Why TZ fails to gain from digital wealth

Monday January 25 2016


By The Citizen Reporters ___ @TheCitizenTZ

Dar es Salaam. In 1995, less than one per cent of Tanzanians had direct access to telephones.

By 2014, more than 70 per cent of Tanzanian households had direct access to a mobile phone and a significant part connected to the internet.

One would have thought that the spread of the internet and the wide use of mobile phones would have made the 2010’s Tanzanian society economically better off than that of 1990 due to the attendant benefits associated with digital technologies. Right? Not necessarily!

A new World Bank report says while developed economies have immensely benefited from digital technologies, Tanzania and many other developing countries have not.

In many cases, there have been a decline in progress in areas that digital technologies were supposed to have helped improve: job creation in ICT sectors, increase of high skilled and middle skilled jobs, innovation, efficient and productive businesses as well as wealth creation through the new digital economy and government openness and accountability. The decline in these areas was not caused by digital technologies but has happened in spite of them.

Entitled The World Development Report 2016: Digital Dividends, the study expounds a story of contradiction, but not intrigue, about a technology, which despite spreading quickly and covering nearly the entire world in a short period, and in spite of its huge potential to transform the way human beings live, it has not reduced the gap between the rich, skilled societies and the poor, unskilled ones.


“More households in developing countries own a mobile phone than have access to electricity or clean water, and nearly 70 per cent of the bottom fifth of the population in developing countries own a mobile phone,” the report released last week says.

“The number of internet users has more than tripled from one billion in 2005 to an estimated 3.2 billion at the end of 2015, meaning that businesses, people, and governments are more connected than ever before,” it adds.

But the massive investments in information and communication technologies (ICTs) have not generated faster economic growth specifically in poor, developing countries. They have not led to more jobs, and better services.

And despite the fact that the spread of ICTs have helped to bridge the digital gap between the rich and poor countries, they have not done much in bridging the digital dividends, which are the benefits that people get from using digital technologies.

Why failure to benefit from the digital technologies?

“The poor almost exclusively use only mobile phones not connected to the internet. And even if they had access to the internet, they lack the skills to use it productively, with many still unable to read in the first place. Positive impacts from using digital technologies are most likely to be captured by those already better off,” the report says.

The report warns that part of the reasons that digital dividends have not spread despite the widespread use of the technologies is because public sector investments in digital technologies are done in a way that they amplify the voice of elites, which, in turn, results in policy capture and greater state control.

“… economics of the internet favor natural monopolies… the absence of a competitive business environment [therefore results] in more concentrated markets, benefiting incumbent firms. …the better educated, well connected, and more capable have received most of the benefits—circumscribing the gains from the digital revolution,” the report says.


How Tanzania has adopted digital technologies

There were 88,000 fixed telephone and 2,198 mobile phone subscribers in 1995 in Tanzania when the population was 29.1 million, according to the Tanzania Communications Regularity Authority (TCRA). While the subscription of fixed telephones remained more or less constant that of mobile phones rose steadily to reach 3 million ten years later.

By 2014, there were 34 million mobile phone subscriptions with a population of 47.4 million, which was equivalent to 71 per cent penetration. In addition, there were 16.5 million mobile money subscribers by September 2015, TCRA says. Internet subscription had also reached 1.93 million in the same period. These included internet cafes (664), institutions (4,003) and individuals (1,929,125).

But according to TCRA, the one million internet subscriptions enabled 11.4 million people to access the internet in 2014. The widespread use of mobile phones and the internet in the country eased communications and access of information. It has also revolutionized money transfer and payments.

But Tanzanian companies have been so slow to adopt the technologies to increase industrial productivity and efficiency which could translate into increased jobs and individual incomes, the report says.

Only about 22 per cent of businesses with more than five employees used the internet in their operations in Tanzania in 2014 compared to 73 per cent in Kenya, the World Bank report says.

As far as the manufacturing sector is concerned, only 8.5 per cent of surveyed firms were found to use the internet to manage inventory compared to about six per cent in Uganda, 26 per cent in Zambia and 41 per cent in Kenya.

Seven per cent of firms in the sector used the internet to their products online compared to 6 per cent in Uganda, 25 per cent in Zambia and 35.5 per cent in Kenya. Firms using the internet for marketing were 6 per cent in Tanzania, 5.5 in Uganda, 35 per cent in Zambia and 40.5 in Kenya.

In the service sector, 7 per cent of the companies used the internet to manage inventory compared to11.5 per cent in Uganda, 15 per cent in Zambia and 35 per cent in Kenya. About 5.5 per cent of companies in the sector used the internet to sell online compared to 9.5 per cent in Uganda, 16 per cent in Zambia and 40.2 in Kenya. About 5.5 per cent of service companies in Tanzania used the internet to conduct their marketing activities, compared to 10.5 in Uganda, 22.5 per cent in Zambia and 47.5 per cent in Kenya.

“The usage of internet by firms shows the adoption of digital technologies differ among developing countries and among companies in the same sector,” the report says.

Tanzania has also not been very successful in using digital technologies to boost employment. Between 1995 and 2012, the share of middle skilled and high skilled jobs decreased by 0.5 and 0.4 per cent respectively, while that of low skilled jobs increased by 0.8 per cent.

In Uganda, by contrast, high skilled jobs increased by 0.4 per cent, middle skilled jobs increased by 0.5 per cent and low skilled jobs increase by 0.2 per cent.

High-skilled occupations include managers, professionals, and technicians and associate professionals. Middle-skilled occupations comprise clerks, plant and machine operators and assemblers. Low-skilled occupations refer to service and sales workers and elementary occupations.

The effect of this trend is that it has ushered in a heightened competition for low-skilled jobs. “The concern is that the ladder to the middle class is pulled away as middle-skilled jobs disappear or are fundamentally transformed by digital technologies,” the report says.

The report also says ICT specialists (ICT occupations) constitute only 0.9 per cent of workers in the workforce in Tanzania compared to 0.5 per cent in Kenya. Tanzania has, however, a negligible ICT sector (ICT manufacturing industries and ICT trade industries) while in Kenya 0.5 per cent of the workforce are employed in the ICT sector. Nigeria and Ghana, according to the World Bank report, has negligible ICT sector employments and have ICT specialists constituting 0.8 and 0.5 per cent of the workforce, respectively.


Experts react to report’s findings

Prof Honest Ngowi from the Mzumbe University agrees with the main findings of the report: “Much as I agree that there is a huge increase in the use of the internet and mobile phones – even in the rural areas - I think there is something wrong with the way we use them.

Many people use them mainly for social networking and for entertainment. There is little emphasis in the use of ICT for self-realisation and for developmental issues.” Prof Ngowi says the role played by mobile money systems to increase financial inclusion in Tanzania is commendable.

Tanzanians’ access to financial services - which includes the use of banks and non-bank formal services – increased from 15.8 per cent in 2009 to 57.4 per cent in 2013, according to a 2013 Finscope study on Tanzania. The increase which even surpassed the Bank of Tanzania’s target of 50 per cent by 2016 was powered by the use of mobile money services.

Prof Ngowi, however, calls for more awareness on the use of ICT as well as increased access to mobile phones and the internet at affordable cost. Prof Semboja Haji, from the University of Dar es Salaam’s Economics Department , says the growth of rapid digital technologies in poor countries like Tanzania was not accompanied with the growth of the infrastructure and improvement of the business environment.

“Despite the growth of technologies being a global phenomenon, it is designed to suit the developed economies which already have the infrastructure and the know-how to deploy the technologies. That is why they benefit more than the developing countries and for that reason you can notice a difference between Tanzania and Kenya in the way they benefit from ICTs,” says Prof Semboja.

He adds that policy priorities vary in different countries, an issue that also influenced the level of ICT benefits to a particular economy. Tanzania was still mostly a consumer of the digital technologies. “I expected the current government to use the internet more in its daily operations. Banning foreign trips, for example, should have necessitated the use of teleconference. We need to learn from other countries,” he notes.


Missed opportunities

The report says that the opportunities that Tanzania and other developing countries miss include creating employment using business processing outsourcing (BPO). Few countries, mainly India, China, Philippines and South Africa have benefited from the BPO. “The BPO industry in India employs more than 3.1 million workers, 30 per cent of them women. In the Philippines, it employs 2.3 percent of the workforce,” the report adds.

Tanzania has also missed the opportunity of using technology hubs to increase employment, foster innovation and help find technological solutions to various socio-economic problems. By 2014, Tanzania had only four hubs-Kino Innovation and Co-creation Space, TANZICT, Dar Teknohama Business Incubator, Buni hub- while Kenya had 11, Rwanda had 3, Uganda had 5 and South Africa had 23.


What should be done to increase benefits of digital technologies

“To maximize the digital dividends requires better understanding of how technology interacts with other factors that are important for development,” the report says.

“Technology can make workers more productive, but not when they lack the know-how to use it. Digital technologies can help monitor teacher attendance and improve learning outcomes, but not when the education system lacks accountability,” it adds. Making the internet universally accessible and affordable a top priority can be achieved through a mix of market competition, public-private partnerships, and effective regulation of the internet and telecom sector.

“For every person connected to high-speed broadband, five are not. Worldwide, some 4 billion people do not have any internet access, nearly 2 billion do not use a mobile phone, and almost half a billion live outside areas with a mobile signal,” the report says.

Developing nations need to foster regulation, so that firms can leverage the internet to compete and innovate, improved skills, so that people can take full advantage of digital opportunities and consolidate accountable institutions, so that governments can respond to citizens’ needs and demands.

Physical infrastructure such as ports, railways and roads must be improved to ensure the thriving of the digital economy.