A market of more than 100 million inhabitants, where only one-third of those over 25 have a bank or mobile finance account (compared to an average ... of 58.5% in sub-Saharan Africa and 79.5% in neighbouring Kenya). An economy where one public institution, Commercial Bank of Ethiopia (CBE), alone manages 55% of outstanding credit. A banking industry so inefficient that its costs absorb 56% of its revenues, but where the return on assets is four times higher than that of Moroccan banks…
“Africa has gotten off on the wrong foot,” Amadou Diop, the Senegal-born founder of the digital strategy firm MNS Consulting, says on the topic of digital sovereignty. His company has been hammering out a plan for several months now to address the issue, and Diop paints an alarming picture of Africa’s shortcomings on the digital front.
The critical infrastructure – namely, submarine cables, terrestrial fibre-optic networks and data centres – needed to ensure the continent’s connectivity and the growth of a full-fledged digital economy is either partly or wholly owned by Africa’s top five telco operators: MTN, Orange, Airtel, Vodacom and Etisalat.
“These five players cover 57% of African subscribers and, aside from MTN, not a one is fully African owned,” Diop adds. Educated as a telecommunications engineer at the French technological university IMT Atlantique, the entrepreneur also holds an MBA from ESSEC Business School.
As for upcoming projects that even more powerful actors, such as Elon Musk’s satellite internet constellation Starlink and Facebook’s numerous initiatives across the continent, including the 2Africa submarine cable, are undertaking, Diop had this to say: “We run the risk of seeing multinational firms come on the scene that will no longer need a national regulator’s approval to tap into a customer base in whatever location they want.”
Creating national civil registries
That said, Diop, who formerly worked for Orange and Altran (now Capgemini Engineering), does not think “all is lost”. If that is indeed the case, what decisions should governments prioritise to stem the tide of their declining sovereignty?
“The key issue at hand is digital identity and the creation of national civil registries. An essential aspect of a country’s sovereignty is knowing its own citizens,” says Jean-Michel Huet, a partner at the consulting firm BearingPoint. “But right now in some countries, the GAFAM [Google, Amazon, Facebook, Apple and Microsoft] companies have a better picture of the digital identity of their customers than governments do of their citizens.”
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When governments gather information, such as data on people’s health or religious beliefs, it is rarely hosted on servers located within the country’s borders. “More often than not, this sensitive data is not even stored on servers in Africa, but instead in places like Ireland,” says Lacina Koné, director general of Smart Africa, an alliance working to develop the digital economy on the continent.
While many providers, including Huawei, Dell, Rack Centre and Econet, offer data storage services to public-sector organisations, few countries currently have even just one national data centre. Africa is home to around 1% of the world’s data centres and hosting costs are often higher than the rates practiced by European or US companies.
Going their own route
“On the technical side, we can build data centres that meet the needs of governments and then perform knowledge transfers so that the infrastructure can be independently operated. If there is a political will, there is a way, and the infrastructure can be tailored to their requirements. But for now, we tend to work more with private operators than governments,” says Philippe Wang, Huawei’s vice-president of public affairs and communication for North Africa.
Since it was adopted in 2014, the African Union (AU) Convention on Cyber Security and Personal Data Protection, also known as the Malabo Convention, has only been signed by 12 countries and ratified by just six (Ghana, Guinea, Mauritius, Namibia, Rwanda and Senegal).
Other organisations have opted to go their own route. For example, the Economic Community of West African States (ECOWAS) adopted the Supplementary Act on Personal Data Protection in 2010, while the Southern African Development Community established a model law for the harmonisation of information and communications technology policies in 2012.
In addition, national governments have passed a slew of initiatives. According to statistics provided by Smart Africa, just 55% of African countries have enacted legislation to protect personal data.
Document to make its way to the AU
The most pressing problem to tackle: figuring out a way to carve out a harmonised framework from these various documents, while taking into account international and industrial standards.
And that is precisely what Smart Africa, with 35 member countries in its ranks, is trying to do: “A document will be ready by this December and will be sent to the AU at that time,” says Koné, who heads a working group in which a number of foreign companies participate, such as Intel, Facebook, Huawei, Microsoft and the Omidyar Network, an investment firm created by the founder of eBay, Pierre Omidyar.
The working group’s African partners include eight regulatory institutions, AU Commission representatives and the Réseau Africain des Autorités de Protection des Données Personnelles, an African network of personal-data-protection authorities.
“The way I see it, digital sovereignty should be looked at from a value-chain perspective,” Diop says. In addition to adopting a so-called Digital Act under which global companies would be obliged to fund investments in Africa’s data hosting capabilities, governments should, in his view, put their heads together to create an environment where Africans can be stakeholders in businesses that develop digital services.
Sovereign wealth funds and state investment arms
“We have the mechanisms to make this happen. Sovereign wealth funds, regional funds, state investment bodies and regional banks and stock exchanges could ensure the financing of certain start-up ecosystems,” says Diop.
As for the internet giants, governments could leverage tax policy as a way to loosen Big Tech’s grip on the digital economy. The African Tax Administration Forum, which has 38 member countries on the continent, is currently working alongside the Organisation for Economic Cooperation and Development (OECD) to devise a digital-service tax.
The proposed legislation involves taxing a percentage of online platforms’ revenues or profits and then redistributing it to member countries. Regarding this point, Diop says that “the AU needs to negotiate the share to be allotted to Africa”.
Unwilling to wait for the proposal’s enactment, Kenya and Tanzania decided to move forward with their own initiatives. Kenya’s digital-service tax, which took effect on 1 January of this year, levies a 1.5% charge on the gross transaction value of digital services provided by foreign enterprises. The measure could possibly raise $45m in revenue in the first half of 2021.
Tanzanian officials are mulling the idea of imposing a tax on messaging apps such as WhatsApp, Signal and Telegram. Such a measure would help it recoup the revenue the government has lost out on due to lower international voice traffic.
Failure of universal service funds
“The tech giants don’t want Africa to adopt the kind of radical position that the OECD did. But Smart Africa’s member countries agree that it’s time for these platforms to contribute their fair share by paying a data tax. It isn’t a question of if, but when,” says Smart Africa’s Koné.
A challenge will be ensuring that future tax revenues are reinvested wisely so as to avoid a repeat of the failure of universal service funds. Financed over the years by telecommunications service providers to expand network infrastructure in rural areas, they continue to be underused due to poor governance.
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