In the words of Albert Einstein, “we cannot solve our problems with the same thinking we used when we created them.” This sentiment rings truer than ever in the context of today’s rapidly evolving economic landscape. As the world hurtles towards an increasingly digital future, the way we approach economic growth, innovation, and sustainability must undergo a profound transformation. Welcome to the era of digitalization: the economy of tomorrow.
The evolution of digitalization traces back to the foundations laid by previous industrial revolutions, each driving significant changes in economies and societies. The fourth industrial revolution, Industry 4.0, signifies a convergence of digital, physical, and biological systems, powered by technologies like artificial intelligence and the Internet of Things. Digitalization, a key aspect of this revolution, integrates digital technologies into all facets of life and business, revolutionizing industries globally.
Digitalization’s impact extends beyond economic growth, driving innovation and fostering inclusivity. By streamlining operations and tapping into new markets, digital technologies fuel entrepreneurship and wealth creation. Examples include e-commerce platforms like Amazon and Alibaba, democratizing access to global markets. Moreover, digitalization promotes inclusivity by expanding access to essential services like education and finance. Mobile banking services like M-Pesa in Kenya empower millions by providing access to financial services previously out of reach.
Moreover, digitalization holds the key to addressing some of the most pressing challenges facing humanity, from climate change and resource depletion to urbanization and healthcare. By harnessing the power of data and technology, we can develop more efficient and sustainable solutions to these complex issues. For example, smart cities leverage IoT sensors and data analytics to optimize energy usage, reduce traffic congestion, and enhance public safety, thereby improving the quality of life for residents while minimizing environmental impact.
Digitalization snapshot around the world
As the global economy rapidly embraces digitalization, the World Economic Forum (2024) suggests that around 70% of new value created in the next decade will stem from digitally-enabled platform business models. This shift is expected to have a profound impact on both micro and macroeconomic indicators. Concurrently, artificial intelligence in the healthcare market, valued at USD 19.45 billion in 2022, is forecasted to surge to USD 280.77 billion by 2032. This exponential growth underscores the transformative potential of AI in reshaping healthcare delivery.
Digitalization serves as the economic backbone for many nations worldwide. Estonia shines as a model, with its digital transformation fostering efficiency and reducing administrative costs through e-government services and digital signatures. Silicon Valley exemplifies digitalization’s impact, driving innovation and economic growth through tech startups and venture capital funding. Kenya’s M-Pesa platform revolutionized financial services, promoting inclusion and empowerment by enabling mobile-based transactions. India’s embrace of digitalization has propelled its shift to a knowledge-based economy, attracting foreign investment and driving innovation. Singapore’s Smart Nation initiative utilizes digitalization to enhance urban living and sustainability, integrating intelligent transportation and digital healthcare services into its vision for a sustainable future. These examples highlight the transformative power of digitalization in shaping economies and societies globally.
Ghana: leveraging on digitalization for economic transformation
Heraclitus’ enduring wisdom, “No man ever steps in the same river twice,” highlights the ever-evolving nature of our economic and technological realms, where innovation continuously shapes the future. The post-COVID-19 world has ushered in new opportunities for economies, presenting Ghana with a choice: to lead or lag. Historically, Africa has often been late to embrace technological revolutions, but Ghana is poised to break this trend by proactively pursuing digitalization initiatives. In 2023, the World Bank published 10 facts about Ghana’s digitalization agenda and suggested that the general internet penetration surged from 8% in 2010 to 69% in 2021. However, the urban centers saw a rise from 13% to 80%. The high internet penetration is facilitating the burgeoning e-commerce business in the country, placing Ghana among the top 10 e-commerce hubs in Africa according to the UNCTAD. The booming e-commerce sector in the country is reducing the cost of doing business in Ghana, especially for start-ups, and hopefully, Ghana’s version of Amazon and Alibaba may emerge soon.
The World Bank report further highlights the quantum leap in fintech penetration from less than 1% in 2012 to 67% in 2021 and it is largely backed by mobile money (MoMo) activities1. Pragmatic efforts by the Government of Ghana in the last seven years like the mobile money interoperability have skyrocketed MoMo transaction volume from GHS78.5 billion in 2016 to GHS1.9 trillion in 2023 according to the Bank of Ghana. The expansion in fintech activities has paved the way for local innovative start-ups like Zeepay, Payup, and a host of others.
The Ghanaian government has made significant progress in modernizing critical sectors through digitalization, leading to improved efficiency and revenue generation. For example, the Passport Office has adopted digital technology to reduce turnaround times, with revenue increasing from GH¢1 million in 2017 to GH¢56 million in 2021, as reported by Myjoyonline. Furthermore, the implementation of a paperless system in ports has streamlined processes and reduced delays and corruption, resulting in increased revenue mobilization. Similarly, the Driver and Vehicle Licensing Authority (DVLA) has shifted to fully digital services, and the establishment of a Motor Insurance Database enables individuals to conveniently check their insurance status via the USSD code.
Harnessing the Power of Data: Ghana’s Strategy to Expand its Tax Base
In the digital age, data reigns supreme, making it a pivotal asset in driving economic growth and development. Recognizing this, the Ghanaian government has embarked on an ambitious journey to leverage data collection as a catalyst for broadening the country’s tax base, thereby bolstering revenue generation.
At the heart of this endeavor lies the recognition that big data is a game-changer in the fourth industrial revolution. By harnessing the vast troves of data available, Ghana aims to revolutionize its tax administration and revenue collection processes.
To kickstart this initiative, the government implemented biometric national ID cards known as the Ghanacard. With over 17 million individuals enrolled in the system, the Ghanacard has significantly reduced incidents of identity fraud, providing a reliable means of identifying taxpayers and ensuring transparency in the tax system. Additionally, Ghana has established a digital address system for every property using GPS technology. This innovative approach not only enhances navigation and location accuracy but also facilitates seamless identification and assessment of taxable properties, further contributing to the expansion of the tax base.
In essence, by harnessing the power of data through initiatives like the Ghanacard and digital address system, Ghana is paving the way for a more inclusive and efficient tax regime, poised to drive sustainable economic growth and development in the years to come.
Addressing the Digital Divide in Ghana
As Ghana embarks on its digital transformation journey, it must confront the challenge of bridging the digital divide. While digitalization holds immense promise for empowerment and economic growth, it also poses risks of exacerbating inequality. One of the key concerns is the unequal distribution of digital access. In many parts of the country, particularly in the northern belt, internet usage rates are below 50%, significantly lower than the middle belt and coastal regions where rates range between 50% and 92%1. This disparity underscores the need for concerted efforts to ensure equitable access to affordable digital infrastructure across all regions.
Moreover, gender disparities in internet usage persist, with men being 7 percentage points more likely to use the internet than women1. This highlights the importance of targeted interventions to bridge the gender gap and empower women with the digital skills necessary to participate fully in the digital economy.
In essence, while digitalization holds the potential to drive inclusive growth and development, addressing the digital divide is essential to ensure that no one is left behind in Ghana’s journey towards a digitally-enabled future.
Dr. Eric Boachie Yiadom
Senior Lecturer
Banking and Finance Department
University of Professional Studies, Accra
Lead Consultant (GreenVista)
linkedin.com/in/eric-boachie-yiadom-phd-b724a5175
