• Friday, March 29, 2024
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Governments must invest in infrastructure and skills

Governments must invest in infrastructure and skills

Africa’s digital economy is still small in size compared with those of its global peers. But it has seen exponential growth over the past decade and now has the potential to redefine the continent’s economies.

Africa had the fastest growth in internet access of the world’s regions between 2005 and 2018, from just 2.1 per cent of the population to 24.4 per cent. It is home to the fastest growing mobile phone industry, with 20 per cent annual growth between 2005 and 2017. It is estimated that half of Africa’s population will have a mobile phone subscription by 2025.

Even so, immense challenges must be addressed to ensure that Africa’s digital ecosystems are positioned to support the employment growth the continent needs. African governments and development finance institutions (DFIS) should look to India as a model and focus on critical infrastructure needs. This includes reducing the cost of data and increasing access to fixed line broadband, spurring corporate ventures in the tech ecosystem, and providing Africans with the skills they need to take part in this digital transformation.

The lack of adequate access to the internet in most African countries boils down to the fact that mobile data is too expensive and fixed line broadband is too slow and not widely available. It costs Africans on average $7.04 or nearly 9 per cent of their monthly income for just 1GB of mobile data (enough to watch about three hours of low quality video on Netflix). That compares with just 3.5 per cent of monthly income in Latin American and 1.5 per cent in Asia.

There has been progress in some countries. In Nigeria, mobile data prices continue to drop following a decision by the Communications Commission in October 2015 to remove a floor on data prices, and increased competition among submarine cable companies.

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In India, competition among carriers played a critical role in lowering mobile data costs, which are now the cheapest in the world. Reliance Jo, a young telecom operator, is highly responsible for the shift, investing $35bn in a 4G network and offering free unlimited data trials to attract new customers. While some have criticised the company’s practices and data prices may increase, the impact of private sector investment and competition has benefited average Indians.

African governments should further liberalise their telecoms sectors and encourage competition to promote private investment in infrastructure that can be shared by providers. Regulators should track the cost of data as a measure of the healthiness of the industry.

Beyond mobile data, African countries must increase the speed of fixed line broadband internet and further improve access. A report by cable. co.uk measuring countries’ fixed line broadband speeds showed zero African countries meeting speeds above 10 Mbps, the deemed minimum speed required by consumers.

Such limitations are problematic for Africa’s growing tech hubs and ecosystems, where internet speed is cited as a limitation for start-ups and customers. While some African countries, such as Kenya, have greatly increased the speed of mobile data, businesses are going to need faster speeds to accelerate growth.

As Africa builds its digital infrastructure, entrepreneurs and tech businesses need quicker access to funding. While numbers vary, Weetracker reports that $725.6m in venture capital was invested in 458 deals in 2018, a year-over-year increase but still tiny in comparison with global peers. Africa has 618 tech hubs today, with Kenya, Nigeria, South Africa and Egypt leading the way.

DFIS, governments and venture funds were key to spurring the first wave of tech hub growth across the continent, but without increased investment and the professionalisation of incubators and accelerators, African start-ups will continue to fall short.

Despite hundreds of hubs (of which about a quarter are solely co-working spaces), start-ups are short of corporate partners to help with the challenge of scaling on a continent with nontraditional supply chains, difficult distribution and limited access to financial markets.