Malawians Move Towards a Digital Future

In Malawi, efforts are underway to ensure that there is access to reliable affordable internet and a digitally fluent workforce, presenting unprecedented opportunities for growth.

Located at a busy market intersection in Lilongwe, the capital of Malawi, Harriet Bwanali, the owner of Choice Pharmacy, reaches for a box of medication that sits high on a shelf.

The interior of Bwanali’s narrow store is cool and quiet, save for the whirr of a small handheld digital device that sparks briefly into life as a customer makes a purchase.

This point-of-sale machine forms the digital backbone to Bwanali’s small business. Although more than half of her customers use cash – mostly for medications that treat malaria and respiratory infections – Bwanali relies on this compact device for mobile phone payments and to tally daily sales. Other than her smartphone, Bwanali has no other digital technology at hand to run her business. She is eyeing software tailored specifically for pharmacies, but doesn’t yet have the resources to purchase it.

“There is software available where a pharmacist can directly see what they have sold and know what stocks she has on a daily basis,” says Bwanali, who opened her pharmacy in 2020 after a long career in midwifery. “We don’t have that facility, but I think that would make a difference for our business.”

While countries across Africa have rapidly embraced the internet, mobile phones, and digital payments, new research shows that this has not translated into a widespread and more productive use to help businesses thrive. But there’s potential for transformative change.

Published this week, Digital Opportunities in African Businesses, a new book from International Finance Corporation (IFC), shows how more than 600,000 formal firms and 40 million African microbusinesses (those with fewer than five workers) can benefit from better access and more sophisticated use of technology. The research shows a strong correlation between productivity and the use of advanced technology, with businesses that use digital tools achieving much faster productivity growth than those that do not. Investments in digitalization, the research finds, could lead to an increase in productivity growth for African businesses, raising wages and creating jobs.

“While the spread of information and communication technologies across Africa has been remarkable, we need to ensure that businesses use the available technology to grow, compete in new markets, and innovate,” says Makhtar Diop, Managing Director, IFC.

“Many businesses continue to rely on analog work and handwritten processes. These tasks could be transformed by technology, leading to a significant boost in productivity.”

While 86 percent of African firms have access to digital tools like mobile phones and the internet, the IFC research, supported by the Government of Japan, shows only 11 percent use advanced digital technologies intensively.

Barriers to complete digitalization across Africa include a lack of infrastructure, high costs, digital literacy deficits, and constrained access to financing. The high cost of technology is a major obstacle, with African businesses paying up to 35 percent more than other regions.

The solution, says Marcio Cruz, a principal economist with IFC and one of the lead authors of the report, is to invest in better telecommunications infrastructure to improve coverage and affordability, reduce trade costs for digital goods, and to enable more startups and disruptive technologies to help overcome market constraints, cost, and digital literacy.

“Africa is ready for a digital transformation. To do this, we need to mobilize private sector investments, make finance available for firms to adopt digital equipment and software, and for innovative tech startups to provide more affordable solutions,” he says.

“We must offer basic and managerial digital skill training to workers and entrepreneurs. Our findings show that while we still need to improve access to technology in countries like Malawi, we should focus on investment opportunities to enhance the productive use of these technologies by businesses, to leverage their potential of boosting productivity and jobs.”

While countries across Africa have rapidly embraced the internet, mobile phones, and digital payments, new research from IFC shows that this has not translated into a widespread and more productive use to help businesses thrive.

Thanks to the West Indian Ocean Cable Company (WIOCC), an IFC client, a significant proportion of the digital capacity that flows into Malawi comes through WIOCC infrastructure.

While it is possible to secure connectivity throughout most of Malawi, thanks to almost 4,000 kms of long-distance internet fiber laid across the country, the high price of smartphones remains one of the biggest challenges to expanding internet access for small businesses.

Building an Enabling Environment for Digital Success

On the fiberglass roof of the Gateway Mall, the largest shopping center in Lilongwe, three technicians in white hard hats and navy jumpsuits unfurl large spools of cable under a midday glare. The men are employees of inq. Digital, Malawi’s largest internet service provider (ISP), a pioneer since 2004 in bringing digital connectivity to the country.

Lead technician, Nickson Foster, explains that the team is installing 21 new routers that will create hotspots throughout the mall delivering internet speeds of 200 megabytes (Mbps) per second, up from the current 50.

The digital footprint across Malawi that enables inq. Digital to expand its network is thanks to the West Indian Ocean Cable Company (WIOCC), an IFC client and the leading player in the deployment of carrier-scale, future-proofed network infrastructure into Africa. Operating exclusively as a wholesaler, WIOCC has laid more than 200,000 KMs of subsea cables, 75,000 KMs of terrestrial cables and installed 30 data centers across Africa, revolutionizing the delivery of high-capacity connectivity between the continent and the rest of the world. In Malawi, a significant proportion of the digital capacity that flows into the country comes through WIOCC infrastructure.

While Gateway Mall shoppers will enjoy high-speed digital service, only 24 percent of Malawians, mostly in urban areas, have access to the internet owing to insufficient middle and last-mile connectivity. It’s a challenge the government is seeking to tackle with investments in digital infrastructure through the Digital Malawi Program, in partnership with the World Bank Group. The initiative is helping construct a National Data Center in Lilongwe and installing high-speed optic fiber cables to provide reliable internet connectivity to over 500 hospitals, primary and secondary schools nationwide.

In October 2022, Malawi became only the fifth African country to receive a license for Starlink, the SpaceX satellite internet constellation, helping improve connectivity in hard-to-reach places. In addition, the government has also lowered taxes to make the cost of imported devices more affordable.

Beneath the inq. Digital team, on the ground floor of the Gateway Mall, a digital divide in the use of technology versus paper is evident from store to store. At the Food Lover’s Market, a large, brightly lit supermarket selling local and imported produce, customers use digital scales, check-out scanners, and contactless payment machines.

At a small store located nearby, the owner employs only a cell phone, handheld calculator, and paper receipt ledger to run her business. Customers who wish to make purchases use either cash or their mobile phones to transfer payment. Devices such as contactless payment machines are too expensive, especially after factoring in the cost of monthly usage fees. So too is the price of the internet, says the shop owner, who asked not to be named.

While the cost of connectivity remains high for many end-users in Malawi, prices have dropped precipitously in recent years, says Limbika Kanjadza, CEO of inq. Digital.

“Five years ago, we were selling one megabyte of internet for as high as $250,” says Kanjadza. “Today we are selling it for less than $40.”

As a landlocked country, Malawians pay high transit costs for connectivity through neighboring Mozambique, Tanzania, and Zambia. But Malawi’s government is pursuing negotiations with its neighbors to lower those costs and signed an agreement last year with Zambia to reduce data prices.

While it is possible to secure connectivity throughout most of Malawi — thanks to almost 4,000 kms of long-distance internet fiber laid across the country — the high price of smartphones remains one of the biggest challenges to expanding internet access for small businesses. But telecoms companies and regulators are looking to change that.

“Having access to the internet is a human right,” says Limbika Kanjadza. “Regulators in Malawi are trying to make sure that everyone, even those in remote villages, can have connectivity. But these things are not solved overnight.”

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“Having access to the internet is a human right.”

Limbika Kanjadza, CEO of inq. Digital

Giving a Boost to Digital Startups

In a red bricked building in Lilongwe, beneath the shade of lush mango trees, Bram Fudzulani opens a door to an interior office. Inside, several software engineers with open laptops test a software application that can help small businesses in Malawi improve their financial operations.

Fudzulani is the Chief Commercial Officer and co-founder of Angle Dimension, a software development startup that specializes in financial technology innovations. One of Angle’s most successful solutions, Fudzulani says, is a smart phone app called Khusa, which allows woman-owned farming cooperatives to digitize – and protect – their earnings. Before the app, the women put their earnings in a basket that was vulnerable to theft. Now, the cooperative leader can bank the earnings via the app and earn credit rating benefits for all members.

In a country where 80 percent of the population live in the countryside and mostly rely on small farming, significant digital literacy deficits pose a challenge to technology uptake. Easy-to-navigate fintech solutions such as Khusa, Fudzulani says, can be transformative in improving daily lives.

Fudzulani and three other colleagues created Angle Dimension in 2016 when they noticed a lack of locally developed software products and services. With limited government aid for startups, however, they had to pool resources and self-fund.

“We were very ambitious at that time and said, ‘Let’s go into this space and create something that could actually work for this tech target group,’” he says. “What we didn’t know was that we’d need a lot of cash for us to do that.”

Africa’s digital start-up ecosystem is one of the fastest growing in the world, with a 700 percent increase in financial deals between 2015 and 2022. Increased support for tech startups through grants and venture capital, particularly in high-impact sectors like agtech, healthtech, and edtech could help digital startups overcome financial barriers such as high interest rates and lack of collateral. But funding constraints for startups across Malawi remain an issue, says Fudzulani.

“We have seen a number of startups with brilliant ideas die in their infancy because there’s no funding,” he says. “If there was more adequate funding for these startups, the ripple effect would be that SMEs would benefit from the proliferation of these tech innovations.”

Malawi, Poised for Digital Transformation

Across Lilongwe, several miles from Angle Dimension, there is a flurry of activity on a Friday morning at the headquarters of mHub, Malawi’s first technology and innovation space. A bright, airy building with floor to ceiling glass walls, comfortable beanbags, and partitioned workspaces, mHub is part of a wider effort to strengthen digital literacy across Malawi and to train a future tech work force.

At an event co-hosted by Mzuzu E-Hub, a tech business development group located in the north of the country, a Who’s-Who of Malawi’s digital front-runners give presentations on the state of connectivity and tech entrepreneurship across the country.

While optimism reigns about Malawi’s digital future, all participants agree on one indisputable challenge: the need to rapidly scale up digital literacy skills for Malawians of all ages.

“I think awareness of literacy education is really vital to accelerating digitalization in Malawi,” says Takuya Kitazawa, an ICT adviser with Mzuzu E-Hub who stresses that any digital innovation in Malawi must first address the entwined challenges of device, network, and education availability.

“Without literacy education, nobody can think about how to use technology for businesses,” he says.

With young people making up most of the Malawi’s population – more than half are under 18 – groups like mHub and Mzuzu E-Hub are betting that Malawi’s youth will drive the next digital revolution.

Backed by an array of initiatives like basic computing skills training to more advanced courses in coding, robotics, and Artificial Intelligence (AI), mHub has trained over 40,000 youth across Malawi, creating nearly 1,000 jobs.

The goal, says mHub CEO, Elijah Lumbani, is two-fold: to help business leaders like Harriet Bwanali, the pharmacy owner, realize their full potential through technology, and to foster an entrepreneurial spirit where young Malawians can reach for the digital stars.

“I’m looking forward to a future where mHub can nurture some young startups that will develop a local digital solution, like Facebook or WhatsApp, that could be used by everybody, every day,” he says.

The IFC report makes clear that businesses across Africa have yet to fully harness the power of digital technology, says Cruz. In Malawi, once small businesses have access to reliable, affordable internet and a digitally fluent work force, the sky’s the limit, says Vincent Kumwenda of the Tony Blair Institute for Global Change and a former CEO of mHub.

“Malawi has big potential for entrepreneurship and innovation despite being a sleeping giant,” says Kumwenda. “There is no better time to be in Malawi than now.”