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Why AI Isn’t (Yet) a Magic Bullet for Africa

Smartphones, move over. This is the age of Artificial Intelligence. Taiwan Semiconductor, the world’s largest chipmaker, makes much more money from high-performance computing than smartphones. Handset makers are struggling, margins are shrinking and even Apple is shipping fewer iPhones. Generative AI has added fuel to the fire. Microsoft invested $10B in OpenAI, and 2020’s epidemiology experts have moved on from crypto to the risks of Artificial General Intelligence.

But where does that leave Africa and African tech? 

An outline map of the African continent with neural networks and circuitry patterns overlaid inside each country’s borders. The patterns glow with a soft blue light, showing how AI has the potential to transform the entire region. Credit: SDXL

AI in Africa Tech

There’s no doubt AI is solving problems in Africa today. Apollo Agriculture and Aerobotics use AI for precision agriculture and credit evaluation. Instadeep, founded by Africans in 2014, builds and deploys AI-based solutions and was acquired recently. Chipper Cash announced “Chipper AI day” where they plan to launch AI-powered features. Despite these, it does not feel like the seismic change we’re seeing in the US, at least not yet. 

What it could look like

It’s not for a lack of problems that AI can help with. There are several. AI can help triage healthcare patients, especially in remote areas where experts are few. In education, AI can create custom learning plans, including for endangered African languages. Governments and businesses can meet customers where they are with audio, images and video in their native languages. Maybe this new wave of AI will create fair, credible and repeatable credit assessment solutions for Africans and truly open up credit access. Those examples only scratch the surface, and there’s many more solutions to be conceived and built. 

Why are AI powered products not more widespread?

It’s taken decades for the full impact of transformational technology to spread through Africa, even in cases where these are developed here. It took AWS 16 years to build its first African data center, even though large parts of EC2 were conceived and built in Cape Town. 6 years after the first GSM call in South Africa, mobile phone penetration in Africa was still at 1%. This happens for a multitude of reasons. Sometimes, it’s because the market isn’t big enough and consumers and businesses don’t have enough spending power. Other times, it’s for regulatory or political reasons. 

There’s more. For Africa’s wicked problems in Healthcare, Education, Logistics, etc, Artificial intelligence is not the long pole. There are fundamental issues to be addressed like rule of law, security, costs before considering the application of AI. Regardless of how much it’s going to change the world, AI is not a magic drug. If you believe everything you read, AI will do all the things that Crypto was supposed to do 24 months ago. (“Financial Inclusion!” “Authentication and Identity!”). It’s reasonable to be skeptical.

AI is also expensive. Training these models requires prohibitively expensive computing resources (the unstated reason OpenAI stopped becoming a non-profit). Using them is not cheap either.  The most conservative costs of LLMs is in the~$25k/month range, more if you include the cost of technical talent and data collection.  It’s even more expensive for languages other than English, where it performs noticeably worse. In any case, the purveyors of these models need their coins, and the more you use, the more you will pay.

While predictive or non-generative AI is cheaper to train and run, it’s still not cheap enough to be widespread. The nature of these models mean that they may require specialized hardware and unlike other technical problems, you may not be able to run it on commercially available hardware.  

On-device AI is showing some promise, but nowhere near useful right now. The high-end devices can do some inference (e.g., keyboard text to speech) but these models are much worse than those in the cloud. Besides, only a fraction of smartphones have dedicated machine learning chips and will be able to make use of this. For context Africa’s smartphone penetration is ~30%, and only phones like Google’s Pixel or Apple’s iPhone have dedicated ML chips of this kind to do this high-level AI.

A bustling African marketplace with people buying and selling goods. In the background, there are tractors and irrigation systems on farms enabled by AI for precision agriculture. A drone flies overhead. Nearby, a healthcare worker examines a patient using an AI diagnostic tool on their smartphone. In the foreground, a child plays with a robot dog – showing how AI can meet local needs across traditional and modern Africa. Credit: SDXL

Risks and Challenges

AI might even be harmful in the short term. Tasks like customer service, currently outsourced to Africa, may start to disappear. Data labeling will become less important as many of these models start to generate their own training data. This may end up being better over a long amount of time, but it’s clear that we will need fewer data labellers and customer service reps if some of them can be replaced with Artificial Intelligence.

It’s also not without risks. The models perpetuate existing biases in how African stories are told. They will make it easy to create and spread misinformation or even empower a police state. As with any technology, we need to carefully evaluate and put the right safeguards in place. 

Looking forward

I choose to be optimistic about the impact of AI in Africa. While AI adoption in Africa may seem slower compared to other regions, it holds tremendous promise if implemented thoughtfully. Healthcare, education, agriculture, and financial services could be radically improved through AI, boosting prosperity and quality of life. 

Africa can use AI for good while minimizing harm. With wisdom and care, the technology could help reduce the impact of systemic constraints and create a more just economic future. The global AI race is on, and Africa has much to contribute if empowered to do so responsibly.

Why Africa’s digital infrastructure needs to be public

Investors are eyeing Africa’s digital infrastructure startups, chasing the creation of an “India stack” across multiple African nations. But what does this mean? And why is the government’s involvement crucial?

Understanding the ‘Stack’

Everyone wants to invest in digital infrastructure startups. Specifically, investors have said they want to invest in the companies building the “India stack” for multiple African countries. You’ve probably heard the term “stack” tossed around. Sometimes it’s about the “identity stack”, other times, it’s a literal payment stack. The dream? Reaching that sweet spot of public infrastructure  that India and Brazil have nailed – a game-changer that sparks growth, kickstarts loads of businesses, and lets the startups cash in on an ecosystem tax. But here’s the catch – for it to really take off in Africa like it did in India and Brazil, we’re going to need the government on board. 

And when I say “digital infrastructure”, I mean everything that lets us live our digital lives. It’s not just the towers and subsea cables that give us internet access, but also the software that lets us chat with computers and use them to chat with each other. We’re mainly talking about the software here, but don’t forget, there’s a hardware angle to this too.

Why it has to be government-led

Prioritizing access over short-term profits

Only a small portion of the population in many African countries has access to digital services, even with the increase in mobile and internet access. Sure, digital services already exist, but they either don’t function as they should, or they charge too much for access. In this scenario, governments can subsidize various parts of the ecosystem to promote access or other public goals (for example, financial inclusion.)

Take India’s UPI as an example. It’s free for merchants and only introduces charges when they hit a high threshold. Compared to the fees charged by Visa or Mastercard, UPI is much more affordable. To get Pix off the ground, the Brazilian government mandated  the country’s largest banks to participate. Someone has to set and enforce the rules. Short-term economic incentives won’t make access a priority; they will (and should) focus on profit. The government’s involvement can offset the costs for private companies providing access – a goal everyone can get behind. Plus, financial inclusion is a fantastic goal that leads to positive economic impacts. We already know that access to digital infrastructure correlates with GDP growth.

If the existing payments infrastructure companies had their way, solutions like UPI or Pix might never have seen the light of day. UPI in India, for example, has been a financial burden for the country’s financial institutions, to the point where the government has considered reimbursing them for lost payments revenue. Access has remained an issue in many countries that have had card-based systems for a long time, even as those systems continued to be profitable for their owners and expensive for the users.  Governments, however, can put off short-term economic interests and prioritize citizens. Who else but the government can place public interests first and shift things in favor of the customers who need it most?

Government as a provider of non-rival services

There are certain things that governments are uniquely positioned – or at least most trusted – to do. Consider identity. The government collects and maintains information used  to identify people and gather other necessary information for law enforcement. Only the government needs to have this level of detail to carry out other state functions like taxation and the distribution of public benefits. How can the government tax us if they don’t know anything about us? This task would be challenging for the private sector to handle alone – consumers would understandably balk at the private ownership of public data. A publicly available identity layer can improve government performance, reduce fraud, and stimulate a new ecosystem. Currently, half of the people in Sub-Saharan Africa don’t have proof of legal identity. Having a legal identity is the first step to paying taxes or receiving government benefits. On the positive side, it seems Africans trust their government and public institutions more than other regions of the world.

Solving the Government’s problems today

Government needs these digital infrastructure solutions more than yet another lending startup or digital neobank. The government needs to have information, identity, and a cost-effective means to perform state functions, like taxation and distribution of public benefits. In other words, the government is the main customer for these use cases. TraderMoni in Nigeria, for example, emerged from a need to identify and disburse low-cost loans to Nigerian businesses. In doing so, they’ve created a reliable registry of SMEs in a country with more people than California, Texas, New York, and Florida combined. This, in turn, makes it easier to provide targeted government grants to those who need them most. This was the driving force behind the creation of India’s Aadhar – to improve benefit distribution to qualified recipients.

Slow down, so the government should build everything? 

No. But governments should actively create, manage, and oversee these solutions. Actually, the gold standard in public digital infrastructure, India’s layer, was constructed with significant input from the private sector.

Yeah, there are risks. We’re talking about data privacy, the risk of supporting or entrenching a totalitarian government, or simply facing public sector incompetence. To make things even more complicated, many African countries aren’t exactly strong states. How can they enforce or apply the necessary safeguards for something like this to work? Africa does have some promising initiatives, but very few are on a scale that can bring about significant change.

But what about the costs?

Even though it’s big, public digital infrastructure can be mega profitable. Plus, it’s not nearly as expensive as physical infrastructure. Solutions like Pix or Aadhar probably generate way more in value than they cost to create. Brazil’s Pix costs 5-10 times less than card payments, and given its scale, they must more than make up for it in volume. (One estimate says Pix cost about $10M to build.)

Get involved

The somewhat awkward(?) conclusion here is that the change we need – be it social, economic, or political – starts with getting involved with the government. Private companies can only do so much, but government direction is necessary to truly transform the lives of the millions of Africans who come online each year. When electricity was first discovered, people didn’t know what to do with it besides using it for lighting. But it’s a different game in Africa – we know what works and why.  It’s time for the government to lead. 

Nigeria needs to raise tobacco taxes

Tobacco has a high public health cost in Nigeria. More people are smoking, starting earlier and smoking for longer than ever. As a result, smoking-related diseases are growing. In addition to the public health costs, Nigeria under-taxes and under-regulates this industry compared to the west or other African countries. There’s a massive financial and public health benefit in better regulation of the tobacco industry, and we can get enough in taxes to manage the public health costs. 

Nigeria charges lower taxes on tobacco, in part due to lower tax rates and how it charges taxes. In addition to import taxes, Nigeria charges tobacco taxes based on the value of the goods, different from the WHO-recommended tax on retail prices. Even without low rates, this tax structure is prone to under-valuation and encourages creation of lower-quality products. 

Nigeria charges 20% of the UCA (unit cost) as taxes, down from 40% in 2009. This is much lower than the WHO-recommended 75% of retail price benchmark, and even lower than the 50% recommended by the Economic Community of West African States (ECOWAS). 

What’s worse is that cigarettes have become more affordable in the past decade, when you adjust for income and affordability. This is unacceptable, and unique to Nigeria. If higher taxes are compelled to lead to higher prices, demand will drop. People will smoke less, and fewer people will die from smoking-related diseases. 

Nigeria needs the revenues, and is in a position of strength to raise taxes. Both British American Tobacco (BAT), and Japan Tobacco International (JTI) have production facilities in Nigeria. BAT controls 80% of the Nigerian market, serving its West African market out of their Ibadan factory, and Nigeria continues to be one of the growth and profit drivers for BAT. This does not end with having the tax laws on the books. We also have a problem with collecting taxes for the laws we do have, and the abused but well-intentioned tax holidays for setting up factories. 

The prize is high for getting it right. It’s a significant revenue opportunity with a payback period as short as a year, according to some estimates. In 2012, the Philippines “Sin Tax” law raised tobacco taxes which counter-intuitively increased revenues and reduced smoking prevalence. This increase in revenue allows the government to subsidize insurance for more of the population. In 1994, South Africa’s increased taxes raised government revenues 100% and dropped smoking rates 30% in a decade. Why not Nigeria?

This is not a knock on the tobacco industry, at least not for the taxes. It is reasonable to expect businesses to find ways to reduce their tax bill. These companies are huge employers of labour, they pay corporate income taxes and their export revenues are a valuable source of foreign exchange for the government. However, studies have not seen any evidence that higher tobacco taxes in countries like Nigeria will lead to job losses. Nigeria can get a “fair share” of this revenue to deal with the public health impact, and in line with other countries. 

Taxation alone will not address the public health implications. We need to enforce restrictions on advertising, better notices on packets and other tobacco control measures. Some Nigerian states are seeking redress in the court system with court cases as far back as 2007. We need everything. Combined with higher taxes, Nigeria can increase revenues and reduce the negative public health impact of smoking.