Africa’s Digital Divide: How Tariffs Are Holding Back Growth

Digital goods—from advanced machinery and computing technology to software—are the lifeblood of modern productivity. For developing economies, access to these goods isn’t just important; it’s transformative. But what happens when the costs of these goods are inflated by trade policies? In Africa, higher-than-average import tariffs on digital goods present a major economic hurdle, impeding long-run growth and innovation. This is evidenced by new research published and reported here from the World Bank.

Digital Goods: The Cornerstone of Productivity

The link between digital goods and economic growth is clear. Countries with greater access to high-quality machinery, electronics, and software tend to experience faster productivity growth, as firms are able to upgrade production processes, compete globally, and innovate. In Africa, where many economies are still catching up, digital goods play a pivotal role in industrialization and services growth.

But here lies the problem: Africa imports most of its digital goods from outside the continent, and those goods come with a price tag inflated by trade tariffs. Currently, digital goods make up only 13% of Africa’s imports, well below the global average of 21%. For students of economics, this discrepancy is a textbook case of trade barriers stifling development.

The lion’s share of Africa’s digital goods imports come from just a handful of regions: 35% from China, 27% from the European Union, and 7% from the United States. Intra-African trade contributes a meagre 3%. This dependence on external markets exacerbates the impact of tariffs, which average 5% across Africa—about three times higher than in other regions.

To see the real effects of tariffs, let’s break it down. High-income countries like Mauritius and South Africa impose minimal tariffs, at 0.07% and 1.35% respectively. But in low-income nations like Cameroon and the Central African Republic, digital goods face tariffs as high as 15%. Even populous economies such as Nigeria maintain tariffs around 10%. The result? Higher prices for vital technology that firms and consumers desperately need.

The Cost of Import Tariffs: Low Quality, High Prices

Our economic analysis shows that African nations tend to import lower-quality digital goods compared to wealthier regions—not because they prefer low quality, but because high tariffs and inflated prices reduce access to better alternatives. Once adjusted for quality, digital goods in Africa are priced similarly to those in higher-income countries at the import stage. But by the time tariffs, transport, and installation costs are factored in, African firms face disproportionately high final prices.

Other studies confirm this price distortion. Digital goods in Africa are, on average, 34% more expensive than in the United States, leaving African businesses and households to bear the burden. Imagine a startup in Cameroon trying to adopt new software or a factory in Nigeria investing in upgraded machinery—these businesses are paying far more for the same goods than their counterparts elsewhere.

AfCFTA: A Solution with Limited Scope

The African Continental Free Trade Area (AfCFTA) agreement, hailed as a historic step towards regional integration, offers little relief for digital goods. If fully implemented, AfCFTA would reduce digital goods tariffs by only 0.13 percentage points, and imports would rise by a mere 0.3%. Why so little impact? Because most of Africa’s digital goods come from outside the continent, and AfCFTA focuses primarily on intra-African trade.

Some countries, like Zimbabwe, Zambia, and Mozambique, with high initial tariffs and more intra-African trade, would see modest gains. But for the continent as a whole, the needle barely moves.

The Case for Broader Trade Liberalisation

The real gains lie in broader trade liberalization. If African nations unilaterally eliminated tariffs on digital goods, imports would soar by 8%. This policy shift would have the greatest impact on smaller, tariff-heavy economies like Congo, Comoros, and Benin, where businesses and consumers currently pay the highest premiums for digital technology.

By removing tariffs, African economies would significantly lower costs for firms and consumers, enabling access to the digital tools they need to innovate, produce, and compete in the global economy. The benefits wouldn’t be limited to businesses alone: digital technology adoption has spillover effects on employment, education, and even healthcare.

A Global Issue with Global Stakes

The digital transformation of Africa isn’t just a regional concern. The continent’s economic growth—and its integration into global value chains—has the potential to lift millions out of poverty while contributing to the global economy. Yet, as it stands, only 6 African nations have signed the World Trade Organization’s Information Technology Agreement (ITA), which removes tariffs on digital goods among members. This hesitation is costing the continent opportunities for faster growth and deeper economic integration.

For Africa to bridge the digital divide, policymakers must rethink trade policies. Cutting tariffs on all digital imports, not just those within Africa, could unlock access to vital technologies, fuel innovation, and build a foundation for sustained economic growth.

The Future of Africa’s Digital Economy

If Africa wants to build a vibrant, competitive digital economy, trade barriers need to come down. Lowering tariffs on digital goods is not merely about facilitating trade; it’s about laying the groundwork for innovation, productivity, and prosperity. For students and policymakers alike, this is a reminder that trade policies, however technical, have profound economic and social impacts.

Africa’s digital future is within reach—if it opens its doors to the technology the world has to offer.

Glossary of Key Economics Terms

1. Tariffs: Taxes imposed on imported goods, which increase the price of those goods for domestic consumers.
2. Digital Goods: Products such as machinery, electronics, software, and computing devices that enable digital and technological development.
3. Productivity Growth: Increases in the output produced per unit of input, often driven by technological adoption and innovation.
4. Trade Liberalization: The reduction or removal of trade barriers, such as tariffs, to encourage free flow of goods across borders.
5. African Continental Free Trade Area (AfCFTA): A trade agreement among African nations aimed at creating a single continental market.
6. World Trade Organization (WTO) Information Technology Agreement (ITA): A global agreement to eliminate tariffs on specific digital goods among member countries.
7. Global Value Chains (GVCs): Networks of production and supply that span multiple countries, where different stages of production occur in different locations.
8. Quality-Adjusted Prices: Prices that account for the quality differences between goods, allowing for fair comparisons across regions.
9. Imports: Goods and services purchased from other countries.
10. Economic Integration: The process of reducing trade barriers and increasing economic cooperation between countries.