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A Site Selection Web Exclusive, September 2012
WEB Exclusive story

No Lines, No Waiting

The mobile phone’s rapid rise holds great economic promise for Africa.

More than 50 percent of Africa’s population is under the age of 20, and Egypt, South Africa and Nigeria each have more youth mobile phone owners (defined as age 15-29) than the U.K.
Photo by Arne Hoel courtesy of World Bank

It is estimated that mobile penetration for Africa has reached 65 percent of the continent’s population of more than 1 billion.
It is estimated that mobile penetration for Africa has reached 65 percent of the continent’s population of more than 1 billion.

he introduction of the mobile phone may have done more than any other single technical innovation to improve prosperity, business and innovation in Africa.

Increasing mobile phone penetration by just 10 percent increased Gross Domestic Product (GDP) by around 1.2 percent in Ghana, Nigeria, Kenya and Tanzania, according to a partnership study done by mobile phone firm Ericsson and Columbia University's The Earth Institute. As mobile penetration continues to grow in these and other African nations, the resulting increases in connectivity and the availability of information will provide previously unthinkable opportunities for growth and innovation throughout the technology sector and the continent's winder economy.

The reason why mobile penetration is resulting in major changes for Africa is because it does not require the same level of infrastructure as previous forms of technology. By eliminating the need for expensive infrastructure investments, mobile technology is opening up the continent in ways never thought to be previously possible.

"Mobile phones in less developed economies are playing the same crucial role that fixed telephony played in the richer economies in the seventies and eighties," says Leonard Waverman, fellow of the London Business School, in a report backed by mobile telecom giant Vodafone. "Many countries with under-developed fixed-line networks have achieved rapid mobile telephony growth with much less investment than fixed-line networks would have needed."

"Mobile is the future," says Edward Amartey-Tagoe, co-founder of African mobile software company Nandi Mobile. Africa has skipped traditional landline connectivity to go online through mobile technology, and the wider business community is embracing its potential to take them to the next level, he adds.

It is already becoming an essential tool for small businessmen across the continent. For example, mobile banking is providing essential services to businesses located in areas without the infrastructure for brick-and-mortar banks. IBM estimates that by 2015, total African mobile money transfers are expected to exceed US$200 billion, which is expected to account for approximately 18 percent of the continent's GDP. And this figure does not include the fringe benefits to productivity that mobile banking incurs, such as eliminated time wasted through excessive travel and queuing.

In just one country, Kenya, around 18 million people use mobile phones for accessing banking services. Kenya's largest mobile money transfer system, M-Pesa, estimated that it moved around $3.15 billion worth of transactions between April and September 2011, says Jon Hoehler, manager of mobile technologies at Deloitte Digital.

Better Information Means Better Decisions

The radical jump Africa is experiencing in technology also benefits business through information sharing. As Africans go from being almost completely reliant on landlines available to only a small percentage of the population to mobile networks that continue to expand in penetration, the amount of information available to local businessmen and consumers grows, enabling them to make better decisions.

"It is clear from the willingness to sacrifice and pay approximately five to 15 percent of income on top-ups that mobile phones represent a monetary benefit for households of at least a similar amount," says Waverman.

By connecting remote areas, mobile phones allow farmers to keep track of price fluctuations in crops and essentials, enabling them to get the best deal when buying or selling. It also enables them to access more buyers and sellers, preventing a local monopoly from forming. For example, an increase in the Ugandan mobile phone network has directly led to an increase in the sales price of bananas for farmers, Waverman adds.

The success of mobile technology in connecting remote areas where landline connections failed to reach comes down to the lower setup costs of a mobile network and the relative speed with which it can be set up. It is estimated that a mobile network costs 50 percent less than a fixed line for each connection, says Waverman.

But there are still some problems facing the continued expansion of mobile technology in Africa. Addressing these will provide a challenge, but also a great opportunity for investment, says African technology investor Kwaku Owoo.

For example, although mobile networks cost less than fixed lines to set up, in remote areas, the energy required to power mobile masts (towers) can account for up to 50 percent of operational costs because they rely on diesel fuel as a power source. There is a significant opportunity for investment in renewable energy or hybrid techniques that could power these masts and lower running costs. This would enable quicker expansion of mobile networks while also presenting a potential business opportunity for innovators, especially for firms with expertise in the renewable energy sector, says Waverman.

These firms and others familiar with mobile technology can take advantage of the massive increase in mobile infrastructure spending currently under way in Africa. It is estimated that $355 million were spent on mobile infrastructure in 2009. By 2015 that number will be closer to $1.5 billion, says Gustav Praekelt, founder of the Praekelt Foundation, an African mobile solutions developer.

Zero to 100 million in 18 Years

And this investment is leading to astounding rates of growth. In 1994 the first African mobile network was created. At that time, Nigeria had around 100,000 landlines and an Internet penetration of nearly zero for a population of nearly 100 million people. But now Nigeria is estimated to be the leading African country for mobile use, with well over 100 million active lines. It is estimated that mobile penetration for Africa as a whole has reached 65 percent of the continent's population of more than 1 billion. This makes it the second-largest mobile market in the world and the fastest growing. Not bad for 18 years' work, Praekelt adds.

Meanwhile more than 50 percent of Africa's population is under the age of 20. This represents huge untapped potential for the future. Already three African countries — Egypt, South Africa and Nigeria — have more total youth mobile owners (defined as ages 15-29) than the United Kingdom, says Hoehler. In South Africa alone, youth mobile phone users will spend an estimated $1.3 billion on data usage this year, he adds.

African technology firms have sat up and taken notice of this demographic, says Ato Ulzen-Appiah, CEO of African mobile technology firm Museke Inc. Businesses are quickly creating mobile apps that appeal to the youth market. These include new social media platforms, entertainment and business tools for budding entrepreneurs.

This will be the first African generation to grow up surrounded by mobile technology and all the benefits it can bring. Even in the remotest areas, there will be people who, with access to the right contacts and information, will be able to create their own businesses and put their own ideas into action. For the first time ever, there will be mass participation in the African economy and its pool of innovators and creators. This has the chance to take Africa to heights it has never previously been able to achieve.

Guideposts Ahead

The questions and answers below offer, if not a Google Map, then at least some search criteria for the confluent journeys of mobile technology and the economies of Africa.

Which governments are leading the way on trying to attract companies in the digital sector into their market? How?


Kenya has become a leading country in the African digital sector. It was one of the earliest nations to focus on Information Communications Technology (ICT). It has a permanent ICT secretary who has played an active role in developing and guiding Kenya's digital technology sector, says Ato Ulzen-Appiah, CEO of African mobile technology firm Museke Inc.

For example, in preparation for the arrival of undersea cables in 2009 that would greatly increase the country's connectivity, the Kenyan government set up a comprehensive communications framework. This framework helped to significantly increase mobile Internet speed and decrease the cost of Internet access for the average user, according to Kenyan technology hub iHub.

The country also held the Freedom Online Summit in early September. This demonstrates its role as a technology pacesetter in Africa, according to Google Africa. "I am proud to be part of the first African country to host this conference, which confirms the country's leading role in adoption of information and communication technology in the region," says Samuel Poghisio, Kenyan minister for information and communications.

South Africa

South Africa is considered to be the African country most ready for the continued expansion of mobile and digital technology, according to the United Nations. Its combination of government spending with established factors such as technological penetration and literacy rates means that it is poised to roll out mobile and Internet coverage to most of its population — an important factor for trying to attract companies in the digital sector. For example, by next year, South Africa will have expanded 3G service coverage from levels of around 52 percent of the population in 2011 to 85 percent of the population, says Jon Hoehler, manager of mobile technologies at Deloitte Digital.

The South African government has also allocated around 1.289 billion South African Rand (US$157 million) to ICT development. This includes funding for not only infrastructure development, but also for increasing access and technological literacy amongst the population. These factors will make the country a more attractive option for firms in the digital sector that are looking to locate hubs in Africa, according to World Wide Worx, an independent South African technology research and strategy organization.


Nigeria was slower in developing its digital sector. It was only last year that it created an ICT ministerial post and started to streamline the various laws, agencies and development plans that had previously controlled parts of Nigeria's ICT development strategy.

However, it has now pledged to increase national infrastructure for both ICT and the power grid; improve universal access and Internet literacy; and foster a greater technology sector as part of its 2020 development goals. It already leads Africa in total number of mobile subscriptions: Its 90 million subscriptions account for 14 percent of the continent's and will continue to grow with the introduction of undersea cables that increase the country's connectivity with the rest of the continent and the wider world. Two cables were added this year, with another to be connected in 2014. The 2014 cable, the WASACE cable, will have a capacity for information transportation almost 1,000 times greater than either of the 2012 cables.

Which companies have established or are about to establish a large office or manufacturing/delivery team in the continent and where? When? Why?

Google already has offices in six countries and is helping small businesses in the information and technology sectors through activities such as training initiatives, says Ulzen-Appiah. For example, it is holding mobile application development seminars as part of its g|Day train program. It is also holding Coding Camps as part of its G Africa Initiative, the firm adds.

Nokia is currently the most popular mobile phone manufacturer in Africa. Its rugged 1100 phone is dustproof, water-resistant and has a built-in flashlight, making it one of the more popular models for connecting consumers in rural Africa. The firm is also organizing training for developers and pushing African-made apps, says Ulzen-Appiah.

Research in Motion (RIM), creator of the Blackberry series of phones, is also increasing its presence across the continent, he adds. It already has a strong presence in the south. Telecom firm Vodacom South Africa estimated that as of September 2011, it had approximately 1.6 million Blackberry phones on its network alone, which made it the most popular smartphone for the network, says Hoehler.

Are the Asian multinationals (primarily Korean/Chinese) leading the way in a similar way to how they have led development of Africa's resources?

Currently South Korean firm Samsung holds a sizable minority share of the African mobile market, particularly in countries such as South Africa, Zimbabwe and Zambia, says Hoehler. Around 25 percent of respondents to a survey in South Africa last year said that they used a Samsung phone of some sort.

However, as Africa catches up with the rest of the world in the number of mobile users on smartphones, it is China's presence in the continent's technology sphere that will increase. It is anticipated that between 2011 and 2015, the ratio of smartphones in use in Africa compared to non-smartphones will rise from one in 32 to one in six. This will be led largely by cheap Android-based smartphones made in China by firms such as Huawei, says Hoehler.

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