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Africa: No Longer the Dark Continent

January 11, 2011 - 4 Comments

By Howard Baldwin, Contributing Columnist

After writing several recent posts on the telecom infrastructure efforts of Connect Africa, I’ve gotten a much better sense of what’s going on there from an ICT standpoint. The conventional wisdom for places like Africa states that it has the potential to achieve telecom parity more quickly than the U.S. and Europe did.

Why? Because it can skip the cost of wireline installations and go straight to wireless. An easier infrastructure, a faster deployment, a more rapid road to the connected life. The question, perhaps, is that optimism unfounded?

You might think so if all you saw was the political news coming out of Africa over the last weeks of 2010: bombings in Johannesburg; a disputed election in Ivory Coast; secession in Sudan; Kenyan politicians named in a drug dealing scandal. Telecom operators are no different than any other business — they’re attracted by stability and repelled by instability.

Africa has Numerous Challenges to Overcome

Notwithstanding politics, even among the ICT standpoint, there is discouraging news. The African Mobile Factbook 2008 cites potential growth inhibitors as well:

Taxation. Africans pay an average of 17% in taxes on both usage and the sale of mobile phones. This could send “the cost of handset ownership to a prohibitive level for many individuals.”

Low income. It’s a poor continent, which makes it hard for mobile operators to offer profitable value-added services. Operators have noted that SMS traffic “falls dramatically when [they] close free-trial periods and begin charging for these services.”

Illiteracy. A population that can’t read doesn’t care about data services, and certainly won’t be able to figure out user manuals or other instructions.

Electricity. Unreliable power supplies also have the potential to forestall usage; Tanzania reported widespread power failures over the holidays. While cell towers can be solar-powered, phones still need to be recharged.

Upside for Africa’s Mobile Network Development

But the Mobile Factbook also cites drivers that inspire optimism. For instance, it suggests that operators such as Orscom, Vodacom, MTN, Millicom, and Celtel will subsidize the cost of handsets to boost business. They may also offer prepaid plans that helps those on limited incomes. At the same time, it cites the potential for telecom deregulation, starting with efforts in both Tunisia and Nigeria.

Finally, low penetration overall (15 percent across the continent in 2005) means Africa has nowhere to go but up. History shows us that the route to both democracy and capitalism can be rocky (consider the American Revolution in the 18th Century, the French Revolution in the 19th Century, and what Russia is experiencing now).

As for the potential for mobile services operator growth, the best signposts for optimism in Africa come from the most recent sparkplugs of mobile infrastructure deployment: India and China.

In 2002, China’s mobile penetration was 16 percent. In 2010, it reached 63 percent. In the same period, India went from 1 million cell phones to 706 million. This clearly shows that, politics and infrastructure issues aside, underdeveloped nations can catch up quickly — and Africa will be no exception. Once it lights up with the glow of millions of mobile phone displays, it will no longer be a dark continent.

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  1. A lot has changed in Africa in the past 40 years which slipped by barely unnoticed underneath the stream of bad news that CNN and BBC specialize in delivering out of the continent. 40 years ago Africa's population was 1/3 what it is now, barely 10% of its people lived in cities (40% now do) and it was predominantly agricultural with practically non-existent disposable income. The economic dynamics have changed which is why the growth of telecoms happened at a rate few expected. For example, at inception MTN the leading mobile telephone service provider in Nigeria expected the total market size to be only 5 million connections. Today there are over 85 million mobile connections.

    • @Franklin, Thank you for sharing your perspective, and the insight about the MTN example in Nigeria -- clearly, that's an amazing market growth story. David

  2. It's true that Africa is developing very much, but still it needs support from stronger countries. I think that companies should prepare for a battle, which of them is going to gain the trust of the African people.

    • @Dan, Agreed, trust is very important -- it's also most valuable when it's mutual. David