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Out-Law News 3 min. read

Mobile IT boom in Africa ‘needs more infrastructure investment’, says survey

Sub-Saharan Africa is “rapidly closing in” on the global penetration rate of mobile communications usage, according to a survey published by Swedish company Ericsson.

Total mobile subscriptions in sub-Saharan Africa stood at about 70% at the end of 2013, compared to about 92% globally, and digital technology is “fast becoming a part of everyday life” in the region, the survey said (8-page / 224 KB PDF).

According to the survey, mobile financial services are increasingly popular as the use of information and communications technology (ICT) grows. However, the survey said: “Mobile operators and relevant ICT stakeholders, including governments, must drive the development of appropriate infrastructure to handle the growing traffic demand on networks.”

The survey said: “Improved network performance will be imperative as increased traffic puts a strain on current networks and consumers demand a seamless user experience. The region’s mobile data traffic is predicted to grow around 20 times between the end of 2013 and the end of 2019. Globally, mobile data traffic will grow 10-fold during the same period.”

The survey projected that there will be more than 635 million mobile subscriptions in the region by the end of 2014. This is expected to rise to around 930m by the end of 2019.

Mobile banking is among increasingly popular services, with 58% of mobile users in the region showing an interest in using mobile banking and mobile wallets in future, said the survey. “New business opportunities that have been created by the internet have been boosted by consumers’ increased access via mobile phones. This has led to the development of new business models. An example of this is the growing industry for value-added apps and services for smart devices.”

According to the survey, the rapid increase in low-cost - less than $100 - devices, such as smartphones and tablets, has “played a pivotal role in driving growth” within sub-Saharan Africa’s mobile market.

The survey said: “ICT has contributed to the growth of many industries within sub-Saharan Africa... The agricultural sector in Nigeria has also been transformed by ICT, with the launch of an electronic wallet system which allows farmers to receive electronic vouchers for subsidised seeds and fertilisers directly onto their mobile phones. It also enables them to pay for farming equipment from private sector agricultural dealers.”

“The potential social, economic, political and technological impact of ICT and broadband is huge, not only globally, but regionally as well,” the survey said.

The survey indicated that sub-Saharan Africa is a “predominantly prepaid market”. In 2013, 99% of subscriptions in Nigeria were prepaid, as were 98% in Kenya and 83% in South Africa, which the survey said are amongst the “top mobile markets in the region in terms of mobile subscriptions”. Other countries in the region “follow largely the same trend,” the survey said.

In the first quarter of 2014, Nigeria and South Africa were still the leading sub-Saharan countries in terms of mobile subscription numbers, followed by Kenya, the Democratic Republic of Congo and Ghana, the survey said. “In terms of net additions per country, Nigeria leads, followed by the Democratic Republic of Congo, Uganda and Ghana.”

A joint report published in 2012 by the World Bank and African Development Bank, with support from the African Union, said “ICT innovations are delivering home-grown solutions in Africa, transforming businesses, and driving entrepreneurship and economic growth”. The report said that, at the start of 2012, Africa’s mobile telephony market was “bigger than either the EU or the US. Some 68,000 kilometres (km) of submarine cable and over 615,000 km of “national backbone networks” had already been laid to boost connectivity across the continent, the report said.

Last month, the International Finance Corporation (IFC), a member of the World Bank Group, announced a $2m advisory services agreement with Tigo Ghana to develop and expand mobile financial services in Ghana. The project is part of the Partnership for Financial Inclusion, a joint $37.4m initiative of IFC and The MasterCard Foundation to expand microfinance and extend mobile financial services in sub-Saharan Africa.

Paris-based telecoms expert Diane Mullenex of Pinsent Masons, the law firm behind Out-Law.com, said that ensuring systems can work together is one of the biggest challenges to the development of mobile money systems.

“On the face of it, bank accounts are interoperate; telecoms accounts are interoperate, so they should have interconnected platforms in mobile money,” Mullenex said. “The biggest issue is clearly cost. Interoperability does imply a version of a four-party model that includes account issuers, merchant/agent acquirers paired with an independent payment switch. Aside from the investment in the network, this also require a large amount of funding and a review of competition regulations.”

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