Back to basics: the state of digital technology use for African microenterprises

Rehema sells potato chips and soft drinks along the main street in her rural village in Tanzania. She works side-by-side with a myriad of other food vendors selling a limited range of products, including nuts, chicken skewers, and fruit juices. A few shops offering basic household goods or airtime litter the village. Options are limited. Poor road infrastructure and lack of public transport means traveling to the closest large town or city is prohibitively expensive. Often children do not attend school because, while it is free to attend, the uniform and stationary are not available in the village, and, therefore, out of reach for most. 

Digital technologies have the potential to help rural communities overcome many of the barriers to access they face, but as yet, this potential is untapped. RIA’s After Access surveys are the only nationally representative source of demand-side data around digital access in multiple  African countries. This data is valuable to help policymakers and researchers understand what factors stand in the way of digital uptake for microenterprises, households, and individuals on the continent.

In Africa, microenterprises are key to the economy, classified as small businesses (not part of a franchise) employing fewer than 10 people, microenterprises are the source of livelihood for the majority of the continent. These business people face significant challenges, including constraints around underdeveloped infrastructure and lack of public and private service provision. The business owners are largely unable to conduct market research to explore new opportunities or more affordable suppliers.  Access to financial or support services is unheard of. This underdevelopment forces business owners to persistently live on the breadline, unable to grow their businesses, while at the same time constraining consumer choice in rural areas, further limiting growth and development.

Digitalisation presents an opportunity for microenterprises to get around many of the infrastructural and other challenges they face, using the Internet to source suppliers, gather information and broaden their market base, not to mention access to finance, business tools, and other services. Digital interactions can also drastically decrease transaction costs. Researchers have identified aggregate increases in mobile phone uptake and Internet use in Africa as a sign of change, but the After Access data reveals much work is still to be done.

Understanding demand-side digital uptake for African microenterprise

As part of our After Access work RIA undertook a  survey (in addition to the household and individual surveys) of Internet uptake by African microenterprises. Working with our country partners, we surveyed a total of 3 904 microenterprises across Nigeria, South Africa, Ethiopia, Uganda, Kenya, Tanzania and Ghana. Previous surveys were undertaken in the same countries in 2008, 2012 and 2018, allowing us to identify trends and growth.

The picture painted by the data is a complex one. Over the past decade, mobile phone ownership has increased from an average of 52% to 80%. The use of the Internet for business activities has increased from an average of 4% to 17%. Financial inclusion, defined as owning a bank account, has increased from an average of 30% to 50%. While these numbers look great on the surface, the growth is from a very low base and signifies only minimal digital activity when compared with the digital activities of microenterprises in the rest of the world.

What is also very significant is who is using their mobile phones for what activities. A first important point to note is that among mobile phone owners of microenterprises, the majority own a basic mobile device with no Internet access. Only 36% own a smartphone. But even among those microenterprise owners who have the means of accessing the Internet, at least half don’t use that access for any activities related to their business.

Barriers to Internet use by microenterprise owners

Our survey includes questions on the main barriers that microenterprises feel are holding them back from accessing mobile internet.

Thirty-three percent said the cost of buying a smartphone is too high. But even more prominent was a lack of awareness of digital technologies and the skills to use them. 

Combined, 41% of microenterprises said they don’t have the skills required to be able to use digital technology (20%), are not aware of how digital technology can benefit their business (12), or find the current digital products and services too complicated to use (10%). 

This skills gap is particularly prominent for the already marginalised groups, notably rural women who run microenterprises. Businesses run by women dominate the African microenterprise landscape but they have internet access levels almost 40% lower than male-owned enterprises. 

These numbers show clearly how digitalisation may have the potential to bridge existing chasms of inequality, but in practice, is widening them. Even if the supply-side challenges are met, including universal smartphone access, state-of-the-art mobile infrastructure, and affordable data costs, there will not be digital equality. To meaningfully tackle inequality, awareness and education should be a policy priority.

Ensuring digitalisation for economic growth

Digitalisation is happening in Africa. But if we think of digitalisation as existing along a spectrum that increases with more intensive and meaningful use of the technologies, Africa is still largely at the bottom end and only just makes it into the spectrum at all. Importantly this digitalisation is only happening in particular areas on the continent, largely urban, affluent areas with high levels of education.

For individuals like Rehema, who live at the intersections of the core digital inequalities, digitalisation is not happening at all, and on the current trajectory, won’t happen in any meaningful way for a long time. Building infrastructure won’t cause Rehema to leapfrog into the digital age. The first step is to identify how Rehema and the many like her can be supported to use the digital technologies available to her, to grow her quality of life, and at the same time, that of the rest of her village.