Building capacity to help Africa trade better

Africa’s Digital Connectivity Dividend in Waiting


Africa’s Digital Connectivity Dividend in Waiting

Africa’s Digital Connectivity Dividend in Waiting

“We have to be able to provide infrastructure and digital connectivity to the lowest common denominator at the most affordable price if we really want digital transformation to transform society.” – Accenture Digital MD Wayne Hull

The industrial revolution of the 18th and 19th centuries completely changed the methods of goods production. Mechanisation, specialisation and the division of labour revolutionised the way raw materials were transformed into products. The improvements in productivity flowing from industrialisation led to the creation of great wealth, much of it ending up in the hands of a new middle class.

In the same way, a fourth industrial revolution is now underway, where the nature of value creation is changing fundamentally. More value is now generated by services than by industry, and the greatest growth is seen in digital or digitally-delivered services. These changes are creating a new privileged class – those who are able to acquire and leverage digital skills. In the same way that agrarian economies were left behind by the industrial revolution, and they remained in low value-added states, countries and regions that are unable to board this digital bandwagon are destined to be left behind and stuck in low value-add production.

The gulf that currently divides the ‘haves’ and the ‘have nots’ of digital empowerment has been coined ‘the digital divide’. While mobile broadband connectivity growth in Africa has been impressive over the past decade, fixed line broadband, satellite broadband and terrestrial broadband growth has lagged far behind; even lagging the growth in developing Asia and Latin America. There are major challenges in bridging the ‘last mile’ or ‘last 50 metres’ of connectivity and spectrum allocation by communications authorities often lags the demand by the market. Even South Africa, a continental digital leader, is guilty of this feet-dragging in the allocation of spectrum.

To make matters worse, Africa still has the most expensive internet in the world. According the Alliance for Affordable Internet (A4AI), the average cost of 1GB of data in Africa is nearly four times the level that A4AI considers affordable or reasonable. Certain individual countries have particularly exorbitant internet costs, among them – Chad, Zimbabwe, Equatorial Guinea, Djibouti and the Central African Republic. In these countries, the cost of 1GB of data is around ten times what A4AI considers affordable. On the other hand, certain African countries boast internet costs that are actually below the A4AI benchmark; Egypt, Mauritius, Rwanda and Sudan being the best examples.

High costs could be the result of a lack of competition, which is often the case in Africa where markets for internet connectivity are dominated by just one or a few players, dividing up the market and tacitly or openly colluding on prices. The solution to this is better democracy and institutions of democracy – the public needs to be protected by the regulator and the competition authorities. In this area – of the ‘democracy of consumer protection’ – many African countries have a long way to go. Before consumers are better protected, democracies have to be strengthened at their cores.

The other driver of costs is simply availability. Simple market dynamics dictate that scarce resources that are in demand will have their prices bid high. As previously noted, Africa’s mobile broadband growth has been impressive over the past decade, but fixed and satellite connectivity lags far behind. Infrastructure expenditure in general is below par in Africa, whereas investment in digital connectivity infrastructure has been strong since the commodity boom of the mid-2000s. This has been driven by the profitability of the sector and it is the private sector that has driven infrastructure investment. The gains are not insignificant – a report by AT Kearny estimates a greater than 30% growth in revenues from mobile technologies and services from 2016 to 2020 for Africa.

By the beginning of 2015, undersea cables connecting Africa to the rest of the world had been laid around the continent and terrestrial fibre optic networks had been installed in some areas. In only the last few years, multiple additional projects have been initiated, among them:

  • The SACS transatlantic fibre cable, connecting Luanda in Angola and Fortaleza in Brazil. This pipeline went live in September 2018 and has seen connection latency between South Africa and the United States (Miami) decrease substantially.

  • Participation by North African countries Egypt, Morocco and Tunisia in China’s ‘digital silk road of the 21st century’, another name for the digital aspect of the Belt and Road Initiative (BRI). This initiative will see many tech projects rolled out in North Africa (and subsequently – presumably – east and southern Africa). Among these are cloud centres, data centres and smart cities. However, connectivity is a critical aspect of the digital BRI and Chinese companies are able to supply fibre optic connectivity to North African countries at far better rates than western competitors.

  • In February 2019, the Rwandan government, in conjunction with UK company OneWeb, launched a satellite that is capable of providing broadband access to rural areas. The intention is to extend access to rural schools in Rwanda, previously unable to access the internet due to an absence of any fixed or wireless broadband connectivity. Rwanda aspires to become a regional tech hub and excel in digital education; and has already partnered with Microsoft in order to drive tech adoption in its education sector.

  • In October 2018 the Global System for Mobile communication Association (GSMA) launched a $391k innovation fund for Ugandan and Ghanian startups focused on extending rural connectivity. The aim is to encourage African innovators to seek home-grown solutions for rural connectivity challenges. Rural connectivity remains the major challenge in Africa, and Rwanda’s satellite option, although effective, is also expensive.

  • In September 2018, Dutch interconnection platform Asteroid signed a memorandum of understanding with its African equivalent, NAPAfrica, to work together to foster connectivity in Africa by supporting the extension of IXP (internet exchange point) infrastructure. NAPAfrica is a South African company but it will work beyond South Africa’s borders in other African countries too. One of the challenges they will seek to overcome is to increase the routing of intra-African internet traffic directly through Africa and not via European pipelines. This will improve latency and the quality of connections.

Just two areas where improved connectivity will see growth are e-commerce and cloud technology. E-commerce is a democratiser and enabler of entrepreneurship, with webshop technology making cross border trade easier than ever before and within the reach of small and micro enterprises in the developing world. China, itself a developing country, probably hosts the most ‘micro multinationals’ in the world, but there is no reason that African entrepreneurs cannot leverage this technology once they have stable and fast connectivity. Of course, delivery and payments systems also need to be in place but these are areas already receiving attention in many countries and also at the continental level.

The cloud technology refers to the vast array of applications, services and data repositories that exist online and remotely from the local machine (or device). Google alone bases most of its services on cloud technology, with Gmail, Gdrive and Google Maps being several examples. The availability of the cloud allows relatively sophisticated online services to be accessed by even modestly specified devices. It also greatly assists with small and micro business development. Platforms such as Uber, AirBnB and FaceBook become available, which are either industry-specific entrepreneur tools or, in the case of FaceBook, a way to find and access a client base and conduct marketing campaigns entirely within the platform.

These are just a few examples, the dividends from connectivity are many and varied. This digital connectivity dividend is already being reaped by the developed world, it now remains for Africa to move quickly and appropriate these considerable returns from digital connectivity.

About the Author(s)

John Stuart

John Stuart is an economist and policy analyst with special interests in trade, economic integration, technology & ICT and economic modelling. He began his career in academia at Rhodes University and later the University of Cape Town, after which he entered private consulting first with AFReC (Pty) Ltd and subsequently with management consultancy PBS (Pty) Ltd, where he served as Chief Operations Officer. Following his time at PBS he created agri-tech startup AgriDrone, one of the first UAV startups in Africa. He has subsequently researched and written extensively for tralac and also consulted to various organisations including the UN Economic Commission for Africa and the OECD. He holds an M. Com degree in Economics from the University of Natal (Durban).

Leave a comment

The Trade Law Centre (tralac) encourages relevant, topic-related discussion and intelligent debate. By posting comments on our website, you’ll be contributing to ongoing conversations about important trade-related issues for African countries. Before submitting your comment, please take note of our comments policy.



Email This email address is being protected from spambots. You need JavaScript enabled to view it.
Tel +27 21 880 2010