Forget bootstraps, Africa is a continent dragging itself up by its code strings to become a global player – but it needs more software developers, writes BRETT PARKER, SAP Africa Managing Director.
Over the last year, all eyes have been on Africa’s technology sector. And for a very good reason: infrastructure growth is booming. Between 2010 and 2016, seven new undersea cables brought fast data connections to the continent, with two more already under development. Meanwhile, mobile providers have invested $13.6billion into getting 500,000,000 Africans online by 2020.
But as necessary as infrastructure investment is, it alone won’t take African business global. So what technological development or product has the potential to make African businesses global players?
Tech sector already outperforms expectations
A common misconception is that raw materials are the big African growth story of the last decade. But according to research by Freshfields, since 2004 Africa’s technology companies have delivered 19% annualised returns, compared to just 11% in commodities.
A clue to why the African tech sector is growing can be found in the East African mobile payments industry. In most of the world, mobile payments is a niche sector, because consumers have many other convenient ways to pay –bank cards, credit cards and banking transfers, for instance.
But in Sub-Saharan Africa, only 34% of people have a bank account. This used to be a significant barrier to any transaction that wasn’t small-scale or local. Or, in plain English, it was a huge inconvenience.
Change began in 2007, when local telco Safaricom teamed up with Vodafone to develop the mobile-payment system M-Pesa. Its creators expected M-Pesa to have 250,000 customers by the end of its third year. After just two years it already had over two million customers.
By 2014, the East African mobile-payments market was worth US$61 billion. There were 41 new African mobile-payment start-ups. A huge 80% of all the world’s mobile payments were African. And global players were looking to Africa to see what lessons they could learn.
So is mobile-payment the technology that could take African business global? There’s clearly huge potential for the industry to grow and act as an enabler for other sectors: in particular African SMEs and sole traders, who need a means of making and accepting online transactions. But for a fundamental transformation to take place, it needs to be about more than just one industry.
Overcoming barriers through technology
Another brake on the globalisation of African business is the tariff and non-tariff barriers that inhibit the growth of a single African market. This is something that African businesses need to change if they are to grow to the point of being ready to operate on a global scale.
Here again, signs are positive. For instance, the NGO, TradeMark East Africa, worked with the Ugandan government to develop an online reporting system for non-tariff barriers (NTBs) to trade.
Exporters in East Africa can now report NTBs online or via SMS, resulting in a 20% reduction in the time taken to move goods around the region. This is expected to lead to increased trade, lower costs and higher regional GDP.
At the same time, the adoption of online revenue, legal and other government systems is helping African countries cut red-tape and increase the speed at which businesses can operate. In Addis Ababa, for instance, tax assessments can now be made online: giving taxpayers access to faster decisions, with less form filling.
Without doubt, institutional barriers to trade and growth need to be broken down, if African business is to go global. But technology is only one part of the solution. Much more depends on political will and clout.
The foundation of any technological revolution
To take on the world, African business will need investment in technological infrastructure. It will need break-out technologies that allow it to disrupt and then likely lead existing global markets. And it will need technology solutions to problems that currently hold it back. But there is something more fundamental than all of these factors:
Africa is the world’s youngest continent. This will give it a demographic dividend, just as the last generation of economic tigers is beginning to age. But only 1% of the 11 million African young people who come of age every year have even basic software coding skills. This is a waste of talent and a barrier to growth. Without basic STEMS skills, let alone coding knowledge, African entrepreneurs won’t be able to grow their businesses to the point of being ready to compete on the global stage.
In April 2016, Africa Internet Group (AIG) – the holding company for a range of online businesses – was valued at US$1 billion, making it the first ‘African tech unicorn’. AIG’s success is not a one-off. M-Pesa in Kenya, the mobile advertising platform Twinpine in Nigeria, and South Africa’s content-distribution service 8bit – among many other successes – prove that.
“If it works in Africa, it’ll work anywhere”, jokes Juliana Rotich, the co-founder of BRCK, a Kenyan-made Wi-Fi hotspot and battery designed for use in the field. And there are hundreds of African technology companies with innovative ideas, ready to prove her right. But in order to do it, they need access to a skilled, digital workforce.
The technology that will take African business global? As AIG and M-Pesa have shown, it’s the software developer’s kit, in the hands of an African programmer and entrepreneur who’s been trained to use it. The time to start training the next generation of African programmers is now.
Africa phones go flat
Africa’s mobile phone market declined 2.1% quarter on quarter in Q3 2018 according to the latest figures from IDC.
The global technology research and consulting firm newly released Quarterly Mobile Phone Tracker shows overall shipments for the quarter totalled 52.6 million units, with feature phone shipments falling 2.7% QoQ and smartphone shipments declining 1.3% over the same period.
Transsion brands (Tecno, Infinix, and Itel) led the feature phone space in Q3 2018, with a combined unit share of 58.2%. Nokia was next in line with 11.7% share. Transsion, Samsung, and Huawei dominated the smartphone space with respective unit shares of 34.9%, 21.7%, and 10.2%. However, in value terms, Samsung led the smartphone market with 37.2% share, followed by Transsion (21.0%) and Huawei (13.0%).
There were differing fortunes in the region’s three major markets, with Nigeria suffering a heavy 11.6% QoQ decline in mobile phone shipments, while South Africa and Kenya saw respective QoQ growth of 8.5% and 7.9% in Q3 2018.
“The decline in Nigeria stemmed from a slowdown in government spending, ongoing warfare in the country’s northern states, and market uncertainty in the lead up to elections,” says George Mbuthia, a research analyst at IDC. “In South Africa, the market’s growth was spurred by the penetration of low-end devices from brands such as Mobicel, Mint, and Nokia, while the launch of entry-level smartphones helped drive growth in Kenya despite increases in taxes and fuel prices placing a significant burden on disposable income in the country.”
While feature phones remain steadfastly popular across Africa, particularly in more rural areas, consumers are increasingly being attracted by smartphone offerings from Chinese brands such as Xiaomi, Oppo, and Huawei, which are actively targeting feature-oriented customers at more economical price points.
“There is a new wave of Chinese brands aggressively pursuing growth opportunities in the region, while the more-established Huawei is also accelerating its marketing efforts and expanding its distribution budget,” says Ramazan Yavuz, a research manager at IDC. “These brands have quickly progressed along the learning curve and evolved their offerings to perfectly reflect the realities of the region by addressing the diverse pricing and feature needs of the consumer base.”
Looking ahead, IDC expects Africa’s overall mobile phone market to reach 58 million units in Q4 2018, spurred by the festive season and online consumer events such as Black Friday. The introduction of more affordable smartphones in the African market will help drive progress in this space over the coming quarters, while the share of feature phones will decline steadily as the transition to smartphones gathers momentum.
Mobile money to cross borders
Orange and MTN launch pan-African mobile money interoperability to scale up mobile financial services across Africa.
Two of Africa’s largest mobile operators and mobile money providers, Orange Group and MTN Group, today announced a joint venture, Mowali (mobile wallet interoperability), to enable interoperable payments across the continent. Mowali makes it possible to send money between mobile money accounts issued by any mobile money provider, in real time and at low cost.
Mowali will immediately benefit from the reach of MTN Mobile Money and Orange Money, bringing together over 100 million mobile money accounts and mobile money operations in 22 of sub-Saharan Africa’s 46 markets. Mowali is ready to enable interoperability between digital financial service providers beyond MTN and Orange operations and markets, to support the existing 338 million mobile money accounts in Africa.
Mowali is a digital payment infrastructure that connects financial service providers and customers in one inclusive network. It functions as an industry utility, open to any mobile money provider in Africa, including banks, money transfer operators and other financial service providers.
The objective of Mowali is to increase the usage of mobile money by consumers and merchants. Mowali enables money to circulate freely between mobile money accounts from any operators in all countries. From the customer’s point of view, this means “I can pay or receive money anywhere from my mobile account regardless of my operator”. The system will unlock further innovation in the digital financial space within the continent.
For Stéphane Richard, Chairman & CEO of Orange, “by providing full interoperability between platforms, Mowali will provide an important step forward that will allow mobile money to become a universal means of payment in Africa. Increasing financial inclusion through the use of digital technology is an essential element in furthering the economic development of Africa, particularly for more isolated communities. This solution embodies Orange’s ambition to be a leading player in the digital transformation of the continent. By joining forces with another of Africa’s market leaders, MTN, we aim to accelerate the pace of this transformation in a way that will change the lives of our customers by providing them with simpler, safer and more advantageous services. “
“One of MTN’s goals is to accelerate the penetration of mobile financial services in Africa, Mowali is one such vehicle that will help us achieve that objective. Furthermore, co-operation and partnerships that help us accelerate the pace of development and overcome some of the scale, scope and complexity of challenges that society faces are key. This partnership with Orange is therefore an important step in helping us play a meaningful role in supporting the United Nations’ Sustainable Development Goals related to eliminating extreme poverty and enhancing socio-economic development in the markets we operate in and beyond. Thus giving our customers access to a bright, digital future.” said Rob Shuter, Group President and CEO of MTN.
The GSMA supports the Mowali initiative as interoperability at this scale is a key accelerator for both financial inclusion and Mobile Money usability across Africa. “Today, there are over 690 million mobile money accounts around the world. Mobile money services have become an essential, life-changing tool across Africa, providing access to safe and secure financial services but also to energy, health, education and employment opportunities. The creation of Mowali will help to further transform mobile financial services throughout the African region. It demonstrates the mobile industry’s continued leadership and commitment to driving financial inclusion and economic empowerment through industry collaboration. The GSMA is proud to support its development,” said Mats Granryd, Director General, GSMA.
“Interoperability of digital payments has been the toughest hurdle for the financial services industry to overcome, in support of financial inclusion. With Mowali, Orange and MTN deliver a solution that will enable them, and other companies, to scale digital financial services across Africa, faster, to everyone—including the poor,” said Kosta Peric, deputy director of Financial Services for the Poor, at the Bill & Melinda Gates Foundation “This is a signal that a new wave of innovation, which can help alleviate poverty and drive economic opportunity, is coming. We’re pleased to see an implementation of Mojaloop—an open source payment platform available to operators across the sector—help achieve that.”