Digital Transformation, Governance and Sustainable Development in Sub-Saharan Africa: Revisiting the Human Capital Paradox

This study seeks to answer whether digital payment infrastructure can offset the shortcomings of human capital and institutional quality in 10 Sub-Saharan African economies from 2010 to 2022, and to examine the extent to which it affects sustainable development. The study fills a critical gap in the development literature by introducing the Digital Development Substitution Framework, which helps explain how digital technologies may replace missing institutional and human capital. The results obtained from two-stage least squares, System GMM, FMOLS, DOLS, panel quantile regression, and panel threshold regression show that the digital payment infrastructure consistently promotes sustainable development, whereas the conditional impacts of education expenditure and Internet penetration are adverse. Governance greatly enhances the development impacts of digital finance, as thresholds suggest that the institutional conditions under which digital finance becomes a complementary rather than a substitute are important. The findings contribute to the theory of digital transformation by identifying development pathway options that depend on efficiency and by informing policy recommendations for bolstering digital ecosystems, governance reforms, and inclusive and sustainable development in Africa.