Research ICT Africa’s Senior Researchers, Dr Roland Banya and Dr Sandra Makumbirofa, collaborated with Kesaobaka Nancy Mopipi to deliver a policy brief for the South African Institute for International Affairs (SAIIA), for their programme Economic Resilience and Inclusion.
“The shadow economy threatens Africa’s economic stability and development goals. Digital public infrastructure (DPI) could be a vital solution to mitigating this issue if the right conditions are met.
Recommendations
Digital public infrastructure (DPI), encompassing digital identity, payments and data-sharing systems, offers African countries a powerful means to enhance administrative efficiency, particularly in revenue mobilisation. To fully realise this potential, the following actions are essential.
- DPI in Africa should be pursued as a multi-layered ecosystem.
- South Africa must advocate for an ‘Africa stack’ to spur private sector innovation and accelerate scalable DPI deployment.
- African tax authorities should prioritise strategic compliance targeting using data and analytics to identify and address non-compliance.
- African governments must adopt a holistic approach to the shadow economy.
- The G20, alongside the AU, should host peer learning workshops on DPI best practices.”
Executive summary
According to the IMF, a significant portion of economic activity in Africa takes place informally – roughly 35% of GDP, around $1–1.2 trillion. While the informal economy plays a vital role in sustaining livelihoods and enabling economic participation, especially in contexts of limited formal employment, it also presents challenges for domestic resource mobilisation (DRM), particularly where it intersects with tax evasion and high- value untaxed transactions. These challenges are most acute in the shadow economy, which encompasses both informal and illicit activities intentionally structured to evade taxation and regulatory oversight. Economic activity in the shadow economy is hindering the development of a stable African economy that contributes significantly to national incomes and development goals. Digital public infrastructure (DPI) emerges as a potential enabler that, with the requisite conditions, could be leveraged to reduce the size of the shadow economy on the continent. This policy brief outlines how DPI can be deployed strategically to improve tax visibility and resource mobilisation from Africa’s shadow economy, as well as the role of the South African G20 presidency in advancing this.”
This brief was originally published by the SAIIA‘s website on 15 September 2025.
