The Rise of Digital Africa
This paper highlights how Africa is well-positioned to lead this transformation and African corporations that adopt the platform mindsets and platform business models will be best placed to take advantage of the numerous opportunities and be resilient in the future.
CO-AUTHORED BY:
Rise of Digital Platformsin Africa
3 Drivers Of The Platform Economy
The rise of digital platforms is driven by three accelerating forces: connectivity, digitization, and intelligence. These forces enable the efficient allocation of resources and creation of new markets.
Global Evolution Of The Platform Economy
A hybrid approach to Africa's platform economy is emerging, with governments collaborating on standards and essential digital capabilities like identity management. Simultaneously, private entities focus on developing crucial financial and logistics infrastructure.
Drivers Of A Successful Platform Economy
As the platform economy grows, authorities in Africa need to understand control points within ecosystems to monitor shifting power structures and to design new frameworks for regulating the market power of platforms.
How Africa Can Chart The Way Forward?
In addition to the B2C segment, there is an untapped opportunity for large incumbent organizations to adopt platform mindsets and focus on the business-to-business markets.
Key Highlights of the Report
Evolution of platform economy in different markets
The rise of platform companies in the US and Asia, notably in China and India, can provide insights into the potential trajectory of Africa’s platform economy.
- Platforms in the US emerged largely through private-sector innovation, while those in China and India have been driven by government investment in digital infrastructure.
- The rise of platform businesses in China and India has been driven by a different set of factors from the US. In China and India, there were fewer infrastructural advantages, so the government took the lead in developing digital infrastructures, which became the foundations upon which private companies could create complementary business models.
- In China, the government created the Great Firewall of China, which limited access to global platforms such as Google and Facebook, and helped homegrown platform companies like Alibaba and Tencent gain scale in a protected environment. Alibaba and Tencent later built out the largest payment networks in the country, which provided the financial infrastructure needed for other platform companies to pursue new business models.
- In India, the government launched the UIDAI, which created a central identity management system called Aadhaar for India’s billion-plus population – a system that formed the bedrock for an even more ambitious project called IndiaStack, the first initiative of its kind globally. IndiaStack has given rise to the world’s largest public digital infrastructure system, with the state-driven initiative leveraged by new private-sector platform companies.
Given the dearth of continent-wide digital infrastructure, Africa’s platform economy looks set to take a hybrid approach to the platform economy, where governments collaborate to develop standards and create basic digital capabilities such as identity management, while private operators build out the necessary financial and logistics infrastructure.
3 accelerating forces driving the rise of digital platforms in Africa
- The rise of smartphones, and subsequently the Internet of things (IoT), has enabled widespread connectivity.
- Cloud computing has enabled the digitisation of workflows and business processes.
- Data created through digitisation is increasingly being leveraged to provide intelligence that facilitates the efficient allocation of resources across connected and digitized users and workflows, and also enables the creation of new markets.
The platform economy in Africa is rapidly growing, with digital platforms playing an increasingly important role in the continent’s economic development. These platforms are connecting producers and consumers in new and innovative ways, and are helping to create jobs and boost economic growth.
How can Africa succeed in the platform economy
Africa’s platform economy needs broad interventions such as standardized identity, continent-wide interoperability, single markets, and non-traditional digital infrastructures.
The prerequisites of a successful platform economy include:
- Standardized identity management: This allows users to be verified across different platforms, making it easier for them to participate in the economy.
- Continent-wide interoperability: This allows platforms to work together seamlessly, regardless of where they are located.
- Single markets: This removes barriers to trade and investment, making it easier for platforms to reach a wider audience.
- Development of non-traditional digital infrastructures: This includes things like mobile money and internet access, which are essential for participation in the platform economy in many developing countries.
- A supportive regulatory environment: This means having regulations that encourage innovation and competition in the platform economy, while also protecting consumers and workers.
- A strong entrepreneurial culture: This is necessary to create the new businesses and platforms that will drive the platform economy.
- A skilled workforce: This is necessary to support the growth of the platform economy and to ensure that everyone can benefit from it.
Africa has a number of advantages that could enable it to develop a successful platform economy. However, there are also a number of challenges that need to be addressed, such as the lack of standardized identity management systems and the high cost of internet access.
By addressing these challenges and investing in the necessary infrastructure, Africa can position itself to become a leader in the global platform economy.
4 Key trends
The platform business model is gaining traction across industries, replacing the traditional pipeline-based model. Platform businesses enable value-creating interactions between external producers and consumers, while pipeline businesses design, manufacture, and sell products or services. The media industry is one example of a sector that has already witnessed a significant shift to the platform economy, with companies like Google and Facebook dominating the advertising market.
Other industries, such as retail, healthcare, financial services, and telecommunications, are also poised for a far-reaching transition to the platform economy in Africa. Here are the 4 key industry transformation trends to watch.
| Industry | Trends |
| Retail Sector | Digital marketplaces are transforming the retail sector in Africa. These platforms are providing consumers with more choice and convenience, and they are helping businesses to reach new markets. |
| Healthcare Sector | Platform businesses have the potential to revolutionize the healthcare industry in Africa. These platforms can help to improve access to healthcare, reduce costs, and improve the quality of care. |
| Financial Services | Platform businesses are also creating new opportunities for banks and insurers. These platforms can help banks to reach new customers and offer new products and services. Insurers can use platform data to better understand their customers and develop new products. |
| Telecommunications | Africa’s telecommunications groups are well-positioned to benefit from the growth of the platform economy. These groups have the infrastructure and expertise to support the growth of platform businesses. |
It is thus safe to say that it is increasingly important for businesses to understand the dynamics of the platform economy and how they can position themselves to succeed in this new environment.
Platform convergence in Africa
As platforms expand their ecosystems, industry boundaries will increasingly blur and players from different sectors will start converging. This is already taking place in the banking, telecommunications, retail, and healthcare sectors.
Telecommunications groups and banks are converging. MTN Mobile Money is an example of a vertically integrated model, where the telecommunications group manages the mobile-money platform as well as the payment platform and agent network.
FNB’s banking app is fully owned and managed by the bank. M-Shwari is a partnership between a telecommunications firm, Safaricom, and a bank, CBA.
Telecommunications companies have played an important role in ecommerce as enablers of payments. In November 2017, Safaricom launched ecommerce platform Masoko, leveraging on the success of its mobile-money arm, M-Pesa.
There has been significant convergence between retail and financial services organizations. Every major ecommerce company has invested in their own payment capabilities, and some are even moving into the lending space.
Using data from its ecosystem, Jumia has entered the micro-financing segment, providing working capital to merchants on its platform.
Many financial services firms are entering the healthcare industry.
Discovery, one of the largest platform players in Africa’s financial services industry, has been highly successful with its Vitality incentives platform, which rewards healthy behaviour. Further, Discovery’s DrConnect platform connects patients, doctors, and medical scheme case managers.
The convergence between the banking, telecommunications and retail sectors will manifest most strongly in the services layer – closest to the end-user. Several initiatives by South Africa’s FNB demonstrate this.
The COVID-19 pandemic has only fueled the convergence between the healthcare and telecommunications sectors.
As discussed previously, Discovery and Vodacom have partnered to scale up the DrConnect healthcare platform to give all citizens free access to virtual doctor consultations. Vodacom provides the technology and connectivity while Discovery provides the network of doctors, who are paid a fee for each consultation.
The world’s largest platforms – Facebook, Google, Amazon and Alibaba – all operate across multiple industries, with their initiatives tied together by identity management.
In conclusion, the most successful platform companies will be those that excel at understanding the identities of their users and the data generated across their ecosystems.
The Platform Economy: A new era of opportunity for African businesses
The platform business model is rapidly becoming a driving force in Africa with both global and local players participating. Despite its relative immaturity, Africa’s digital infrastructure is evolving rapidly, and existing corporations have a sizeable and unrealized opportunity to participate in the platform economy by leveraging their assets, capabilities, and rich sets of data.
In the short to medium term, established corporates in Africa could generate new types of revenue streams by:
- Monetizing their own back-office and technological capabilities
- On-selling the capabilities of trusted partner organizations to clients
- Co-developing new solutions for clients by combining their data sets and capabilities with those of their partner organizations.
- Well-established African organizations that embrace the platform economy will be best placed to take advantage of the numerous opportunities to tackle Africa’s unique problems and drive growth.
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