For 48 long hours, employees of Senegal’s National Telecommunications Company cut telephone and internet connections to the rest of the world. That bold action, in August last year, sought to force the government to back down on a plan to grant a US company exclusive rights to manage incoming international phone calls.
The shutdown sent shockwaves throughout Senegal’s economy. Dozens of institutions were affected: banks, travel agencies, customs offices, call centres, calling card vendors, the airport and the harbour. Newspapers ran angry editorials. “Our economy lost CFA50 billion” (R737 million), one headline complained.
The event vividly shows just how important the information and communications technology (ICT) sector has become in Africa. It is not only a major industry in its own right, but also a backbone for many others.
Nascent only a decade ago, ICT in Africa has grown at an unparalleled pace. In some countries, various studies note, the “information economy” is becoming one of the main drivers for growth more generally.
In 2009, South Africa’s ICT sector generated $24.2bn (R178bn) and contributed more than 7 percent to the country’s gross domestic product (GDP). In Tanzania, its share hit 20 percent of GDP. Everywhere in Africa ICT is expanding rapidly, with annual revenues now estimated at about $50bn.
Investments in cellphones have grown from $8.1bn in 2005 to almost $70bn today, according to the UN’s International Telecommunication Union (ITU). Cellphone companies are now major sources of revenue for African governments, averaging 7 percent of tax receipts.
Behind these impressive numbers lie three major changes over the past decade. The first was Africans’ unexpectedly fast adoption of ICT services. In 2000, 11 million people in Africa had cellphones. Five years later the number grew to almost 200 million, and now approaches 400 million.
The pace of growth has defied all predictions and is an “ongoing success story” in Africa, notes the ITU.
There has also been steady growth in internet access on the continent, from 3 million users in 2000 to more than 100 million last year. This upward trend will continue as Africa literally becomes wired to the rest of the world with the completion of a number of undersea communications cables.
In the meantime, Africa has emerged as a world leader in “mobile web” technology – internet access through cellphones – and a pioneer in the development of sophisticated mobile banking, health and education services.
A second development also aided the ICT economy’s rapid growth: the rush to Africa of foreign investors drawn by the sector’s high profit margins.
In 2008, Britain’s Vodafone, the world’s largest cellular operator in terms of revenue, started an African shopping spree in Ghana when it bought 70 percent of Ghana Telecom for $900m. It has since made its way into Egypt and Kenya, and has become the majority owner of South Africa’s Vodacom.
France Télécom has also got into the act, announcing plans to invest more than $8.8bn in Africa and the Middle East. Most notable among foreign investors in Africa’s ICT economy, however, is India’s Bharti Airtel. In March 2010, Bharti’s aggressive search for an African presence led it to buy the Africa assets of Kuwait’s Zain for a record $10.7bn.
This frenzy of acquisitions is a sharp break with the past. A decade ago, only a handful of African businessmen and companies saw opportunities in the continent’s changing landscape. When Sudan-born Mohamed Ibrahim launched the Celtel cellphone network in 1998, his company shared much of the African market with just two other companies, South Africa’s MTN and Vodacom.
No more. And even though returns on investments in the region’s ICT sector are less than they once were, they still remain attractive to Western companies struggling with stagnant markets and low profit at home. Five years ago in Africa, “it took half a year to recover investments in infrastructure for new clients”, said Marc Rennard, the head of France Télécom’s African and Middle Eastern operations. “Now it’s more than two years. But that’s still pretty good.”
And third, the policies and institutions needed to help Africa’s ICT sector reach its potential are finally in place.
“Telecommunications growth has been encouraged by the easing of regulatory restrictions by African governments and increased liberalisation across the market,” Ernst & Young noted. Today most African governments have opened up their cellphone and internet markets to competition and to private investment and set up regulatory authorities to oversee the sector.
As governments devise plans for ICT development, national regulatory agencies have also aggressively promoted wider access. In Kenya, where parliament adopted a plan to transform the country into a regional ICT hub, the national regulator recently asked operators to extend coverage to rural areas in exchange for reduced licensing fees. It also required them to lower charges for cellphone banking.
Long known for mining and tourism, Africa’s booming ICT sector is making a great many people think again.
André-Michel Essoungou is a reporter for the UN Africa Renewal Short Features Service.