Artificial intelligence (AI) could contribute up to USD 15.7 trillion to the global economy by 2030, according to the World Economic Forum. The AI market in Africa, on the other hand, is expected to reach USD 870 million in 2021 and only moderate growth is anticipated through 2024.
Some argue that the Global South will continue to benefit less from AI than the North. The growth of AI in Africa has been hampered by bottlenecks, according to Oxford Insights, including the need for governments to provide the right regulatory environment, adequate data infrastructure, and an innovative vision for state-level implementation.
However, progress is being made in key areas to harness the power of AI in the continent, and it is clear that AI adds invaluable value to many African industries (such as fintech and agritech). Africa is well-positioned to gain significantly from AI, not only economically but also socio-environmentally, thanks to the continued development of dependable and extensive internet infrastructure and progressive AI policies.
Machines can function with high levels of intelligence thanks to a constellation of technologies called artificial intelligence (AI), to the point where they can even imitate human abilities. The machine’s capacity is further enhanced by its capacity to evolve over time and learn from experience. Because of this, AI applications are numerous and adaptable, and they all need a reliable internet connection to process data and produce useful results.
With only 16% of the population using the internet in 2013, Africa has historically had underdeveloped internet infrastructure. Southern and Northern Africa, on the other hand, will have internet penetration rates higher than the global average of 62.5% by 2022 (at 66% and 63%, respectively). Another important area of growth for AI in Africa is regulatory, where digital health is a key pillar in the African Union Digital Transformation Strategy.
A strong national AI framework is essential for implementing progressive policy at the national level, as is the case in Mauritius, which the World Intellectual Property Organization Index named Africa’s most innovative country in 2022 and which also has a strong national infrastructure.
In order to manage science and innovation, a number of state organizations have been established in South Africa, including the Technology Innovation Agency and the National Intellectual Property Management Office (NIMPO). These groups support and safeguard the knowledge economy. Spending on AI is expected to grow at a record 36.3% compound annual growth rate (CAGR), from USD 74.7 million in 2019 to USD 651.4 million in 2025.
As a result, the continent is home to both of the factors that are necessary for AI to flourish: strict regulation and expanding internet infrastructure. Agribusiness and financial services, particularly fintech, are the two major sectors in Africa that stand to gain the most from AI, despite the fact that it can be used in many different industries.
In the last five years, the number of fintech startups in Africa has increased significantly, rising from 301 in 2017 to 576 in 2021. Funding has increased as a result of the sector’s expansion, as is evident between 2019 and 2021, when annual fintech funding increased from USD 107 million in 2019 to over USD 1 billion in 2021.
Fintech startups in Africa are predicted to generate $30 billion in revenue by 2025, with some firms reporting revenues of $4 billion to $5 billion, on par with market leaders worldwide. Assisting the unbanked (45% of sub-Saharan Africans are unbanked), these startups have a positive socioeconomic impact by expanding financial inclusion.
For a variety of reasons, AI is crucial to the fintech sector. On one level, AI could be used exclusively for the creation of application code. In 2022, 52% of Africans between the ages of 18 and 24 polled by the BBC stated that they have firm plans to leave the continent. This significant brain drain exposes industries like software development to underdevelopment and a lack of innovation. AI can help with app development and the development of low-code technology, a growing trend in the fintech industry that is predicted to account for 70% of app code by 2025.
Furthermore, it might help keep talented employees in the workforce. The functionality of an app can also use AI to run programs more quickly and efficiently. Fraud detection, risk assessment, and customer credit rating evaluation are some of the major uses of AI in the financial industry.
A notable example is JuicyScore, a fintech company based in Nigeria that uses AI to support credit decision-making with alternative and non-personalized data. Nokwary, a Ghanaian company that used AI to enable payments to be made in a variety of languages, is another illustration. It was the winner of the Ecobank Group’s 2020 Fintech Challenge. 32 AI fintech startups are currently operating in South Africa, including Jumo, a smart financial services platform that supports accessible banking in Africa and has received USD 305 million in funding.
In the agricultural industry, AI can be useful outside of the fintech industry by identifying pests, diseases, and nutritional deficiencies on farms. Implementing internet of things (IoT) solutions in agritech stimulates agrarian sector outputs, improves food security, and generates economic gains.
Farmers can become better informed and can prevent crop damage thanks to AI’s efficient analysis of recent and historical data. The adoption of AI in this industry is largely supported by farmers; Digital for Agriculture (D4Ag) currently has over 33 million farmer registrations and is expected to reach 200 million by 2030.
With a population that is expected to grow to 2.4 billion people by 2050, food security in Africa is crucial. Time is of the essence to improve food security in Africa given the growing effects of climate change and the supply chain shock caused by the conflict in Ukraine. Even though AI solutions can be pricey, there are many options that are both affordable and efficient, such as apps that use AI to predict market prices, translators, and data processors that are all focused on boosting food production in Africa. A good example is the Sowing App, which indicates the best time to plant each crop based on weather patterns.
The potential contribution of Africa’s digital economy to the global economy by 2025 has been estimated in a report co-authored by Google and the International Finance Corporation (IFC). The effects of an AI Divide will be the continued marginalization of continents in the Global South and the reaffirmation of their position on the periphery of the world. The fourth industrial revolution (4iR) and its associated technologies, such as AI, are being incorporated into African infrastructure that is still being built and developed. Making sure that the North/South divide does not permeate the 4iR and beyond requires continued funding recognition of the growth potential in Africa.
