Anchoring East Africa’s economic growth toward digitalization

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In the discourse of socio-economic growth in the African subcontinent, East Africa is recurringly featured because of its innate strengths and resources. The region is home to over 146 million people who share a common dream: prosperity, from Kenya, the largest economy, to Burundi, the smallest. But where does digitalization stand in the region? And do digitalization and economic growth go hand-in-hand?

Today, given all the unprecedented opportunities that digitalization presents for nations with systemic challenges, the East African dream for prosperity is more alive than ever. Research from the World Bank demonstrates the relationship between digitalization and economic growth: a deeply integrated and competitive digital market among the EAC countries alone can boost the GDP by about $2.6 billion.

Yet, the internet penetration in East Africa is hovering at about 26%—considerably low from the global average of 62.5%. While that status quo calls for concrete measures, stakeholders must also reconcile with pressing issues such as climate change, escalating energy costs, and supply-chain disruptions.

That priority is more pronounced in chief economic sectors such as agriculture and manufacturing, where legacy systems, obsolete processes, and inefficiencies remain unchecked. A case study following its entry into Kenya put things in better perspective for Schneider Electric. 

How do digitalization and economic growth go hand-in-hand for East Africa?
Digitalization and economic growth for East Africa

Integrating critical functions for higher efficiencies

Businesses in conservative sectors such as agriculture and manufacturing tend to harbor an entrenched aversion toward digital transformation. As often as not, such complacency leads to systems and processes outliving their purposes – and even more so in economies where internet penetration is low.

As part of the change, Schneider started its Kenyan project by integrating existing legacy systems such as Navision, as well as adding new people management and learning tools into the mix. These became the bedrock for further digitalization. 

The subsequent introduction of CRM tools and group-wide ERP integration paved the way for a data-driven culture, which accompanied streamlined processes. Employees could effectively track down projects, support communications, and automate reporting.

Likewise, regardless of the sector, integration can help businesses achieve a deeper and more holistic view of operations. The insights thus derived can help optimize supply-and-demand forecasting, reduce inventory, and build readiness against disruptions.

Such possibilities are of great consequence in East Africa, where value-chain gaps, unreliable power, and archaic business models are hindering growth. 

Saving energy and costs through IoT solutions

According to the IEA, by 2050, temperatures could rise by 2°C, on average, globally. However, in Africa, the median temperature rise could be higher, at 2.7°C. The IEA estimates East Africa’s GDP to reduce by up to 15% as a result of the temperature rise.

So, while the regional contribution to global emissions is relatively low, East Africa must adapt to climate risks faster than most. Subscribing to this notion, Schneider is actively leveraging digitalization to help businesses unlock savings in energy and associated costs while reducing their overall carbon footprint. 

In one such project involving a factory with energy-consuming systems scattered throughout, we centralized the data collection through IoT integration.

Using Schneider EcoStruxure Power Monitoring software, we analyzed the energy data from the grid and in-house solar panels, mapping and tracking the consumption patterns. We observed that the factory’s night-time energy consumption, powered by the more-expensive grid electricity, was high due to workers forgetting to turn off the fans.

Corrective measures, combined with insight-led decision-making on equipment replacement and maintenance, enabled us to achieve quantifiable results: About 70% reduction in energy bills, ROI within two years, and a 7% reduction in carbon footprint. 

Future-proofing through digitalization 

The presence of an IoT infrastructure is conducive to constant upgrades and additions of new technologies as and when they emerge. The said infrastructure can also be scaled seamlessly—a capability that complements East Africa’s need to scale power grids and internet services to remote, rural areas.

Advanced infrastructures also open up opportunities to add renewables to the energy mix. In other words, businesses can future-proof themselves through digitalization, just as they can align with regional sustainability goals and climate actions. 

That said, we believe there is no one-size-fits-all approach to digitalization. It is not a destination; it is a journey with stages and pivots. For every step of the way, businesses must reconcile technology adoption with bigger goals. Solutions providers, for their part, must ensure their offerings are simple, intuitive, and attuned to client expectations.

Additionally, the role of policymakers is pivotal in clearing regulatory roadblocks, drawing investments for large-scale projects, and engaging all stakeholders—solutions providers, intergovernmental organizations, and grassroots-level changemakers—for a whole-of-society approach to socioeconomic growth.

Every transformation must be preceded by a multidimensional analysis of opportunities and challenges. For example, drastic digitalization through automation solutions could render many jobless. With 3.9 million people expected to enter job markets every year till 2030 in East Africa, they could get trapped in the digital divide if not provided with the right training and upskilling avenues.

Through steady investments in the ICT and telecom sectors, policymakers can increase internet penetration, thereby facilitating training in remote, rural areas, where the digital divide is wider. Developing digital dexterity will enable jobseekers to assimilate well into the transformation and make meaningful contributions toward the dream of a prosperous, productive, and sustainable East Africa.

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