MENA’s digital economy is predicted to leapfrog to $100bn by 2023

The digital economy in the Middle East and North Africa (MENA) region is projected to leapfrog to about $100 billion by 2023 from an estimated $44bn last year, fuelled by rising consumer adoption of digital services, including online payments, latest research says.

Large sectors such as travel, food delivery and e-tailing are driving the digital economy in the region, the market research study by global consultancy RedSeer Consulting said.

“The key drivers [for the acceleration] are high consumer adoption and stickiness of digital services, increasing digitalisation of payments, improving logistics capabilities, more brands building online capabilities and favourable policies,” said the research report, released on Monday.

The digital economy in the region, which has seen a fall of 17 percent in 2020 to $44bn from $52bn in the previous year, mainly on account of a pandemic-induced sharp plunge in online travel services, is predicted to see a sustained annual growth of 30 percent during 2021-2023 to reach $97bn, according to the report.

It said that although the digital sector has witnessed announcements of some mega investments – amounting to $500 million or above – in recent years, such as the ones by Souq in e-commerce, Medianet in digital media and Flydubai and Careem in the transportation sectors, the digital economy is mainly driven by mid-size investments – between $10m and $100m in a wide-range of sectors.

“My sense is that sectors such as edutech, healthtech and eB2B will see a major pick up [in investments] in the region soon,” Sandeep Ganediwalla, Dubai-based managing partner of RedSeer Consulting, told Arabian Business.

EPMG, Namshi, dubizzle, Talabat, Zomato, EMP, Starzplay, Newport Media, Quiqup, Tabby and Trukker are among the companies which have already announced investment plans in the range of $10m – $100m in the digital play in sectors ranging from e-tail, e-commerce, food-tech, fintech, health-tech and agri-tech.

The report said while the e-tail segment, excluding grocery, has seen a big jump in growth from 23 percent of the overall digital economy in 2018 to 41 percent in 2020, the online travel segment has shrunk during this period to 34 percent last year from a whopping 63 percent two years ago.

The market study also revealed that the food-tech segment has climbed several notches to account for 17 percent of the overall digital market in 2020 from 10 percent in the previous year, aided by the pandemic-induced lockdown and mobility restrictions.

Significantly, the RedSeer research has predicted the food-tech segment falling to 13 percent of the overall projected $97bn digital market in the region, while the e-tail segment – excluding grocery – is predicted to see only a marginal one percent increase to 42 percent by 2023.

The study, however, has predicted a rise in the online travel segment in the region to 36 percent in 2023 from 34 percent last year, apparently on the expectations of a pick-up in leisure and business travels post-pandemic.

The report also revealed that the UAE and Saudi Arabia accounted for 70 percent of the digital economy in the MENA region in 2020.

Significantly, the growing importance of the digital economy to the UAE is also evident in the action of Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of UAE and Ruler of Dubai, last week granting approval to the board of directors and advisory council of the Dubai Chamber of Digital Economy as part of a recently announced shake-up.

The Dubai Chamber of Digital Economy is tasked with transforming the emirate into an international technology hub and building an advanced digital infrastructure – attracting global investment in e-commerce and digital technologies, providing incentives and facilities to attract talents and entrepreneurs in advanced technologies from all over the world.

According to figures, there are 90 investment funds in the digital sector and 12 business incubators in the UAE. Arabian Business