E-commerce, digital economics retool business

By Pieter Verkade Time of article published Nov 13, 2013

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It all started with a simple urge to communicate. From the messenger who walked kilometres from village A to village B to announce that the chief’s daughter was getting married, to more sophisticated methods like the beating of a drum, blowing of a horn and sending pigeons. All these were efforts to satisfy the need for humans to communicate.

Before long, the need to satisfy the urge to communicate spiralled into an explosion of what is today known as information and communication technology (ICT).

On the contrary, in the early 1990s when cellphones arrived in sub-Saharan Africa, some people thought little of the 0.5kg voice-enabled brick. But they were in for a surprise. Since 2000, sub-Saharan Africa, which represents 49 out of the continent’s 54 countries, has experienced the highest mobile connection rate in the world. From just 1 percent in 2000, mobile penetration in sub-Saharan Africa has increased to 54 percent in just 12 years, says the 2012 sub-Saharan Africa Mobile Observatory, a report by the GSMA, a global mobile association. The report also predicts that penetration will continue to grow to about 700 million connections in 2016.

The benefits of the booming mobile industry are immense. There has been a substantial contribution to the economy through tax and spectrum fees and growth of the digital economy. That is why this year’s AfricaCom conference, the continent’s largest event for telecoms professionals, which is being held from November 12-14, has themed its 2013 summit “Building Africa’s Digital Economy.”

“In 2011, it is estimated that mobile operators and the associated ecosystems had a direct economic impact of $32 billion (R331bn), including paying $12bn in taxes,” the GSMA report on sub-Saharan Africa said. In addition to this, mobile operators also invest in various infrastructures such as building access roads to rural communities. International equipment vendors have set up offices throughout sub-Saharan Africa. In turn this has opened up job opportunities for local contractors offering network and installation services.

Other businesses linked to the mobile industry such as distributors, handset vendors, airtime suppliers and the advertising industry are flourishing.

The industry has also encouraged entrepreneurialism. For example, in Nigeria, rural telephony projects have opened business and employment opportunities to locals who work as phone centre operators or retailers of handsets and recharge cards.

Research done by the GSMA also shows that the mobile industry has created about 3.5 million jobs in the formal and informal sectors in 49 sub-Saharan countries.

The report also forecasts that mobile internet will be the key growth area in the future in sub-Saharan Africa. Already with WACS (West Africa Cable System) and other cables launched in Africa, mobile operators in sub-Saharan Africa are providing fast internet access.

With the introduction of the Multiprotocol Label Switching (MPLS) network, the awarding of 3G licences in some countries, as well as the roll-out of long-term evolution (LTE) technology recently in sub-Saharan Africa, projections are that there will be a further upsurge in revenues.

The demand for the internet in the sub-Saharan region has also given rise to internet-based services across industries. The appetite for ICT solutions that are relevant, more effective and efficient is growing.

For example, digital jobs now exist across various sectors such as large corporations, small and medium enterprises (SMEs), non-government organisations and governments.

The internet is a necessity in an increasingly information-based society. Providing internet access opens the door to a knowledge-based economy, which in turn will promote the continent’s social and economic development. That is why governments are introducing more transparent and integrated management systems. For example, citizens can now apply for certain services online.

The recently launched cloud service provides business automation tools to enterprises across professional services, micro finance, health and SMEs sectors. Cloud computing involves the delivery of computing resources over the internet.

Users access cloud-based applications through their web browsers or mobile apps, while software and data are stored on remote servers. This makes the service convenient and cost-effective by centralising access to services.

Machine-to-machine solutions link remotely located or moving devices to provide data on which to make informed business decisions. These include fleet monitoring and mobility smart electricity metering solutions that also help reduce energy costs and carbon emissions.

An SMS and e-mail alarm is sent through a network, wired or wireless, to an application that translates this into meaningful information for industries, and municipal and other authorities. This helps to reduce response times, damage or loss to assets, related productivity and revenue losses, pre-empting evacuations and equipment failure, preventing downtime and enabling easier compliance with air quality legislation. Distant monitoring of operations and its impacts socially and environmentally, help businesses save on transport, human resources costs and allow them to respond quickly to incidents of environmental pollution.

With the GSMA expecting mobile broadband connections to increase almost four times from last year to 2016 and the increased penetration of smartphones, there is no doubt that the future of sub-Saharan Africa lies in unleashing its digital economy.

At the Transform Africa Summit, which was held in Rwanda last month, the Carnegie Mellon University (CMU) highlighted the demand for highly skilled workers to complement the high number of cellphone subscribers in Africa.

To address this, the CMU plans to provide graduate programmes in Rwanda, designed to produce Africa’s next generation of technology leaders and innovators.

The Rockefeller Foundation says the high rate of youth unemployment in sub-Saharan Africa can soon be a thing of the past as the ICT sector provides immense job creation opportunities.

“The digitisation of our world has driven the growth of ICT sectors, and with it, the demand for workers with digital skills. The digital economy is churning out data at an unprecedented rate. Businesses and organisations need workers who can curate and manage data. Globalisation enables these kinds of digital tasks to be performed from almost any location in the world, so long as there is a well-trained and well-equipped workforce. This means that multinational corporations can tap into the high-potential youth who remain unemployed in Africa,” the foundation says.

Mobile services also provide platforms that improve the chances of finding employment. Despite the immense benefits of the mobile industry, the future of Africa’s digital economy could be at stake.

Although the mobile connection rate in sub-Saharan Africa is the highest in the world, the continent falls short when it comes to spectrum allocation, yet the digital economy of Africa hinges on the successful development and operation of mobile broadband.

According to the GSMA report, “the amount of spectrum allocated to mobile services in Africa is currently among the lowest worldwide”. Why is it imperative for mobile operators to have access to harmonised spectrum? The development of mobile broadband is expected to lead to rapid increases in mobile traffic. This will be driven by the availability of mobile spectrum.

Releasing the digital dividend spectrum and liberalising existing spectrum licences so that operators can use spectrum in the bands for 3G or LTE technology would provide operators across sub-Saharan Africa with the capacity required to support mobile broadband networks.

The prospects for e-commerce and the continent’s digital economy are promising in the next few years, but this is dependent on infrastructure readiness and broadband maturity. The continued growth of our continent’s ICT industry will be determined largely by three factors – globalisation, knowledge and technology.

Welcome to the New World Africa.

Pieter Verkade is the group chief commercial officer at MTN. He will be a panellist at the AfricaCom conference in Cape Town.

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