Africa’s tech explosion promises economic growth

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Ask web entrepreneur Stefan Magdalinski why he moved from London to Cape Town two years ago, and he points to a map that illustrates the technological revolution reshaping Africa.

The map shows the 14 undersea fibre-optic cables that will link the continent’s internet service providers to the servers of Europe and Asia by mid-2012, increasing the capacity of its cable internet connections almost three-fold from today and nearly 300-fold from 2009.

The cables are drawn in different colours and in thicknesses that represent their capacity — from the thin gray line showing the 120-gigabit cable that was Africa’s only fibre optic link in January 2009, to the broad orange swath showing a 5,120-gigabit cable set to launch in 2012.

With its violet, yellow and orange cables swooping down the continent’s west side and its blue, brown and red lines tracing the northern and eastern coasts, the map looks like an expressionist painter’s vision of Africa.

“If that doesn’t look like an opportunity for transformation, fun and profit to you, I don’t know what is,” Magdalinski says.

Magdalinski is the CEO of Mocality, a business directory designed for the mobile phone.

His goal is to create the largest online business database in Africa — from upmarket stores in swank shopping centres to neighbourhood shops housed in corrugated metal shacks — and bring it to shoppers on their cell phones.

He is one of many entrepreneurs in Africa tapping the twin trends of growing cell phone ubiquity and exploding internet bandwidth, developments that promise to transform the way the continent does business and communicates.

The digital divide is still a persistent problem for Africa, where only 9.6 percent of people are internet users, compared to 65 percent of Europeans.

The cost of internet and phone services is also higher in Africa than anywhere in the world, despite the region’s poverty, according to the UN International Telecommunications Union (ITU).

But as undersea cables increase internet providers’ capacity and decrease their reliance on slow satellite connections, the cost of getting online is falling.

And as technology allows users to access the internet with ever-cheaper cell phones rather than computers, more and more people will use their mobile phones to get online in Africa, the world’s fastest-growing mobile market with 333-million mobile subscribers, up from 88-million five years ago.

These converging booms in internet and cell phone technologies hold the promise of economic growth, since studies show a link between rising broadband and mobile penetration and economic development.

“Every day, European mobile companies are calling me about the opportunities in Africa,” says Antonie Roux, CEO for internet global operations at Naspers Group, a South African multi-media company.

“We are seeing things happen in Africa first,” says Jon von Tetzchner, co-founder of Opera Software, a Norwegian company that makes a mobile browser.

Von Tetzchner cites mobile banking as an example of Africa’s emerging tech savvy.

A programme called M-PESA launched by Kenya’s Safaricom network three years ago pioneered mobile cash transfers, and the popularity of the service has soared.

M-PESA essentially turns cell phones into bank accounts by letting users make and receive payments on their mobiles and cash in at small cell phone shops.

In July the service had almost 12 million customers, up from 52 000 when it launched. Mobile banking services in Rwanda, South Africa and Uganda have seen similar growth.

“I’m very excited about the fact that we are seeing so many people doing banking on their mobile,” Von Tetzchner says.

“In other parts of the world this isn’t possible. This is actually Africa jumping ahead, and by doing that giving access to banking to a lot of people that do not have it today.”

More related articles

  • Read more about Mocality here
  • The Memeburn interview with Opera CEO Jon von Tetzchner is here.

    Cable summary information

    Seacom EASSy TEAMs WACS MainOne

    GLO1 ACE
    Cost (millions
    of USD)

    650 265 130 600 240 800 700
    Length (km)

    13,700 10,000 4,500 14,000 7,000 9,500 14,000
    Capacity

    1.28 Tb/s 3.84 Tb/s 1.28 Tb/s 5.12 Tb/s 1.92 Tb/s 2.5 Tb/s? 5.12 Tb/s
    Completion

    July 2009 July 2010 Sept 2009 Q3 2011 Q2 2010 Q3 2010 Q2 2012
    Ownership

    USA 25%

    SA 50%

    Kenya 25%

    African

    Telecom

    Operators 90%

    TEAMs (Kenya) 85%

    Etisalaat (UAE) 15%

    Telkom

    Vodacom

    MTN

    Tata (Neotel)

    Infraco et al

    US Nigeria, AFDB France

    Telecom et al

    See below for full list

    Investor details

    Seacom (http://www.seacom.mu)

    Industrial Promotion Services (25%), an arm of the Aga Khan Fund for Economic Development (USD 75 million)

    (Kenya – founded by Prince Karim Aga Khan IV of Pakistan)

    VenFin Limited (25%) – USD 75 million)

    Herakles Telecom LLC (backed by Blackstone) (25%), New York-based lead company, no website (USD 75 million)

    Convergence Partners (12,5%) – USD 37.5 million

    Shanduka Group (12.5%) – USD 37.5 million

    EASSy (http://www.eassy.org/)

    EASSy is 90% African-owned although that ownership is underwritten by a substantial investment by Development Financial Institutions (DFIs) including World Bank/IFC, EIB, AfDB, AFD, and DfW. Total DFI investment is apparently $70.7 million, with $18.2 million coming from IFC, 14.5 million from AfDB. This is a smaller amount than the originally advertised $120 million investment from DFIs.

    South African investors in EASSY include Telkom/Vodacom ($18.9 million) , MTN ($40.3 million), and Neotel (~$11 million).

    WIOCC, an SPV created to facilitate open access is the largest shareholder, with 29%. WIOCC consortium members include: Botswana Telecommunications Corporation, Dalkom Somalia, Djibouti Telecom, Gilat Satcom Nigeria Ltd., the Government of Seychelles, the Lesotho Telecommunications Authority, ONATEL Burundi, Telkom Kenya Ltd., Telecommunicacões de Mocambique (TDM), U-COM Burundi, Uganda Telecom Ltd., Zantel Tanzania and most recently, TelOne Zimbabwe and Libyan Post, Telecom and Information Technology Company (LPTIC)

    Other investors in the system include Bharti Airtel Limited of India, British Telecommunications, Etisalat of the United Arab Emirates, France Telecom, Mauritius Telecom, Saudi Telecom Company, Comores Telecom, Sudan Telecom Company, Tanzania Telecommunications Company, Telecom Malagasy, Zambia Telecommunications Company, Zanzibar Telecom.

    TEAMs

    85 per cent of the cable is owned by TEAMs (Kenya) Ltd and the rest by Etisalaat of the United Arab Emirates (UAE). The TEAMS (Kenya) Ltd holding breaks down as follows:

    • 42.5% – Telkom Kenya Ltd
    • 22.5% – Safaricom Ltd
    • 10% – Kenya Data Networks Ltd
    • 10% – Econet/Essar Telecom Ltd
    • 5% – Wananchi Group
    • 3.75% – Jamii Telecom Ltd
    • 1.25% – Broadband Access/AccessKenya Ltd
    • 1.25% – Africa Fibrenet (Uganda) Ltd
    • 1.25% – InHand Ltd
    • 1.25% – iQuip Ltd
    • 1.25% – Flashcom Ltd

    West African Cable System (WACS)

    • Telkom
    • Vodacom
    • MTN
    • Tata Communications (Neotel)
    • Broadband Infraco
    • Cable & Wireless
    • Portugal Telecoms
    • Congo Telecoms (formerly Sotelco)
    • Telecom Namibia
    • Togo Telecom
    • OCPT (Office Congolais des Postes et Telecommunications)
    • Angola Telecom

    MaIN OnE

    Privately owned. On June 1, 2009, the African Development Bank confirmed USD 66 million financing for the project.

    Africa Coast to Europe (ACE)

    ACE consortium signatories:

    • Baharicom Development Company
    • Cable Consortium of Liberia
    • Companhia Santomense de Telecomunicações
    • Côte d’Ivoire Telecom
    • Expresso Telecom Group
    • France Telecom
    • Gambia Telecommunications Company
    • International Mauritania Telecom
    • Office Congolais des Postes et Télécommunications
    • Orange Cameroun
    • Orange Guinée
    • Orange Mali
    • Orange Niger
    • PT Comunicações
    • Republic of Equatorial Guinea
    • Republic of Gabon
    • Sierra Leone Cable Company
    • Sonatel
    • Sotelgui

    Credit: Africa cable picture and information sourced from Many Possibilities (Steve Song), with additional reporting by Memeburn journalists and AFP

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