Leveraging Digitization To Fast-Track Economic Recovery

Leveraging Digitization To Fast-Track Economic Recovery

Of the many challenges and untold hardships inflicted on the global economy by the COVID-19 pandemic, if the world could point to one way in which the pandemic influenced the universe positively, that would be the rate at which it accelerated the use of technology and digital tools to achieve results.

Prior to the pandemic, the world was already moving into more digitization, although at a relatively low pace, with players in the financial sector taking the lead by introducing innovative products and services that was gradually moving financial services away from the brick and mortar model.

What COVID-19, therefore, did was to speed up the rate of adoption of technology and digital tools. With COVID-19 forcing countries to go into lockdowns and impose restrictions, companies were left with no other choice than to leverage on digitization to continue to remain relevant to their customers.

However, with things now stabilizing, there have been calls on businesses and economies at large to continue to leverage on technology to ensure a quick economic turnaround and unlock new pathways for rapid economic growth, innovation, job creation, and access to services that would have been unimaginable only a decade ago.

Therefore, in assessing Ghana’s digitization agenda and how the country can leverage it to fast track its economic recovery, Mr. Bright Simons, the Founder of mPedigree, gives insight.

Mr. Simons has pointed out that, although the world is moving more towards digitization, the digitization agenda was ongoing only in a few sectors. He therefore revealed that, it was necessary to distinguish between sectors like finance, communication, telecoms, and media which indeed are digitizing very fast. However, sectors like education, health, agriculture and to some extent security and defence appears to be digitizing slowly. He further attributed this to the level of intertwining and interconnectedness between the government and the private sector in these sectors.

“The challenge with these sectors is that you often need to intertwine or interconnect public, private and civil society in order to be able to digitize rapidly and this is very difficult to do. Where the government has made some progress is in digitizing government services. When it comes to finance, telecom, media, it’s much more straight forward to digitize because a lot of the activities is private sector oriented.

“You can also digitize a branch of government services. But the problem arises when you need to intertwine government, private, and civil sectors and let the digitization emerge as a consequence of that intertwining and that is more difficult. So, when government digitizes its services where it is the primary decision maker, it is not that difficult; and when the private sector is digitizing areas where it is the primary decision maker, it is also not that difficult.

“The real challenge is when you have to digitize sectors like healthcare, where you have a lot of intertwining. In healthcare, in Ghana, government is the biggest payer because of the National Health Insurance Scheme, and we have all the private hospitals and facilities and the pharmacy chains. All of these somehow will have to talk to each other and that is where we have struggled worldwide with digitization.”

GOVERNMENT’S DIGITAL AGENDA

The government, since 2017, embarked on a digitization agenda and this has been spearheaded by the Vice President, Dr Mahamadu Bawumia. The government’s digital development focus has been guided by the need to: improve the delivery of public services; formalize the economy; improve revenue mobilization; deepen and broaden inclusiveness in the country’s development processes; and curb bribery and corruption.

Over the last four years, the government has implemented what it describes as the five foundational building blocks for the achievement of its digital strategies. The five foundations include the establishment of the biometric National ID Card (NID), or the Ghana Card which provides a unique bio identification for all Ghanaians and residents, including fingerprints, facial recognition, and irises.

Also included is the establishment of the Ghana Post GPS or the National Digital Addressing System, which provides an address system using unique postal codes for every property within Ghana. The system allows for the easy location of addresses as well as for the delivery of goods and services across the country, and expected to be the backbone of Ghana’s e-commerce market.

The government has also introduced the Mobile Money Payments Interoperability System, which makes it possible for the transfer of funds from mobile money accounts to bank accounts (back-to-back) and from mobile or bank accounts to biometric payment card accounts, for example e-Zwich.

Also included in the five foundations is the introduction of the Ghana.Gov (Digital Payment Platform), which is a one-stop shop platform to enable citizens easily access government services, simplify payments for public services, ensure prompt payments for the services and promote transparency and visibility of government revenues.

The last of the five foundations is the Universal QR Code, which takes individuals to the last mile of the payment system of everyday economic transactions of most citizens. The platform provides a secure, convenient and low-cost payment platform to the vast majority of Ghanaians, especially in the informal and MSME market.
Commenting on the government’s digitization agenda, Mr Simons stated that “to the extent that government has focused primarily on digitizing government services, it is merely doing very well and it will have some dividends but it is not as important as getting to the crux of the matter which involves interfacing the three segments of society and that is the next level of the challenge. That is where hopefully, COVID-19 could have provided some impetus.

He further indicated that “digitization of tax records and the likes will have an impact on improving the efficiency of government services, but we all know that it’s not just the efficiency of government services that matter, it is how the government impact on private sector and if you have operations that are in the private sector that interface with government.”

He, however, advised the government to now focus on introducing technology to sectors where it interfaces a lot with the private sector to bring more efficiency in those areas as well.

“Like in education, how can we have a system where the government schools are provided with content by the private sector. Those things can be very difficult to organize because we don’t have the template for them. It’s a bit more complicated than what people think, but I will argue that we have not framed the opportunity carefully and because we have not done that, we have not invested in the area which will make the most difference in the coming years and decades.”

Commenting on which areas of the economy the government should invest more in technology, he pointed out that if the country invests more in Financial technology, it would be a global play where there is not going to be much room for the country to make a difference.

“But health, education, are much more difficult and to do digitization there, you need a new model in terms of how government works with the private sector and that is where we have not paid attention to.”

CHANGE IN POLICY DIRECTION

The accelerating adoption of digitization throughout many economies and industrial sectors have prompted many countries to rethink their policy directions in favor of polices that creates the environment for digitization to thrive.

In Ghana, although there is no clear policy direction from the government with regards to digitization, the government has recently added more responsibilities to the Minister of Communication by renaming the ministry to Ministry of Communication and Digitization, which shows some commitment to pursue more digitization in the coming years.

Speaking on whether the accelerating rate of digitization around the world required any changes in policy direction in the country, Mr Simons, who is also a Vice President at IMANI Ghana, said “Yes, the government must change its policy direction. In Africa, we don’t see the link between digitization and industrialisation and we seem to think that digitization is a way you bypass industrialisation.

“The truth is that, a lot of the industrial sectors are being heavily digitized but not in a way that people tend to think– not in the artificial intelligence, automation segments. If you take power transmission, we are now struggling with it. But what most people don’t realize is that, a huge percentage of the transmission system is now digital. You need to invest in significant amount of new software’s and new enterprise resource management to build a power grid.

“In some calculations, maybe 35 percent of the investment in a new grid, that is really efficient, will have to be in information technology related components. But when you look at government’s policy promoting digitization, it’s almost always in the consumer domain and in government services but rarely do you see them in these kind of infrastructure related and industrialisation related sectors like power management”.

He then revealed that, this meant when the country builds the infrastructure and sign contracts with foreign contractors to come in, it often does not pay attention to the technology component by not compelling these contractors to do local exchange.

“We think the only time we have to think of local content is when we have somebody coming in to do gold mining or oil. But the true fact of the matter is that infrastructure is our biggest spending area. When it comes to capital expenditure, the place we are spending most is infrastructure and those places are highly IT intensive. So, when you look at the interchanges they are doing, you ask yourself how many times does government insist that as part of the architecture service and the engineering service, we are hiring local technology actors.

“In short, we don’t pay attention to the infrastructure and industrialisation sectors and that is where policy needs to change dramatically.”

DIGITAL INFRASTRUCTURE

Internet connectivity, cost of internet, as well as other digital infrastructure appears to be a major problem for African countries as far as digitization is concerned. Therefore, in rebuilding after COVID-19, policymakers in Africa have been urged to invest in innovative technology to leapfrog the continent’s obstacles.

Touching on this, Mr. Simons, noted that compared to other African countries, Ghana’s connectivity infrastructure was better, but comparing to Asia and Latin America, it was not the best.

He said the country could therefore make more progress in the way that it creates smart networks for companies to unbundle their infrastructure.
“If you have realized, a lot of the companies don’t want to manage the infrastructure bit so they sold them and rented them back. This is because they wanted to have lean balance sheets but if the government had put in place frameworks that were more effective, the situation as it existed will not just have relied on private equity which is what eventually happened.

“So private equity put out the money, some companies came in and bought the connectivity infrastructure and then the telcos started to rent from them but the incentive to build more was not necessarily in those structures. Those financial structures did not have anything inherent in them to create more of the infrastructure. So the government would have to be more involved in the financial arrangements and its design so that we have a national framework for smart connectivity.

“And then within that, we could have had the investments but right now, what we have is basically private equity came in, bought it and rented it out and this is not sufficient to increase the appetite to create more of the infrastructure.

“Secondly, we also have a problem, where in a lot of the rural areas, it is just not commercially profitable; so you need to create a situation that is sustainable.”

Citing an example, he noted the current situation with the Ghana Investment Fund for Electronic Communication (GIFEC) making some investments in the rural areas and not being linked to any industrialization and any sustainable economic activity.

“It’s almost as if all they are doing is CSR and that is not sustainable. So to boost infrastructure, we need a national grid infrastructure plan and within that you attract capital and on top of that you find ways in which you link the extension of the IT connectivity infrastructure to rural industrialisation and rural economic activity. Otherwise, what you will have is subsidization arrangements which just simply do not pay for themselves and if they are not paying for themselves, you cannot expand beyond a certain level.”

Mr Simons also pointed out that the problem with digitization in Africa goes beyond connectivity and cost.

“We also have situations like in Chad, where every now and then, the government can shut down the internet and at one point they shut down the internet for more than one year. So, there are also other challenges beyond physical connectivity. But physical connectivity and cost are important impediments; but Ghana is doing very well in that regard.
“If you look at the cost of data in Ghana compared to some parts like Zimbabwe and many parts of sub Saharan Africa, we are doing well; but we could do better though.”

LEVERAGING DIGITIZATION TO FAST TRACK ECONOMIC RECOVERY

The International Monetary Fund (IMF) has indicated that the COVID-19 pandemic, despite all the economic and social devastation it has caused, provides an opportunity for African countries to innovate and go digital. It has, therefore, urged African countries to rebuild their economies and should not merely repair them; but should remake them, with digitalization leading the way.

It has, therefore, become a necessity, rather than a luxury for African economies, Ghana included to fast-track the adoption of technology and digitization. By increasing productivity and facilitating innovation, technology has become a key impetus for the economic development of any country, and those who have embarked on their digital transformation journeys are better equipped to handle the challenges better.

A recent report by McKinsey & Company on Africa in the wake of COVID-19, suggests that to expedite Africa’s economic recovery beyond the pandemic, the continent will need to accelerate its digital transformation. The report urges governments and social sector institutions to expand and broaden digital offerings, foster an enabling environment for rapid digitization and speed up infrastructure investments, among other things.

Mr Simons, therefore urged the government to look at more innovative ways, backed by technology and digitization to fast track the country’s economic recovery.

He said one of the things that COVID-19 did was to increase the urgency in which government projects get undertaken.

“Some of that can be used for various good things because a big chunk of the problems in the technology space has been approvals and being able to put together bankable projects and the elements that have to receive approvals at different levels of government.

“By creating a new level of government and inter-ministerial committees and presidential task forces, you create a way in which you can fast track critical projects in the technology space which will grow the economy. The first thing we have to do is to identify critical projects that have stalled and think through them. Like television white spaces, we have talked a lot about it and spectrum on bundling, but nobody has moved.

“Now is the time that these committees that cut across government must look some of these things, rapidly accelerate them and cut the silos that are in these bureaucracies, remove the bottle necks and get them going. We need to take a fresh look at policy. One of the limitations of policy is that when it comes to technology transfer, our current posture is very bureaucratic. If we say that we want to do a long term technology transfer agreement, you need to go and register with Ghana Investment Promotion Centre (GIPC), and then the government controls the pricing and this makes no sense.

“We need to modernize these rules and use the GIPC, not as a bureaucratic body to control technology coming into the country, but as a facilitator and enabler to get more technology into the country. “We need to change the orientation and mindset of the institutions we have set up to promote technology into the country and this is the only way it can help our economy to grow.”

TAKING ADVANTAGE OF AfCFTA

The coming on board of the African Continental Free Trade Area (AfCFTA) agreement creates a huge market and presents Ghanaian companies with lots of opportunities to enter other African markets.

To take full advantage of this agreement, Mr Simons advised Ghanaian enterprises to leverage on technology to specialize in whatever it is they are doing.

He said the reason why African countries have not been able to trade among itself more in the past was due to the similarities in the products and services offered.

“The challenge is African countries are too similar… Usually trade is not very encouraged because we are all struggling with the same thing. We are all importing rice and exporting commodities like cocoa and that does not foster a lot of trade. What AfCFTA is trying to do is to increase the diversity across the continent so that if somebody want to import from Rwanda, it is very likely that what you will get from Rwanda is different from next door in Burkina Faso.

“Specialization is what we need and technology can help with specialization by encouraging some degree of industrial birth. So, if we think of what we do with cocoa, everybody automatically thinks about chocolate but if we take the cocoa pod alone, there is a whole lot of things we could do with it and all of that requires technology.”

NEED TO DIGITIZE AGRICULTURE SECTOR

Agriculture is considered as a major backbone of the economy, employing over 14 million people in the country. Despite this, there has been little or no digitization or innovation in this space, leaving farmers with the old methods of farming.

On how to introduce some innovation into the farming business, Mr Simons noted “most people are aware that the average farmer has very small farm sizes and that is often been seen as a constraint. But the surprising thing, though, is that the size of a farm in Africa is often bigger per farmer than in India and in China. The average African farmer has more land than and that means that if India can mechanize, it makes no sense that we cannot.

“The way they have done their mechanization is through pools, and we have not really explored pools properly in this country. Somehow, the economics of it has not been well designed and part of that has been because we often want the government to go and buy heavy equipment and there is no financial strategy in terms of who owns that and how that gets to be managed.

“We need to unbundle this. The entity who uses the capital to buy the facility should not be the entity that manages it. We need to have specialized companies who will manage those machines. This will require policy because typically, in our part of the world, people cannot venture into new areas because of risks. So the government must set the tone and then other people will follow.

“It is almost like the telecom sector. Government started investing in it and all of a sudden people saw the space and came in. So, the government must come out with smart policies around how we unbundle the ownership of the mechanization equipment and the management.

“At the starting point, government invests in the machinery and then using open tender arrangements, get managers to come and manage the equipment, then the farmers can rent. If we do that and we have financial institutions involved, that would be a huge experiment which will show the way for people to invest in mechanization.”

Moreover, he noted that without mechanization, the country was going nowhere with regards to agriculture.

“We need to increase yields and if we do that, we will increase productivity which will then increase agro processing. This will then shift labor away from just the hard breaking sustenance work in the farming business. Right now, too many people are depending on the land, which means with the little money that you make from selling the farm produce, you are paying too many people, so everybody is very much under-paid which means you cannot attract young people into farming.

“So to unbundle that, you need to have fewer people on the land but more people into the agro value chain which means you need to mechanize. It doesn’t make sense to ask graduate to go into farming when it pays so little.”

Bright Simons IMANI Ghana


Bright Simons
Founder and President
mPedigree

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