World Bank data suggests . Over the past decade, the GDP contribution of the digital economy has grown at a rate two-and-a-half times faster than overall GDP growth.

Separate data has found that a 10% increase in mobile broadband access in less developed economies can .

For East Africa, the digital economy holds enormous opportunity, with the potential to power growth across every sector of the economy.

However, a pervasive lack of tech skills is impeding innovation efforts, hampering digital transformation initiatives and leaving organisations with a reduced capacity to deliver projects that could transform local economies.

ÌýTech skills in focus

reveals that four in five African organisations were affected negatively by a lack of tech skills in the past year. In Kenya, the main impacts of a lack of tech skills included more pressure on existing staff (cited by 78% of organisations), a lack of capacity to take on new projects (72%), and delays with completing existing projects (67%).

A third of organisations also experienced a loss of customers as the lack of tech skills capacity forced customers to seek support elsewhere.

This is concerning news for East Africa’s burgeoning tech sector, which not only has to compete with the thriving tech sectors in West and Southern Africa, but increasingly competes with more developed markets where tech skills may be more readily available.

It is also interesting to note the types of tech skills that East African organisations seek. The 51·çÁ÷research reveals the most in-demand tech skills for Kenyan organisations are cybersecurity (in-demand at 67% of organisations), industry-specific tech skills (63%), data analytics (57%), and sales skills (47%).

The skills gap is all the more alarming when considering the youthful nature of the region’s population. More than 60% of Africa’s population is under the age of 25. Over the coming decades, 1.3-billion people will be born in Africa, pushing the continent’s population to over 2.5-billion by 2050. This will create the world’s largest youth workforce, which could – with the right investment – become a leading force powering the global economy.

Developing sustainable initiatives that use the region’s youth dividend to upskill and train a new generation of digital economy worker should be a top priority for East African governments and the private sector.

Filling the tech skills gap

In the short term, however, organisations have to take urgent steps to fill critical gaps and ensure their digital transformation and innovation efforts succeed.

Alarmingly, more than half (53%) of Kenyan organisations expect it likely that they will experience a tech skills gap in the year ahead.

While a lack of tech skills is a continent-wide challenge, East African economies can take bolder steps at addressing the ongoing skills shortage. Nearly three-quarters of Kenyan organisations rated the quality of tech skills emerging from the country’s education system as ‘excellent’ or ‘above average’, but had found that only 58% of students agreed that digitalisation is supported financially at their institution. The same study found that only 53% of Kenyan students often or always had access to a computer.

In the short term, organisations in the region are turning to a broad range of measures to improve skills availability. Eight in ten East African organisations prioritise skills development for current employees, while 43% focus on redeployment or reskilling of their workforce to fill critical skills gaps.

Encouragingly, only a third of organisations in the region invest 10% or less of their HR and IT budgets in skills development training. Twenty percent spend 15% of more of their IT or HR budgets on training. And four in ten want to partner with educational or training institutions to fill skills shortages.

Here, the role of initiatives such as the 51·çÁ÷Skills for Africa initiative, which includes 51·çÁ÷Young Professionals Program and the 51·çÁ÷Dual Study Program, can play a vital role. The Young Professionals Program has already trained and graduated nearly 2000 young talents from 22 African countries, providing a steady stream of work-ready SAP-qualified tech skills to African public and private sector organisations.

Collaborating with broader digital transformation and skills initiatives is also vital. The African Union’s Digital Transformation Strategy and the World Bank’s Digital Economy For Africa initiative that supports it could help regional economies harness the digital economy as a driver of growth and innovation.

In the end, however, it will be the responsibility of all public and private sector role players to ensure East Africa unlocks its vast human potential and develops the skills needed to turn the region into a leading player in the 21st century digital economy.

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Countries across East Africa are breathing a sigh of relief as pandemic-related challenges finally ease and the prospect of some form of normalcy emerges.

While the region avoided the worst of the health-related impacts of the pandemic,Ìý, andÌý.

The impact of the pandemic has prompted renewed calls for a transformation of East African economies to better suit the challenges and opportunities in the global economy.

However, the latestÌýÌýby the Brookings Institute points out that a lack of investment in science and technology has hampered Africa’s economic transformation at a structural and sectoral level, and stifled innovation.

But following a two-year period of disruption, the region has an opportunity to rebuild in a way that not only aids its economic recovery but also establishes a powerful foundation for the region’s growth over the coming decades.

Three vital sectors could hold the key to how well the region recovers over the coming years, namely manufacturing, tourism, and pharmaceutical.

Considering the important economic role that manufacturing plays in East Africa, investments into technologies that can foster greater global competitiveness in the region’s manufacturing sector could unlock much of this potential to the benefit of East African economies.

The focus should be on building Industry 4.0 capabilities that bring together next-generation technologies – such as artificial intelligence, robotic process automation, Industrial Internet-of-Things and predictive analytics – integrated to an intelligent core that can bring unprecedented control, predictability and efficiency to manufacturing operations.

Aspects such as quality control, plant consumption and energy management, smart warehousing, factory asset intelligence and overall performance management can be transformed with Industry 4.0 capabilities. Integrating manufacturing facilities with digital supply chains could further help alleviate some of the present challenges with the global supply chain and bring greater stability to manufacturing operations.

In a recent global study, 21% of manufacturers said theyÌý, while 19% cited productivity improvements of more than 10%.

As the region reboots a manufacturing sector vital to its economic prospects, smart investment into Industry 4.0 technologies could help the sector accelerate its growth and boost its global competitiveness.

Special attention, however, must be paid to developing innovative supply chain solutions, especially considering the global supply chain crunch that has seen shortages of goods in markets around the world.

Any efforts at digitising the manufacturing value chain through Industry 4.0 technologies must include interventions and innovations that bring greater transparency and predictability to the supply chain.

Pharmaceutical sector: closing the R&D gap

Research and development initiatives hold the potential of unlocking tremendous economic advantages and stimulating foreign direct investment.

However, Africa lags far behind the more developed nations in their R&D spending, with the result that the majority of product and service innovations driving African economies stem from outside the continent.

This R&D gap and lack of local capacity was on full display during the early stages of the pandemic when Africa’s lack of local pharmaceutical production and manufacturing capacity left most of the continent without access to life-saving vaccines.

Policymakers and industry leaders should look at the opportunities for greater regional investment into R&D and draw on international best practices. For example, 18 of the world’s 20 largest vaccine producers run their production facilities using 51·çÁ÷technologies, so local production facilities could draw on learnings from their global peers to avoid costly mistakes and fast-track success.

As with the manufacturing sector, pharmaceutical companies should support investment into digital transformation with efforts at gaining greater visibility over their supply chain.

While it is unlikely the pandemic will disrupt the global supply chain as it has over the past two years, other disruptive events are bound to emerge. Investing in tools that bring predictability to the supply chain will enable pharmaceutical companies to more easily adapt to further disruptions.

Tourism sector: safely opening the doors to international visitors

Prior to the pandemic, the tourism sector was a key economic driver for East African countries andÌý.

However, travel restrictions implemented to help curb the spread of COVID-19 in the region resulted in losses of 92% of tourism revenues, with arrivals dropping sharply from seven million in 2019 to little over two million in 2020. Further global travel restrictions as a result of the Omicron variant have only compounded the losses.

With Western countries now lifting many of their travel bans – and in some cases removing all mandated restrictions – East Africa needs to urgently work to re-establish the region as a prime tourist destination.

The introduction of theÌý, which integrates the testing and vaccination data of regional countries could help ease movement across East Africa and stimulate greater tourism industry revenues.

Using digital technologies to remove some of the friction inherent in post-lockdown international travel could further encourage international arrivals, while innovation in tourism experiences built on technological innovation could turn the region into a test case for how countries attract tourists in the year ahead.

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Following a year of constrained growth – East Africa saw only meagre growth of 0.9% in 2020, compared to 6.6% in 2019 – economies across the region look poised to recover some lost ground.

According to , Kenya is expected to see growth of 6.3% in 2021, Ethiopia 4%, Uganda 3.7%, Rwanda 5.7% and Tanzania 5.2% in 2021.

While traditional sectors such as tourism took a heavy knock due to the lockdowns imposed as well as limits to international travel, the region’s tech sector proved resilient and could hold promising potential for accelerating the region’s economic recovery.

For example, mobile money, for which the region is considered a global leader, continued to perform well. Mobile money transfers in Kenya grew by 62.9% in 2020, largely due to social distancing measures that saw consumers shy away from cash payments.

The (healthy) state of start-up innovation in East Africa

The quality of fintech start-ups that has emerged in East Africa over the past decade has established the region as one of the continent’s most innovative.

Nairobi, long considered as a regional technology and trade hub, recently took a bold step toward also becoming a world-class financial hub with the launch of the Nairobi International Financial Centre. The centre could unlock a new era international investment into East Africa and its vibrant business ecosystem, by the UK government.

The region has also established vital innovation hubs to provide support and greater market opportunities for local innovators.

Rwanda’s provides an open space for collaboration and innovation, and brings together students, thinkers, and entrepreneurs to turn concepts into viable products and services. In Uganda, the incubation and innovation space provides similar support to local entrepreneurs, while has brought together innovators and some of the world’s leading organisations to accelerate start-up activity in the country.

And in Kenya, the , a brand new smart city spanning 2000 hectares and designed to create up to 100 000 new jobs, is currently under construction. Once completed, the smart city will play host to business processing outsourcing, software development, data centres, call centres, a university campus and residential units, schools and hospitals.

Supporting innovators and entrepreneurs

There is arguably a vital role that larger enterprises can play in supporting the region’s start-ups and fostering greater innovation.

In the energy sector, green energy innovation in investment into the continent’s transition away from fossil fuel energy. As large global enterprises shift to more sustainable practices and boost investment into cleaner technologies, partnerships with local innovators could prove beneficial and ensure knowledge and revenue is retained locally.

Building climate-resilient infrastructure – a growing concern for nations facing the escalating impacts of rapid climate change – holds a further investment opportunity of between $130-billion and $170-billion.

And investment into the circular economy could unlock not only new innovation, but an opportunity to reverse some of the more harmful and unsustainable business practices that are still prevalent today and establish the region as a leader in the fight for sustainability. Examples of circular economy innovation in East Africa abounds:

Kapa Oil Refineries, one of Kenya’s leading manufacturers of sustainably and ethically produced consumer goods, has established more than 1.5GW of solar power to reduce the impact of its operations on the environment.

Silafrica, the region’s largest packaging manufacturer, has embedded circular economy principles in its production processes, and today counts leading global companies such as Coca-Cola among its customers.

And CP Solar Resources, a leading solar power installer in Kenya, is providing households, businesses and manufacturers with turnkey solar power options to reduce the strain on Kenya’s power grid while advancing the growth of the local green economy.

Such examples point to a growing ecosystem of contributors to the circular economy, driven by the region’s Ìýmost innovative entrepreneurs and companies.

As we work together to repair the economic damage wrought by the pandemic and endeavour to build a more sustainable and equitable society, our world-class tech start-ups could hold the key to our collective success. It is vital that we provide them with the support they need to find solutions to some of our most pressing challenges.

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With the exception of Kenya, Tanzania and Djibouti,Ìý, although all countries (with the exception of Sudan) are forecast to record positive growth this year.

Traditional foreign exchange revenue sectors such as international tourism has all but disappeared. Data from the UN indicate that tourism numbers declined by 91% in Kenya: in August 2019, the country received 162 000 tourist visitors. By August 2020, that number had dropped to a mere 14 000. In the Seychelles, tourist numbers dropped from 335 000 to 16 000 over the same period.

According to official data, the region has also been the worst-hit in Africa in terms of labour impact. A total ofÌý, and subsequent fiscal stimulus is estimated to have only generated 5% of jobs lost, compared to 33% in Southern Africa.

Facing the prospect of a rapidly growing youth population, countries in the region are in a race to equip their youth with the digital skills they need to drive economic growth and innovation.

Maximising the youth dividend

East Africa’s youth population isÌý, creating a youth dividend that would be the envy of any developed country.

According to the UN’s Medium Variant prediction, Rwanda’s youth population (those aged 15-34) will increase from 4.2 million in 2015 to 7.1 million in 2050. Over the comparative period, Kenya’s youth population will grow from 17 million to 24 million; in Tanzania from 17.9 million to 47.4 million, and in Uganda from 23 million to 38 million.

The pandemic-forced closure of schools has however undermined efforts at empowering youth with 21st century digital skills.

Unesco estimates that the closure of schools and other education institutions in the region affectedÌý, of which 79% were in primary school or younger. While governments across the region introduced remote teaching to minimise the impact of school closures, UNICEF estimates that nearly half (49%) of students in East and Southern Africa were unable to access remote learning.

Public-private partnership -led education and digital skills development initiatives will play a vital role in augmenting governments’ education efforts in the region. The 2020 51·çÁ÷Africa Code Week (ACW), for example, switched to an all-virtual format which allowed learners from all African countries to participate.

In a survey conducted at the end of the 2020 ACW, 87% of respondents indicated that the initiative plays an influential role in advancing the adoption of coding curriculum. Nine African countries indicated that coding is already part of the national curriculum, and ten more are implementing plans to incorporate coding.

SMEs show the way with digital transformation

In 2017, SMEs accounted for 98% of all businesses in Kenya and created 30% of all jobs annually. According to the International Trade Centre,Ìý.

In Tanzania, an estimated three million SMEs contributedÌý.

SMEs in the East Africa region are adopting the latest technologies to improve visibility over operations, gain granular insight into their finances and automate outdated manual processes to drive greater efficiency.

Mzuri Sweets, a Kenyan candy manufacturer, implemented a fully automated system that has replaced the business’ reliance on spreadsheets and manual reporting. Company decision-makers now have full visibility over the business and, in line with the demands of new hybrid work models, can make approvals from any location.

In Mauritius, engineering firm Sotramon Limitée replaced a reliance on manual processes with a system that supports effective stock-taking, improves financial analysis and delivers up-to-date insights about the performance of the business. The business now has improved versatility and greater independence, allowing it to more easily adapt to challenges and take advantage of emerging opportunities.

How governments and the private sector respond to the impact of the COVID-19 pandemic over the coming months will determine the mid- and long-term success of the region’s efforts at building back better. Many businesses still record their activities on paper, or in disconnected systems and applications that create data siloes and cause a lack of integration between business planning and execution systems. Organisations across East Africa need to invest in and adopt technology at a rapid rate to ensure they continue operating successfully.

Governments will also continue to feel the pressure to reduce the rate of infection and contain the spread of COVID-19. However, many of the technology systems that are being used for vaccine rollouts are not designed to provide the requisite traceability. Data sharing to public and private health facilities entails multiple stakeholders, not all of which have the benefit of automated systems and processes.

To alleviate some of the challenges, 51·çÁ÷is working with governments across the globe to drive a more resilient response to the pandemic. The accelerated uptake of SAP’s experience management platforms by governments help to inform policy and program design across all portfolios to enable greater responsiveness to the needs of citizens and businesses. By using such technologies, governments in East Africa can demonstrate an unprecedented level of responsiveness and so help build trust in the rollout of vaccines in the region.

As East Africa faces a challenging period ahead, businesses and governments should continue to invest in their digital transformation to build the resilience, agility and adaptability needed to survive and thrive in a post-pandemic world.

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