Digital Platforms in Africa: the "Uberisation" of Informal Work

Abstract

The "Uberisation" of work - the increasing use of digital platforms by self-employed service providers – is often seen as a pathway into precarious employment in rich countries. In Africa, quite the opposite may be true: the rise of digital platforms offers new opportunities for informal entrepreneurs to become more productive, and eventually formalise. Digitalisation in Africa is happening on a scale and at a pace that many would not have anticipated. Digital platforms - such as Uber, Airbnb, and local varieties - are spreading. At the same time, most African economies are characterised by the pervasive informality of firms and employment. Informality is high because formalisation does not pay for firms. Digitalisation is likely to affect both the costs and benefits of formalising. Digital platforms can increase firm and worker productivity, for example through better market access, and they also provide an entry point for formalising firms. The Uberisation - and formalisation - of employment could be beneficial to the many African self-employed. Anecdotal evidence suggests that self-employed drivers registered on a digital platform, for example, have higher earnings than "conventional" taxi ones. Customers can benefit from better services and lower prices, and governments can raise their capacity to generate tax revenue using information from online platforms and digital transactions. Overall, the positive effects of digital platforms seem to outweigh the negative ones. At the same time, adjustment costs - as evident in the protests by established taxi drivers witnessed in many countries - need to be addressed and mitigated. There is very limited empirical evidence on the effects of digitalisation in general, and of digital platforms in particular, in Africa. Such research is urgently needed to harness the potential of new technologies for inclusive economic development. Digital platforms can contribute to formalising economies and improving tax collection in Africa. Smart policies and regulation need to achieve these ends without inhibiting innovation and technology adoption.