Joburg’s digital economy – a boom or a bust?

by | Dec 23, 2023

Thirty-seven percent of South Africa’s population is missing out on the progress of a digital economy because they do not have an internet connection.

There is a digital skills gap in South Africa resulting in the outsourcing of over 300 000 jobs and the loss of R8,5 billion in export revenue each year. This is according to Derek Davey.

South Africa is one of Africa’s top five economic hubs according to Ventures Africa, but does the City of Johannesburg (CoJ) have what it takes to bridge the digital skills divide and become one of the continent’s leading tech hubs with a thriving digital economy?

Before we can dive into this question, we first need to understand what the digital economy is about.

What is the digital economy and why is it so important?

According to Bukht and Heeks, the term digital economy simply refers to the effect that digital technologies have on economic activities. These digital technologies include but are not limited to, digital infrastructure and media platforms. Within the digital economy, people produce and consume goods and services obtained from these digital technologies.

Head of Digital Skills at Wits University’s Tshimologong Precinct, Carol Jaji, describes people as being “users embedded at the core of bringing together economic activities.”

The digital economy, which is mainly supported by information and communication technologies (ICTs) – defined as “a diverse set of technological tools and resources used to transmit, store, create, share or exchange information” by Unesco – is the driving force behind economic growth in both developing and developed countries.

A study conducted by the World Economic Forum in 2015 found that emerging markets are experiencing a growth of 15 to 25% yearly in the digital economy. Furthermore, the WEF’s 2023 Digital Transformation Framework states that digitally enabled technologies and business models will carry approximately 70% of the world’s economy over the next ten years. It is therefore essential that all economic hubs worldwide adapt to the digital transformation, considering its potential to offer a new form of economic growth and employment opportunities.

The key to a thriving digital economy

There are five pillars proposed by the World Bank that can help countries benefit from digitalisation, and be fully engaged in the digital economy according to a report compiled by the Brookings Institution on the digital divide in Africa.

The first pillar is about access to the digital infrastructure needed so that people can engage in digital activities. For the digital economy to succeed, there needs to be high-quality and affordable internet connectivity.

Approximately 37 % of SA’s population have no access to the internet according to the IOL. Furthermore, a survey conducted by the 2023 Digital Quality of Life Index on 121 countries making up 92 % of the world’s population ranks South Africa 63rd in internet quality and 52nd in internet affordability. This shows that the country still has a long way to go before it can achieve the high-quality and affordable internet connectivity needed for the success of a digital economy.

The second one relates to digital entrepreneurship which shows the strength of the digital economy through entrepreneurs’ ability to easily find new products and work opportunities in the digital sector. This is determined by the access to venture capital and credit.

In the past five years, the South Africa Investment Conference (SAIC), companies have pledged a total of R200 billion in the country’s digital services and ICT sectors. In addition, the National Skills Fund (NSF) will allocate R800 million to fund digital skills training for unemployed youth. This was announced in one of President Cyril Ramaphosa’s weekly newsletters.

Digital finance is the third component of digitalisation. It measures people’s access to financial services that enable them to conduct digital transactions thus enhancing financial inclusion. 

The fourth determining factor is access to digital public platforms where the government can digitally provide public services and engage with citizens.

Lastly, there is the digital skills component which looks into the skills and education capacity necessary for an active digital ecosystem. Countries need to prioritise equipping their people with digital skills because digital technologies can only be useful if people are taught how to use digital infrastructure and platforms. A digitally competent workforce and government will not only allow the digital economy to flourish but will also enable an efficient transition into digitalisation.

How is the city promoting the growth of the digital economy?

According to the Department of Economic Development, it “ has two main areas of responsibility; it is tasked with ensuring that the right environmental framework and initiatives are put in place to foster economic growth and job creation in the province. Secondly, it is responsible for ensuring that sound financial management policies and structures are in place.”

Various policies and strategies have been implemented through the work of the department’s units, activities and programmes to achieve this.

As one of the department’s key performance areas, the Sustainable Employment Facilitation (SEF) directorate aims to decrease youth unemployment by providing skills development training programmes for youth with various skill levels. To facilitate these programmes, the department has entered into partnerships with private and public companies, other government departments, and educational institutions.

The SEF directorate states that the skills development training programmes subunit aims to:

  • Obtain internal and external funding sources
  • Have precise training records and constantly check training progress
  • Make sure that they look for the appropriate training providers
  • Track the city’s training interventions and compile annual reports from the COO’s office training and development forum
  • Have a database registration for opportunity seekers that can connect unemployed individuals to public and private companies

Wits Vuvuzela tried contacting the department of economic development to access the data on the progress of the policies mentioned above but did not receive a response by the time of publication.

In an attempt to keep up with the rapidly growing digital economy, the city has partnered with organisations such as WeThinkCode and MTN to offer various digital literacy and e-learning programmes designed to train the youth in digital skills.

How do these partnerships in digital skills programmes work?

Since its establishment in 2015, WeThinkCode has had 500 graduates, with 93 % of whom have found full-time employment. MTN on the other hand, has enrolled 900 unemployed youth throughout the country into its “Digital Skills for Digital Jobs” programme.

“Our ‘Digital Skills for Digital Jobs’ programme will enhance the link between digital skills training and demand for jobs”, says Nompilo Morafo, who is the Chief Sustainability and Corporate Affairs Officer at MTN.

What datasets are available that can be used to measure the success of the digital economy in the city?

Given its growing penetration into the city’s economic activity, measuring the digital economy has become an essential process, which is unfortunately flawed considering the lack of available data sets. There is not a lot of data on the country’s digital economy (let alone of Johannesburg) and the little that is available is not of the best quality. The city’s directorates acknowledge the growth of the digital economy but the exact size is not clearly outlined.

However, considering the evident gap in the digital sector and the pace at which digital skills training programmes are being facilitated, it is clear that more partnerships need to be formed as the government cannot tackle the 60% youth unemployment rate on its own.

FEATURED IMAGE: WeThinkCode software engineering student, Mario Antonio, coding on his laptop. Photo: Nonhlanhla Mathebula

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