12:47 GMT 12th April 2011
However, the continent needs to have greater access to new technologies in order to catch up with developed countries. the new technologies, while improving the lives of the people, will make the region more attractive to foreign direct investment (fDi), which is eager to tap into Africa’s growing middle class and consumer population.
A report released last June by leading global consulting firm McKinsey says Africa's collective gross domestic product (GDP), at $1.6 trillion in 2008, is now roughly equal to Brazil’s or russia’s. it adds that Africa’s growth acceleration was widespread, with 27 of its 30 largest economies expanding more rapidly after 2000. All sectors contributed, including natural resources, finance, retail, agriculture, transportation and telecommunications.
Natural resources directly accounted for just 24 per cent of the continent’s GDP growth from 2000 through 2008. Key to Africa’s growth surge was improved political and macroeconomic stability and microeconomic reforms. Future economic growth will be supported by Africa's increasing ties to the global economy. Rising demand for commodities is driving buyers around the world to pay dearly for Africa’s natural riches and to forge new types of partnerships with producers. Africa is also gaining greater access to international capital, with total foreign capital flows into Africa rising from $15bn in 2000 to a peak of $87bn in 2007.
Africa’s economic growth is also creating substantial new business opportunities that are often overlooked by global companies. McKinsey projects that at least four groups of industries – consumer-facing industries, agriculture, resources, and infrastructure –together could generate as much as $2.6 trillion in revenue annually by 2020, or $1 trillion more than today. ‘Today the rate of return on foreign investment in Africa is higher than in any other developing region. Early entry into African economies provides opportunities to create markets, establish brands, shape industry structure, influence customer preferences, and establish longterm relationships. Business can help build the Africa of the future,’ says the report.
In addition, the rise of the African urban consumer also will fuel long-term growth. Today, 40 per cent of Africans live in urban areas, a portion close to China’s and continuing to expand. The number of households with discretionary income is projected to rise by 50 percent over the next 10 years, reaching 128 million. By 2030, the continent’s top 18 cities could have a combined spending power of $1.3 trillion.
It is believed that Africans can accelerate development by skipping less efficient technologies and moving directly to more advanced ones. Among them is the telecommunications sector, which is attracting a flurry of public and private investment. A recent research by the University of Yaounde in Cameroon says such a leap is feasible. According to Yunkap Kwankam and ntomambang ningo, authors of the research, Information Technology in Africa: A Proactive Approach and the Prospects of Leapfrogging Decades in the Development Process, Africa's lack of technological infrastructure, should not constitute a drawback to investing on the continent. it ‘can be turned into an advantage if properly managed’, they say.
That is because African countries are not weighed down by extensive networks built on obsolete technology. By using the latest products and methods to build new infrastructure, African countries can bypass several stages and even decades in the use of information technology (it). ‘In doing so, they will learn from the experience of more advanced countries the ways and means of providing the greatest social benefits to a large fraction of the population, while avoiding any unpleasant side effects,’ say Kwankam and ningo.
The research says that African countries, by virtue of their potential market size, should not be obliged simply to react to trends in the it industry, but should play an active part in their determination. A proactive rather than a reactive approach should be adopted in the development of it in Africa. This means anticipating problems and designing strategies to resolve them before they occur. ‘Our vision should not be limited to catching up with what exists in the developed world. This will simply guarantee the propagation of the gap between them and us. Secondly, it will perpetuate problems of appropriateness, adaptability, etc., perennial issues which will continue to eat up our meagre resources,’ said Kwankam.
In fact, Africa's it landscape is rapidly changing, says Alex twinomugisha, of the Nairobi-based Global e-Schools and Communities Initiative. He attributes the improvement in Africa’s investment environment to financial backing from public and private investors. According to him, the growth of the telecom industry, is due to the large amount of foreign direct investment. ‘This investment alone is about one percent of sub-Saharan Africa’s total GDP in 2008, estimated by the World Bank to be about $987bn.’ But the money is not only from foreign sources. Local companies are raising millions of dollars from local banks to expand network coverage.
‘The banks wouldn’t put in their money if they didn’t think that the business was viable,’ said Twinomugisha. ‘There is money to be made. In fact I think the market is still virgin.’ Businesses have been focusing their resources on big investments like cable networks. Twinomugisha says the potential market is underestimated. ‘There has been little investment going into services, software because it is seen as a small market.’ He says there is still a misconception that the market is small. But he points to successful ventures like M-pesa, a mobile money transfer scheme that has been embraced by millions of Kenyans, according to parent company Safaricom.
M-pesa was launched in 2007 and is used by six million people around the country, mostly in rural areas. It has transferred 135.38bn Kenya shillings ($1.8 billion).
Two other telecommunications companies, IBM and the India-based company Bharti Airtel, have announced they will provide IT services for 16 African countries. As part of a 10-year agreement, IBM will deploy and manage the information technology infrastructure and applications to support Airtel's goal of providing affordable and innovative mobile services throughout Africa, the world’s fastest growing mobile market.
Making it all possible is the development of underground fibre optic cables. Several efforts are underway to lay them across the continent. Kenya and Rwanda have both openly encouraged investment in information technology. Kenya has invested more than $80 million in an initiative called Teams (The East African Marine System), which will link East Africa to the rest of the world through an underwater fibre optic cable. Teams moves Kenya away from expensive satellite communications, thereby lowering costs.
But perhaps the best-known cable system in Africa is Seacom. According to Seacom chief executive Brian Herlihy, the project is providing inexpensive bandwidth to cell phone and internet customers, including businesses, in southern and eastern Africa, connecting them to global networks in India and Europe. Broadband access is expected to reduce the digital divide between Africa and other continents. It is also expected to be a major boon to many local industries, especially ones based on outsourcing. Herlihy is not surprised 70 per cent of the cost of Seacom – about $600m – was raised in Africa. ‘They understand the need,’ he said. ‘That African investors are willing to spend millions of dollars on a project that benefits the continent is very telling [about] the level of enthusiasm [and] shows a belief in the viability and potential of the African market.’
Africa has become the fastest growing telecoms market in the world. Between 2001 and 2007 the industry grew by 49.3 per cent with a total investment of $18bn. Despite this, Africa still lags behind the rest of the world when it comes to broadband technology. Its slow development is one of the major topics of discussion at various fora on the sector in Africa. The secretary- general of the International Telecommunications Union (ITU), Hamadoun Touré, believes that access to broadband is the key to the continent’s advancement. ‘Even with such high growth rates, access to broadband is still low. Access to high speed Internet is essential to using and fully harnessing the potential of the internet. We need to focus on creating unprecedented opportunities for positive change,’ he said.
A report by IT Web in October 2010 indicated that broadband usage, though low, is growing rapidly in Africa. MD of 4G communications company Alvarion, Winston Smith, said that African broadband subscribers would reach 19 million by 2014.
‘According to an ITU report, for every 100 inhabitants in Africa, 32 have mobile subscriptions while in other developing regions, the ratio is 49 in every 100. For the rest of the world, for every 100 people, 59 have mobile subscriptions,’ said Smith. But he remained optimistic that growth on the continent could surpass other regions because of the influx of new entrants as well as content players.
One strategy to ensure IT’s growth is to build it into priority development sectors identified by African governments themselves: areas such as education, health, and the environment, which open up new vistas of application, say Kwankam and Ningo. ‘[Health and education] are examples of areas where IT can be used not only to promote development of the sector but also to serve a hidden agenda of promoting use of the technology,’ they say, adding that ‘this development should take a long-term view, reaching for the cutting edge of the technology, for which some institutional capacity already exists.’
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