as advanced enablers.The middle bar shows the average share of firms with digital enablers that adopt digital technologies across GBFs.Basic digital technologies refe

270、r to gen-eral applications(e.g.,standard software,email).Advanced digital technologies refer to integrated systems or specialized software designed to perform specific functions(e.g.,enterprise resource planning).The right bar shows the average share of firms that intensively use their most sophisti

271、cated digital technologies across GBFs.“No intensive use”estimates include 6 percent of firms that adopt advanced digital technologies but intensively use basic digital.GBFs=general business functions.Productive use of digital technologiesAccessBasic 34%No enablers 14%Adoption ofdigital enablers Adv

272、anced 52%24%63%86%Advanced 37%No adoption 23%Adoption ofdigital technologiesin business functionsBasic 26%No intensive use 39%Intensive use ofdigital technologiesin business functionsAdvanced 11%Basic 13%Share of firms(%)16 DIGITAL OPPORTUNITIES IN AFRICAN BUSINESSES FIGURE 1.3Completing Digitalizat

273、ion and ProductivitySource:World Bank,Firm-level Adoption of Technology survey data;Cirera et al.(2024).Note:Estimated levels of a linear regression correlating labor productivity(measured as standard deviations from the country mean)with firms size,sector,location,and the different levels of digita

274、-lization in business administration.0.50.40.30.20.100.10.20.3Technology used for business administrationLabor productivity(standard deviation;0=country mean)0.38No accessto enablers0.15Manual0.04Basic(not intensive)0.09Basic(intensive)0.15Advanced(not intensive)0.21Advanced(intensive)Africa is a di

275、verse region with important variation in digitalization of firms across countries.Figure 1.4 summarizes some of these differences by displaying countries in the FAT sample in two groups.Group 1(Burkina Faso,Ethiopia,and Malawi)consists of countries with lower income levels and larger digital gaps.Gr

276、oup 2(Ghana,Kenya,and Senegal)has middle-income countries and is more advanced in digitalization by several measures(for example,infrastructure,share of the population with internet,concentration of tech start-ups).In addition,representative data from VietNam and the Republic of Korea are used as be

277、nchmarks.The results highlight three key findings:For lower-income countries,lack of access to digital enablers is still an important challenge for digitalization,in particular access to the internet.In middle-income countries,connectivity is widespread across firms,but there are still regional disp

278、ari-ties in regions outside of capitals.MAKING FULL USE OF DIGITALIzATION 17FIGURE 1.4Degrees of Incomplete Digitalization,by Country GroupSource:World Bank,Firm-level Adoption of Technology survey data.Note:In each panel,the left bar classifies adoption of enablers,namely the percentage of firms wi

279、th access to at least one digital enabler.The middle bar shows the percentage of firms with digital enablers that do not adopt digital technologies,adopt basic digital technologies,or adopt advanced digital technologies to perform GBFs.The right bar shows the percentage of firms that do not inten-si

280、vely use digital technologies,intensively use basic digital technologies,or intensively use advanced digital technologies to perform GBFs,among those that already adopt digital technologies to per-form these functions.Firms that adopt an advanced digital technology but use basic digital as their mos

281、t widely used technology are classified under no intensive use.Estimates in the middle and right-hand bars represent averages across GBFs.Representative data from Viet Nam and the Republic of Korea are included in panels c and d,respectively,as benchmarks.GBFs=general business functions.AdvancedBasi

282、cNo adoption or usec.Viet Namd.Korea,Rep.Share of firms(%)9734344406080100Uptake ofenablersAdoption in a businessfunctionIntensive usein a businessfunctionUptake ofenablersAdoption in a businessfunctionIntensive usein a businessfunctionShare of firms(%)9824050406080100a.Group 1

283、(Burkina Faso,Ethiopia,Malawi)b.Group 2(Ghana,Kenya,Senegal)443620292526780100Share of firms(%)Uptake ofenablersAdoption in a businessfunctionIntensive usein a businessfunctionUptake ofenablersAdoption in a businessfunctionIntensive usein a businessfunctionShare of firms(%)573854225281512

284、4002040608010018 DIGITAL OPPORTUNITIES IN AFRICAN BUSINESSES In Africa,firms that are digitally enabled are less likely to adopt a digital technology in a GBF relative to Viet Nam.Although this is true for both groups of countries,firms in group 2 tend to adopt more advanced digital technologies tha

285、n those in group 1.Converting the adoption of digital technologies into intensive use of them is a key challenge across all countries.Thirty-six percent of all firms in group 1 and 40 percent of all firms in group 2 do not intensively use the most sophisticated digital technologies at their disposal

286、,on average,across business functions.This challenge is also present in countries such as Viet Nam,and it is a contrast to the digitalization story of Korea,where most firms that adopt a digital technology use it intensively.Yet,the lack of adoption or intensive use of digital technology should not

287、be an objective per se but rather a decision driven by the gains expected by the firm,such as profitability.Chapter 3 provides a broader discussion of barriers to digital adoption.The World Bank report Digital Africa:Technological Transformation for Jobs(Begazo,Blimpo,and Dutz 2023)emphasizes the va

288、riation of digitalization across countries,but there is also sizable variation within countries(refer to figure 1.4),and even greater variation in technology sophistication within firms,as highlighted by Cirera,Comin,and Cruz(2024).Therefore,this chapter focuses on the average patterns across firms

289、to highlight some key findings that are consistent within and outside Africa.Some common patterns across firms characteristics suggest that detailed information on firm demographics(for example,the number of firms by size and formal status)can be informative as to the prospects of digitalization,and

290、 are further explored in chapter2.The next sections of this chapter describe in detail the magnitude of incomplete digitalization across different dimensions among African firms.Three Layers of Digital Gaps across FirmsThe three layers of digital gaps across firms include the uptake gap for digital

291、enablers,incomplete digitalization through adoption gaps,and incomplete digitalization through intensive-use gaps.This section provides more detailed measures across these dimensions.Digital Enablers:The Uptake Gap regarding Devices and ConnectivityMobile phone adoption is widespread across African

292、firms,but there is large variation in adoption of other devices and connectivity,depending on firms size,sector,and location.Firms located outside major urban areas,smaller firms,and agricultural-sector firms have lower levels of adoption of digital enablers(referto figure1.5).Suchvariation can part

293、ly be explained by the role of technology across different business models.For example,for many service-sector firms,smartphones and computers are their main way of connect-ing with their clients and providing services.Foragricultural firms,digital enablers might mean a higher level of access to inf

294、ormation,but they are still able to offer their products in the absence of those enablers.MAKING FULL USE OF DIGITALIzATION 19Despite recent progress in the availability of digital infrastructure and widespread adoption of mobile phones,African firms lag in their uptake of digital enablers such as c

295、omputers or internet.Figure 1.6 shows that this uptake gap persists for firms in Africa compared with other regions(including Latin America,Asia,and Europe),controlling for income differences,which points to barriers to digitalization beyond the regions stage of development.FIGURE 1.5Percentage of F

296、irms Adopting Digital EnablersSource:World Bank,Firm-level Adoption of Technology survey data;Cirera et al.(2024).SmallMediumLargeCapitalOutsideMobileInternet020406080100SmartphoneComputerSocialmediaClouda.By size groups020406080100MobileSmartphoneComputerInternetSocialmediaCloudb.By regionAgricultu

297、reManufacturingServices020406080100MobileSmartphoneComputerInternetSocialmediaCloudc.By sector20 DIGITAL OPPORTUNITIES IN AFRICAN BUSINESSES FIGURE 1.6African Firms Mobile Phone,Computer,and Internet Uptake Gap as Compared to Other RegionsSource:World Bank,Firm-level Adoption of Technology survey da

298、ta;Cirera et al.(2024).Note:Estimated margins of a dummy variable for African countries in a linear regression controlling for size,sector,and income differences.Countries outside of Africa include Bangladesh,Brazil,Chile,Georgia,India,Poland,and Viet Nam.0.021.736.2010203040Conditonal uptakegap,by

299、technologyTechnologyComputersInternetMobile phonesUptake of digital devices and connectivity is a prerequisite for digitalization.The gap in the uptake of different digital enablers in Africa exists even across groups of firms that tend to have higher access to digital infrastructure,such as large f

300、irms,service-sector firms,and firms located in capital cities.Results show that even after controlling for income,African firms tend to lag in the usage of computers and internet relative to similar firms in other global regions.These same gaps are larger for firms in agriculture,small firms,and fir

301、ms outside of major cities,underscoring how the traditional digital uptake divide in Africa is larger and is not solely explained by differences in income across countries.Incomplete Digitalization through Adoption Gaps for Productive UseDigitalization goes beyond the adoption of digital enablers.Af

302、rican firms exhibit low levels of productive use of digital technologies in most GBFs,with the exception of digi-talpayments.For most GBFs,adoption of advanced digital technologies has been low among firms with five or more workers(refer to figure 1.7).Manual processes are the typical technology use

303、d by African firms for most business functions.MAKING FULL USE OF DIGITALIzATION 21Firms adoption of digital enablers does not automatically translate into produc-tive use for business purposes to perform specific tasks that could rely on digital tools.These tasks,such as business administration or

304、planning,are information intensive and could benefit from various applications of digital technologies,from basic spreadsheet files for accounting all the way to more automated systems,such as ERP.Indeed,when looking at the average across GBFs,between 30 percent and 48 percent of firms do not adopt

305、any digital technology to perform a specific GBF.A large share of those already have access to computers and internet.Despite significant variation across firms linked to characteristics including size,sector,and region,only in payment methods and among large firms does adoption of advanced digital

306、technologies exceed 50 percent.Digital payments are widespread even FIGURE 1.7Adoption of Digital Technologies Varies across Business FunctionsSource:World Bank,Firm-level Adoption of Technology survey data;Cirera et al.(2024).36.239.847.739.629.933.228.832.823.224.239.85.035.027.429.236.230.361.802

307、04060Share of firms(%)General business functionsPercentageof firmswith accessto mobile,computer,or internet8090BusinessadministrationProduction orservice operationplanningSourcing andprocurementMarketing andproductdevelopmentSales channelsPaymentmethodsBasicAdvancedManual22 DIGITAL OPPORT

308、UNITIES IN AFRICAN BUSINESSES in groups less inclined to digitalize,such as small or agricultural firms and firms outside capital cities.At the same time,half of medium-size firms and 20 percent of large firms still rely on manual or basic digital technologies to perform business administration task

309、s.Differences across size,sector,or location might reflect differences in the net benefits of digitalization by different types of firms.However,African firms have lower adoption of advanced digital technologies for almost all GBFs than do similar firms outside the region,particularly for business a

310、dministration.These results hold after controlling for income levels or focusing only on firms with access to computers.Thisfirst level of incomplete digitalization suggests adoption barriers specific to Africa,such as the costs of technology that are assessed in the next chapters.The adoption gap i

311、s more concentrated in internal business functions,with business administration standing out for having the largest gap.More important,these are functions that usually require further investments to use integrated digital technologies,and their use is less dependent on economies of network(for examp

312、le,customers and suppliers also need to use the technology for interactions).The adoption and use gaps are also larger outside capital cities and in small and medium-size enterprises.Incomplete Digitalization through Intensive-Use GapsLow uptake of enabling technologies and low adoption of digital t

313、echnologies for productive use within firms are only part of the digitalization challenge in Africa.This section presents evidence of African firms lack of intensive use of available digital technologies in their day-to-day operations.Although many firms have adopted digital payment technologies and

314、 about one-third have adopted advanced digital technologies for business administration,intensive use of such digital technologies is very low even in large firms(refer to figure 1.8).For most GBFs,the majority of firms in Africa still rely on manual processes,including for payment methods,for which

315、 cash and checks are the most frequently reported.For sales,as well as for customer relationships for marketing and product development purposes,the use of manual methodsthat is,those that involve face-to-face interactions,without any use of digital technologiesis also predominant.These functions(pa

316、yments,sales,and marketing)each involve direct interaction with individuals and other businesses that are external to the firm,such as customers and suppliers,requiring their adoption for intensive use.For these external-to-firm functions,the gap between use and intensive use is larger than for thos

317、e functions that are internal to the firm,such as administration and planning.Even in large firms,cases of incomplete digitalization are widespread.Between 40percent and 55 percent of large firms that have adopted advanced digital technologies for business administration,production planning,sourcing

318、,or marketing use manual or basic digital technologies intensively in their day-to-day operations rather than the MAKING FULL USE OF DIGITALIzATION 23advanced digital technologies at their disposal.These gaps are even larger in other types of firms and are widespread in sales and payment methods(ref

319、erto figure 1.9,panel a).In summary,2 out of 3 firms that have adopted advanced digital technologies for internal business functions do not use them intensively in their day-to-day operations,7 instead using analog or basic digital technologies.On average,firms tend to adopt basic digital technologi

320、es but still rely mostly on manual procedures when consider-ing themost frequently(or intensively)used digital technologies to perform GBFs(refertofigure 1.9,panel a).In contrast to external business functions,which depend FIGURE 1.8Intensive Use of Digital Technologies Varies across Business Functi

321、onsSource:World Bank,Firm-level Adoption of Technology survey data;Cirera et al.(2024).Note:Intensive use refers to the technology most frequently used to perform the business function.51.654.346.876.577.492.934.637.231.47.421.00.213.88.521.816.11.66.900708090100BusinessadministrationProd

322、uction orservice operationplanningSourcing andprocurementMarketing andproductdevelopmentSales channelsPayment methodsBasicAdvancedManualGeneral business functionsShare of firms(%)Percentage of firmswith access to mobile,computer,or internet24 DIGITAL OPPORTUNITIES IN AFRICAN BUSINESSES FIGURE 1.9Inc

323、omplete Digitalization in Productive Use of Advanced Digital TechnologiesSource:World Bank,Firm-level Adoption of Technology survey data;Cirera et al.(2024).Note:Panel a shows the average digitalization index by GBF.The index takes a value of 2 if the technology used is a sophisticated digital one,1

324、if it is basic,and 0 if it is manual.Panel b shows the share of firms that do not use the sophisticated digital technology intensively,conditionally on having adopted it.Panel c shows the distribution of the number of years of adoption of a sophisti-cated digital technology for firms with incomplete

325、 digitalization.GBF=general business function;max=maximum level of sophistication of the technologies adopted;most=level of sophistication of the most intensively(frequently)used technology.Business administrationa.Level of digitalization by GBFb.Percent of firms not intensively usingadvanced digita

326、l technology already adoptedPlanningSourcingMarketingGeneral business functionsSalesPaymentMaxMost6080BusinessadministrationPercentProduction orservice operationplanningSourcing andprocurement012c.Years since adoption of digital technologyfor business administration2046810Density(%)51015Y

327、ears since adoption of digital technologyfurther on interaction with customers,8 the intensive use of digital technologies in internal functions(for example,business administration and planning)relies more on management decisions.These functions also show a large share of firms not intensively using

328、 advanced digital technologies already adopted to perform these tasks(refer to figure 1.9,panel b).These cases of incomplete digitalization are not driven by firms having recently switched to using digital technologies.On average,these firms have had advanced technologies at their disposal for more

329、than eight yearsyet still rely inten-sively on less advanced technologies(refer to figure 1.9,panel c).MAKING FULL USE OF DIGITALIzATION 25Digital Payments as Entry and End PointsThe digital divide across firms is less evident in the use of digital payments,an important entry point of digitalization

330、 in Africa.Half of the firms with low levels of digitalization have implemented digital payment methods.9 After assigning firms(by using cluster analysis)to digitalized(leading)or low-digitalization(laggard)groups,the data show that larger gaps between leading and laggard firms are associated with f

331、unctions that are internal to the firm,namely,business administration and planning(refer to figure 1.10).Although the typical entry point to more advanced digitalization is through digital payments,only a small share of firms in Africa progress to using a second digital tech-nology in other business

332、 functions.In many African firms,digitalization seems to start and end with digital payments(refer to figure 1.11).Most firms that adopt advanced dig-ital technologies for payments do not adopt a second digital technology.Outside Africa,more firms tend to proceed to implementing more advanced digita

333、l technologies for FIGURE 1.10Digitalization Classification by Adoption of Advanced Digital Technologies in Each GBFSource:World Bank,Firm-level Adoption of Technology survey data;Cirera et al.(2024).Note:Classification of firms into low-digitalization or digitalized groups is the result of a k-means cluster analysis across firms.The cluster analysis groups firms on the basis of the similarity of