ICT in Africa: The future is brighter

ICT in Africa: The future is brighter

The telecommunications boom has truly arrived in Africa. The last decade has witnessed a period of huge growth, skyrocketing investment and crucial technological advancement in the sector across the continent, but the future promises even more, writes Tom Jackson.

A recent report by telecoms specialists Analysys Mason predicted Africa’s telecoms market would grow faster than anywhere else in the world over the next five years, with a compound annual growth rate (CAGR) of 6%. Revenues from mobile data will match those from voice revenue – growing at a 6.7% CAGR compared to just 1% for fixed – as a result of increased 3G coverage and the increasing prevalence of low-cost smartphones.

Cisco says the Middle East and Africa (MEA) region’s mobile data traffic growth rate will be the largest in the world until 2017, with 77% growth. Its 2014 Sub-Saharan Africa: Ericsson Mobility Report said the growth was underpinned by the number of mobile subscriptions in the region, which the company predicts will increase by 50% (300m subscribers) between 2014 and 2019, to reach 930m. Usage is also growing impressively – Ericsson believes data traffic will increase by 20 times in the next five years, while even voice traffic is set to double.

The size of the opportunity is evident in the number of international operators turning to Africa in the last few years. As Johan Van Huyssteen, partner in PwC’s telecoms practice in South Africa, notes, around 60% of operators present in Africa are affiliated with major international telecoms groups such as France Telecom, Vodafone, MTN, Bharti Airtel and Millicom.

“This strong involvement by global players is a function of the consolidation process of recent years,” Van Huyssteen says. “The world’s biggest operators – facing market maturity, cut-throat competition and slower growth in their more established markets – have turned their attention to the opportunity in Africa.”

Mobile payments central to opportunity

At the centre of the excitement surrounding the African telecoms industry are mobile payments. As PwC global communications leader Pierre-Alain Sur says in his company’s most recent Communications Review on telecoms in Africa, Africa’s relative lack of legacy infrastructure has enabled it to almost completely bypass fixed-line services and move straight to mobile. This dynamic communications market has proved itself one of the most innovative with its use of mobile payments.

Africa has been at the forefront of the mobile payments industry since the launch of M-Pesa in 2007. MEF’s Global Consumer Insights Series on Mobile Money estimates that 82% of consumers in Africa are engaged in mobile banking, compared to a global average of 66%. More than 17m Kenyans today use M-Pesa, with 25% of the country’s gross domestic product (GDP) passing through the service last year.

The Kenya Bankers Association (KBA) says 60% of Kenyans use their mobiles to pay bills and transfer money, with KES2bn ($23.3m) transacted each day. Mobile money transactions total more than double that of commercial banks.

The opportunity has again not been missed by global players. New international entrants to African markets include Western Union and MoneyGram, while banks are also catching up, with Kenya’s Equity Bank notably obtaining a mobile virtual network operator (MVNO – see box) licence this year. Moves are under way to make mobile money even more accessible.

In May of this year, nine African telecoms firms announced they would cooperate to implement interoperable mobile money services across Africa and the Middle East

Interoperability allows individuals and businesses to move money to any mobile money account regardless of what company that account is held with.

The move is aimed at boosting competition within the mobile market and allowing customers to move money unhindered.

The first moves towards interoperability have already been made in Tanzania, where operators Airtel, Tigo and Zantel have become partners for a cross-network transfer service.


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Written by African Business Magazine

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