The Cipher Brief spoke with Laurent Elder, leader of the Information and Networks program at the Canadian International Development Research Centre (IDRC), about opportunities and challenges for Western businesses looking to enter the mobile technology industry in Africa. Elder advises harnessing and scaling the already existing creativity and skills in Africa to other markets.
The Cipher Brief: How would you assess the growth of the mobile technology industry in Africa? How has this contributed to economic development on the continent?
Laurent Elder: The growth of mobiles in Africa during the last decade can be summed up in one word: revolutionary. When I first started working in Senegal in 1999, the oft-quoted statistic was that there were more phone lines in Manhattan than all of Sub-Saharan Africa combined. Today the mobile penetration rate is roughly 73 percent, reaching almost every household in a way that was unthinkable a decade ago. Household survey research by Research ICT Africa, supported by IDRC, uncovered that more households in developing countries own a mobile phone than have access to electricity. Although Internet access still lags in Africa, hovering around 20 percent, the vast majority of Africans who access the Internet do so through their mobiles.
Africa’s mobile phone revolution can, in part, be explained by its utility for doing business. Noted economist Jeffrey Sachs described mobile phones as “the single most transformative technology for development.” Muhammad Yunus, Nobel Peace Prize winner and founder of the micro-credit Grameen Foundation, stated that “if you want to lift someone out of poverty, hand them a mobile phone.” Many studies confirm these views. One study showed that in a typical developing country, an extra ten mobile phones per 100 people results in 0.6 percent growth in per capita GDP - double the impact in a developed country. Also, in a study we commissioned in two villages in Tanzania, residents of one village received five months of mobile phone airtime and Internet access, while the other village did not. Remarkably, the first village experienced a reduction in all seven of the poverty criteria used, while changes were seen in only two of the indicators in the second village.
TCB: How have international organizations and investors contributed to this growth?
LE: International organizations and investors contributed significantly to the mobile revolution, mainly through enabling the liberalization and privatization of telecommunications markets. Until recently, Africa was plagued with government-owned telecommunications monopolies that made it difficult and expensive for consumers to get connected. Changes in telecommunications regulations led to a wave of investment in mobile providers, both publically and privately owned, that in turn fostered a more competitive environment that increased demand and brought down the cost of mobile connectivity. Organizations played an important role in demonstrating how different m-health, m-agriculture, and m-commerce applications could offer viable solutions for Africa’s challenges.
Yet, arguably, African consumers were actually the principle actors in spurring the mobile revolution. They adopted innovative mobile practices such as: setting up charging stations, buying or selling airtime, sharing devices among an entire community, or even ‘beeping’ or ‘flashing’ where the caller hangs up after one or two rings to signal the receiver to call back, thus keeping costs down. These innovations helped to support wider access and spur demand.
TCB: Are there opportunities for Western businesses in the African mobile technology industry looking forward? Where do these opportunities lie (m-banking, m-health, m-commerce, etc.) and what types of companies are best situated to expand into this market?
LE: Some of the most important experiments and innovations in mobile applications are happening in Africa. Amongst the many examples: M-Pesa, a mobile banking platform that has spread across Kenya, Tanzania, and other parts of Africa, and Ushahidi, a Kenyan mapping software that has been replicated thousands of times around the world - including during relief efforts for Hurricane Sandy in the United States. Countries like Kenya, South Africa, Nigeria, and Ghana have burgeoning mobile start up scenes, epitomized by iHub, a Kenyan tech incubator that was named one of the most innovative companies in the world by Fastcompany.
There is a dynamic start-up scene in all sectors, from agriculture, health and education to banking and e-commerce. Any company that is seeking new partners, markets, or ideas in these sectors should be interested in working in Africa.
TCB: What challenges may Western businesses face when trying to enter this market? From your extensive time working in Senegal, what recommendations would you give to these businesses for achieving success in African markets?
LE: It can be quite difficult to break into the African market. It’s largely unregulated and therefore businesses are offered limited legal protection. The big telecommunication companies still dominate most markets, even on the application side. In some countries, skilled workers are scarce and infrastructure is also spotty. Moreover, much of the business culture across the whole continent relies on trust and relationships built over long periods of time.
In light of these challenges, anyone entering the African technology market should be prepared to stay awhile, get to know the local market and local players, and find local partners. Also, do not assume that skills and creativity don’t already exist – there is so much creative ferment that it is actually about finding a way to harness and scale interesting ideas and talents to other markets.
