Op-Ed: As COVID-19 presents Africa with conflicting choices between relief for today and investing for tomorrow, here’s why it needs to consider digitization

PUBLISHED: Fri, 05 Jun 2020 18:30:25 GMT

By His Excellency Dr. Eyob Tekalgn Tolina and Dr. Ruth Goodwin-Groen

As the COVID-19 crisis widens, and the economic outlook darkens, governments across Africa will face what seems like conflicting choices between relief today and investing for tomorrow. The one exception? Digital payments. They can save lives and livelihoods on a massive scale. Yet, once the infrastructure is there and adoption expands, the vast benefits that drive inclusive growth last well past a crisis. Now is the time to seize them.

Put simply, this is because how government support is delivered matters every bit as much as what it consists of. This is equally so whether delivering economic life-support, fiscal shock-treatment, or rehabilitation measures for a sustained recovery.

Investing in digitization will deliver huge dividends on three fronts.

First, better digital infrastructure will enable future rounds of support to people and businesses to flow with much greater speed, accuracy, efficiency, transparency and safety in the age of COVID-19.  Governments that invest in digital infrastructure will have a powerful weapon in their arsenal: the ability to deliver financial support directly to businesses and individuals who need it most – in a matter of days, not weeks or months. For countless millions, this is literally a matter of survival.

It’s equally vital that people can also spend funds digitally, and thus minimize in-person cash transactions. As governments take extraordinary steps to limit proximity between people, this must be high on the list. 

Second, there is now a vast body of evidence showing that digitizing payments drives economic inclusion, tax revenues and productivity.  All three are vital for returning to sustained economic growth, and the wider Sustainable Development agenda.

New data soon to be released by the United Nations-based Better Than Cash Alliance shows that digitizing tax payments can deliver an additional US $300 billion every year for emerging economies.  This equals almost one third of the US $1 trillion funding gap that is pushing the Sustainable Development Goals (SDGs) off track.

Third, digital infrastructure is a powerful springboard that can help emerging economies take a giant leap forward towards the modern economies that people deserve as much as those in the developed world.  Notably, in the recovery as in brighter economic times, bringing more women into the formal economy is a crucial driver of living standards, opportunity and growth. As with all of the SDGs, gender equality is more than a moral imperative; it is economically essential. Here, digitizing payments have a track record as impressive as any other driver of women’s economic empowerment. 

There are some guiding principles that enjoy near-unanimous support among experts in this field.

Measures to digitize payments – including vital infrastructure – must be responsible.  Payment recipients need their data, privacy and security protected and trusted systems to address grievances and ensure that the payments help them become more resilient. This applies even more in times of crisis.

Investments should also take into account the needs of different users, so that they are practical in times of crisis, and drive more flow-on economic activity in better times. For example, in many markets, digital infrastructure will serve women better when accompanied by measures to improve their access to ID and digital technology, and to prevent financial discrimination. 

Emerging countries may be extremely vulnerable in this pandemic, but also extremely well positioned to shift digitization efforts into top gear. Before the pandemic, Ethiopia had already made great progress on its digitization roadmap. The early efforts to put in place the foundations for a digital economy are already paying off, encouraging startups to lead in launching digital payments and markets to promote social distancing. These are promising initiatives that will not only help to cope with the pandemic but also prepare us for the post-COVID-19 global economy. But – like many emerging economies – it can’t be done alone.

As the UN Secretary-General has urged: COVID-19 is a body-blow to our common humanity; humanity must unite to fend it off and recover.  Success will depend on three factors: urgency, cooperation and taking collaboration between policymakers, the private sector and the development community to a new level. But this is all more likely when government and civil servants lead the way.

His Excellency Dr. Eyob Tekalgn Tolina is State Minister of Ethiopia’s Ministry of Finance and Dr. Ruth Goodwin-Groen is the Managing Director of the United Nations-based Better Than Cash Alliance, a global partnership of governments, including Ethiopia, companies and international organizations committed to digitizing payments to advance the Sustainable Development Goals.

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