The Foundations of Technological Transformation in Africa

IMF News, December 15, 2017

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Authors: Christine Lagarde
Published: December 15, 2017

1. Introduction — framing and demographic context

Speech delivered December 15, 2017, Addis Ababa, Ethiopia by Christine Lagarde, Managing Director, International Monetary Fund.
Central premise: technological innovation requires a strong foundation — roads, education and health systems, public involvement, and public-private partnerships — to flourish.
Demographics and opportunity:
- 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]
Risks and macro context:
- Global IMF projections: 3.6 percent growth for 2017 and 3.7 percent for 2018.
- Africa-wide projections: growth expected to reach 2.9 percent in 2017 and 3.5 percent in 2018 and 2019.
- Variation across countries: nearly one-third of nations growing at around 5 percent; many commodity exporters experiencing a slowdown.
- On a GDP per capita basis, 15 countries are expected to see a decline this year (encompassing about 40 percent of the population).
- Public debt concern: public debt has reached 50 percent of GDP in nearly half of sub-Saharan Africa’s countries.

2. Preconditions and enablers for innovation

Foundational public goods and institutions highlighted as prerequisites for technology to deliver inclusive benefits:
- Roads, education, health systems.
- Access to electricity and reliable infrastructure.
- Access to credit and financial integration.
- Streamlined regulation and access to markets to encourage competition and innovation.
- Public support for basic research.
Financial inclusion and mobile money:
- 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]
- In countries such as Côte d’Ivoire, Somalia, Tanzania, Uganda, and Zimbabwe, people were more likely to have a mobile account than a traditional bank account.[4]
Energy and infrastructure:
- Hundreds of millions of people live without access to power on any given day.[5]
- Solar solutions (examples):
- M-kopa sells solar panels with small deposits and pay-off over a year through mobile banking; the system has brought electricity to over half a million homes.
- New solar stations in Burkina Faso, Zambia, Benin.
- Morocco constructing a facility that will become one of the largest solar power plants in the world.
- Infrastructure gap: estimated to be over $90 billion annually.[6]
Local innovation examples:
- Andela training and matching African workers for tech jobs.
- A community innovation lab in Togo developed the first 3-D printer made entirely of electronic waste and plans to place 3-D printers in every school within a kilometer of the lab.[7]

3. Government use of digital tools — fiscal and service delivery gains

Fiscal savings and efficiency from digitizing government payments:
- IMF analysis in Digital Revolutions in Public Finance: countries across the developing world could save around one percent of GDP by updating government payment systems from cash to digital; in some places in Africa the potential is even higher.[8]
- Nigeria example: digital payments could save between 5 to 9 billion U.S. dollars, or about 1.7 percent of GDP.[9]
Service delivery and crisis response:
- Sierra Leone: mobile wallet system during the Ebola outbreak saved lives and improved resource allocation.
- Cote D’Ivoire: Ministry of Education (2011–2014) shifted all tuition payments from cash to digital — result: fewer lost fees, less fraud, and new investments in the school system.
- Ghana pilot: blockchain platform bitland used to record land sales; note that approximately 90 percent of agricultural property is unregistered in Ghana.[10]
Broader benefits of digitalization:
- Potential to reduce corruption, increase revenues, generate investments in health and education, and contribute to meeting the 2030 Sustainable Development Goals.
- Digital tools can enhance transparency, accountability, and citizen access to information.

4. IMF engagement: capacity building, innovation, and knowledge sharing

Practical IMF support and examples:
- 2016: sub-Saharan Africa was the largest recipient of IMF capacity development efforts.
- Six IMF capacity development centers across Africa enable rapid response to emerging needs.
- Free online courses have trained nearly 30,000 individuals worldwide, including many in Africa; courses cover public financial management, debt sustainability analysis, and other topics.
- Example of creative problem-solving: 2016 Dakar “hackathon” with the Senegalese Ministry of Finance — 100 young entrepreneurs proposed solutions to improve tax collection (apps for offline filing, document-simplifying software, websites for taxpayer access).
Role promoted for the IMF:
- Support members in harnessing technology to improve economic conditions and strengthen institutions.
- Promote best practices and knowledge-sharing across countries and continents.

5. Policy implications and recommendations

Build and protect foundational public goods:
- Invest in roads, education, health systems, and reliable electricity to underpin technological adoption.
Promote financial inclusion and digital payments:
- Encourage transition from cash to digital government payments to realize fiscal savings and reduce leakage.
Support public-private partnerships and regulatory reform:
- Create environments where entrepreneurs are rewarded, markets are accessible, and competition spurs innovation.
Invest in human capital and skills:
- Train youth in digital skills and support community innovation labs and tech training programs like Andela.
Prioritize energy investment and closing infrastructure gaps:
- Expand scalable solutions such as solar to reach unelectrified populations and enable manufacturing and digital services.
Foster cooperation:
- Strengthen cooperation between public and private sectors, between people, and among multilateral institutions (IMF, UNECA) to scale successful models.
Continue capacity development and knowledge dissemination:
- Use IMF capacity development centers and free online courses to spread best practices and technical skills.

Source: Speech "The Foundations of Technological Transformation in Africa" by Christine Lagarde, Managing Director, International Monetary Fund, delivered December 15, 2017, United Nations Economic Commission for Africa, Addis Ababa, Ethiopia.

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