Technological Leapfrogging and the Formalisation of Africa’s Informal Sector

This research paper examines how technological leapfrogging, specifically through digital ID systems and mobile payment platforms, can facilitate the incremental formalisation of Africa's large informal economy to increase productivity and domestic revenue mobilisation.

• Africa's informal economy is substantial, often representing over 60% of employment and up to 40% of GDP. This sector's operation outside formal regulatory and financial systems limits access to social protections, insurance, savings, and credit, while also restricting the ability of governments to collect corporate, income, and VAT taxes.
• Data from 2024 indicates the informal sector accounted for approximately 58% of the total labour force and 27% of GDP. Projections for 2050 suggest a gradual decline to 50% of the labour force and 24% of GDP.
• Digital ID systems are identified as the essential first step for formalisation. While roughly half of the one billion people globally without official identification reside in Africa, many countries with stable governments have implemented biometric ID programs, with Nigeria and South Africa noted as being among the most advanced.
• The adoption of digital IDs and technology can unlock significant economic value. A McKinsey study involving seven countries—the US, UK, Nigeria, India, Ethiopia, China, and Brazil—estimated that full digital ID coverage could generate economic value between 3% and 13% of GDP by 2030, provided there is widespread adoption and high-value use cases.
• Technological tools such as mobile payment platforms, PAYG models, and digital transaction records allow for 'incremental formalisation'. These tools enable governments to monitor economic activity and expand the tax base efficiently without imposing heavy compliance burdens on small-scale operators.

APA

Yeboua, K. (2026). Technological Leapfrogging and the Formalisation of Africa’s Informal Sector. Institute for Security Studies. https://futures.issafrica.org/thematic/guide.pdf?thematic=09-leapfrog&topic=05-technological-leapfrogging

Chicago

Yeboua, Kouassi. Technological Leapfrogging and the Formalisation of Africa’s Informal Sector. Institute for Security Studies, 2026. https://futures.issafrica.org/thematic/guide.pdf?thematic=09-leapfrog&topic=05-technological-leapfrogging.

Wikipedia

{{cite report |last1=Yeboua |first1=Kouassi |title=Technological Leapfrogging and the Formalisation of Africa’s Informal Sector |publisher=Institute for Security Studies |date=25 May 2026 |url=https://futures.issafrica.org/thematic/guide.pdf?thematic=09-leapfrog&topic=05-technological-leapfrogging |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{yeboua2026technological, author = {Yeboua, Kouassi}, title = {{Technological Leapfrogging and the Formalisation of Africa’s Informal Sector}}, institution = {Institute for Security Studies}, year = {2026}, month = may, url = {https://futures.issafrica.org/thematic/guide.pdf?thematic=09-leapfrog&topic=05-technological-leapfrogging}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }