Africa: The Next Frontier For The Internet

Forbes, by Miriam Tuerk

Expanding network connectivity across sub-Saharan Africa will open up digital services that many of us now take for granted.  Mobile Banking, Whatsapp Chatting and video, e-health, e-education are key services only possible with reliable internet connectivity.

For a geographically disparate population, it will mean greater access to essential services, including e-agri services. There are hugely populous cities in sub-Saharan Africa – Lagos in Nigeria is one of the fastest growing cities in the world – but even in the center on Victoria Island, the internet connection can be patchy and face frequent outages.

For those populations, access to the internet means being able to save, invest and borrow money, getting an education, having access to basic healthcare, and being able to trade with bigger markets; are all fundamental to socioeconomic advancement. That has been a powerful force fueling economic growth over the past century across Europe, North America and Asia. 

The Demand Is There

There is a lot of pent-up demand for internet services in sub-Saharan Africa.  Indeed, a substantial portion of mobile phones have internet and messaging capabilities.

Mobile usage in sub-Saharan is more widespread than electricity – in 2016, The Economist found that while less than half the population has access to electricity, two-fifths own a mobile phone. In a Pew Research survey of six sub-Saharan Africa countries, a median of 41% used the internet occasionally or had access to an internet-capable smartphone – that compares to 89% of Americans.

Digital innovations have also taken off quickly in sub-Saharan Africa, partly because the younger demographic is more ready for adoption of new technologies. Compared to aging populations in developed countries, the median age in Africa is 19.2 years old. In a study by Pew Research, it notes that adults younger than 30 in six sub-Saharan African countries are more likely to use the Internet, echoing trends seen elsewhere.

We’ve seen this in the quick adoption of digital technologies. Safaricom, Kenya’s largest telecom operator, has seen widespread adoption of its mobile payment app, M-Pesa, since it was launched in 2007. The app now has 24.5 million users, representing over 70% of the mobile money market in Kenya, and can be used to send and receive funds via SMS without having a bank account.  

The Supply Is Growing, But Still Faces Bottlenecks

There are a number of mobile carriers now seeking to expand network coverage in Africa, especially in rural areas.  Governments are pushing for these infrastructure roll outs as they recognize that communications and renewable energy are two key tenets of development for their countries. Telecom technology over the past decade has advanced significantly, with specialized product development to address the needs of Rural telecom particularly in terms of the off-grid renewable energy, resilience to extreme temperatures, and software driven base stations meaning that masts can placed almost anywhere.

The wider need for infrastructure development in telecom and renewable energy is well recognized. The African Development Bank (AfDB) estimates that the continent of Africa will need investment of at least US$130 billion to $170 billion annually.

In recent years, the majority of that capital investment into African infrastructure has come from China – foreign direct investment from China has grown 40% annually over the past decade, and it could be even higher, dwarfing investment from other economic partners, including the U.S.

Huawei, ZTE and China Telecom CHA have all made in-roads into the region. Huawei recently announced that it was launching a 5G transport network with Rain in South Africa, the first network operator in the country to deploy 5G. Huawei’s growth in the region has raised concerns that it could be used for surveillance; The Wall Street Journal reported last year that technicians from the company helped African governments to spy on their political opponents.

At the same time, Western companies such as Vanu and Parallel Wireless are developing innovative solutions and products. While growth in technology is overall a good thing for society, it cannot come at the cost of democracy. Western governments need to do more to invest in African telecoms to secure the future of this region and our economic relationships with it.  

Telecom providers in Africa have also been supporting efforts to roll out renewable energy and off-grid solar in their markets. Solar off-grid kits have been sold and distributed by telecos in various parts of their market, and demand has outstripped supply. Telco OTEL’s see the opportunity to provide a basket of goods and services and in the same way that your power utility sells you water heaters, telco’s see e-payments, e-health, renewable energy all as a basket of services that will increase revenue per subscriber.

So far that support has come from private tech companies like Facebook, which recently announced plans to build a subsea internet cable network, 2Africa, with a conglomerate of telecom partners including MTN, Orange and Vodafone. The network will lay 37,000 kilometers of cable building a direct high-speed internet connection between 16 countries in Africa with Europe and the Middle East.

Technology Fuels Economic Growth

While the internet can’t solve everything – there are still services and infrastructure that need physical presence – it can help expedite that process.

Once the technology barrier is breached in providing initial basic internet access, and evolving into faster and larger network, we can expect to see a dramatic increase in the global digital population. And as that growth in internet access happens, particularly among Africa’s younger demographic, it will power economic growth and create new markets.  

ICT services and cloud storage providers (Amazon Web Services and Microsoft MSFT Azure) will likely benefit from a boost in Internet access – a report by McKinsey found that ICT spending by Africa’s SMEs amounts to 0.17% of GDP, a fraction of what is spent in Asia and North America. With greater consumer access to the Internet, businesses will likely increase availability of digital services such as e-payments, online check-in for flights and hotels, and e-commerce sites.

Other digital service providers will also see an uptick in demand, across telemedicine, edtech and fintech. That could lead to the emergence of new technology players targeted toward these markets – just as we have seen the rise of home-grown technology giants in China, including Alibaba BABA, WeChat and Tencent, and India with startups like Flipkart, Paytm, and Ola.

Digital services that require a physical component – for instance, ridesharing services – may face slower adoption due to other infrastructure challenges in Sub-Saharan Africa. Growth of those services will be primarily limited to cities.

As an investor or entrepreneur, when you look for opportunities for disruption it is often a simple formula. Where does demand exceed supply? There is a clear-cut case for telecoms in Africa, and that is where significant investment is already being made by governments and large corporations. What will happen next is the interesting part, as this will likely fuel significant growth in Africa’s digital economy bringing rise to new companies and technologies that could go on to dominate the world