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Better connectivity has economic spinoffs for Africa

By Sunil Maharaj & Simon Barnes

Broadband has the potential to be an enabler for reducing poverty, improving education, promoting gender equality, improving health services, ensuring environmental sustainability and providing a platform for global partnerships for development.

By some estimates, a 10% increase in broadband penetration in low- and middle-income countries can result in a 1.38% increase in economic growth.

Africa has a long way to go before it can reap any broadband dividend. In 2014, only 19% of Africa used the internet compared to the world average of 40.4%, and Europe’s 74.8%.

Nor is the rate of broadband penetration growing at the speed it needs to. A recently released network readiness index shows that countries in the top 10% of preparation and use of broadband technology have seen twice the level of improvement since 2012 as those in the bottom 10%.

The installation of undersea cables, which connected countries on the east and west coasts of Africa via submarine cables, has led to great improvements in connectivity. But a great deal more needs to be done.

A 2015 estimate for the average percentage of households with internet access is only 10.7% for Africa – vastly lower than Europe’s estimated 82.1%. Even where there is connectivity, access is extremely slow. Some countries have a low one kb/s of international internet bandwidth per internet user.

This demonstrates the scale of the challenge facing developing countries seeking to develop the infrastructure, institutions and skills needed to reap the full benefits of improved connectivity.

Connectivity and economic growth

Broadband, or high-speed internet connection, is a 21st-century necessity for doing business anywhere in the world. And increasing evidence shows that countries effectively harnessing the use of technology are more successful at passing on economic benefits to their citizens.

Information and communications technologies can create economic opportunities, lower costs and raise productivity. They can foster social and political inclusion, ultimately contributing to shared prosperity.

Online marketplaces, such as Lending Club, allow borrowers and lenders to connect directly online. Big data makes it possible to compute a credit score for virtually every human being.

Perhaps one of the best examples of how the mobile revolution is changing financial services is M-PESA, the mobile-based money transfer system that was launched in Kenya and Tanzania.

In the education arena, the proliferation of massive online open courses allows people around the world to upgrade their skills, train, or re-train more frequently, more flexibly, and more cheaply than through traditional channels.

Technology is also allowing for a more direct interaction between citizens and governments.

Mobile as a driver of the economy

The number of fixed-line internet subscriptions has grown over the past decade but this seems to be slowing. Part of the reason for this may be that consumers are opting for mobile internet connections. Mobile internet is better suited to economies with low levels of fixed broadband infrastructure.

Mobile subscriptions have overtaken the growth of fixed line accounts. and they are still growing at a fast pace. By the end of 2013, mobile penetration reached 66% in Africa with almost 10 out of 38 African countries surveyed showing a 100% mobile cellular penetration.

This too is important for economic growth. In 2013, the mobile industry already accounted for 5.4% of GDP in sub-Saharan Africa. The potential for further growth aimed at capturing billions without access to the internet is immense.

And the mobile sector’s growth continues apace. Global mobile subscription growth in the first quarter of 2015 was driven by demand in Africa and Asia.

This indicates that there is still opportunity for growth in Africa, which should be encouraging for mobile operators.

Opening up of more radio wavelength is key to improving and increasing the reach of broadband. This will allow operators to roll out high-speed wireless communication services. These offer faster internet speeds, a key requirement for effectively doing business.

The speed of internet service has an impact on how quickly employees access their email or find important information. It also affects the quality of customer experience.

Most connected countries in Africa

Good policies, including legislation, can have a positive effect on better internet access. Kenya remains a shining example of this. The East African country liberalised its telecommunications sector in the late 1990s.

The Kenya Internet Exchange Point, which was created in 2002, acts as a local hub for traffic between broadband service providers and content providers without having to obtain them internationally.

These changes had a dramatic effect. The percentage of Kenyans with access to the internet went from 1% in 2002 to 39% in 2014. They also led to a drop in internet providers’ operating costs and retail prices. And the use of local content went up, which created jobs and new business opportunities.

Lower communication costs is enabling people to reach wider markets, making it possible for goods and services to be traded in a new way. For example, women’s groups in Tabaka, in the Gucha district west of Kenya, sell their soapstone artefacts to the world by taking digital pictures of their new products and posting them online.

Easier and faster access to email has enabled a firm that spins yarn and makes woollen products in Eldoret, west of Kenya, to establish and keep in contact with customers in Europe and the US.

The World Economic Forum’s ranking of how prepared countries are to apply the benefits of information and communications technologies placed Kenya 86th out of 143 countries surveyed.

But Mauritius stands out as Africa’s greatest success. The Indian Ocean island is the most connected country in sub-Saharan Africa. It ranked 45th out of the 143 countries surveyed – higher than Italy (55th).

Mauritius also scores well on affordability, with the second lowest broadband costs in the world. It is the only sub-Saharan African country to make the top half of the rankings.

The development of the technology sector has transformed Mauritius into a cyber island, providing a home to companies involved in data management, e-commerce and call centres.

Mauritius’ success shows there’s no reason why internet connectivity cannot transform the rest of Africa.

  • Sunil Maharaj  is Sentech Chair in Broadband Wireless Multimedia Communications; Dean of the Faculty of Engineering, Built Environment and Information Technology at University of Pretoria
  • Simon Barnes is a PhD Candidate, Sentech Chair in Broadband Wireless Multimedia Communications, Department of Electrical, Electronic and Computer Engineering at University of Pretoria
  • This article was originally published on The Conversation
  • Email TechFinancials.co.za at editor@techfinancials.co.za

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