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End of the African telecoms boom?

The upsurge in sub-Saharan Africa mobile telecommunications seems to be subsiding as companies continue to overcrowd the market while trying to gain more clients. Sizeable investments and how businesses aim to win over customers’ favour was investigated in a new report.

As one boom ends, another begins Bitange Ndemo, secretary of the Kenyan Ministry of Information and Communications, believes. (image: file)

The Morgan Stanley Research report, a global investing firm, says as firms backed by big money, like Bharti Airtel, continue improving their network coverage and decrease tariffs, Africa will become more competitive. Old timers, such as MTN and Safaricom, that have enjoyed market dominance are set to be affected the most. According to the report, the boom will be replaced by market driven innovation, new products and expanding data services.

“All companies are focusing on driving data usage, and new services to reduce churn. The most important are mobile money services like M-Pesa, where innovation take-up is high,” the report says.

“We expect mobile revenues to grow from 3,4% of gross domestic product (GDP) in 2011 to 3,7% by 2015, as we believe mobile revenue growth will outpace GDP in the next four years,” the report says.

Bitange Ndemo, secretary of the Kenyan Ministry of Information and Communications, says there is little room for new entrants in the local market.

“Unfortunately, there has been market erosion of about 20%, mostly because of competition that has seen cuts in tariffs in the sector. A new entrant would have a lot of problems as the four firms (Safaricom, Bharti Airtel, Yu Mobile, Orange) are struggling due to stiff competition,” Bitange told Daily Nation.

Industry analysts agree with his conclusion. ”What we are seeing is a correction of factors like the supernormal profits that some telecoms have been enjoying in the past,” Techie Makau, a Nairobi-based telecommunications consultant, said.
Makau added that providers now have to focus on provision, customer service and value addition. In the Kenyan market, the average price per minute fell by 80% due to competition largely from Bharti Airtel, between Sh2 and Sh4 ($0.03-0.05).

Despite the report, Bitange believes the data market is set to kick off next. Kenya’s internet penetration is only 30%, so once fibre optic cables expansion starts he believes we are set for another boom. “The data market is beginning to take shape as the fibre optic network continues to expand,” he said, adding: “this will see a lot of consumption of broadband… and that is what the companies should be looking at.”

Nico Gous

February 21, 2012/by actualize

Does Mobile Impact Economic Growth in Developing Countries?

Photo Credit: Webdesign Depot

A recent study reported by ITU/InfoDev reveals that investment in telecoms generates growth dividend because the spread of telecommunications reduces costs of interaction, expands market boundaries, and enormously expands information flows.

The study which was funded by Vodafone and the Leverhulme Trust was a collaborative research by some renown researchers from the University of Calgary and University of Toronto in Canada, and FTI Consulting in London. Using data from 92 countries (high income and low income) between 1980 and 2003, the researchers subjected the impact of telecoms roll-out on economic growth in poorer nations to a thorough empirical scrutiny by employing the Annual Production Function (APF) and the Endogenous Technical Change (ETC) approaches.

The results of the study show that in general the advent of mobile telephony has had a positive and significant impact on economic growth in both developed and developing economies. Key among these are:

A) Developed Economies

In the OECD economies, modern fixed-line networks took a long time to develop
Access to homes and firms at the time required physical lines to be built which was a slow and expensive process
These economies by and large had fully articulated fixed-line networks by 1996
The addition of mobile networks in these economies had significant value-added benefits by complementing the existing fixed lines.

B) Less Developed Economies

Developing countries may be said to experience a low telecoms trap i.e. the lack of networks and access in many villages increases costs, and reduces opportunities because information is difficult to gather
But at the same time, the impact of mobile telephony may be twice as large in these countries compared to developed countries
In these economies, mobile phones may be substituting for fixed lines
They are playing the same crucial role that fixed telephony played in the richer economies in the 1970s and 1980s
The growth dividend of increasing mobile phone penetration in developing countries is therefore substantial and far larger because mobile phones provide, by and large, the main communications networks
Mobile telephony therefore supplants the information-gathering role of fixed-line systems.

The study concluded that telecommunications is an important prerequisite for participation in the modern economic universe. The differences in the penetration and diffusion of mobile telephony appear to explain some of the differences in growth rates between developing countries. But given the speed with which mobile telecoms have spread in developing nations, it is unlikely that large gaps in penetration will persist forever.

Visit here to access the full report.

January 4, 2012/by actualize

Agriculture, Climate Change, Food Security, Irrigation and Water, Land Management, Mobile, Originally posted on the GBI Portal

IFAD President: Africa can ensure its own food security

Photo Credit: Zunia

The President of the International Fund for Agricultural Development (IFAD), Mr. Kanayo F. Nwanze, hosted a virtual press conference from his Rome office yesterday, September 29 to discuss why he believes Africa can ensure its own food security through investment in agriculture, with particular focus on West Africa.

The interactive press briefing touched on a number of pressing and interesting issues relating to African agriculture. According to Mr. Nwanze, reducing rural poverty in Africa is a high priority for IFAD, and Sub-Saharan Africa (SSA) remains IFAD’s highest priority, absorbing as much as 40% of new commitments. IFAD investment in Africa and SSA is more than 50% of IFAD’s total investment worldwide. With years of investment and working relations with African experts and governments, IFAD has accumulated a rich experience of what works and doesn’t work in Africa.

The agency has identified with the great challenges facing African agriculture including volatile food prices, changing climate, the challenge of feeding its populace, land grabbing, among others. But at the same time, sees great promise for Africa in the face of all these challenges. Africa has the highest share of the world’s arable land for agriculture, with West Africa alone holding about 284 million hectares of arable land available for investment. Out of this, only 60 million are currently in use. In addition, the region has more than 10 million hectares of land that could be irrigated, but it barely uses 10% of this to its full value. About 60% of Sub-Sahara African is under 25 years of age with high skills and training to be tapped for agricultural growth.

I asked Mr Nwanze what IFAD’s view is on policies that ensure investment in ICTs for agricultural development in Africa. He referenced the on-going Agricultural Knowledge Share Fair (AgShareFair) in Rome with support from IFAD and other UN agencies that brought together people from all over the world including Africa with innovative information and communication technologies for knowledge sharing. IFAD is also supporting many projects in the area of mobile telephony, mobile banking, last mile etc. that are helping in the advancement of agriculture in Africa. Also the use of this virtual press briefing by the President, which made possible for people to participate remotely attests to IFAD’s recognition and commitment to ICTs for development. On policies guiding the creation and administration of Universal Service and Access Funds (USAF) in African countries, Mr. Nwanze recalled a recent meeting by ITU that brought together telecom regulators together to deliberate on its application for development.

Responding to another question from the press as to why Africa is starving, the President stated that Africa is not starving. He cited booming economies in Africa such as Ghana, Rwanda, Tanzania, and Ethiopia where African governments are pursuing sound economic policies thereby enabling the growth of their economies. He cited Ghana as an example that made enormous stride and has great promise for growth with the possibility of transitioning into middle-income country in the near future. He was quick to state, however, that he is ‘no prophet of the future’ to tell how things will turn in these countries. Referring to the crises at the Horn of Africa, the President said agriculture must be made a priority in Africa by all who are interested in reducing poverty and ensuring food security. He called on African leaders to “act now: investing in agriculture is the best way to prevent famines.” African leaders must take the lead and invest in agriculture – no people or nation can make progress with sole external support, the President stated.

On the possibility of investing in green energy for Africa’s agriculture, Mr. Nwanze said it depends on how one defines green energy. According to him, African farmers are already practicing green energy in their farm practices through good soil management practices to prevent erosion and the like.

My main take of the press briefing applies to the question of Mr Nwanze’s view on ICTs investments by African people for agricultural development in Africa. Mr. Nwanze pointed some interesting initiatives by IFAD to expand access to ICTs in rural Africa but it is not clear how much of this is being spearheaded by Africans themselves. On the issue of availability of vast arable lands, huge youth population, and skills in Africa for investment, it is difficult to see how that translate into food security and prevention of future famine in Africa. In this era where Africa is experiencing more and more rural-urban migrations, not only the youth but also the older generations, as a result of declining opportunities and lack of incentives for farming, policies should go beyond mere recognition of ‘rich resources’ on the continent. The President did not mince his words by calling on African leaders to act now, but I also think that there is so much to explore outside African governments and political leaders. The call for investing in low-cost and simple technologies such as information and communication technologies for example should be a fertile ground for Africa’s young entrepreneurs. By creating a conducive environment for investment, Africa could see a wave of young investors especially in the ICTs sector.

Mr. Nwanze also responded to questions from the press covering areas of good governance for agricultural development, south-south collaborations for knowledge transfer to Africa, investment in post-conflict countries such as Liberia, the use of subsidies, and examples of successful models of agricultural development in Africa. The session was covered by over 25 different media outlets across the world in the area of radio, TV, magazine, blogs, multimedia press such as Voice of America, Voice of Nigeria, Deutsche Welle (DW), the Organic Farmer, Think Africa Press, and the Global Broadband for Innovation Program of USAID.

September 30, 2011/by actualize

Connectivity, Originally posted on the GBI Portal

Morocco’s attractive broadband network

Morocco has a rather attractive broadband network

Morocco’s growing broadband network and an increase in competition for video has placed the region at the forefront for regional ICT investments.

“Whether it be VOIP providers, broadband Internet repackaging, or pay-TV installers, the smaller companies will be called to duty and therefore present a viable option for investors looking to capture a share of the projected $1.44-billion data segment by 2015, or other promising indicators,” says Majd Hosn, a telecoms analyst for Pyramid.

The North African country’s telecom sector revenue will see a 4.1% annual growth rate over the next five years. The telecommunications projections position the industry at $5.47-billion in 2015.

Moroccan communications ministry official Ibrahim Saeed told ITNewsAfrica that he is hopeful that these projections will maintain excellent prospects.

“We have worked hard to build a strong IT and telecom sector and hopefully Pyramid’s report will turn out true,” says Saeed.

“The leadership changes and popular uprisings that have spread in North Africa will take their toll on the stability and growth of Morocco,” adds Pyramid.

“However, (the country will) maintain a strong position compared to other Middle Eastern and North African communications markets.”

Jonathan Terry

July 18, 2011/by actualize