South Africa’s Digital Economy: What Will It Look Like by 2030?

South Africa is one of the leading countries setting the pace for digital transformation in Sub-Saharan Africa, with expanding internet access, technological innovation, and steady investment in digital infrastructure. While the country doesn’t yet compete on equal footing with its BRICS peers or other middle-income nations—ranking near the bottom of those groups—it continues to outperform most of Sub-Saharan Africa in key areas like connectivity, digital adoption, and skills development.

The GSMA report, Driving Digital Transformation of the Economy in South Africa , paints a vivid picture of where the country stands in its digital journey. It celebrates the strides South Africa has made while shining a light on the barriers still holding it back. More importantly, it emphasizes the pivotal role mobile technology plays in driving progress and bridging divides.

The Big Picture: The Potential of South Africa’s Digital Economy

South Africa’s digital economy has become a mainspring of its overall economic landscape, demonstrating potential for growth and innovation. It is described in the report as “heterogeneous, ranging from basic infrastructure to advanced technology-based companies.” Its influence goes far beyond its immediate sphere, creating ripple effects across traditional industries.

As a Source of Innovation

South Africa is carving out a reputation as a hub for digital innovation in Africa, with its fintech sector leading the charge. In 2023, the country accounted for 21% of all fintech startups on the continent, following Nigeria at 32% and ahead of Kenya at 15%. Key players like MTN, with its MoMo payment services, Telkom’s financial solutions such as Lend, and Vodacom’s VodaPay platform are at the forefront of this fintech revolution, demonstrating how mobile operators are driving innovation and financial inclusion.

The digital economy is also fueling entrepreneurial growth. The proportion of startups in South Africa’s digital sector has grown significantly, from just 1.0% in 2015 to 3.2% in 2021. This rise reflects the country’s ability to foster innovation, encourage new business creation, and generate employment in the tech-driven economy

While South Africa’s digital economy is thriving, its impact on traditional industries is equally transformative. Mining, which contributes 4.8% to the country’s total value-added, remains an important part of the economy. Digital technologies are being increasingly adopted to improve productivity and safety throughout the production process, ensuring the sector’s continued contribution to jobs, tax revenue, and exports.

The agricultural sector, the most developed and diversified in Africa, also stands to benefit significantly from greater digitalization. Technologies like precision farming, IoT, and AI have the potential to revolutionize production, boost efficiency, and address challenges like climate variability, ensuring sustainable growth.

The digital economy is also playing a transformative role in empowering MSMEs, offering innovative tools and platforms that enhance productivity, expand market reach, and foster growth. Through digital technologies, even the smallest businesses can overcome traditional barriers such as limited access to customers, high operational costs, and inadequate infrastructure. Digital payment systems, mobile banking, and online marketplaces are some of the innovations that have revolutionized how MSMEs operate.

The digital economy also encourages innovation within the MSME sector itself. Entrepreneurs are leveraging technology to create new products, services, and business models that cater to the evolving needs of South African consumers.

South Africa’s digital economy is driving progress on multiple fronts. These advancements highlight the transformative power of digital technology and its potential to create a more inclusive and prosperous future.

The Mobile Sector and the Digital Economy

The mobile sector is a driver of South Africa’s digital economy. Mobile revenues have seen impressive growth, increasing at an average annual rate of 5.2%, outpacing broader industry. The sector directly employs around 30,000 people and supports approximately 160,000 jobs indirectly, underlining its role as a vital job creator. Beyond employment, the digital economy contributes 3–4% of the government’s tax revenues, reinforcing its importance as an economic driver. Telecommunications operators alone generated ZAR 208 billion in revenue in the year leading up to September 2023. When factoring in indirect contributions from suppliers and employees, the sector’s overall impact on GDP is estimated at ZAR 250–330 billion—around 4–5% of South Africa’s total economic output.

Mobile Network Operators (MNOs) are key players in this transformation, generating an average revenue per user (ARPU) of approximately USD 5 per month—similar to what is seen in countries like Brazil and Russia. Beyond revenues, MNOs are among the country’s largest investors in physical infrastructure, ensuring widespread coverage and reliable connectivity. Today, over 95% of South African households have access to either a mobile or fixed line, with the vast majority relying on mobile phones for communication and internet access.

The scale of digital adoption fueled by mobile connectivity is also remarkable. By 2024, South Africa reached 45.3 million internet users—a striking increase of 20 million over the past 11 years. This reflects an annual growth rate of 5.6%, with mobile devices serving as the primary gateway to the digital world. Importantlyx, this rise in mobile internet usage has significantly narrowed the digital divide. The gap between those who use the internet and those who live within range of mobile broadband but remain offline is shrinking.

In an interview with Angela Wamola, Head of Sub-Saharan Africa, GSMA at the launch of this report in Cape town, she noted:

“In South Africa, 54% of the population is already connected, which is double the connectivity rate of Sub-Saharan Africa. This means South Africa only needs to close the remaining 44% of the usage gap.”

-Angela Wamola, Head of Sub-Saharan Africa, GSMA

The Digital Economy is NOT Without Challenges

South Africa’s digital economy, despite its achievements, faces a growing set of challenges that could undermine its position as a regional leader. Countries like Kenya and Nigeria are gaining ground, attracting significant investment into tech startups and showing strong potential for digital growth. If South Africa doesn’t address its issues, it risks falling further behind its global peers.

One of the core issues is the sustainability of investment in digital infrastructure. South Africa’s economy has grown slowly, with an average GDP increase of just 0.8% annually from 2012 to 2024. This sluggish growth isn’t enough to support the country’s goals for economic transformation and poverty reduction. The tough macroeconomic environment, including high interest rates and a weak currency, has made it harder for companies to invest in and expand digital infrastructure.

Building and maintaining telecommunications networks and infrastructure in South Africa is expensive. Companies face multiple challenges: securing rights of way, the rising cost of electricity, and frequent theft or vandalism of network infrastructure. These factors push up operational costs, making investments in the sector less sustainable. The country’s energy issues, particularly the ongoing load-shedding, force MNOS and other operators to invest heavily in backup power systems, further increasing costs.

Adding to this, the Universal Service Funds, which were supposed to address some of these infrastructural issues, are seriously underperforming in Africa generally, leaving a significant gap in support. Caroline Mbugua, Senior Director, Public Policy and Communications, Sub-Saharan Africa, GSMA, told us in an interview at the launch of this report that:

“We surveyed both policymakers, regulators, and the private sector across over 40 countries in Africa. The results showed almost unanimous agreement that USFs in the region are underperforming. This means the objectives they were supposed to meet are not being achieved. Funds are being collected, but they are not doing the job they were meant to do.”

– Caroline Mbugua, Senior Director, Public Policy and Communications, Sub-Saharan Africa, GSMA

 

 

Also, the high rates of theft and vandalism are another serious concern. As telecom infrastructure becomes a target for criminals, both the cost of repairs and the impact on service quality grow, which in turn affects the ability of network providers to deliver consistent service.

Affordability is another major roadblock, especially with high unemployment rates and stagnant economic growth. Many households struggle with limited budgets, which impacts their ability to purchase smartphones or new digital services. Mobile operators have seen flat revenues in recent years, as price-sensitive consumers switch to cheaper alternatives like Mobile Virtual Network Operators (MVNOs) or over-the-top (OTT) services.

To solidify that these challenges are not just mere speculations, we spoke to Sitho Mdlalose, the CEO of Vodacom South Africa, one of the biggest MNOs in South Africa, at the launch of the report and he aptly told us the challenges they face:

“The cost of rolling out the network is not small at all. The real challenge also comes in maintaining that infrastructure. There are operational issues like vandalism, theft, and the broader energy problems in the country. While load shedding has reduced, there are still issues with the transmission grid, load reduction, and so on. The cost of operating the infrastructure is massively challenging. And once you roll out the network, it’s useless if people don’t have affordable devices.”

– Sitho Mdlalose, CEO, Vodacom South Africa

 

Moreover, the cost of smartphones is exacerbated by taxes. Imported devices are subject to high levies, including a 9% ad-valorem tax and 15% VAT, making digital access unaffordable for many South Africans.

“Governments in Africa need to recognize that telecoms are not just a cash cow—they are the driving engine of our economies. Reducing taxation on this sector will allow us to focus on the economic gains that come from various activities. Instead of heavy taxes at the point of entry, whether on new products, services, or operators, lowering taxes encourages more investment. The more an operator is incentivized to invest in infrastructure and services, the greater the revenue government will ultimately receive from the economies of scale created by large-scale investments.”

– John Omo, Secretary General, African Telecommunications Union (ATU)

 

 

In addition to these financial hurdles, the country’s regulatory framework is outdated. The Electronic Communications Act (ECA) is over 20 years old, and since its implementation, the market has changed dramatically. Data has overtaken voice services as the primary driver of digitalization. The regulatory framework needs to be updated to keep pace with the evolving market and support the ongoing digital transformation.

Key areas for reform include licensing, spectrum allocation, and regulations for new digital services like OTT platforms and emerging technologies such as Low Earth Orbit (LEO) satellites. A revised regulatory framework would provide the certainty needed for continued investment and innovation, allowing South Africa to better support its digital economy and achieve its socio-economic goals.

Addressing these challenges can drive progress significantly by 2030

To do this, a coordinated effort from both the public and private sectors is needed. Angela Wamola gave a very optimistic forecast;

“By 2030, if these recommendations are adopted, we anticipate that South Africa could reduce its current 44% internet usage gap to just 30%. One-third of this improvement in internet adoption would come from the adult population, while the remaining third would be unlocked by implementing key recommendations to boost connectivity.” 

The policy recommendations include;

• Policies must prioritize consistency and long-term impact, balancing trade-offs to attract and retain investments in the sector.

• Adopt a market-led, collaborative approach to finalize the digital migration and sunset 2G/3G networks, ensuring spectrum allocation promotes further investment.

• Implement measures to improve network deployment efficiency, ensure reliable energy supply, and protect infrastructure from vandalism and crime.

• Reduce taxes on imported devices to make technology more affordable and accelerate nationwide digital skills training to boost adoption.

• Mandate high-level leadership and allocate dedicated resources for executing the Digital Masterplan and related strategies.

• Update regulations to foster growth, ensuring fair competition for emerging technologies like AI, OTT services, and low earth orbit satellites.

A Shared Journey Towards Digital Transformation

It’s only fair to acknowledge that many of the challenges South Africa faces in its digital economy are not unique but resonate across the African continent. The GSMA’s report on The Role of Mobile Technology in Driving the Digital Economy in Nigeria highlights several similar issues, including the high cost of infrastructure, device affordability, and policy lags. These recurring themes suggest that most African nations grapple with comparable hurdles as they strive to harness the power of digitalization.

While this article primarily addresses South Africa’s challenges, the insights and recommendations are relevant across borders. Other countries can draw lessons from South Africa’s experience, adapting strategies to fit their unique circumstances. By learning from one another and addressing shared obstacles collectively, African nations can accelerate progress toward a future of inclusive and sustainable digital transformation.

“Having closely observed the industry’s evolution, it’s clear that the key to overcoming these challenges lies in collaboration and shared knowledge. This is not just true for South Africa, but for the entire continent. By working together and learning from one another, we can build a more connected, innovative, and digitally empowered Africa.”

– Akim Benamara, Founder and Chief Editor, TechAfrica News

“We will continue to highlight, spotlight, and draw attention to the challenges and opportunities within Africa’s digital transformation. It takes everyone—governments, businesses, and individuals—to collaborate and drive meaningful change. Together, we can shape a more inclusive, connected, and digitally empowered Africa.”

– Joyce Onyeagoro, Editor, TechAfrica News