By Adetokunbo Abiola
Not unlike Europe, Asia and South America, Africa has embraced mobile phones as an important communication device. According to research by RNCOS Industry Research Solutions, the number of mobile subscription in Egypt will touch ninety million by the end of 2012, with penetration exceeding 100%, comparable to Saudi Arabia and United Arab Emirates. Ghana clocked fifteen million subscribers recently, with the number expected to rise. Nigeria added a whooping 22 million mobile subscribers in 2008, with the level of penetration exploding. Even in tiny Rwanda, according to its technology minister, Romain Murenzi, cell phone revenue will reach $1 billion by 2012. Similar development takes place in Uganda, Democratic Republic of Congo, Kenya and others. A report from the London Business School stated that over the last few years Africa has witnessed faster growth in mobile telephone subscription than anywhere else in the world.
More surprising is that much of the development is because mobile phones are applied to innovative tasks on the continent. In the last few years, South Africans in Western Cape trigger their supply of electricity by using text messages on their phones. Vodacom Tanzania subscribers pre-pay for their electricity via a mobile payment service. Ugandan handyman Jackson Mawa bought a solar-powered mobile phone to cope with unreliable electricity supply.
Much of the explosion in mobile phone users can be attributed to other innovative uses such as cash transfer, commodity price monitoring, weather forecasting, health research and medical diagnosis. In Ghana, MTN introduced Mobile Money in partnership with nine banks to provide people with a way to transfer money through mobile phones. In South Africa, Wizzit, a cell phone banking facility, evolved a system where customers can use any cell phone to deposit cash into their cell-based account in any post office, branches of Amalgamated Banks of South Africa or the South African Bank of Athens. In Zambia, Celpay allows businesses to pay for services and receive payment via mobile phone accounts. In Kenya, M-Pesa, a joint product of Vodafone/Safaricom mobile phone company, the Commercial Bank of Africa and Faulu Kenya, a microfinance organisation, allows for deposits and receipts of money through phones. In Rwanda, MTN, like in Ghana, introduced a mobile phone money transfer service. "The service has been quite successful in its uptake," said the Head of MTN Mobile Money in Rwanda, Albert Kinuma.
Africans use the phones for interactive purposes. In Uganda, people spend almost $600,000 last year to send greetings to their friends and relatives over the Christmas/New Year season. In some countries like Zambia, Ethiopia and Namibia, households devote as much as 10% of their income, compared to 3% in developed countries, to communicate with friends and family members through mobile phones. According to Synovate, a research company, South Africans, not unlike Europeans and Asians, save their contact information, birthdays, addresses, photographs and others in their cell phones and cannot live without them. ”With mobile phones, you also have the opportunity to be more interactive," said Andries Lombaard, Synovate's Clients Services Director.
Though low income and poor telecommunications infrastructure keep many Africans from using the internet through the computer before now, cellular protocol technology letting mobile networks offer inexpensive internet access is changing this. Internet protocol allows phones route all types of calls, whether they be voice, text messages, or mobile internet surfing sessions, as small packets over the network. According to MTN, around 80 to 120 million Africans, attracted by this last year, accessed 3 G mobile, many of them never having used the internet for web surfing and/or e-mails. To drive mobile phone internet usage upwards, MTN slashed data transmission costs in South Africa in April, reducing the cost of one megabyte of data from $8 to $0.33. MTN plans to cut the mobile data costs for users of its network in other African countries it serves, including Swaziland and Nigeria.
The growth of mobile phones can be attributed to another factor - mobile advertising. According to InMobi, an ad network, mobile advertising acceptance is highest in Nigeria than anywhere else in the world. InMobi's survey, done in partnership with Digital Marketing Intelligence Agency and ComScore, also found, after 2,500 customers were interviewed in South Africa, Nigeria and Kenya, that Africans are among the most progressive in the world when it comes to mobile advertising. . "With advertising space shrinking in Zimbabwe newspapers," wrote Stanley Kwenda, a Harare-based journalist, in Mail and Guardian, "companies are making use of SMS to advertise. Their advertising has become one of the most lucrative businesses in the country for the thousands seeking to flee the country."
To remind patients to take their medicine and warn them if they are about to make a mistake, a doctor in South Africa, David Green, developed a cellular-enabled pill bottle. The Rwandan Ministry of Health unveils a new technology using mobile phones to support public health. IntraHealth International launches a partnership to provide mobile phones to African health workers who offer maternal and child health services, safe deliveries, obstretic consultations, HIV prevention and treatment.
Other major users of mobile phones are farmers and fishermen. According to New York Times, farmers in Niger Republic use cell phones to find out the market that gives the best price for their products. Amos Gichamba, a Kenyan, created a text message-based system allowing farmers to query dairy companies so they know how much farmers can charge for their cow milk. Many fishermen in Zanzibar, according to a BBC report, now carry mobile phones while they are at sea, using them to check market prices.
Just as internet connects large areas of China and India, mobile phones do the same in Africa. It reduces the transaction costs of financial services for the poor, especially those who do not have access to banks in the rural areas of Rwanda, Ghana, Kenya and South Africa. City dwellers send money to relatives living in rural areas` through the same process. "Users do not need to have a bank account to use the service," said Carl Ashie, a mobile phone specialist at Zain, one of Africa's leading telecoms companies. South Africans often paid couriers the equivalent of $30-50 to deliver cash to relatives, now such transactions cost only $0.50 through mobile bank networks. "The greatest impact is in rural areas," said Beyers Coetzee, a rural community officer for Wizzit.
As in Asia, Europe and South America, the phones appeal to the need for expression and individualty among the younger generation. According to many surveys, people use them as alarm clock, camera and instrument to download music. According to a research by Synovate, almost a third of South Africans send and receive e-mail through mobile phones while 46% use them for internet browsing. Synovate research found out the phones are also used for social networking, instant messaging, video viewing and, to a much lesser extent, watching television.
Nowhere in Africa is the use of mobile phones more prevalent than Nigeria, which has the fastest growing mobile phone market on the continent. In Lagos, a megalopolis of 18 million, their use is as common as in New York or Mumbai in India. Sales of mobile phones have soared, and it seems everyone is tied to them in one way or the other. Everybody has one - people in public transportation, private vehicles, on the streets, in restaurants, etc. They are talking 24 hours a day. "It has really enlarged my business," said Mabel Ogunleye, selling crates of soft drinks and dealing with a customer on phone. Other parts of Nigeria experience the same phenomenon. Market women and bus drivers are not left out. Both the young and the old are in the game. "We're all connected and fully integrated into the information world, thanks to GSM," wrote a Nigerian blogger. "If your thing is mobile phone accessories and you're looking for a ready market, Nigeria is it."
Not just in Nigeria alone. The number of mobile subscribers in Rwanda hit 2.6 million in a country of 10 million, and the figure is projected to rise this year. With rapidly improving mobile infrastructure and intense competition among operators, the number of consumers will grow by 14% between 2010 and 2013 in Nigeria. The number of mobile subscribers in Kenya will grow by 15% between 2010 and 2013.
Businessmen and ordinary people are so optimistic about the mobile market they plan big for the future. Wizzit hopes to reach 16 million South Africans in a country where some 60% of the population do not have bank accounts. David Bangirana, a village leader in Uganda, sees potential in using a network of community leaders armed with mobile phones to educate and collect key data in remote places. Celpay, Safaricom and MTN are convinced the mobile telecoms sector has changed the lives of millions of Africans, catalysed economic development and strengthened social tires. "It means unprecedented, substantial change for ordinary people," said Lauri Kivinen, head of corporate affairs for the Nokia Siemen network.
Still, questions remain about the ability of mobile phones to catalyse development. Despite their prevalence, critics say the extension of mobile phone networks and services in recent years have been 'sub optimal'. Jenny Aker and Isaac Mbiti in Boston Review argue the promise of economic development in Africa cannot be realised merely by the use of mobile phones. Other questions concern universal access; inadequate investment in physical, financial and human capital and refusal of cell phone banking facilities to give credit to their customers. But these have not debarred Africans from buying into the industry. Like other continents, Africa's patronage of mobile phones cannot be easily overlooked, and it is indicative of a brave new world where people still find a way to forge ahead.
Thursday 10 March 2011
Wednesday 16 February 2011
MOBILE TELECOMS: Why Africa is Experiencing Growth
By Adetokunbo Abiola
Though Africa remains at the very frontier of emerging markets, the expansion of its mobile telecoms industry sometimes surpasses growth elsewhere. A report from the London Business School stated that over the last five years Africa has seen faster growth in mobile telephone subscription than anywhere else in the world. The continent's mobile phone use during the period increased at the rate of 65% annually, about twice the global average. Africa is reported to be the first continent to have more mobile phone users than fixed line subscribers. The continent is rated as the fastest growing mobile telephone market, faster than in the economies of India and China.
Much of the boom in the industry is driven by a burgeoning domestic market, the largest outside India and China. Although a modest middle class made up of government workers or others tied to the ruling elite has been present on the continent, it expanded in recent years with private sector employers. This growing segment of the African population is upwardly mobile, low-to-middle income consumers. The new class could number as many as 300 million, out of a total population of 1 billion, according to development expert, Vijay Majahan, author of the 2009 book Africa Rising. It includes secretaries, computer gurus, teachers, journalists, lawyers and others who by virtue of education, geography or luck have benefited from economic growth of 6% annually in such countries as Ghana, Uganda and Kenya and around 8% in Rwanda. According to Bloomberg Business week, the household spending of this class and others in Africa totaled $860 billion in 2008, more than that of India or Russia. What's more, Africa's consumer markets in the last few years grew two to three times faster than those in Organization for Economic Cooperation and Development (OECD) countries.
The growth in Africa's telecoms industry can be attributed to other forces: trade liberalisation, strengthening the rule-of-law, improved legal and support institutions, better governance, improved transparency, better transport and economic reforms. At least 17 countries have broad-based privitisation programmes in place. Some 25 countries in Sub-Saharan Africa transferred all or part of their telecoms ownership from the state to the private sector. Countries that privatise such as Ghana, Mozambique and Uganda attracted significant foreign direct investment, allowing profits to be repatriated freely or offering tax incentive and similar inducements to foreign investors. Often changes are deliberate and domestic. Inflation has been cut by half to 11% since 2001. "Most importantly, we've seen regulatory changes and this begins to open up a door to long-term investment," said Obiageli Ezekwesili, Vice President, African Region, World Bank.
Despite Africa’s reputation for sit-tight leaders, pointless wars and corruption, a substantial chunk of the continent is experiencing change. Many countries embraced democracy, freedom of speech and political reforms. Spurred by their citizens, African governments, like in China and India , deregulated the telecoms sector and developed infrastructure – gone are the days of central planning and public sector-driven growth strategies. The political situation reflects a free flow of information and a parallel rise in expectations. During Kenya ’s recent political crisis, members of the middle class, who were losing money, reportedly pressured the country’s warring leaders into a compromise. Change has translated into boom for the telecoms sector.
Urbanisation has increased at the same time, making Africa a potential source of substantial consumption and production in the years ahead. Today 40% of Africans live in cities, a portion that is close to China and continuing to expand. This segment of the population accounts for 80% of the total GDP, according to UN Centre for Human Settlements. Apart from this, the continent already has 52 cities with population greater than 1 million - equal to Western Europe - and is projected to add 32 by 2030. One in five of the planet's young people will live in it by 2040, and it will have the world's largest working-age population. Already, the continent boasts of the world's highest rate of urbanisation, which jump-starts development and growth through industrialisation and economies of scale. McKinsey and Company estimates that over the last 20 years three-quarters of the continent's increase in GDP per capita came from expanding workforce and higher productivity. As in countries such as China, India, Brazil and Mexico, urbanisation created jobs and increased demand for telecoms goods and services.
Not surprising is that urbanisation is also lifting income and fuelling consumption. According to Bloomberg, the number of households with discretionary income has grown and is projected to expand by 50% over the next 10 years, reaching 128 million. While few African households have the kind of disposable income found in Asia and the West, they are driving up demand for goods and services, particularly mobile telecommunication products. For instance, while households in developed countries devote only 3 % of their income to telecoms use, those in some African countries such as Namibia, Ethiopia and Zambia devote as much as 10% . Though unemployment is high and something needs to be done, the surge in private consumption of telecoms products seems likely to continue.
According to a study by a World Bank program, the Africa Infrastructure Diagnostic, improvements in African mobile telecoms infrastructure have led to growth. Nowhere is this relationship between infrastructure and potential growth more apparent than in the multimillion-dollar Glo 1 submarine cable being laid across the West coast of Africa between Nigeria and the UK. Having a length of 9,500 kilometres and a minimum capacity of 640 Gbit per second, the submarine cable is set to rival the South Atlantic cable (SAT-3), which has been enjoying complete monopoly in the West African sub-region. The arrival of the submarine fibre-optic cable will boost bandwidth, cut costs, and stimulate businesses that rely on technology. "Africa has been able to leapfrog from having the most backward system to taking advantage of the latest technologies," said Vanessa Gray of the International Telecommunications Union.
Many experts believe growth is also driven in part by the fact few Africans own computers or can access the internet. So mobile phones are applied to tasks such as health research, cash transfer, weather forecasting, commodity price monitoring and others. Often users themselves conceive such adaptation of the intended functions to meet everyday needs.
Safaricom, Kenya's biggest telecoms company, is one of the firms cashing in on Africa's mobile telecoms boom. Incorporated in 1997, it had only 20,000 subscribers when its chief executive Michael Joseph arrived in 2000. By Nov 2010 when Joseph left the company, its subscribers base grew to 20 million in a country of 40 million. Its peers are now Pan-African giants such as Orascom and MTN. Its 2008 initial public offering became the biggest flotation on an East African stock market, and surpassing it may take some doing. It posted $262 million in profits at the end of its financial year in March 2010, attracting investors into the Kenyan economy.
Econet Wireless is another company that cashed in on the remarkable growth of the mobile telecoms industry in Africa. Founded by Strive Masiyiwa, it began operations as a cell phone provider in 1998 in Zimbabwe. It soon expanded its operations into Botswana by establishing Mascom Wireless, which is one of the spectacular success stories of the African telecoms sector and currently enjoys a market share of over 70%. Econet Wireless then put together a consortium that later dominated MTN in the Nigerian market before winding up its operation. Econet Wireless has expanded into such countries as Lesotho, the United Kingdom, Kenya, Burundi, New Zealand and several other countries.
As a result of all this, Africa's mobile telecoms growth story cannot be easily overlooked. The continent's telecoms revenue increased at a compound annual growth rate of 40% in the last few years, achieving the highest profit margin in the industry worldwide. Swedish-based world's leading supplier in telecommunication, Ericsson, benefited with sales soaring up to 400 million Euro this year alone, its highest ever sales. With recovery in Western economies still looking fragile, Africa continues to be the destination of choice for firms seeking expansion and growth, as countries such as China, India, Japan make forays. Telecommunication firms signed up more than 400 million subscribers since 2000 - more than the total United States population. For example, Nigeria added over 22 million mobile subscribers in 2008. Though the level of penetration in Africa went up from 0.8% in 1998 to 33% in 2008, ample room exists for more foreign direct investment.
While many experts believe Africa, with its expansive base of consumers, may very well be on the verge of becoming the next India and China in the telecoms industry, challenges remain. Alison Gillward, Director, Research ICT Agency (RIA) said: "The extension of networks and services in recent years have been 'sub optimal'" Other problems include inadequate governance arrangement, corruption, absence of institutional capacity and some regulatory incompetence. To be sure, there remains serious problems and risks to growth to any individual country, but if recent trends continue, Africa will play an increasingly important role in the telecoms industry. Like China, India and Brazil, countries getting all the headlines for their prowess in the telecoms sector, Africa has the potential for more growth in an industry that aims to bring the continent's widely dispersed people in closer contact with one another.
Though Africa remains at the very frontier of emerging markets, the expansion of its mobile telecoms industry sometimes surpasses growth elsewhere. A report from the London Business School stated that over the last five years Africa has seen faster growth in mobile telephone subscription than anywhere else in the world. The continent's mobile phone use during the period increased at the rate of 65% annually, about twice the global average. Africa is reported to be the first continent to have more mobile phone users than fixed line subscribers. The continent is rated as the fastest growing mobile telephone market, faster than in the economies of India and China.
Much of the boom in the industry is driven by a burgeoning domestic market, the largest outside India and China. Although a modest middle class made up of government workers or others tied to the ruling elite has been present on the continent, it expanded in recent years with private sector employers. This growing segment of the African population is upwardly mobile, low-to-middle income consumers. The new class could number as many as 300 million, out of a total population of 1 billion, according to development expert, Vijay Majahan, author of the 2009 book Africa Rising. It includes secretaries, computer gurus, teachers, journalists, lawyers and others who by virtue of education, geography or luck have benefited from economic growth of 6% annually in such countries as Ghana, Uganda and Kenya and around 8% in Rwanda. According to Bloomberg Business week, the household spending of this class and others in Africa totaled $860 billion in 2008, more than that of India or Russia. What's more, Africa's consumer markets in the last few years grew two to three times faster than those in Organization for Economic Cooperation and Development (OECD) countries.
The growth in Africa's telecoms industry can be attributed to other forces: trade liberalisation, strengthening the rule-of-law, improved legal and support institutions, better governance, improved transparency, better transport and economic reforms. At least 17 countries have broad-based privitisation programmes in place. Some 25 countries in Sub-Saharan Africa transferred all or part of their telecoms ownership from the state to the private sector. Countries that privatise such as Ghana, Mozambique and Uganda attracted significant foreign direct investment, allowing profits to be repatriated freely or offering tax incentive and similar inducements to foreign investors. Often changes are deliberate and domestic. Inflation has been cut by half to 11% since 2001. "Most importantly, we've seen regulatory changes and this begins to open up a door to long-term investment," said Obiageli Ezekwesili, Vice President, African Region, World Bank.
Despite Africa’s reputation for sit-tight leaders, pointless wars and corruption, a substantial chunk of the continent is experiencing change. Many countries embraced democracy, freedom of speech and political reforms. Spurred by their citizens, African governments, like in China and India , deregulated the telecoms sector and developed infrastructure – gone are the days of central planning and public sector-driven growth strategies. The political situation reflects a free flow of information and a parallel rise in expectations. During Kenya ’s recent political crisis, members of the middle class, who were losing money, reportedly pressured the country’s warring leaders into a compromise. Change has translated into boom for the telecoms sector.
Urbanisation has increased at the same time, making Africa a potential source of substantial consumption and production in the years ahead. Today 40% of Africans live in cities, a portion that is close to China and continuing to expand. This segment of the population accounts for 80% of the total GDP, according to UN Centre for Human Settlements. Apart from this, the continent already has 52 cities with population greater than 1 million - equal to Western Europe - and is projected to add 32 by 2030. One in five of the planet's young people will live in it by 2040, and it will have the world's largest working-age population. Already, the continent boasts of the world's highest rate of urbanisation, which jump-starts development and growth through industrialisation and economies of scale. McKinsey and Company estimates that over the last 20 years three-quarters of the continent's increase in GDP per capita came from expanding workforce and higher productivity. As in countries such as China, India, Brazil and Mexico, urbanisation created jobs and increased demand for telecoms goods and services.
Not surprising is that urbanisation is also lifting income and fuelling consumption. According to Bloomberg, the number of households with discretionary income has grown and is projected to expand by 50% over the next 10 years, reaching 128 million. While few African households have the kind of disposable income found in Asia and the West, they are driving up demand for goods and services, particularly mobile telecommunication products. For instance, while households in developed countries devote only 3 % of their income to telecoms use, those in some African countries such as Namibia, Ethiopia and Zambia devote as much as 10% . Though unemployment is high and something needs to be done, the surge in private consumption of telecoms products seems likely to continue.
According to a study by a World Bank program, the Africa Infrastructure Diagnostic, improvements in African mobile telecoms infrastructure have led to growth. Nowhere is this relationship between infrastructure and potential growth more apparent than in the multimillion-dollar Glo 1 submarine cable being laid across the West coast of Africa between Nigeria and the UK. Having a length of 9,500 kilometres and a minimum capacity of 640 Gbit per second, the submarine cable is set to rival the South Atlantic cable (SAT-3), which has been enjoying complete monopoly in the West African sub-region. The arrival of the submarine fibre-optic cable will boost bandwidth, cut costs, and stimulate businesses that rely on technology. "Africa has been able to leapfrog from having the most backward system to taking advantage of the latest technologies," said Vanessa Gray of the International Telecommunications Union.
Many experts believe growth is also driven in part by the fact few Africans own computers or can access the internet. So mobile phones are applied to tasks such as health research, cash transfer, weather forecasting, commodity price monitoring and others. Often users themselves conceive such adaptation of the intended functions to meet everyday needs.
Safaricom, Kenya's biggest telecoms company, is one of the firms cashing in on Africa's mobile telecoms boom. Incorporated in 1997, it had only 20,000 subscribers when its chief executive Michael Joseph arrived in 2000. By Nov 2010 when Joseph left the company, its subscribers base grew to 20 million in a country of 40 million. Its peers are now Pan-African giants such as Orascom and MTN. Its 2008 initial public offering became the biggest flotation on an East African stock market, and surpassing it may take some doing. It posted $262 million in profits at the end of its financial year in March 2010, attracting investors into the Kenyan economy.
Econet Wireless is another company that cashed in on the remarkable growth of the mobile telecoms industry in Africa. Founded by Strive Masiyiwa, it began operations as a cell phone provider in 1998 in Zimbabwe. It soon expanded its operations into Botswana by establishing Mascom Wireless, which is one of the spectacular success stories of the African telecoms sector and currently enjoys a market share of over 70%. Econet Wireless then put together a consortium that later dominated MTN in the Nigerian market before winding up its operation. Econet Wireless has expanded into such countries as Lesotho, the United Kingdom, Kenya, Burundi, New Zealand and several other countries.
As a result of all this, Africa's mobile telecoms growth story cannot be easily overlooked. The continent's telecoms revenue increased at a compound annual growth rate of 40% in the last few years, achieving the highest profit margin in the industry worldwide. Swedish-based world's leading supplier in telecommunication, Ericsson, benefited with sales soaring up to 400 million Euro this year alone, its highest ever sales. With recovery in Western economies still looking fragile, Africa continues to be the destination of choice for firms seeking expansion and growth, as countries such as China, India, Japan make forays. Telecommunication firms signed up more than 400 million subscribers since 2000 - more than the total United States population. For example, Nigeria added over 22 million mobile subscribers in 2008. Though the level of penetration in Africa went up from 0.8% in 1998 to 33% in 2008, ample room exists for more foreign direct investment.
While many experts believe Africa, with its expansive base of consumers, may very well be on the verge of becoming the next India and China in the telecoms industry, challenges remain. Alison Gillward, Director, Research ICT Agency (RIA) said: "The extension of networks and services in recent years have been 'sub optimal'" Other problems include inadequate governance arrangement, corruption, absence of institutional capacity and some regulatory incompetence. To be sure, there remains serious problems and risks to growth to any individual country, but if recent trends continue, Africa will play an increasingly important role in the telecoms industry. Like China, India and Brazil, countries getting all the headlines for their prowess in the telecoms sector, Africa has the potential for more growth in an industry that aims to bring the continent's widely dispersed people in closer contact with one another.
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