The Influencer Economy: An Avenue for Economic Opportunities in Africa

Introduction

Technological innovation has opened new avenues, particularly in the digital sphere. The unprecedented growth of social media platforms like YouTube, Instagram, TikTok, and X (formerly Twitter) has birthed a new economy – the influencer economy.

In today’s hyperconnected world, it is almost inevitable to scroll through a social media feed on your tablet, phone, or computer without encountering an influencer or content creator. This article examines this nascent, game-changing industry, analysing its economic implications and the unique challenges it faces on the African continent.

The Genesis of the Influencer Economy

As companies and organisations increasingly embrace digital transformation to connect with broader audiences – or potential customers – social media influencers and content creators stand at the intersection of this paradigm shift. The influencer economy, a model built on three interconnected axes, has emerged as a key player:

• Corporations and brands enhance their digital presence via social media to engage with new audiences and market their products and services.
• Social media users gravitate toward niche-focused content created by prominent influencers with whom they identity and like.
• Influencers with substantial followings are approached by brands to promote their products or services in exchange for endorsements, monetary compensation, or complimentary products— or a combination of these.

In this virtual theatre, influencers act as intermediaries, connecting brands to their target audiences. They are central to this model, which parallels the “click economy”— a strategy where businesses drive website clicks to increase conversions and sales. However, while related, these terms are not interchangeable.

Economic Opportunities in Africa

Inevitably, the content creation wave has made its way across the Atlantic, catapulting many African content creators into the global digital spotlight. On a micro level, this emerging and lucrative career path allows many young Africans to make a good living while entertaining their followers. On a broader scale, the influencer economy has the potential to drive job creation, introduce new career opportunities, and increase tax revenues for African governments.

Traditional advertising channels, such as television, radio and newspapers are on the decline, with social media emerging as the preferred medium for Africa’s youthful population. According to TIMA, a social media agency $159.90 million was spent on influencer promotions in Africa, with projections of $267.5 million by 2028. With over 650 million Africans under the age of 17, the influencer economy in Africa is poised for long-term growth.

Taxation Challenges in the Influencer Economy

Regulation remains a big question mark when it comes to this economic model. According to Ecofin, Cameroon and Kenya are the only African countries so far to successfully implement taxation schemes targeting content creators. Cameroon levies a 5% tax on income earned through digital platforms, while Kenya imposes a 15% tax. Other African countries like Tanzania are speedily following suite on digital taxation. Tanzania is also introducing a 5% tax on content creators as part of its 2024/2025 fiscal plan.

Proposed Solutions

The underlying problem in implementing a digital taxation scheme for content creators stems from the difficulty in tracking income generated online. Specifically, it involves establishing a direct link between a content creator’s revenue and their partnerships with organisations or brands.

Drawing inspiration from the Gulf Cooperation Council (GCC) countries, where annually, renewable licenses are mandated at a fixed cost for online influencers in compliance with regional Anti-Money laundering laws, this approach could significantly boost governments revenues while curbing money laundering activities within the industry.

Radvan has proposed that states impose innominate contracts on content creators due to the absence of a conventional employment relationship.

Addressing the current taxation issues is especially crucial for developing countries, which stand to generate substantial revenue from an ever-evolving industry valued at over $250 billion and projected to double to $500 billion by 2027.

The potential for income tax in this sector is enormous for African countries. Creating a regulatory framework to monitor this burgeoning economy is indispensable to reap the long-term benefits.

Compliance With Privacy Laws

Privacy and data security concerns underscore the need for strong regulatory frameworks at both national and continental levels. Social media platforms collect and store vast amounts of personal data, raising significant privacy challenges. Monitoring and addressing violations are daunting tasks for African governments. For instance, the United States Congress has scrutinized TikTok, a Chinese-owned platform, over national security concerns, pressuring it to cease operations in the U.S. or divest its ownership.

Conclusion

The influencer economy, a multi-billion-dollar industry, is poised for exponential growth, offering immense opportunities for African content creators and influencers and governments alike. Beyond individual earnings, this sector can generate substantial employment and tax revenues for African states. It is primordial for African governments to establish comprehensive legal frameworks at both national and continental levels to regulate social media platforms, protect users’ data, and ensure compliance. By fostering a supportive environment for the influencer economy, African states can fully harness the economic benefits of this transformative industry.

REFERENCES

Carter, Timothy . “The Click Economy: Is There a Future?” Medium, ReadWrite, 18 Feb. 2021, rww.medium.com/the-click-economy-is-there-a-future-f0747fda734. Accessed 22 Jan. 2025.

Chouta, Paul. “La Loi de Finances 2024 Fait Grincer Des Dents Au Cameroun.” Dw.com, Deutsche Welle, 5 Jan. 2024, www.dw.com/fr/la-loi-finances-2024-fait-reagir-cameroun/a-67903260. Accessed 22 Jan. 2025.

Ecofin Agency. “Tax Authorities in Africa Struggle to Regulate Influencer Earnings, Report Finds.” Ecofin Agency, 19 June 2024, www.ecofinagency.com/comms/1406-45631-tax-authorities-in-africa-struggle-to-regulate-influencer-earnings-report-finds. Accessed 22 Jan. 2025.

Maricha, Julius . “Tanzania to Impose 5 Percent Tax on Digital Content Creators.” The Citizen, 15 June 2024, www.thecitizen.co.tz/tanzania/news/national/tanzania-to-impose-5-percent-tax-on-digital-content-creators-4659112. Accessed 22 Jan. 2025.

Mason, Kiana. “What Is a Content Creator? And How Can You Become One?” SIEGE MEDIA, 30 Aug. 2024, www.siegemedia.com/creation/content-creator. Accessed 22 Jan. 2025.

Radvan, Michal. “Taxation of Instagram Influencers.” Studia Iuridica Lublinensia, vol. 30, no. 2, 30 June 2021, p. 339, file:///C:/Users/User/Downloads/12369-50558-1-PB.pdf, https://doi.org/10.17951/sil.2021.30.2.339-356. Accessed 22 Jan. 2025.

Shoutout. “Is the Advert Dead? The Shift from Traditional Advertising to Social Media.” ShoutOut, 29 July 2024, www.shoutout.social/is-the-advert-dead-the-shift-from-traditional-advertising-to-social media/. Accessed 22 Jan. 2025.