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Mobile Communications Help Create Virtuous Circle in Africa

Roz Roseboro
3/20/2018

Closing the digital divide in Africa is a primary goal for stakeholders from operators to governments to NGOs. Ensuring its more than 1 billion citizens can participate in the global economy and raise living standards across the region will require commitment and time, but can create a virtuous circle that will benefit all.

On the supply side, public/private partnerships and the many national broadband plans have help spur investment, and dramatically increase the availability of telecom services in Africa. This access is helping to bring many out of the informal or shadow economy. Business benefits from this access by becoming more productive, while governments benefit from the additional tax revenues—which can help fund additional infrastructure investment. For example, if a farmer can get a text to tell him which location will give him the best price for his goods, can save valuable time and increase his income. Given that large swaths of Africans make their living in agriculture, the multiplier effect can be profound.

Operators and others are likewise demonstrating value to individual subscribers to stoke demand. Like in most emerging markets, the African mobile market is predominantly pre-paid, with widespread multi-SIM usage. Subscribers make the decision on which SIM to used based on who they are calling, or which operator has the best promotion. This low loyalty/high churn dynamic means operators in the region have extensive loyalty programs. The rewards can range in value from free minutes to goods in physical stores. Many telecom operators in Africa provide more than connectivity. Mobile operators have filled a void left by a lack of traditional financial infrastructure, offering mobile-based services including payments, insurance and investment. Indeed, Safaricom, which was the pioneer of such services with its M-PESA offer, generated 27% of its mobile service revenue from M-PESA in the first half of its FY18. The increased availability of mobile communications, including Internet access, is also providing an opportunity for more greater access to E-learning, E-government and E-medicine. While pricing for smartphones has declined in recent years, they remain out of reach for many in Africa. The cost of mobile data is also a consideration. To cater to these most price sensitive users, operators take advantage of USSD channels to provide access to selected applications like Facebook on featurephones without incurring any mobile data charges.

Users in Africa are finding creative ways to use mobile communications to generate economic growth. Micropayments can help facilitate new business models and support new business with low upfront costs whose impact can be orders of magnitude greater and lift entire communities. This facilitates activities like reselling minutes, creating a new business opportunity with little upfront investment, and thus suitable for resource-constrained entrepreneurs. In addition, tech companies such as Google, Facebook are investing in innovation hubs in Africa to nurture local talent. They are training them in digital technologies, upskilling people so they can be producers, not just consumers of mobile services and content. In the long run, it is hoped that this will help raise incomes and generate increased economic activity. Again, there is the potential for a multiplier/knock-on effect, since better and more relevant products designed by and for Africans stokes demand, and increases usage. This, in turn, will generate more revenue for home-grown suppliers and operators.

Stakeholders across the value chain are increasing mobile network availability and innovators are creating more and more relevant mobile services. Together they will create the conditions needed to spur sustained growth throughout Africa.

– Roz Roseboro, Senior Analyst, Heavy Reading

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