A new report by Google and the International Finance Corporation (IFC) estimates that Africa’s Internet economy could potentially contribute nearly $180-billion, or 5.2%, to its economy by 2025.

By 2050, the contribution to gross domestic product (GDP) could increase to $712-billion, the ‘e-Conomy Africa 2020’ report shows.

Africa’s Internet GDP (iGDP) was estimated at about 1.1%, or $30-billion, of the continent’s GDP in 2012, increasing to $99.7-billion by 2019, before growing to about $115-billion, or 4.5%, of Africa’s $2.554-trillion GDP in 2020, an analysis conducted by Accenture found.

Comparatively, the Internet economy contributed 9% of GDP in developed economies, such as the US, in 2018.

Africa’s potential Internet economy growth is driven by increased access to faster and better-quality Internet connectivity, a rapidly expanding urban population, a growing technology talent pool, a vibrant startup ecosystem and the continent’s commitment to creating the world’s largest single market under the African Continental Free Trade Area, the ‘e-Conomy Africa 2020’ report says.

While the total contribution will ultimately depend on the intensity of the use of digital technologies by businesses and various policy actions, the Internet economy is expected to improve productivity and efficiencies across many sectors.

Despite the impacts of the Covid-19 pandemic and the resultant implementation of significant mitigation measures, which will lead to a decrease in Africa’s total GDP and a negative macroeconomic outlook, the African Internet economy is expected to be resilient as digital connectivity and services have been widely used to support business continuity and consumer needs.

Subsectors such as urban mobility, hospitality, travel and events may struggle to recover from the economic downturn; however, growth is expected in various subsectors of the African Internet economy, particularly ecommerce, elogistics, edtech, entertainment, fintech and healthtech, which can be boosted by the digital economy.

“The African Internet economy will no doubt be transformed in the aftermath of Covid-19; exactly what this transformation will look like remains to be seen,” the report notes.

Since 2000, the number of people with Internet access has grown to over 520-million, or nearly 40% of the population. About 60% of the population accesses the Internet through a mobile device.

Over the next ten years, the number of Internet users in Africa is expected to grow by 11%.

“The digital economy can and should change the course of Africa’s history. This is an opportune moment to tap into the power of the continent’s tech startups for much-needed solutions to increase access to education, healthcare and finance, and ensure a more resilient recovery, making Africa a world leader in digital innovation and beyond,” says IFC executive VP, COO and interim MD Stephanie von Friedeburg.

Digital startups in Africa are driving innovation in fast-growing sectors, including fintech, healthtech, media and entertainment, ecommerce, emobility and elogistics, contributing to Africa’s growing iGDP.

According to Partech Ventures Africa, the continent is home to 700 000 developers and venture capital funding for startups has increased year-on-year over the past five years, with a record $2.02-billion in equity funding raised in 2019.

“Although formal sector businesses, such as large corporations, have historically shaped the economy, the Internet economy offers leapfrog opportunities to address challenges faced by Africa’s fast-growing number of informal businesses and workers,” the report indicates.

The increasing connectivity is presenting an opportunity for businesses and communities to leapfrog with new technologies, paving the way for economic development.

“Google and the IFC have created this report to highlight the role the digital startup sector is playing and other factors driving the continent’s growth, to showcase and support the opportunities the continent presents,” explains Google Africa director Nitin Gajria.

“Investments in infrastructure, consumption of digital services, public and private investment and new government policies and regulations will play an important role in supporting Africa’s digital growth.