Mobile economy holds out bright promise for Africa but hurdles abound

Digital experts are betting on African startups to not only reap big as the shift to digital economy gathers momentum. FILE PHOTO | NMG   

By John Cheruiyot

Sub-Saharan Africa seems to be ticking all the right boxes in the adoption of mobile technology. This is at least according to the GSMA conference held in Kigali, Rwanda, which heard that the region
will continue to record the fastest growth in subscription rates, with Kenya, Nigeria, Tanzania and Ethiopia in the driving seat behind these trends.

The conference, held on July 16-19 painted a rosy future for sub-Saharan Africa’s “vibrant” digital use, projecting that mobile technologies will by 2023 contribute $185 billion to the region’s economy, representing 9.1 percent of GDP. This is an increase from $144 billion — 8.6 percent of GDP — in 2018.

The tech forum coincided with the release of a GSMA report which also outlines the digital progress Africa has already made, while charting the way forward for the mobile economy that last year contributed 3.5 million direct and indirect jobs to the region, and generated $15.6 billion revenue to state coffers in form of taxes.

The report, The Mobile Economy: Sub-Saharan Africa 2019, underscores the importance to the Continent of the informal economy that accounts for the biggest proportion of the mobile ecosystem. About 1.2 million of the 1.7 million directly employed by the mobile ecosystem are working informal jobs in the distribution and retail mobile services. GSMA’s sanguine prospects for Africa’s mobile economy outlook is based on a set of factors not least of which are rising penetration of mobile use, rapidly increasing number of active internet users and expansion of broadband coverage.

With an additional 167 million users by 2025, the total subscriber base will hit more than 600 million, representing nearly half the region’s population. Nigeria and Ethiopia will record the fastest growths at 19 and 11 percent respectively. This translates to 31 million new subscribers for Nigeria and 18 million for Ethiopia. DRC will come in third with 15 million new mobile users, while in East Africa, Tanzania is tops at 10 million followed by Kenya at nine million.

The period between 2018 and 2025 is also projected to witness a significant transition by those connected to basic phone services into smart platforms.

What do all these figures mean? To the GSMA’s Kigali summit, they represent a compelling opportunity for Africa to leapfrog hurdles to development as an increasing number of people plug into ecommerce and tap into a variety of transformative services available on the digital ecosystem.

Akinwale Goodluck, Head of Sub-Saharan Africa, GSMA, told the conference that all these trends promise to expand ecommerce, drive disruptions in various sectors of the economy, and help in propelling forward inclusive development agenda that the region is banking on to lift millions out of poverty and set them on the path of prosperity.

Mobile money

Armed with solid statistics, the GSMA conference rightly noted that the mobile money ecosystem remains the “pride of Africa”. By the end of last year, there were 395.7 million registered mobile money accounts in the region, representing nearly half of total mobile accounts globally. The continent is home to more than 130 live mobile money services, a good number of them led by mobile operators, and a network of more than 1.4 million active agents. Today more than 60 percent of the adult population in a number of countries, including Ghana, Kenya and Zimbabwe have a mobile money account.

For a continent that is known better for a disproportionate share of depressing economic indicators, this is no mean feat.

“In mobile solutions Africa is setting the pace and this should be sustained through laying of broadband services in underserved areas,” Telkom Chief Executive Mugo Kibati told the Mobile360 conference which brought together mobile firms, innovators, State actors, investors, among a diverse group of digital players.

The robust mobile money sector is expected to continue being a key cog in efforts to accelerateg financial inclusion and growth of e-commerce whose sales reached $16.5 million in 2017 and are expected to hit $29 billion by 2022, driven primarily by lifestyle changes among the expanding middle class, increasing internet smartphone adoption, and the growth of digital payment solutions.

Mr Kibati’s sentiments were echoed by Nancy Matimu, MasterCard head of market development for Sub-Sahara Africa, who said the region is “on the cusp of unparalleled opportunities”. She, however noted that for the region to take complete advantage of these massive opportunities, telcos need to make financial sacrifices for the common good and expand digital infrastructure to far-flung areas that may not have the capacity to contribute to their profit margins.

“Firms need to look beyond profits,” she asserted.

A recent study by global consulting firm, Deloitte projects that expanding internet access in Africa to match levels in developed countries could ramp up productivity by as much as 25 percent, generating $2.2 trillion in GDP and more than 140 million jobs.

Digital experts are betting on African startups to not only reap big as the shift to digital economy gathers momentum, but also to be the spearhead of e-commerce and efforts to improve livelihoods and seal inequalities.

It emerged at the GSMA conference that most partnerships driven by mobile operators are focused on helping startups, especially those with the potential to make a broad and deep positive impact among the population at the base of the pyramid. These partnerships are tailor-made to address the perennial challenges at the root of SMEs’ woes, the principal of which are funding constraints as well as lack of management skills and mentorship programmes.

“These partnerships help the startups to attain efficiencies, build capacity and reach as many consumers as possible,” says Max Cuvellier, GSMA’s head of mobile for development utilities and ecosystem accelerator programmes. “

“Startups have a great opportunity to benefit because they are flexible and are agile enough to adapt to new technologies.”

The UK’s Department for International Development (DFID) senior innovation advisor Magdalena Banasiak said the UK is keen on partnerships that focus on Sub-Saharan startups with a transformative agenda.

“These startups need help to scale and build sustainable operations as well as resilience to cope with climate change,” she said in Kigali.

Ms Banasiak announced £38 million at the event to finance partnerships that support initiatives working on digital solutions for economic challenges facing the contient.

The bright mobile economy outlook presented by the GSMA report and Kigali meeting, however, obscures the stark realities of the challenges that the continent faces, especially when compared with advances in the developed world.

An outstanding obstacle is the lack of infrastructure, especially broadband coverage. At the end of last year, 499 million people across the region were covered by mobile broadband (MBB) but do not subscribe to the mobile internet. About 304 million are entirely not within the MBB reach, meaning the region has to earnestly grapple with digital exclusion.

Anna Ekeledo, Executive Director of Afrilabs, a pan-African network of technology and innovation hubs, decried low level of local content in solutions being designed for the region.

“We need local perspectives and approaches as we search for solutions for the challenges we face,” she said.

ITU Africa Director Andrew Rugege echoed Ms Ekeledo’s sentiments, lamenting that most innovations about Africa are crafted by outsiders.

African youth, Mr Rugege said, are innovative and have groundbreaking ideas but are held back by unavailability of the right tools to actualise their dreams.

Aside from broadband, lack of reliable electricity, which is a key part of connectivity infrastructure, is a major barrier to internet inclusion. Phones and computers need power to run, yet large swathes of Africa are still unconected. Then there are unfavourable regulatory environment and expensive handsets, especially smartphones.

To bridge the infrastructure deficit, the conference heard, needs vast sums of money from the private and public sector.

Bharat Vagadia, senior director regulatory affairs OOREDOO Group, a global telecommunication firm, said regulations that stifle growth should be weeded out.

“The cost of compliant to some regulations are too high,” Mr Vagadia said and call for flexibility to allow innovations to thrive.

Ngozi Megwa, MasterCard Senior Vice President, Digital Partnerships for Middle East and Africa, admitted that there exist challenges regarding the regulatory environment, but was quick to strike an optimistic note, saying the situation will progressively change for the better because political leaders are increasingly becoming receptive to, and appreciative of, technological changes.

“There is a desire and will among leaders to design regulatory framework favourable for innovations,” she said.

Digital divide

Another challenge pointed out repeatedly at the Kigali conference is the digital divide along gender lines and between rural and urban areas. Some of the factors attributed to this phenomenon are widespread illiteracy, lack of broadband coverage and costly handsets.

Studies show that in Sub-Sahara Africa, women are 13 percent less likely to own a mobile phone and 41 percent less likely to use mobile internet than men.

“There are valid concerns that the technology push will increase digital divide,” said MTN Rwanda chief executive Bart Hofker while addressing the Mobile360 conference, adding that the number of active data users as a percentage of total mobile subscribers is still too low.

In 2015, a GSMA survey found that 28 per cent of women and 22 percent of men in Kenya perceived lack of technical literacy and confidence to use new technology as a barrier to owning and using mobile phone.

Harriet Lwakatare, Director Customer Service Operations, Vodacom Tanzania said advances in mobile technology may result in wider gender inequalities.

“The more technological systems get complicated, the more women shy away,” she said.

Director General of Rwanda Utilities Regulatory Authority (RURA) said ignorance will be Africa’s undoing in efforts to tap the vast opportunities of the digital economy. This, he warned is likely to exacerbate the digital divide and attendant inequalities.

Ms Megwa said provision of infrastructure, digital awareness and provision of real-time information is critical in fostering digital inclusion. She called for programmes that will enable women to embrace change while still sparing sufficient time for their family responsibilities.

“We need to a push for flexible hours where women can put in fewer hours or work from home,” she said.

The recent G7 leaders forum also acknowledge the threat of rising digital divide in Africa, especially along gender lines, and promised to finds ways to help about 400 million women, most of who are found in rural, from being left behind by digital economy.

A programme launched by the leaders and which will require $255 million for a start, is aimed at empowering millions of women by enabling them to tap technology and mobile banking to transform their lives.