Internet is a key component in Africa’s economic development but it is not serving to its potential and a lot more has to be done, a new Internet Society Report indicates.

The report, "Promoting the African Internet Economy,” was released last week. It shows that there is need to address the lack of local content infrastructure in African countries, such as data centers, routers, servers in order to drive wider and deeper internet usage.

While it indicates that internet has significantly helped African countries, there is significant work to be done for it to benefit the continent more.

The report indicates that in both developed and developing countries, applications and services powered by the Internet have accelerated economic growth and created jobs.

Small businesses, in particular, have used internet to deliver economic growth to their local communities, harnessing it to overcome traditional barriers such as a lack of access to education or skills, and exporting their products and services to national and international markets.

Internet Society describes ‘internet economy’ as an economy and society where Internet-connected networks, applications, and services are fully embedded in all economic and social activities.

The internet’s contribution to gross domestic product (GDP) is low in Africa. Internet sector, which the report says is comprised of companies that exist only because of internet, makes up an average of 3.7 per cent of GDP in developed economies.

In Africa, internet contributes just 1.1 per cent to GDP. Internet sector makes up three to 5 per cent of the workforce in the Organisation for Economic Co-operation and Development (OECD) countries, but only 1 per cent in developing countries.

"It has been further shown that a 10 per cent increase in Internet use can increase international trade by 0.4-0.6 per cent,” the report says.

Content infrastructure is key

Internet Society says that building the Internet sector can be critical for development in Africa, but argues that improved efficiencies from an internet-enabled economy can be more significant.

"Internet economy must sit on the foundation of a strong Internet sector, and can be facilitated with Internet platforms that help businesses and governments to go online,” the report suggests.

Research by McKinsey estimates that the internet can deliver productivity gains in Africa in the education, healthcare, financial services, agriculture, retail and government sectors, valued between $148 billion to $318 billion by 2025.

For African governments, many of which still rely on pen and paper, there could be cost savings of 60 per cent to 75 per cent just on administrative tasks. The report points to the example of Irembo, Rwanda’s e-Government portal that has digitised more than 50 services and helped reduce paper work.

But as much as progress is being made, just 21.8 per cent of individuals are online in Africa. Adoption is uneven across the continent, with countries like Eritrea and Somalia lagging in the low single digits, while others like Morocco and South Africa are comfortably above 50 per cent.

The lack of local content infrastructure in African countries, such as data centers, routers, servers and content delivery networks (CDNs) is one of the key challenges Internet Society identifies as need to be addressed to drive wider and deeper internet usage.

"Hosting content locally significantly reduced the latency and cost of content delivery, in turn making it more accessible for the local community,” it says.

Commenting on the report, Jean Philbert Nsengimana, the information technology and communication minister, acknowledged that it’s true the content infrastructure is still a challenge.

"Content hosting capacity is a challenge and we believe we have to increase on the supply side, especially by attracting investors and developers of data centres. But there is improvement in terms of actions,” he told The New Times yesterday.

The minister said that, together with Internet Society, they commissioned a study in 2015 in which some of these issues were highlighted, and that they have been calling on investors to come up and build new data centres and strengthen capacity.

"Normally, 70 per cent of running a data centre is power. We have had unreliable power supply with high costs of power, which has limited the growth. But in the recent past the government approved that data centres can be considered as other industries which are benefiting from government subsidies,” Nsengimana said, adding that, today, there is reliable power supply.

While it may be easy for a local developer to create content that can be consumed by people, it is not easy for the content to be served to the people in the same country in a rapid and seamless way. That often doesn’t happen because when information travels, it’s routed halfway across the world through internet exchanges in Europe or North America before being delivered back home to readers.

This means that internet delivery is slower and more unreliable than elsewhere and also more expensive, which is discouraging. Fixing this problem would be a big step in the right direction.

"Ultimately, it is clear that local content infrastructure must be developed in order to support a robust Internet economy across Africa,” Internet Society Report recommends.

editorial@newtimes.co.rw