A lot lost from not harnessing digital economy potential- EPRC Researcher

A lot lost from not harnessing digital economy potential- EPRC Researcher

Digital technologies have transformed society at an unprecedented scale over the last two decades. They have changed the ways we live, work, learn, commute, and interact. Today, digital technology has the potential to usher in widespread socioeconomic change. Consequently, it has become crucial for nations to understand and cater to the needs that enable the digital economy to grow. At The Innovation Village, we believe that the digital economy is key in accelerating opportunities for young people, women, and small businesses and we will continue to support the ecosystem to achieve growth in that area.  

On the other hand, Uganda must quickly tap into this goldmine and how do we do that? 

In an interview, Tony Odokonyero, a Research Fellow at Economic Policy Research Centre shares more about the state of Uganda’s Digital Economy and what we can do to harness the opportunities therein. 

What does the state of Uganda’s digital economy look like from your lens? 

The digital economy embodies economic activities that utilize digital technologies or information as factors of production. It involves numerous interconnectedness such as daily online connections among people, businesses, devices, data, and processes in carrying out economic activities.  

Uganda’s digital economy, just like the rest of the world, is characterized by a growing hyperconnectivity pertaining to increase in the interconnectedness of people, organizations, businesses, and machines through use of internet, mobile technology and the internet of things. Different sorts of digital technologies that are used to collate, store, analyze and digitally share information with the aim of economic and social interaction transformation are evolving in Uganda, for example – internet, big data, FinTechs, and cloud computing among others. 

The digital economy space in Uganda is growing. For example, over the period of Uganda’s second National Development Plan (NDPII 2014/15-2019/20), Uganda’s digital economy sector registered impressive growth, with an average growth rate of about 15 per cent. Due to this growth and associated benefits, the digital economy makes notable contribution to Uganda’s economy in terms of Gross Domestic Product (GDP) – e.g., at about 3 percent in the NDPII period. 

Growth of digital economy space implies increase in size of the digital economy. The size of the digital economy in Uganda is estimated at US$1 billion (Shs3.5 trillion)– this means through digital economy alone, Uganda can stimulate economic activities capable of generating millions of jobs if well harnessed, especially for young Ugandans who are affected by high level of unemployment. Currently, digital economy employs about 2.3 million people, and there is potential to more than double this level of employment within the digital economy space. 

What are the gaps and why do they persist? 

Opportunities presented by the digital economy notwithstanding, Uganda’s digital economy space faces a number of setbacks that hinder further growth and opportunities from the sector. Among others, the salient barriers for digital economy growth in Uganda are;  

Limited access to digital technologies or devices such as the internet, computers, and smartphones among others. Majority of Ugandans and Ugandan-based businesses do not have access to basic online accounts. The cost of internet and digital devices is deterrent to digital inclusivity – for example, within the East African region, Uganda has the highest cost of mobile data for the internet. Further, there is inadequate coverage and quality of Information and Communications Technology (ICT) infrastructure in the country, and the digital skills gap within the populace is large. Other gaps include; limited understanding of the digital economy, coupled with digital transformation complexity, cyber insecurity, and complexities related to numerous local languages in Uganda (over 40), hence the difficulty in engaging local people through e-commerce activities. 

As the world embraces the digital economy, what do we stand to lose as a country if we do not harness its potential? 

Countries that have undergone significant digital transformation have made quite significant economic gains in different dimensions. So, if we do not adequately harness the potential of the digital economy, we lose a lot. The losses we encounter are in the form of subdued economic growth and development. Specifically, economic growth is subdued, unemployment (especially among young people) remains high, low level of productivity and efficiency both within the public and private sectors prevails, low quality of service delivery in key sectors (such as health, education, agriculture, financial sector, etc.), and low financial inclusion and innovation among others.  

What interventions do we need as a country to take advantage of the opportunities presented by the digital economy? 

Some of the key interventions to harness the potential of the digital economy include; digital skills development initiatives; support towards young innovations in digital product development and commercialization; improving the policy and regulatory environment to ensure continued expansion of the digital economy and minimize cyber insecurity related hazards; and widening and deepening digital coverage and infrastructure. 

Lastly, how can Ugandan entrepreneurs plug in to make the most out of the emerging digital economy? 

Most Ugandan businessmen and women including entrepreneurs are excluded from the digital space majorly due to technical and economic reasons. Entrepreneurs can therefore be plugged into the digital economy space through deliberate efforts for espousing e-commerce and building capacity of the entrepreneurs to engage in e-commerce through entrepreneurship-related technical and skills development. We need to support entrepreneurship financing programs that can enable inclusion into the digital economy including the development of business models. It is also important to lower the cost of doing business through e-transactions, for increased inclusivity. Additionally, engage and/or sensitize entrepreneurs in following up-to-date digital economy trends, and in particular, e-commerce trends and evolution. Entrepreneurs should be made to appreciate that, especially in this COVID-19 era (and highly likely in post-COVID-19) when there has been a major shift in demand from brick-and-mortar retail business to e-commerce. All these can be achieved through well-designed digital related initiatives.