Making the case for digital connectivity for MSME’s: How improved take up and usage of digital connectivity, in particular for ecommerce, supports development objectives (ITC)
7 Dec 2023 10:00h - 11:30h UTC
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Alex Wong
The affordability of digital connectivity poses a major obstacle for micro, small, and medium enterprises (MSMEs) in low and middle-income countries. Currently, the cost of connectivity in many of these nations surpasses the recommended threshold of 2% of Gross National Income (GNI). In fact, more than half of the 134 low and middle-income countries face costs higher than this threshold. For instance, in Africa, the cost of a 2GB data package can be around 4.5 times the recommended threshold. Even in rural areas, the expense of a data package can range from 10 to 50% of the monthly GNI.
To tackle this challenge, the Broadband Commission and the International Telecommunication Union (ITU) are actively working to enhance the affordability and accessibility of digital connectivity. The Broadband Commission has established an advocacy platform dedicated to resolving the issue of digital connectivity for MSMEs. Their recommendations include reducing taxes and import duties, establishing efficient local supply chains, and introducing innovative financing mechanisms.
A notable initiative, the Giga initiative, in collaboration with the ITU and other organizations, aims to map the connectivity status of every school worldwide. By utilizing schools as connectivity nodes, the goal is to create a global backhaul network that facilitates connectivity solutions. To make this approach sustainable, they are exploring the use of machine learning and satellite technology. Leveraging the ubiquity of schools and the strong political support for connecting them is a strategic move, as it is widely acknowledged that linking schools is paramount for providing quality education.
In addition to addressing connectivity costs, it is imperative to consider other factors in addressing the MSME challenge. Access, affordability, relevance, knowledge, and safety and security are crucial aspects that need to be tackled. Michael’s proposed framework highlights these points, emphasizing their significance in enabling sustainable MSME growth.
Lowering taxes and import duties on ICT equipment is another potential solution to stimulate business and economic potential. Currently, some governments impose the same tax rate on ICT equipment as luxury items, hindering progress in the digital sector. Reducing these taxes could encourage more businesses to adopt and leverage ICT tools.
Moreover, it is essential to have the support of government leaders who possess a deep understanding of the power of digital technology and can implement policies that foster its growth. Rwanda serves as a positive example, with its head of state recognizing the relevance of ICT in driving economic development and enacting supportive policies.
In conclusion, the affordability of digital connectivity remains a significant challenge for MSMEs, particularly in low and middle-income countries. The Broadband Commission and ITU, through their initiatives, are actively working towards making connectivity more affordable and accessible. Utilizing schools as connectivity nodes, reducing taxes on ICT equipment, and promoting supportive government policies are key strategies in lowering connectivity costs and enabling sustainable MSME growth.
Melle Tiel Groenestege
The analysis of the provided statements reveals several important insights regarding mobile internet adoption, digital inclusion, gender equality, and the role of governments and the mobile industry.
One concern highlighted in the analysis is the drop in the rate of mobile internet adoption in low-middle-income countries. This drop is especially significant as mobile is the primary way of accessing the internet in these regions. Additionally, there has been little progress in reducing the gender gap in mobile internet use over the past two years. This indicates a need for interventions and strategies to address the barriers to mobile internet adoption and promote gender equality in access.
On a positive note, the use of mobile technology has been shown to significantly increase profitability for micro-enterprises, as evidenced by a study conducted in Ghana. The study found that micro-enterprises that utilise mobile technology can increase their profitability by almost 50%. This underlines the important role that mobile technology plays in fostering economic growth and supporting the livelihoods of small businesses.
However, there is a significant lack of awareness and usage of digital platforms like e-commerce among micro-enterprises. Many micro-enterprises primarily use mobile technology for voice and text communication but are unaware of the opportunities offered by digital platforms. This highlights the need to address the awareness and usage of digital platforms among micro-enterprises to unlock their full potential for growth and innovation.
Gender-specific challenges also pose a significant obstacle to digital inclusion. These challenges include the lack of the right type of device and structural inequalities, such as restrictive social norms and dependency on men for mobility. Overcoming these challenges requires collective efforts, including men speaking out on gendered challenges and the global community setting ambitious targets, such as reducing the gender gap by half by 2030.
The mobile industry has a crucial role to play in addressing the gender divide. For example, an operator in Bangladesh faced a problem with targeted marketing campaigns when 80% of their registered female customers were actually men. This implies that the industry needs to take proactive measures to ensure accurate gender representation in their customer base and tailor their services accordingly.
To foster digital inclusion and address the lack of awareness and digital skills, initiatives like the GSMA’s mobile internet skills training toolkits have proven to be impactful. These toolkits have already reached and impacted 65 million people. This highlights the importance of providing accessible training and education to empower individuals with the necessary digital skills.
The analysis also sheds light on the role of governments in supporting the digital economy. One of the significant costs for mobile operators is spectrum prices, which tend to be much higher in developing countries. Additionally, taxation remains a major issue for operators. Governments can play a crucial role in addressing these challenges by reducing spectrum prices and implementing favourable tax policies. Furthermore, government support in digital skill development is essential for creating an enabling environment for the digital economy to thrive.
Despite the availability of mobile broadband networks, there is a significant usage gap in mobile internet use, particularly in sub-Saharan Africa. While 85% of the population in the region has access to mobile broadband, only 25% actually use it. This indicates that barriers to adoption, along with infrastructure, need to be addressed to bridge the usage gap and ensure that the benefits of mobile internet access are fully realised.
Additionally, micro-enterprises have a limited uptake of digital services. For example, only 1 to 10% of micro-enterprises utilise digital services like invoicing. This highlights the untapped potential and the need to increase the adoption of digital services by micro-enterprises to drive their growth and integration into the digital economy.
However, imposing strict data protection regulations on micro-enterprises may pose challenges. Micro-enterprises usually have a small number of employees and limited resources, making compliance with stringent data protection regulations overwhelming. Therefore, a balanced approach is needed to ensure data protection while considering the specific challenges faced by micro-enterprises.
A balance between security requirements and innovation in digital services uptake is crucial. As digital services become more prevalent, ensuring adequate security measures is of paramount importance. Skills training plays a vital role in this area, as individuals need to be equipped with the necessary cybersecurity skills to protect themselves and their organisations from digital threats.
In conclusion, the analysis of the provided statements highlights the need for concerted efforts to address challenges related to mobile internet adoption, digital inclusion, and gender equality. The mobile industry, governments, and the global community all have key roles to play in bridging the gender divide, improving access to digital platforms, and fostering the digital skills needed for the future. By addressing these challenges collectively, we can work towards a more inclusive and equitable digital society.
James Howe
Title: The Importance of Digital Connectivity for Small Business Growth
Summary: Digital connectivity is crucial for the growth and success of small businesses, enabling online trade and expanding business opportunities. The Broadband Commission has conducted a study to address data and understanding gaps related to the digital connectivity of Micro, Small, and Medium Enterprises (MSMEs). However, there is a persistent usage gap in digital connectivity, with small businesses facing barriers and lacking understanding of its benefits. Bridging this gap is essential to encourage broad internet usage for economic growth. The private sector plays a vital role in driving digital connectivity initiatives and making them self-sustaining. Closing the gender divide in digital connectivity can bring significant returns on investment, and efforts are being made to empower women and improve their access to digital connectivity. Policymakers must prioritize the participation of micro and small businesses in the digital economy to promote economic growth and achieve the Sustainable Development Goals. Rwanda, led by President Kagame, has shown commitment to innovation and digital progression, serving as an inspiration for other countries. Import duties on devices contribute to the high cost of internet, highlighting the need for alternative approaches to promote affordability and accessibility. James Howe suggests efficient measures like consumption taxes to protect and promote local industries while ensuring a fair and competitive environment. Prioritizing digital connectivity for small businesses is essential for their economic growth and overall development.
Keywords: digital connectivity, small businesses, online trade, Broadband Commission, usage gap, private sector, gender divide, Sustainable Development Goals, innovation, digital progression, import duties, affordability, consumption taxes, local industries.
Osman Issah
The analysis highlights several key points related to the digital economy and the need for policies to support micro, small, and medium enterprises (MSMEs). One of the main arguments is that MSMEs require more recognition to contribute to a successful digital economy. Smart Africa proposes practical steps in the policy framework to ensure that MSMEs have access to the necessary connectivity. This argument is supported by the fact that Smart Africa supports the implementation of recommendations within member states and emphasizes the importance of policies specifically addressing the role of MSMEs in national policies.
Another important point emphasized in the analysis is the significance of investment in digital infrastructure and skill development. Governments are encouraged to prioritize investment in digital infrastructure and broadband access. It is argued that closing the connectivity and usage gaps is crucial, and MSMEs must be trained to effectively use digital devices and services in various sectors such as agriculture and e-health. The analysis suggests that public-private partnerships can create an enabling environment for MSMEs to thrive.
The analysis also provides insights into SmartAfrica’s initiatives for implementing the digital transformation of Africa. SmartAfrica collaborates with the Africa Union and ITU and plans to work with the private sector to implement recommendations. The focus is on affordable access devices to close the usage gap, as well as offering capacity building around digital transformation. It is worth noting that Smart Africa plans to start initiatives in Rwanda, Nigeria, Kenya, and Congo-Brazzaville in the second quarter of 2024.
Addressing challenges for inclusive participation in the digital economy requires comprehensive and inclusive collaboration between governments, the private sector, stakeholders, and civil society. South Africa is ready to support efforts in addressing these challenges, particularly within member states. It is acknowledged that the lack of adequate digital infrastructure is a common problem in rural communities. Therefore, it is crucial to integrate the informal sector into the formal digital economy.
The analysis also highlights the lack of resources for youth and startups to invest in digital technologies. Providing additional support to these groups is seen as necessary to overcome their challenges. Moreover, it is argued that accessibility challenges disproportionately affect people with disabilities and that policies and technologies should be designed with consideration for their needs.
Another noteworthy observation is the gender inequality in access to devices, particularly in certain communities where men traditionally own smartphones before women. This represents a challenge to economic development, as women often drive economic activities but are not given priority when it comes to access to devices.
Finally, the analysis discusses the potential economic gains from removing taxes on ICT. Studies conducted with the support of GSME demonstrate the potential economic advantages of such tax cuts. Finance ministers need to be convinced of these economic benefits, and a working group has been formed by top mobile operators in Africa to demonstrate the effects of removing taxes on ICT. The findings will be presented to finance ministers at an African Union meeting.
In conclusion, the analysis highlights the need for policies supporting the role of MSMEs, investment in digital infrastructure and skill development, SmartAfrica’s initiatives for digital transformation, the challenges of inclusive participation, the lack of digital infrastructure in rural communities, the resource challenges faced by youth and startups, the integration of the informal sector, accessibility considerations for persons with disabilities, gender inequality in access to devices, and the potential economic gains from removing taxes on ICT. These insights provide valuable information for policymakers and stakeholders in driving a successful digital economy in Africa.
Audience
The analysis highlights several important aspects regarding digital risks and connectivity in small businesses. It underscores that small businesses are particularly vulnerable to digital risks due to their increased connectivity. This reliance on digital platforms exposes them to various online threats, necessitating the implementation of effective digital security practices.
One significant observation is the need for policies or actions to enhance digital security practices in companies. Small businesses often handle a significant amount of personal data, making them susceptible to data breaches that can severely impact their operations. Implementing robust digital security measures is crucial to protect this sensitive information and safeguard business operations.
The analysis also emphasizes the impact of taxes and trade issues on the costs of connectivity devices and digital transmissions. Customs on connectivity devices significantly increase expenses for small businesses, hindering their ability to access and afford the necessary tools for digital connectivity. Furthermore, proposed discussions about introducing customs on electronic transmissions could further exacerbate the financial burden on small businesses. It is essential to address these trade-related challenges to promote widespread digital connectivity, particularly in developing countries.
In contrast, advocates argue for a trade openness approach while promoting digital connectivity. They contend that reducing customs barriers could significantly benefit developing countries. Drawing on the example of Sweden’s history with trade openness and development, they support initiatives by the International Trade Centre (ITC) and the United Nations Conference on Trade and Development (UNCTAD). By embracing trade openness, these advocates believe that developing countries can enhance their digital connectivity, fostering economic growth and reducing inequalities.
The analysis further emphasizes the importance of digitalization in e-commerce for developing economies. It highlights a particular example where numerous small and medium-sized enterprises (SMEs) in a developing economy lost access to a certain channel they used for exporting. The banning of this channel resulted in approximately six million sellers losing their market access overnight. This example underscores the critical role of digitalization in enabling SMEs from developing economies to participate in e-commerce and access global markets. Embracing digitalization can be a transformative catalyst for economic growth and reducing inequalities.
However, a significant challenge mentioned in the analysis relates to regulatory frameworks failing to keep pace with the growth of e-commerce and digitalization. While businesses in developing economies recognize the benefits of digitalization and e-commerce, they often face regulatory barriers that hinder their operations. The banning of the aforementioned channel used by SMEs to export serves as an example of this regulatory disconnect. Efforts are needed to bridge this gap and create regulatory frameworks that facilitate, rather than impede, digitalization and e-commerce.
Lastly, the analysis highlights the tensions between affordability and security in technology for small businesses, which are a matter of concern. Adam Sachs from the Center for International Private Enterprise raises the question about navigating this trade-off. Cheaper technology options may come with associated risks, such as data tracking apps and cybersecurity vulnerabilities. Balancing affordability and security is essential for small businesses to ensure they have access to suitable technology while adequately safeguarding their operations.
In conclusion, the analysis underscores the vulnerability of small businesses to digital risks, the need for improved digital security practices, the impact of taxes and trade issues on connectivity costs, the benefits of trade openness and digitalization for developing economies, the challenges posed by regulatory frameworks, and the tensions between affordability and security in technology. These insights provide valuable considerations for policymakers, businesses, and stakeholders involved in developing strategies and policies to enable secure and connected digital ecosystems for small businesses.
Cynthia Saab
Mastercard has set a goal to include one billion individuals and 50 million small businesses financially by 2025, with a particular focus on supporting women-owned businesses. This commitment reflects Mastercard’s corporate responsibility and recognition of the importance of financial inclusion in achieving the Sustainable Development Goals (SDGs), including SDG 1: No Poverty, SDG 5: Gender Equality, SDG 10: Reduced Inequalities, and SDG 8: Decent work and economic growth.
Private-public partnerships are considered crucial in successfully implementing digital inclusion strategies. Mastercard leverages its network, reach, and technologies to support digital inclusion efforts, especially in collaboration with governments. This collaboration helps provide suitable frameworks and tools for small businesses to thrive in the digital economy.
Mastercard also advocates for providing affordable payment tools, along with developing proper infrastructure and connectivity, to ensure the survival and growth of small businesses. Enabling small and medium-sized enterprises (SMEs) to have payment and e-commerce capabilities through affordable technology adoption can expand their market reach and enhance competitiveness.
Governments play a key role in motivating SMEs to adopt digital payments by offering tax incentives. This drives the transition towards a digital economy and enables SMEs to optimize their business operations and support growth. Furthermore, government regulations are important in providing supportive mandates and regulations that create a conducive environment for digital payments and cybersecurity.
Education tailored to the specific needs of SMEs is vital for small business success. The provision of knowledge and literacy components empowers SMEs to navigate challenges and seize opportunities. However, education provisions for small businesses vary significantly across regions, highlighting the need for tailored support.
Small businesses require cash flow and access to credit for growth and expansion. Building a transaction history is crucial for SMEs to access micro-lending or bank loans, and secure and immediate payments support daily operations. Successful micro-credit programs like Jazaduka in Kenya have helped small businesses by offering zero-interest credit, allowing them to buy goods and build a purchasing history.
Connectivity and infrastructure remain significant challenges for small businesses. While some solutions can function offline, the scalability of operations is limited without internet connectivity. Overcoming this hurdle is essential for small business growth and success.
Partnership models like Jazaduka, in collaboration with big corporates such as Unilever, assist small businesses in achieving growth and sustainability. These partnership models can be replicated across various industries and contribute to SDG 17: Partnerships for the Goals.
Mastercard’s commitment to cybersecurity is crucial in an increasingly digital world. The company has heavily invested in acquiring cybersecurity capabilities to ensure the safety and security of its payment network and facilitate secure transactions. Interoperability and affordability are also key factors to consider when implementing digital solutions, providing accessible and seamless financial services.
In conclusion, Mastercard’s efforts to financially include one billion individuals and 50 million small businesses, with a focus on women-owned enterprises, by 2025 align with the SDGs. By leveraging private-public partnerships, advocating for affordable payment tools and infrastructure, providing suitable education and credit opportunities, and prioritizing cybersecurity, Mastercard aims to facilitate the growth and success of small businesses and achieve sustainable and inclusive economic development.
Speakers
AW
Alex Wong
Speech speed
198 words per minute
Speech length
2187 words
Speech time
662 secs
A
Audience
Speech speed
174 words per minute
Speech length
1056 words
Speech time
364 secs
CS
Cynthia Saab
Speech speed
163 words per minute
Speech length
2051 words
Speech time
757 secs
JH
James Howe
Speech speed
174 words per minute
Speech length
5546 words
Speech time
1914 secs
MT
Melle Tiel Groenestege
Speech speed
182 words per minute
Speech length
1875 words
Speech time
617 secs
OI
Osman Issah
Speech speed
146 words per minute
Speech length
1901 words
Speech time
780 secs
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