Home Africa and the Middle EastAfrica and the Middle East 2005 Connecting Africa to the global economy

Connecting Africa to the global economy

by david.nunes
Mohamed IbrahimIssue:Africa and the Middle East 2005
Article no.:6
Topic:Connecting Africa to the global economy
Author:Mohamed Ibrahim
Organisation:Celtel International
PDF size:56KB

About author

Dr Mohamed Ibrahim is Chairman of Celtel International BV. Prior to Celtel, Mo Ibrahim founded MSI (Metapath Software Inc) after six years with Cellnet, as Technical Director. Metapath, which grew into one of the largest independent consultancy and software operations in the mobile industry, was sold to Marconi in June 2000. Mo Ibrahim founded MSI Cellular Investments in 1998 (renamed Celtel International BV this year). The company operates cellular networks in 14 African countries. Mo Ibrahim holds a BSc in Electrical Engineering from the University of Alexandria, Egypt, an MSc in Electronics and Electrical Engineering from the University of Bradford, United Kingdom, and PhD in Mobile Communications from the University of Birmingham. He is a member of the Africa Regional Advisory Board of the London Business School. Mo Ibrahim is of Nubian, Sudanese, origin.

Article abstract

The Commission for Africa, seeking to create a strong, prosperous, Africa has focused upon its infrastructure, governance and investment climate. Many agree that in Africa, the fastest growing mobile phone region in the world, the telecommunications infrastructure will have the greatest impact on development. Governance is improving, multi-party elections have been held in many countries and businesses are beginning to recognise the importance of corporate governance. Investors, too, are beginning to recognise the enormous opportunity that Africa’s untapped mass market represents.

Full Article

The Commission for Africa, chaired by the UK’s Prime Minister Tony Blair, has set as one of its objectives – to generate new ideas and action for a strong and prosperous Africa. The commission’s focus is on three areas: infrastructure, governance and investment climate. In many ways, unfair perceptions have dogged Africa. The continent is all too often associated with risks such as unstable political environments, corruption, unpredictable economic performance and a lack of finance and skilled staff. The political ambition to address both perceptions and the reality is here today. The recent report by the Commission for Africa supports the best of existing work on Africa, in particular the New Partnership for Africa’s Development (NEPAD). The G8 summit later this year, and European Union initiatives, provide perfect platforms to make substantial progress with some of the initiatives to connect Africa to the global economy. It seems clear that African businesses, operated by Africans enhance Africa’s place in the global economy, and have a vital role to play in the continent’s future. There is, increasingly, academic support for this. Professors SL Hart and CK Prahalad espoused the business theory that global companies can thrive by developing markets for the poor at “the bottom of the pyramid”. They concluded that there is an enormous opportunity open to multinational corporations at the bottom of the economic pyramid, where four billion people are living on less than US$2 per day. As Professor Prahalad said in Fortune Magazine: “Competing in the bottom-of-the-pyramid markets is increasingly an imperative for managers seeking organic growth, innovation, and, most important, organisational transformation. The developing world offers large firms an opportunity to find new sources of value – and to do good besides. Ignoring these markets in the long term could be a fatal mistake; participating will help lay the groundwork for what I like to call inclusive capitalism.” An expansion of Africa’s ICT infrastructure In 1995, Nelson Mandela laid down an objective for Africa. He said that Africa needed “a vast expansion of its communication and information network”. When Mr Mandela spoke these words Africa had huge unmet telecom needs. Indeed, at that time less than one per cent of Africans had access to a fixed telephone line and there were less than one million mobile phones in Africa for a population of more than 800 million people. Today, Africa is the fastest growing region in the world for mobile phones. Last year there were more new mobile customers in Africa than in North America and today there are some 100 million phones in use in Africa. However, this is just the beginning. Of all Africans, a mere 12 per cent has access to a phone of any sort compared to 100 per cent in Europe. The importance of mobile telecoms is vital to economic growth. As The Economist concludes in its March, 2005 issue: “Plenty of evidence suggests that the mobile phone is the technology with the greatest impact on development. A new paper finds that mobile phones raise long-term growth rates, and that their impact is twice as big in developing nations as developed ones.” Survey results in South Africa and Tanzania suggests that: “…mobiles have brought considerable benefits to communities and small businesses. People at all income levels are able to access mobile services, either through owning or sharing a phone; and gender, age and education do not seem to constitute barriers to access. While income certainly explains the level of usage, lack of income does not prevent mobile use. Even the absence of electricity does not present an insurmountable barrier, thanks to the sharing of mobiles and recharging batteries in the nearest town, or recharging locally by a generator or car battery.” (source: Mobile Communications in South Africa, Tanzania and Africa: Results from Community and Business Surveys, March, 2005) Local mobile companies played a vital role in this development by delivering reliable telecommunications services to their customers many of whom had never had access to a phone in their lives before. In doing so, these companies are changing people’s lives for the good. As an example, think of the young people who have moved from rural areas to the cities seeking jobs and economic prosperity that can now call their families at home and of the small and medium sized enterprises using their mobile phone to get the best possible price for their products or crop. These are examples of how mobile phones truly impact on the lives of their users and help make life better in Africa. Good governance: an imperative for government and businesses To build a solid base for growth, improved political governance is vital. In recent years there have been clear signs of improvement. In many of the countries in Africa, multi-party elections have been held in recent years and civil wars are being resolved through peace treaties. The Commission for Africa and NEPAD initiatives for Peer Review are tools that will further strengthen trends for improved political governance. For business, though, good governance must start at home, beginning with the company’s mission, vision and values that include the highest corporate governance standards. This pays off in an open, transparent and inclusive culture, which is the only sound basis on which to do business with governments, regulators and local partners. It also lays the foundation for attracting a world-class and supportive investor base. An experienced board of directors will include people who not only have a deep understanding of industry, but, equally importantly, of the African environment. Companies that value good governance refuse to do business when transparency is inadequate; they find that their business partners and governments in Africa appreciate their corporate governance position. As governance takes hold on the continent, it will help Africa to become a better integrated part of the global networked economy. Investment climate There are many excellent examples of the improving investment climate in Africa. Six years ago, commercial banks claimed there was a total of about US$250 million looking to invest in Africa. Since then, though, billions in equity and debt have been raised, and some companies are planning to test the improving investment climate, perhaps with a listing at the London Stock Exchange. Private capital is about risk versus return, and returns in Africa are among the highest in the world. As the Financial Times’ Lex Column remarked, concerning African telecoms on November 16, 2004, “Boldness pays. Over the past two years, shares in emerging market operators have consistently outperformed their peers in developed countries. Special rewards were on offer for those willing to bet on growth of mobile telephones in sub-Saharan Africa…The key appeal of African telecom operators remains that these risks are largely uncorrelated with global economic trends.” It’s all about people At the end of the day it’s all about real people in Africa trying to make their lives better every day. African mobile telecommunications is now a thriving US$25 billion industry. Some US$2 billion of this value, alone, is created by several hundred thousand local entrepreneurs selling pre-paid phone cards. Although good governance and the investment climate are political and macro-economic realities, it is easy to demonstrate the importance of telecommunications on a continent where infrastructure is often sorely lacking. Mbonea Msuya, a 28 year old banana trader, uses his mobile phone to find the latest prices quoted in the market in Dar es Salaam, Tanzania’s capital, before buying fruit from farmers on the slopes of Mount Kilimanjaro more than 250 miles to the North. He also bought phones for his four assistants, to keep the information flowing. “I’m making more money”, Msuya says, “before using the mobile phone I travelled by bus from one place to another to know the prices and get orders.” (source: Business Week, November 10, 2004) It is but one example of an African entrepreneur becoming part of the networked global economy.

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