Determinants of Digital Transformation in Sub-Saharan Africa: Some Fiscal Policy Implications

Abstract

The study examines the determinants of digital transformation by using panel data of 35 countries in sub-Sahara Africa (SSA) for the period 2014–2021. Based on the fixed effect model, the findings established network coverage, ownership of mobile phones, adult literacy rate, and income were positive and significant determinants of internet use in SSA. The empirical findings suggest governments in SSA countries should nurture potential of the internet in the drive to inclusive economic growth and development, as well as digital transformation. To that effect, they should promote investment in internet infrastructure, digital literacy, and refrain from taking actions that would undermine the transformative potential of digital technologies. In relation, the SSA governments could, among others, suspend value-added tax (VAT) on low-end smartphones to render them affordable for low-income earners; and, establish a Universal Service Fund for subsidizing access to lower-cost smartphones in rural areas that are newly connected to 3G and 4G networks; and pay for a subsidized public Wi-Fi hotspot. The SSA government, individually or under the public-private partnership (PPP), could get involved in parts of the value chain of smartphones – including marketing, distribution, and retail.