Corruption hurts businesses but digital tools offer the hope of fighting it, say manufacturers in Ghana and Nigeria

Technology has changed the way the world does business. Mobile and digital payment platforms, blockchain, cloud computing and artificial intelligence (AI) tools have all driven innovations in recent years. They allow businesses of all sizes to become more efficient and reach new markets.

For small and medium enterprises (SMEs), these advances can be especially powerful. SMEs are often the backbone of emerging economies. The World Bank estimates they provide between 60% and 70% of jobs in sub-Saharan Africa and about 40% of the GDP in low-income countries.

Now that smartphones are nearly ubiquitous and mobile internet access has become more affordable and widespread, SMEs can reach customers well beyond their immediate geographic markets.

Another area where digitisation can make a notable difference is in the fight against corruption. This is a persistent challenge. Corruption hampers business growth and internationalisation across the region.

Electronic payments, online procurement systems and automated record-keeping can make business processes more transparent and accountable. Digital platforms can also improve the interaction between businesses and government agencies. This minimises the need for face-to-face interactions where corrupt practices often occur. It also boosts fairness and transparency.

We conducted a study to find out whether SMEs in Ghana and Nigeria’s manufacturing sectors believed that introducing more digital tools and systems would lessen the risk of corruption. We also wanted to know if they felt this would increase their chances of being able to do international business.

The answer was a resounding “yes”. And those that had already adopted some kinds of digital technology said their international business had increased as a result.

Their challenges and successes can provide valuable insights into the potential corruption-fighting effects of digitisation across the region.

The study

The study focused on SMEs that were no more than 10 years old. All operated in the manufacturing space. In Ghana, we generated a random list of potential participants from the Ghana Business Directory. We contacted 800 firms; 292 responded. In Nigeria, our participants were drawn from the Nigerian Export Promotion Council; of the 600 firms contacted, 189 replied.

The respondents were founders and/or CEOs. They replied to questions we asked about, among other things, their perceptions of corruption levels in the relevant country.

It was clear that respondents saw a link between digitising their businesses, lessening the risk of corruption hampering their work, and boosting their international presence. One Ghanaian CEO said:

Digitisation helped us access global markets and streamline operations, making us reduce petty corruption and (become) more competitive.

A Nigerian founder told us:

Corruption hindered our business, causing delays and increased costs. However, digitisation has helped us bypass some of these issues, improving efficiency and transparency.

Their experiences were echoed by many other respondents from both countries.

What the findings reveal

Our findings have implications beyond individual firms.

They suggest that, by promoting digitisation, governments in African countries can help create a more transparent and efficient business environment. This will attract more foreign investment and foster sustainable economic growth. Studies suggest that countries perceived as less corrupt tend to attract more foreign direct investment. There’s also ample evidence to show that investors are more confident in stable, transparent environments where the risk of corruption-related uncertainties is lower.

Several key recommendations emerged from our study.

First, investing in robust digital infrastructure is paramount. This requires both urban and rural areas to have consistent and high-speed internet access. Reliable internet connectivity is the backbone of digital transformation. It enables SMEs to operate online, access global markets, and use digital tools effectively. Though individual governments must be the main drivers, international organisations and development agencies can support these efforts.

Second, comprehensive training programmes should be developed to enhance digital literacy among SME owners and employees. These should cover basic digital skills, cybersecurity awareness, and advanced digital tools specific to various industries. It is also critical to create online resources, including tutorials, webinars and support forums, that SMEs can access at their convenience. This ensures continuous learning and support as they use digital solutions. Here, again, development agencies and international organisations have a role to play.

Finally, we recommend that policymakers offer tax incentives, grants and subsidies to SMEs that invest in digital technologies. This can help offset the initial costs associated with digitisation and encourage more businesses to take the leap. Through digitisation, sub-Saharan African countries can create an enabling environment for SMEs to thrive, despite the challenges posed by corruption.