 | Issue: | Africa and the Middle East II 2002 |
| Article no.: | 10 | |
| Topic: | Telecommunications – The Turning Point For Africa | |
| Author: | Stephen Nolan | |
| Title: | Country Manager and General Manager | |
| Organisation: | Motorola Southern Africa and Motorola’s Global Telecommunications Solutions Sector (GTSS) for Middle East & Africa | |
| PDF size: | 40KB |
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Article abstract
Demand for telephony is high throughout Africa, particularly from the large informal sector. Small, informal, businesses see wireless communication as an indispensable, integral, part of their daily business. Wireless networks, which can be installed more inexpensively and quickly than fixed-line networks, are absorbing much of the demand. They are growing 40% annually compared to 10% for fixed networks despite the fact that network growth is often hindered by the lack of infrastructure and skills, over-regulated environments and political instability.
Full Article
Africa, considered to be one of the world’s emerging markets alongside the Far East, has succeeded in bucking the trend of a global slowdown in telecommunications spending, with the African telecoms market experiencing significant growth. It has been reported that, going forward, 83% of subscriber growth until 2010 will be in emerging markets. A stark contrast to established markets such as Europe where telecommunication services are reaching saturation point. Looking ahead, Information and Communications Technology (ICT) will continue to play a significant role in putting Africa on par with the rest of the world. Telecommunication networks will drive business activities and act as critical catalysts in bridging the ever-present digital divide. In addition, telecommunications will play an important role in facilitating economic and social development on the continent. Before going further, it is important to differentiate between the benefits and challenges of fixed and wireless telecommunications. Fixed-line networks require more time to roll out and are expensive to deploy and maintain. By contrast, wireless networks can be installed at a lower cost and quicker rate than traditional fixed-line networks. In the year 2000, 31 new GSM networks were launched in Africa and a further 14 were launched in 2001. In Nigeria for example, it took three mobile network operators just six months to eclipse the total number of Public Switched Telephone Network (PSTN) lines installed over the last century. Further reports indicate that fixed line networks will grow at a rate of approximately 10% this year, whilest wireless network growth will top 40%. One of the benefits of Africa’s late entry into the telecoms market is that it has been possible to leapfrog older technologies with the focus on establishing GSM networks across the continent. This eclipse has paid off handsomely, with 30 million mobile phone subscribers reported in Africa over the last year. Conservative reports indicate that by the end of 2005 there will be approximately 100-million cellphone users, with the greatest driver in the market being voice calls. Having painted a picture of Africa as being the ideal wireless landscape, it is important to highlight some of the constraints that exist. It goes without saying that doing business in Africa is fraught with challenges. A lack of basic infrastructure and telecommunication skills, over-regulated environments and political instability are just some of the issues facing the telecommunications market in many countries on the continent. The impact of famine and HIV/AIDS, is, and will continue to have an adverse effect on Africa’s socio-economic stability, hindering the rate of growth in the telecoms market. A further challenge that one is often faced with is overcoming the financial constraints placed on new and current operators with regards to expansion of their networks. This is exacerbated by the difficulties of the global telecoms landscape and the pressures placed on return of investment (ROI) to shareholders. However, having said this, ROI has often been realised far sooner than anyone initially anticipated. Furthermore, average revenue per user (ARPU) figures for most of the developing African countries are considerably higher than in more established markets such as South Africa (SA). For example, in the Democratic Republic of Congo (DRC) the ARPU figure is 24, compared with only nine in SA.* To overcome this particular financial challenge, more and more private, local, money is being used to fund operators. A recent example is Nigeria, where a large portion of the total investment that took place was Nigerian capital. It appears that the overall global slowdown is forcing the people of Africa to invest in their own future, which will inevitably lead to greater local ownership and success. It is also one of the first times that one is seeing overseas investors making private sector investments into Africa. Despite the stated difficulties, Africa is a place where companies can perform well. It is a region with huge potential for growth in the telecommunications market. It is also currently the continent with the least amount of telephones for its total population, making up just 2.6% of the world’s cellular subscribers, compared to Europe, which contributes 38.4%. It is for this reason that a telecommunications renaissance is sweeping across the continent, driven largely by wireless technology. The International Telecommunications Union (ITU) reported earlier this year that the number of cellphone users in Africa leapt to 30 million last year from just 2 million in 1997. This reinforces the message that Africa is rearing to go with its inhabitants hungry for basic voice and data telephony. One of the factors to be taken into consideration when conducting business in Africa is the demand for wireless telephony and the fact that the real Gross Domestic Product (GDP) of an African country is not reflected in official numbers. GDP per capita is not a clear indication of how much wealth actually exists in a particular country. Africa’s unreported informal sector is often as big as its formal economy with small businesses mushrooming everywhere. In the DRC for example, the published GDP is only 104. However, it has been indicated that approximately 70% of the economic activity comes from the informal sector which remains unaccounted for. These businesses in the informal sector see wireless communication as an integral part of conducting day-to-day business. Wireless technology’s major competitor to disposable income spending in Africa is entertainment. However, even with this challenge, the demand for wireless telephony is great enough for people to spend proportionately more of their income on communications than their counterparts in the developed world. Going forward, the challenge facing relevant stakeholders will be to reduce the cost of communications. This means providing cellular products suited to the budget of Africa’s first time users. The regulatory environment, which is moving to a more competitive landscape, is helping to bring cellphone costs down to an affordable level in many countries. It is worth noting, and even applauding, certain stakeholders in Africa who have waived the import duties of handsets, assisting to make communications more affordable to Africa’s citizens. With telecommunications continuing to play a greater role in economic development, the various telecommunications players are working together to find solutions for low-entry buyers and, more importantly, to devise innovative solutions that will offer services at a low cost to the end user. Credit must also be given to African governments for recognizing the extreme importance of market deregulation and the benefits of a competitive telecommunications environment. Looking ahead, it will be important to continue to work closely with network operators to establish viable business propositions for expansion of networks as well as the introduction of new networks to ensure the sustainable success of wireless communication. Demand for telephony is high throughout the continent. The roll-out of sophisticated new networks means that African countries can quickly bring themselves up to speed with first world communication technologies. Part of this process includes the support of government bodies such as The New Partnership for Africa’s Development (Nepad). Bridging the gaps in Africa’s infrastructure – including telecommunications – is a top priority for Nepad. With this focus on change and a commitment to the development of communications infrastructure in Africa, the telecoms market will continue to thrive. Conclusion Our tradition is, and has always been, to become involved in local markets. We see ourselves as a part of Africa. Our company has been present on the continent for over 30 years and is here to stay. Our commitment to Africa is that we will continue to work closely with all stakeholders to create viable telecommunication solutions that will benefit all the people of Africa. *Official figures from EMC
