Assessing the potential of the Gig Economy in Africa
Africa has the world’s youngest population, providing both opportunities and challenges for the future of work. Expanding internet access and mobile phone adoption on the continent has enabled the growth of digital platforms and online work. However, realizing the full economic potential of e-commerce and the gig economy in Africa requires addressing infrastructure limitations and policy gaps.
Demographics and Employment
- Africa’s population is expected to double to 2.5 billion by 2050, with over 60% under age 25 (1). Creating jobs for the 10-12 million young people entering the workforce each year is a pressing need (2).
- The continent’s labor force is projected to expand from 444 million in 2020 to 794 million in 2050 (3). The International Monetary Fund estimates that 18 million new jobs will need to be created every year to absorb this influx (4).
- According to the ILO, the youth unemployment rate in Africa was 12.4% in 2020 compared to 13.6% globally (5). Unemployment is even higher in North Africa, exceeding 25% on average (6).
- Mobile phone adoption surpassed 500 million subscribers in Sub-Saharan Africa by 2016 (7). Countries like Kenya have mobile phone penetration over 90% (8).
- However, smartphone adoption remains around 34% in South Africa, 26% in Nigeria, and 22% in Kenya as of 2017 (9). Expanding mobile broadband access will be key.
- Internet users comprise just 28% of Africa’s population, far below the global average of 48% (10). The continent’s online penetration lags on key infrastructure.
The Informal Sector
- Around 86% of employment in sub-Saharan Africa is informal, representing over 170 million workers (11). This sector is vital but lacks protections.
- Digital platforms like M-Pesa are now used by over 37 million active customers in Africa for financial services (12). But regulatory gaps remain.
- In Kenya, youth unemployment led to the creation of digital job matching platforms like Lynk, connecting workers to opportunities (13).
The Emergence of E-Commerce
- Africa’s e-commerce market grew 21% to reach $18.6 billion in 2021 and is projected to reach $33.6 billion by 2025 (14). Adoption is accelerating.
- South Africa has the largest e-commerce market, valued at $3.9 billion (14). But sub-Saharan Africa’s online retail is below 2% of total retail (15).
- Cross-border e-commerce is limited but platforms like Jumia and Mallfortheworld reach multiple African countries (16,17).
Challenges for Digital Entrepreneurship
- High data costs, taxation, legal barriers and limited venture capital restrict the startup ecosystem (18). Most funding flows to South Africa, Kenya and Nigeria (19).
- Fewer than 1% of Africans over age 18 invest in startups and early-stage firms according to Global Entrepreneurship Monitor (20).
- Poor logistics infrastructure makes delivery complex. Warehouse, storage and fulfillment capacity lags (21). Cash on delivery dominates (22).
Policies to Leverage E-Commerce
- Expanding digital and financial inclusion requires investing in digital infrastructure and skills training (23). Public access facilities can also help.
- Updating legal frameworks for e-commerce and online work supports market expansion (24). experiments like regulatory sandboxes encourage innovation (25).
- Regional integration and cross-border e-commerce promotion can accelerate growth, as AfCFTA aims to achieve (26).
- Public-private partnerships, dialogue and data sharing can strengthen the ecosystem (27). But funding gaps persist around supporting African ventures (28).
With smart policies and regulations, strategic investments and infrastructure improvements, Africa can tap into its youthful demographics and technological leapfrogging to create inclusive digital economies. This will boost job creation, generate growth and support sustainable development across the continent.