First, the creation of a digital-supportive environment is critical as SSA’s digital readiness lags behind other regions of the world. The lower level of digital readiness in the region results in lower digital transformation for firms, compared to those in the rest of the world.
Digital skills, a key driver of firm digital transformation, are particularly deficient in SSA. Enhancing firm competitiveness can also help overcome country-level barriers to digitalization. Exporters tend to be the top performers in their country. Exporting firms in SSA demonstrate higher digital adoption than nonexporters in the region, as analysis in this paper shows. These firms benefit from better devices, greater awareness of digital trends, a higher likelihood of having a digital strategy as well as a more digitally skilled workforce.
Introduction in a world grappling with the aftermath of a global pandemic and the escalating climate crisis, enhancing business performance—especially among small firms—has become crucial for reigniting economic growth, improving living standards, and achieving the Sustainable Development Goals. This is particularly pertinent in Africa, where less than 6% of the 32 SDG targets are on track to be achieved by 2030.
Digital technologies are pivotal to boosting firm productivity. They offer the potential to connect businesses to new markets, enhance efficiency, and drive innovation.
Despite significant efforts to leverage digital tools across African countries,6 many businesses, especially smaller ones, continue to face obstacles in adopting and effectively using digital solutions. This is a critical issue because greater efficiency and competitiveness gains come from digital deepening—moving beyond basic digital technology use to achieve comprehensive digital transformation. Digital transformation represents the latest and most impactful wave of technological change. It involves two interrelated processes: digitization and digitalization.
Digitization entails converting analogue data and processes into a machine-readable format. It involves capturing information from a physical source, such as a customer order form, and storing it electronically in a computer system or database. Digitalization refers to the use of data to enhance business processes. For example, certain electronic data collected by governments are made available to and used by the private sector in designing and delivering services.
It builds on both digitization and digitalization to disrupt modes of production or ways of doing business. Telemedicine shows the continuum of digitization, digitalization and digital transformation in action. Digital transformation applies digital technology to create entirely new ways of delivering value: for instance, telemedicine platforms allow doctors to perform virtual consultations with patients and make faster preliminary diagnoses, thus making healthcare more accessible, personalized and efficient. Whether firms can make advanced use of technologies and achieve digital transformation depends on several factors.
But a firm’s ability to integrate digital technologies depends on a multitude of factors. Externally, the business environment in which a firm operates crucially influences to what extent it has access to, and deploys, digital technologies. This section explores these external factors and proposes a novel index of firm-level digital transformation to demonstrate the intricate connection between country digital readiness and firm digital transformation.
A Guest Editorial