Reinventing Informality in Sub-Saharan Africa : The Role of Digital Innovations

Abstract

This research examines the impact of digital transformation on the informal sector in sub-Saharan Africa. As the digital revolution unfolds globally, sub-Saharan Africa actively participates in this transformation. The informal sector, a critical pillar of the regional economy, is undergoing significant change. The World Bank estimates that the informal sector employs over 70% of the workforce and contributes nearly a third of Gross Domestic Product (GDP) in many sub-Saharan African nations. However, the dominance of this sector presents challenges, particularly by limiting governments’ ability to mobilize resources for economic stimulation, especially during crises. This paper explores the potential of digital transformation as a solution for formalizing the informal sector. It highlights the opportunities for job creation, wealth generation, and increased tax revenue.

Key words: Digital transformation, Informal sector, sub-Saharan Africa, Economic development, Formalization.

Introduction

Digital transformation is much more than just a global trend : it is a veritable revolution that is redefining the economic, social and cultural contours of this planet. Under its influence, no corner of the globe stands still, and sub-Saharan Africa, far from being on the sidelines, is at the heart of this evolution. In this dynamic region, where the informal sector plays a crucial role, the transition to digital is shaping an entirely new economic landscape. According to a recent World Bank study, the informal sector is the mainstay of the economy in many sub-Saharan African countries, accounting for more than 70% of total employment and contributing almost a third of GDP (World Bank). However, this predominance of the informal sector presents major challenges, particularly by limiting the ability of governments to mobilise the budgetary resources needed to stimulate economic activity, especially in times of crisis. Faced with these challenges, formalising the informal sector through digital transformation is emerging as a crucial solution. This process, facilitated by the widespread adoption of digital technologies, offers immense potential: it can not only create jobs and generate wealth, but also considerably increase tax revenues, thereby strengthening the financial foundations of governments (IMF, Finance Developpement). Yet this transition is not without obstacles. Major challenges stand in the way of formalisation, including lack of access to technology, gaps in digital skills and complex regulatory barriers. These difficulties underline the crucial importance of a holistic and collaborative approach, where researchers, policymakers and private sector players work hand in hand to overcome these obstacles.

In the ever-changing digital landscape of sub-Saharan Africa, recent statistics on internet penetration show explosive growth. In 2017, the region’s internet penetration rate was 24%, well below the global average of 64%. However, this situation has changed radically over the last decade, with a penetration rate that has increased tenfold. In 2016, sub-Saharan Africa already had 420 million unique subscribers, and projections indicated that this figure would reach 535 million in 2020, representing a penetration rate of 50% for the region (GSMA). To better understand these trends and their impact on the informal economy, ten specific countries in sub-Saharan Africa will be discussed: Nigeria, South Africa, Kenya, Ghana, Ethiopia, Tanzania, Uganda, Cameroon, Senegal and Rwanda. These countries have been selected for their diversity in terms of size, level of economic development and progress in digital innovations, offering valuable insights into the different facets of this regional phenomenon.

The informal sector landscape in sub-Saharan Africa

The informal sector, also known as 

robertotientcheu

Roberto Carlos Tientcheu Nouake graduated in Economics from the University of Douala and went on to study Project Analysis and Evaluation at ESSEC Business School in Douala. His professional experience includes internships at the State Bank and UNDP, where he acquired practical expertise in the field of economics and development. He is broadening his academic horizons by studying Supply Chain at the University of Paris Assas Panthéon and Trade Policy and Trade Law at TRAPCA in Tanzania. As an initiator, he plays an active role in YouthShare, a project mobilizing young people worldwide to promote social change. His diverse background demonstrates his commitment and passion for economics, project development, and his desire to make a positive contribution to society through international initiatives.

View all posts by robertotientcheu →

Leave a Reply