The Fast-Growing yet Exclusionary Digital Economy
South Africa’s digital industry has emerged as one of the fastest-growing sectors in its economy. However, this growth is marred by a concerning issue – racial inclusion and access to financial resources are woefully inadequate for historically disadvantaged persons (HDPs), who make up the majority of the country’s population.
Lack of Racial Inclusion: A Barrier to Growth
A provisional report by the Competition Commission (CompCom) highlights the dominance abuse and anti-competitive behavior of online intermediation platforms within South Africa. The regulator found that HDPs face significant barriers to participation in the digital economy due to a lack of funding, exclusion from business networks, scarcity of wealth and asset accumulation.
The Scourge of Exclusion
Startups founded by HDPs face greater pre- and post-revenue funding challenges compared to those founded by white entrepreneurs. The report also notes that HDP businesses experience significant difficulties when joining major B2C sites.
"The Inquiry has found a distinct lack of participation by HDPs in online platform markets and even low representation amongst the business users on the intermediation platforms," CompCom said in its findings.
The Untransformed Online Economy
In some cases, this lack of participation reflects the limited transformation of industries served by platforms. However, it is striking that the online economy remains relatively untransformed compared to traditional sectors – even within categories such as tourism and estate agencies.
Given the rapid shift towards an online economy, these barriers to participation threaten a new level of exclusion for South Africa. CompCom emphasizes the need for targeted funding initiatives to address this issue.
The Legacy of Apartheid
CompCom attributed the exclusion of HDPs from South Africa’s digital economy to the apartheid system, which institutionalized racial oppression and segregationist policies from the 1940s to the early 1990s. The country remains one of the world’s most unequal societies, with 10% of its population owning more than 85% of household wealth.
Wealth Accumulation: A Barrier to Funding
The regulator notes that HDPs’ lack of wealth accumulation under apartheid has created a substantial barrier to accessing pre-revenue funding from family or associate "angel investors." Unlike their white counterparts, HDP entrepreneurs often rely on limited financial resources.
Addressing the Gap
To bridge this gap, CompCom emphasizes the need for targeted initiatives to support HDPs in accessing funding and business opportunities. This includes:
- Training and capacity-building programs
- Access to funding and investment opportunities
- Policy reforms to promote racial inclusion
Conclusion: A Call to Action
The report highlights the imperative for South Africa’s digital industry to address its exclusionary nature. By prioritizing targeted initiatives and policy reforms, we can unlock the potential of HDPs and foster a more inclusive digital economy.
This transformation requires collective effort from government, private sector, civil society, and individuals. Together, we can create opportunities for all, regardless of background or socio-economic status.
By embracing this vision, South Africa’s digital industry can become a driving force for growth, innovation, and social justice.
Recommendations
- Develop targeted training programs to equip HDPs with digital skills
- Establish dedicated funding initiatives for HDP-led startups
- Introduce policy reforms to promote racial inclusion in the digital economy
By implementing these recommendations, we can create a more inclusive digital industry that benefits all South Africans.
The Future of Digital Inclusion
As we move forward, it is essential to prioritize diversity, equity, and inclusion in the digital economy. By fostering a more inclusive environment, we can unlock the full potential of HDPs and drive growth, innovation, and social justice.
This journey requires collective effort, policy reforms, and targeted initiatives. Together, we can create a brighter future for all South Africans.
Conclusion
South Africa’s digital industry has immense potential to drive economic growth and social development. However, this potential is marred by the exclusionary nature of the digital economy. By addressing these challenges through targeted initiatives and policy reforms, we can unlock the full potential of HDPs and create a more inclusive digital future.
This transformation requires collective effort from government, private sector, civil society, and individuals. Together, we can create opportunities for all, regardless of background or socio-economic status.
By embracing this vision, South Africa’s digital industry can become a driving force for growth, innovation, and social justice.