How Information Communication Technology (ICT) is transforming Africa

Posted by Alex Twinomugisha on Friday, October 16, 2009 at 3:12pm.

This year, the Kenya Information and Communication Technology (ICT) regulator, the Kenyan Communications Commission (KCC) marked its first 10 year anniversary with flamboyant radio, newspaper and television adverts detailing its achievements. Many of the radio stations have been offering cash prizes to listeners who can innovatively detail what life was like before the advent of the mobile phone 10 years ago and how we kept in touch with friends and business associates. Submissions from the public have been hilarious in many ways and reveal how much Kenya and the continent at large have changed. Looking back, it is unimaginable that only a decade ago, most Africans had never heard of email, the internet, SMS or even made a telephone call.

The African ICT landscape a decade ago could be likened to the lunar surface- desolate and almost devoid of life.  All telecommunication services including TV, radio and telephony were tightly controlled by governments through government owned companies. Services were mostly of poor quality, unreliable and limited to the elite in the capital cities.  I distinctly recall the days when the BBC and Radio France Internationale (RFI) were the premier and authoritative sources of information on current events in Africa and when it was easier to call the United States from Tanzania than attempt a telephone call to Benin (most international calls between African countries were routed through Europe).

The landscape started to change almost unnoticed in the early 1990s with the deregulation or removal of government control and restriction from radio and Television. In the mid to late 90s, private FM stations mushroomed across the continent and became the rage of the century. Literally overnight, populations that had endured poor quality radio reception and government propaganda on state owned stations found themselves spoilt for choice. Then the mid 1990s saw deregulation of the rest of the telecommunications sector, the introduction of mobile phones and the rise of African mobile giants like Celtel (now Zain) and MTN. In the telecommunication industry, Africa is now unrecognizable from a decade ago.

The mobile phone is responsible for changing this landscape the most. Africa currently leads the world in annual growth rates for mobile subscriptions. Most countries have now achieved at least 60% mobile coverage. According to the International Telecommunications Union (ITU), about 32% of Africans had a mobile phone in 2008 compared to less than 2% having a mobile phone in 1998. While this is still significantly below the world average, the fact is growth has been explosive.

The explosive growth in ICTs especially mobile phones is transforming Africa in many ways. It has directly created many new jobs in such fields as engineering, sales and marketing and advertising. It has created hundreds of thousands if not millions of small businesses directly tied to the mobile industry such as those selling “airtime” or “credit”- essentially pre-paid top-up vouchers and even small business that charge a fee for charging your mobile phone: an essential service in a continent with very limited coverage of mostly unreliable electricity. Mobile phone companies in many countries are now among the top tax paying firms. More importantly for Africa’s economies, the growth of the mobile phone and other ICTs is encouraging Direct Foreign Investment (DFI) on an unprecedented scale for many countries. In just one year, 2008, for example, Africa received about $8 billion dollars in ICT investments according to the ITU. Let me put this in perspective:  this investment alone is about 1% of sub-Saharan Africa’s total GDP in 2008 estimated by the World Bank to be about $987 billion dollars!  For a continent heavily dependent on Foreign Aid for all other social and economic sectors, this large flow of FDI is amazing and should be a wakeup call for Aid-dependant countries. It seems that the old adage of Africa having a “risky” investment environment is being shattered as more international players rush to catch a piece of the ICT action.

Mobile phones are also fuelling the rise in internet usage in Africa. For example, while only about 1% of Africans have a broadband connection, 90% of these broadband connections in Africa are now mobile-based according to the ITU. Millions more Africans now have low speed access to the internet through their mobile phones. Among the urban youth in cities like Nairobi, Accra or Dakar, social networking sites like Facebook are all the rage. While internet access on the mobile phones is still constrained to the higher-end handsets that are still too expensive for the majority of mobile phone users in Africa, there are encouraging signs that things are changing. Handset makers like Nokia have begun making their low end mobile phones data-capable and cheap Chinese and Taiwanese phones come data-ready.  Interestingly, Google is increasingly becoming a major player in this field. Google’s SMS service is being piloted in Uganda to enable mobile phone users search and access other internet services using SMS. The service will be rolled out to other African countries soon. Africa’s internet trajectory is likely to take a different path from the developed world with the mobile phone as the key access device. To win the African Internet market, which is a potentially lucrative market, service providers are going to have to innovate and design applications and content specifically for the mobile platform.

On the socio-political front, the dramatic increase in mobile phones and private radio and TV stations has had an interesting effect on that well-loved democratic yardstick:  elections. It is becoming increasingly difficult to “steal” an election in Africa because the state no longer controls access to information! More importantly, these ICTs make it easier for populations to organize effectively making it easier for them to hold government accountable.

A new trend likely to transform Africa is mobile-banking and mobile-commerce. East Africa is at the forefront of m-banking and m-commerce innovation.  Kenya’s mobile giant Safaricom led the way when it launched its mobile money transfer scheme MPESA (Pesa means money in Swahili) in 2007. MPESA currently boasts 6 million users out of Safaricom’s estimated 13.4 million customers with a total of 135.38 Billion Kenya Shillings equivalent to US$ 1.8 Billion (representing about 5% of GDP) transferred since service launched in 2007 according to the company’s latest financial reports.  Zain, the other big service provider has also rolled out a similar service branded “Zap” starting with Uganda, Kenya and Tanzania and will soon extend the service to 13 other countries in Africa where it has a presence. MTN the other African mobile giant hasn’t been left out with a service launched in Uganda recently where it is being tested before being rolled out across the rest of Africa. For many Kenyans now, it increasingly easy to send and receive money, manage their bank accounts and check and pay their utility bills- all this on their mobile phones from the comfort of their office, home or car in Nairobi’s increasingly gridlocked traffic. Increasingly, one can also pay for goods and services and transfer money across borders using the mobile phone. In the last 2 months alone, Safaricom and Zain have announced the availability of international and cross-border money transfers. In October 2009, Safaricom announced that residents of the UK can now send money to Kenya through MPESA while Zain has gone one better boasting a world first with the ability for its customers to “send and receive money directly from banks anywhere in the world”! Go beyond the marvels and sophistication of these technologies and the impressive statistics and one will encounter the truly amazing stories and glimpse the future of Africa. According to a 2009 Financial Access Survey report for Kenya, 22.6% of the adult (over 18 years old) population uses formal financial services mostly from banks. In the last two years, the use of formal financial services from non-bank institutions has increased from 7.5% to 17.9% mostly due to Safaricom’s MPESA service.  But considering that 17 million Kenyans have a mobile phone compared to a total adult population of 18.7 million, it is not inconceivable that services such as MPESA and ZAP have the potential to bring a significant part of the population into the formal banking and financial services sector. As the service spreads in other African countries, I believe that we shall see a revolution on the continent. I will examine the impact this increased access to financial services on business in my next post.