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The Foundations of Technological Transformation in Africa

By Christine Lagarde, Managing Director International Monetary Fund United Nations Economic Commission for Africa Addis Ababa, Ethiopia 

December 15, 2017

This speech was delivered on December 15, 2017, in Addis Ababa

1. Introduction

Thank you, Madame Executive Secretary Songwe for that generous introduction. It is an honor to be here at the United Nations Economic Commission for Africa (UNECA). I want to thank the Ethiopian government for welcoming me to Addis Ababa.

It has been an excellent visit so far. Yesterday morning, in fact, I visited the Eastern industrial park.

It was fascinating to see how technology of all kinds needs public involvement and good public-private sector partnerships to succeed. There is a direct link between roads, education and health systems and innovation.

It is a powerful reminder that technological innovation requires a strong foundation to flourish.

This is what I would like to speak about today: The impact of technology for the economies of Africa and the new opportunities being created for the next generation.

Why do I talk about the next generation?

Because historic demographic changes require us - all of us - to focus on youth and assess the impact of these changes. This is a moment where young people can take their destinies into their own hands.

In fact, youth in Africa already comprise 75 percent of the working age population. [1] By 2030, over half of new workers entering the global labor force will come from Africa. [2]

With the right strategy, the demographic dividend can bring prosperity. This incredible surge could translate into a virtuous cycle of economic growth and development.

Clearly technology does not hold all the answers. In fact, technology often raises new questions, including about the impact of automation.

But there is no doubt that technology is an important part of the story.

And being here at UNECA, it is impossible not to think about Africa’s story.

The famous artist, Afewerk Tekle, created the beautiful stained glass windows that are part of UNECA’s headquarters. His three-piece installation is titled “Africa Then,” “Africa Then and Now,” and “Africa Now and in the Future.”

Technology is already shaping “Africa Now.” And with the right investments, it can be a powerful tool to help build stronger economies for “Africa in the Future.”

Outlook

Let me start by offering a brief overview of the economic context for the application of new technologies and home-grown innovation in Africa.

Globally, the sun is shining through the clouds and helping most economies generate the strongest growth since the financial crisis. The IMF is projecting 3.6 percent growth for 2017 and 3.7 percent for 2018.

Looking at the continent of Africa, the recovery is strengthening in many countries. Growth is expected to reach 2.9 percent in 2017 and 3.5 percent in 2018 and 2019.

This topline number masks significant variations among countries. While nearly one-third of nations are growing at around 5 percent, others — particularly the commodity exporters — are seeing a slowdown due to lower commodity prices.

On a GDP per capita basis, 15 countries on the continent are expected to see a decline this year. This encompasses about 40 percent of the population.

And there are concerns on the horizon as well, even as the sun is shining. Indeed, as I have been saying recently, it is when the sun is shining that we have to fix the roof. One concern we see is a sharp increase in public debt, which has reached 50 percent of GDP in nearly half of sub-Saharan Africa’s countries. This is a big cloud on the horizon.

How can we find a way to achieve lasting growth that is stronger and more inclusive, so that people across Africa benefit and see higher living standards?

Earlier this week, in Benin, I outlined how economic diversification is part of the solution , and how it is critical to strike the right balance between investment and debt sustainability.

It is not the only answer. Each country will have to find the right policy mix.

And again, harnessing the promise of technology is another way we can accelerate economic and social development.

2. The Right Environment for Technological Innovation

Too often, we see the endgame of innovation. A drone that delivers medical supplies in the Rwandan countryside, saving resources and more importantly saving lives. Or a social network for farmers in Uganda that creates an online forum for sharing crop information.

We tend to overlook the conditions that helped foster innovation and allowed it to grow.

Consider financial integration, where new technology has expanded access to credit across Africa.

One of the prime examples is banking. In 2015, nearly 35 percent of the adult population in sub-Sahara Africa had a mobile money account, the highest percentage in the world. [3]

While Kenya is a leader in mobile banking, other countries are catching up. In Côte d’Ivoire, Somalia, Tanzania, Uganda, and Zimbabwe, and many others. People are now more likely to have a mobile account in these countries than a traditional bank account. [4]

What does it mean to have banking through your phone? Well, it may mean the difference between being approved for a loan or not. Or it may mean that someone who is losing his or her job can more easily face the hardship because friends and family can send money quickly.

In short, it can mean the difference between being empowered and being marginalized.

As more citizens access credit and achieve basic economic security, opportunities develop, aspirations grow, and a brighter future comes within reach. It also a critical factor in order to improve trust. Mobile banking can help eliminate the middle man and create more confidence throughout society.

The same is true when it comes to infrastructure investment.

Perhaps the greatest obstacle to the development of manufacturing in Africa is the lack of sufficient and reliable electricity.

Hundreds of millions of people on the continent live without access to power on any given day. [5]

Solar energy is one tool that is making a difference. In the last few years, tens of thousands of people in Ghana and Tanzania have been brought online thanks to new solar businesses. M-kopa, a Kenyan energy company, sells solar panels to rural homes for a small deposit, with the remainder paid off over the course of a year through mobile banking.

The system has brought electricity to over half a million homes — helping remote areas come online while extending credit to those who need it the most.

Energy investment is a focus throughout Africa.

In Burkina Faso, in Zambia, in Benin, new solar stations are already in development.

In Morocco, construction is underway on a facility that will become one of the largest solar power plants in the world.

These projects will help Africa close its infrastructure gap, which is estimated to be over $90 billion annually. [6] And they are most likely to succeed when the public and private sector work together.

That is one of the reasons that the IMF is supporting the Compact with Africa, a joint project between the G20 and seven African nations so far, which is designed to boost private sector investment and create jobs.

When it comes to jobs, it is the foundational elements, including access to credit, good infrastructure, education and training that so often form a springboard for even more innovation.

With these elements in place, a true world of opportunity can open up.

In October at our Annual Meetings, I was excited to meet the head of a company called Andela that considers Africa “home to the largest untapped talent pool” and is training and matching African workers to help U.S. companies fill shortages in tech jobs such as programming.

Just recently, a group of young entrepreneurs in Togo, who were supported by a community innovation lab, developed the first 3-D printer made entirely of electronic waste. They saw a problem in their city — digital junkyards full of cell phones and laptops discarded from other parts of the world — and they had an idea.

They would turn that waste into a powerful machine. Now they plan to put 3-D printers in every school within a kilometer of the lab, in the hopes of sparking students’ imagination and creating a lifelong interest in technology. [7]

None of this would have been possible if those young inventors had not been given the skills and resources to pursue their passion.

This is where governments can make a difference.

Not only by creating a foundation for innovation, but also by streamlining regulations so that everyone plays by the same rules and entrepreneurs are rewarded for their ingenuity. It is not the only thing that governments can do.

From my point of view having spent twenty-five years of my life in the private sector, I have seen the ways governments can ensure that there is access to markets and more competition. This is what creates more innovation and more productivity.

And not only can governments do more to encourage innovation, they can also help lead the way themselves by supporting basic research.

3. How Governments Can Leverage Digital Tools

IMF analysis in our recently published book, Digital Revolutions in Public Finance, shows that across the developing world, countries could save around one percent of GDP by updating their government payment systems from cash to digital. In some places in Africa the potential is even higher. [8]

In Nigeria, for example, we estimate that a government move to digital payments could save between 5 to 9 billion U.S. dollars, or about 1.7 percent of GDP. [9]

When governments put technology into practice millions of people can be helped. Think of Sierra Leone. During the Ebola outbreak, some emergency responders had to leave their patients for days to go and collect payments from a regional office.

By introducing a mobile wallet system, the government was able to save lives and better allocate resources where they were needed the most.

The possibilities go beyond paychecks. Between 2011 and 2014, the Ministry of Education in Cote D’Ivoire shifted all tuition payments from cash to digital. The result was fewer lost fees, less fraud, and new investments in the school system.

In Ghana, a pilot program of a new blockchain platform called bitland is being used to record land sales. [10] In the future, land disputes may be easily and more quickly settled out of court.

So this is not just about saving money, it is also about creating more transparency, promoting stronger accountability, and in the end, delivering a better life for every citizen.

We are already seeing the positive impact of technology today for government services, private transactions, and the way we live our lives.

The potential to help reduce corruption, increase revenues, and generate investments in health and education means digital tools could be a decisive factor in meeting the 2030 Sustainable Development Goals. The voice of the IMF will be part of that process.

The IMF is committed to working with all of our members in Africa, as well as our regional and international partners, to help reach these goals. And to help meet the economic goals for the entire continent.

To get there, we will need a little creative thinking.

4. How the IMF is Helping Members Harness Technology

Let me give you an example of where creativity can make a difference. Last year, the IMF and the Senegalese Ministry of Finance organized a “hackathon” in Dakar to find ways to improve the government’s tax collection system. 100 young entrepreneurs came to share their ideas.

The winning proposals showcased the potential when governments embrace technology. From an application that allows people to file taxes without internet access, to a software system that simplifies thousands of pages of documents, to a website that gives citizens better access to their own tax information.

This is just one example of how we serve our membership by helping to improve economic conditions and strengthen institutions.

In fact, in 2016, sub-Saharan Africa was the largest recipient of our capacity development efforts. And when we see something that works, we can help promote best practices and knowledge-sharing across countries and across continents.

Our six capacity development centers across Africa allow us to respond quickly to countries’ emerging needs.

And we continue to innovate through our free online courses, which have already trained nearly 30,000 individuals worldwide, including many right here in Africa. These courses qualify officials in public financial management, debt sustainability analysis and so many other topics.

Not every one of these programs has a technology focus, but each initiative is designed to secure the economic foundations of our members. And where there is a strong foundation, technology, as well as all types of innovation, can flourish.

5. Conclusion

Let me conclude by drawing upon the wisdom of a friend and leader who has inspired so many in Africa — and all over the world — President Ellen Johnson Sirleaf.

She once said, “The size of your dreams must always exceed your current capacity to achieve them. If your dreams do not scare you, they are not big enough.”

When I travel in Africa, I never worry that the dreams of the next generation are not big enough. They are.

The only question is how can we help create the environment where those dreams will have a chance to come true.

Diversification of economies is one way. Harnessing technology is another.

We can do it, there is a path to do it, and it is called cooperation.

Cooperation between public and private sectors, cooperation between people, and cooperation between multilateral institutions such as the IMF and UNECA.

The IMF looks forward to continuing to be your partner in this journey.

Thank you very much.

IMF Communications Department
MEDIA RELATIONS

PRESS OFFICER: Media Relations

Phone: +1 202 623-7100Email: MEDIA@IMF.org

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