Big plans are in store to spread the Internet across all of Africa. However, despite the hype surrounding Silicon Savannah in Kenya, the digital economy on the continent is but a strand in the World Wide Web. What obstacles must be overcome so that a true Internet revolution takes hold there?
Innocent Munzaneya’s version of the global e-commerce site eBay, called Cyamunara (which means “Auctions”), seems like a great idea on the surface.
Munzaneya decided to create the platform, which is in Kinyarwanda (Rwanda’s most-spoken language), after seeing people visit the capital city of Kigali from far away just to attend auctions. He thought these people could do this online, from the comfort of their office or home. It has certainly worked in other places. The German startup incubator Rocket Internet, famous for replicating successful Internet business models worldwide, is the most notable example, with clones of Amazon, Booking.com and eBay functional across several African countries.
Yet when Amine Chouaieb, a Tunisian consultant and entrepreneur, dug into the idea a little further during a lunch at the recent International Business Forum 2013 in Istanbul, skepticism arose. Cyamunara’s maximum potential return—provided that all of Rwanda’s 100,000 Internet users sign up as active customers (an unlikely scenario) —would be around $500,000 (U.S.) per year. A low figure that Chouaieb doesn’t find very attractive, given that Munzaneya’s website, founded three years ago, is still very far from a 100,000-customer threshold. However, despite Chouaieb’s current estimates and calculations, there is one important thing to consider: Internet penetration across Africa has become a central growth policy for many governments.
“In Rwanda, the president likes IT and wants it everywhere,” says Munzaneya, who was given a Best SME in the ICT Sector award two years ago by the Rwanda Development Board for his holding company, Hoziyana Group Ltd., which includes Cyamunara and an IT hardware import company. But, despite the president’s motivations, the Internet in Rwanda is actually not so widespread. Only 8 percent of the population can access it, which is low compared with many other African countries. Morocco, for example, has an Internet penetration rate of 55 percent. Then there’s Seychelles, Tunisia, Mauritius, South Africa, Nigeria and Kenya, all with more than 30 percent.
Most African countries, however, have an Internet penetration rate lower than 15 percent, with Eritrea at the very bottom, at 0.8 percent. With developed countries’ rates varying between 70 and 95 percent, it appears the digital divide is wide in Africa.
But numerous infrastructure projects are on the agenda to solve this problem, potentially making a company like Cyamunara considerably more acceptable and worthy of investment. Regional and international organizations, as well as African and multinational corporations (TNCs), are investing in new undersea cable projects, while 3G and 4G networks—the latter technology being implemented in Africa more or less at the same time as in some developed countries—are attracting a great deal of foreign direct investment (FDI).
Indeed, foreign and local investors, like Percival Ampomah, head of investments at the Ghana Venture Capital Trust Fund, believe the “mobile phone has revolutionized the way of doing business [in Africa],” as he says.
According to the Groupe Speciale Mobile Association’s 2012 Sub-Saharan Africa Mobile Observatory report, mobile-phone penetration rose from nonexistence in 2000 to a rate of 55 percent in 2012, bringing with it both growth and development opportunities. Investors want to get the lion’s share in this potential boom. Especially if, as the GSMA’s report details, the number of mobile broadband connections soar, with a 360 percent increase from 2012 to 2016, while fixed broadband connections remain rather stable and far behind.
Nevertheless, broadband access will not be equally distributed across the continent. Not all countries are getting access to 4G, and in some, their remote and rural areas don’t even have 3G connections now. Moreover, if coverage is available, it is sometimes not accessible to all because of price concerns. As stated in the International Telecommunication Union’s 2013 Study on International Internet Connectivity in Sub-Saharan Africa, a wired connection can be cheap, at around $25 a month in South Africa, or very expensive. The 10 highest fees range from $170 in Uganda to more than $1,000 a month in Burkina Faso, which is said to be too expensive even for businesses.
Apart from the plan prices, hardware is also an additional high cost for Africans. Although programs exist that supply low-cost computers in several African countries, such as One Laptop per Child and Computer Aid International, international smartphone manufacturers and local followers are designing cheap, fashionable devices that are more likely to become the main agent driving the Internet revolution in Africa. What’s more, smartphones make it easier for bottom of the pyramid consumers to use a computer interface they might have never seen, or had access to, before. Lucas Simons, founder of the consultancy firm NewForesight and the agricultural rating agency SCOPEinsight, says spreading the Internet “will help collect information about groups” that were earlier deprived of access to information, so that “new business models will be developed to serve them better in the future.”
This is in line with what Munzaneya said about Rwandan President Paul Kagame and his goal of equipping the country with modern information and communication technologies (ICT) through Vision 2020. The plan’s central goal? To turn the economy into a knowledge-based one.
“Today in Ethiopia,” says Pascale Bonzom of the United Nations Development Programme, “young people are not present in agriculture,” which continues to be the major economic sector there. “Alternatives such as services to agriculture or food processing are to be considered.”
For Stephanie Ludwig and Thorsten Scherf, ICT advisers at German enterprise GIZ, “market research, pricing, distribution and marketing/customer relationship management are the areas that ICT can leverage the most.” Therefore, by upgrading communication speed, enabling video transfer and generalizing the use of smartphones, the shift to a connected continent could bring a double economic boom and, in turn, provide more jobs.
The first boom would occur through a local economy’s diversification of its industry. A digital economy, being less capital-intensive than other sectors—once a connectivity infrastructure has been created—allows for plenty of opportunities in the creation of small and medium-sized enterprises (SMEs) in areas like smartphone application design or online commerce. Or, if some TNCs are starting to build or already have digital markets, they will need to hire local people as software developers, technicians or content producers. Improvements in the existing economy through the emergence of productivity gains would drive the second expected boom.
For SMEs, cloud computing will enable better data management, and advertising will be cheaper, targeted and reach a larger scale. What’s more, various services may compensate for poor local infrastructure. In the case of video conferencing, “people could avoid traveling a four-hour round trip because of Cairo’s road traffic for a one-hour meeting,” says Bernhard Rohkemper, head of the GIZ RIBH MENA tech hub.
In agriculture, Ghanaian company Esoko has already increased market price transparency with its SMS-based system, but it could be more accurate and detailed with more frequent broadband Internet updates.
As far as finance is concerned, the “mobile money is good but has a too-low penetration rate,” Ampomah says. A user-friendly interface application for smartphones might encourage more people to join this system.
The Internet could also be particularly profitable and beneficial for the health sector. Remote photo/video-based consultations in rural areas deprived of doctors have great potential. According to the World Health Organization, in 2012 Africa had 2.2 physicians per 10,000 inhabitants. Imagine their bolstered reach if equipped with Skype. Moreover, improving access to information has a vast social impact. When information can be accessed from independent channels, government officials should be “better able to understand what happens at the macro-level and then influence policies,” Ampomah notes.
As an instrument of transparency, the Internet might even help break the cycle of corruption that Ampomah describes as “systemic” in Africa. Charles Ocici, Enterprise Uganda’s executive director, says that “corruption affects the cost of opportunity to start a business, FDI and the cost of financing through interest rates.” Honesty, by way of the Internet, pays off.
In the end, if the Internet can indeed be leveraged across Africa, it won’t be so much an Internet revolution as a revolution in everything else. Therefore, for his online auction venture, Munzaneya can count on more just than his president’s support. He’ll have the support of many positive agents within Rwanda and across the rest of the continent. An expansive digital market is being built in Africa, and despite the obstacles, it will see the light of day.
In the meantime, Munzaneya has another challenge waiting for him: Rocket Internet has just launched Kaymu, its eBay clone, in Rwanda. The market is hardly built, and there’s already little room for the competition.