Africa continues to trail behind the world in developing a knowledge-based digital economy, a new report by the World Economic Forum (WEF), written in collaboration with Deloitte, has found.

Despite startups across the continent raising $1.2-billion of new capital in 2020 – a sixfold increase in five years – and expectations of growth to $10-billion by 2056, it represents less than 1% of the $156-billion raised by US startups in the same year.

The latest report, ‘Attracting Investment and Accelerating Adoption for the Fourth Industrial Revolution in Africa’, which reviews the challenges Africa faces in joining the global knowledge-based digital economy, also found that the continent’s investment in research and development (R&D) was just 0.42% of gross domestic product in 2019, less than a quarter of the global average of 1.7%.

While there are incentives to support industrialisation, there are few that focus on technology, technology adoption and technology integration.

A review of 188 government incentives for business across 32 African countries revealed that just 14 incentives, fewer than 10%, facilitate investment in Fourth Industrial Revolution technology, and many of these incentive schemes lack an efficient monitoring and evaluation system to gauge their effectiveness.

Africa’s digital economy could contribute nearly $180-billion to the region’s growth by mid-decade; however, Africa is currently the world’s least connected continent.

African economies have the lowest number of Internet connections globally, with only 39% of the population using the Internet, while the coverage gap in sub-Saharan Africa remains the highest globally, with 67% of the world’s population, at about 800-million people, still not connected to mobile Internet.

“Connecting the region to the global digital economy will not only open new avenues of opportunity for small businesses, but will also increase intra-Africa trade which is low at 16%, compared with markets such as intra-European trade which is about 65% to 70%,” says Deloitte Africa chairperson Delia Ndlovu.

While progress has been made in bridging the technological gap and connecting more people to the Internet, outdated government policies, poor digital infrastructure, a lack of the right skills or skills mismatch and high levels of corruption remain a challenge.

According to the report, the success of digital transformation in Africa rests on enabling the necessary digital infrastructure that can assist in reducing the digital gap; developing digital literacy and skills to solve the skills mismatch; ensuring the region has less corruption within its structures to ensure that sustainable economic growth can occur in all areas; and creating enabling environments to allow national stakeholders to manage risks better by having the right regulations and frameworks in place to offer support locally, across the region and internationally.

“African governments urgently need to drive greater investment in the tech sector and the knowledge economy,” says WEF Africa division head Chido Munyati.

“Policymakers can make a difference by reducing the burden of regulation, embedding incentives within legislation and investing in science and technology skills.”

The report outlines three policy enablers, including the passing of legislation such as ‘Startup Acts’ designed to spur private-sector innovation, reduce the burden of regulation and promote entrepreneurship; embed incentives for startups in legislation, such as startup grants, rebates on efficiency gains through technology implementation, co-investment in critical infrastructure, tax-free operations for the early years and incentives for R&D; and investing in workforce education, skills and competences.