Beyond VCs, Public Investments Further Africa’s Digital Transformation Agenda

There is little doubt that the digital economy has transformative potential for emerging markets like the ones on the African continent. It can create jobs, stimulate economic growth and provide a range of development opportunities, just to name a few benefits.

But without the fundamentals — a reliable internet connection, a skilled talent pool and access to funding opportunities — creating a fertile environment for digital innovation will be an uphill battle, and budding entrepreneurs will stand very little chance of succeeding.

And in Africa, where many areas are disconnected from the global digital economy because of poor telecommunications networks, investing in digital transformation often means supporting companies that build critical infrastructure to increase network coverage and internet access.

Against that backdrop, organizations like the International Finance Corporation (IFC), a sister organization of the World Bank that works to stimulate private sector innovation and create new market opportunities through investment, can play an important role in driving growth in the regional digital ecosystem.

In fact, across Africa, IFC money is being used to upgrade infrastructures and kick-start the digital transformation of the region’s economies.

Earlier this month, for example, it was revealed that the IFC is purchasing a $160 million stake in Safaricom Ethiopia, joining existing investors Safaricom, Vodacom Group, Vodafone Group and CDC Group, an international consortium that last year won a contract to build and operate telecommunications networks in the country.

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The telecoms deal marks the first time the East African country has licensed a private mobile operator in an effort to open up its telecommunications market, which up until recently was dominated by the state-owned company Ethio Telecom.

The IFC’s capital investment will be used by Safaricom Ethiopia to build much-needed infrastructure in the country, increase network coverage and expand internet access. The IFC has also injected a $250 million investment in Liquid Intelligent Technologies, a pan-African technology group building the data centers and fiber optic networks needed for digital businesses to thrive.

Alongside the World Bank, the global development institution has also supported governments with their own digitization initiatives, including helping the government of Somalia launch an online business registration and licensing system in March of this year.

Following an initial 12-month pilot, the new online system has made it easier for entrepreneurs to register new businesses and get licenses to operate. According to a statement on the IFC website, online registration “[helps] to fuel the growth of new businesses, especially micro, small and medium-sized enterprises (MSMEs).”

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Compared to the outdated, paper-based system that was previously in place, Somalia’s new digital registration process has reduced the waiting period from an average of two months to just four days between application and confirmation — a significant improvement that will drive business growth.

“We developed the online system to reduce lengthy registration and licensing procedures and save businesses time and operational costs. This is particularly true for informal and smaller businesses seeking to formalize their operations but not having substantial resources,” Somalia’s Deputy Minister for Commerce and Industry, Abdulkadir Sharif Shekuna Maye, said at the time.

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