EFFECTS OF DIGITALIZATION ON ECONOMIC GROWTH IN SADC: A COMPARATIVE ANALYSIS OF UPPER- AND LOWER-INCOME COUNTRIES

Abstract

The 21st century has witnessed a transformative surge in digitalization, the integration of digital technologies into all facets of society. This phenomenon has fundamentally reshaped traditional production processes and birthed entirely new business models. This study investigates the impact of digitalization, measured by information and communication technology (ICT) use, on economic growth in Southern African Development Community (SADC) countries. A central question is whether the benefits of ICT investments differ between upper income and lower income member states. Employing data from SADC countries for the period 1999-2022, the analysis utilizes the Bias-Corrected Method of Moments (BCMM) estimator to assess the magnitude and direction of the relationship between digitalization and economic growth. The findings reveal a positive overall impact of digitalization on economic growth within the SADC region. Mobile phone subscriptions and international bandwidth usage emerge as key drivers of this growth. However, the significance of international bandwidth is limited to upper income countries, with a relatively weak positive effect. Mobile phone subscriptions stand out as a significant factor in both income groups, exhibiting a comparatively stronger positive impact on economic growth in lower income countries. The study recommends that concerted efforts must be directed towards harnessing the inherent benefits of digitalization which include expanding mobile network coverage, increasing the affordability of mobile data plans, actively promoting the adoption of mobile money services and so forth.