Internet & Democracy Blog

On February 20, Harvard Business School hosted its eleventh annual African Business Conference in Cambridge, Massachusetts.  While the conference broadly addressed the continent, a number of breakout events focused on the centrality of mobile technology, as addressed in titles such as “Reaching Africa’s Un-banked Population,” and “African Telecom: Growth and New Opportunities.” The over 4 billion mobile phones now buzzing around the planet, however, hide the fact that in Africa mobile penetration is only 40 percent.

Mobile mixed with e-commerce may yet be the most empowering platform, in Africa and beyond. This “e-Mobility” is taking shape, as mobile payment platforms improve access to services, and reduce transaction costs associated with payments.  Lowering transaction costs saves time and travel, effects that improves household disposable income by between 5 and 30 percent. A CGAP report indicates that mobile transactions cost one-fifth of traditional ones.

Mobile banking and transaction enabled phones bring the un-banked population into the formal folds of financial services, a delicate process necessitating new trust, but one through which inflows of capital expand the ability of local banks to provide entrepreneurial loans, expanding business and jobs, and fueling growth.

One HBS panelist and McKinsey principal, Zakir Gaibi, focused on subscriber growth as a vital first step to improving mobile access.  Foremost, was the need to reduce handset costs to facilitate access within the ultra poor demographics of the regions in Africa, such as the Sahel.  In Niger, Chad, and even in the Democratic Republic of Congo, he noted that mobile penetration is cited as low as 10 percent.  High tele-density is not yet universal.

Subscriber growth in unsaturated markets will be contingent on reduced costs of access, notably in headset costs, and in voice service costs.  Due to poor power infrastructure, African telecommunications companies rely on expensive generators that drive up costs.  It’s often quipped that second to power companies telecommunication groups produce the most energy in Africa.  However, these costs are passed onto consumers in the form of expensive voice and data plans, some approaching per minute costs in developed markets, despite drastic differences in purchasing power.  Moreover, concurrent deficiencies in local human capital necessitate talent sourcing abroad, and ex-patriot retention packages impact consumer prices, further impeding subscriber growth in the poorest markets.

Countries that recognize mobile trends could capitalize in the form of economic growth, and increased employment opportunities.  Countries like Morocco have built upon expanding tele-density, and created an infrastructure that has enabled them to provide services to the European market.  Given their geographic and temporal proximity to the EU, and their linguistic overlap in French, Spanish, and English, mobile penetration, tele-density, and infrastructure investment have created a conduit for service export, economic growth, and human capacity building.

Perhaps investment in reducing headset materials cost could increase mobile penetration, improve access to mobile banking, help formalize financial services the poorest regions of Africa, facilitate greater access to capital, and improve growth.  Or then again maybe cheaper headsets coupled with mobile promotions and spotty service will mean that those Africans who currently carry two phones to compensate for poor coverage might just pick up a third.

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