Africa's Digital Market Going Forward

Where are things heading in the late 2020s?

Africa's digital journey continues to develop, though not always in a straight line.  Both the war in Ukraine and the war in Iran, like the traffic in Nairobi (pictured above), are slowing economic growth.  In part because Egypt, Senegal, Sudan, Tanzania and other countries are dependent on wheat and corn exports from Ukraine [as well as Russia] and on oil ship-ments from the Gulf.  How will the related blockages and sanctions along with the economic slowdown affect digital progress across Africa?

Before answering the question, keep in mind that Africa's digital momentum is often in the eye of the beholder.  Some observers, especially distant ones, believe the smartphone is pervading the continent as is m-pesa.  Others point to the metric of actual users of mobile money, which can lag dramatically behind how many persons have signed up for the service.  In the case of internet use overall, it depends on the focus.  Is it on North or South Africa or the rest of the continent, where the levels still hover below 30%.  Limited network coverage, lack of electricity, low incomes, and reliance on oral languages [or languages without web presence] limit digital access and use.

At the same time, Africa has been the source of digital and broadband innovation. From m-pesa to regional IXPs, much has happened on the continent.  In Somalia, mobile money use has [is] reached [ing] Kenya's level, in part because the same groups that offer mobile ser-vice also operate the banks.  As a result, they make money on the floats and do not charge fees for fund transfers, thus increasing usage.

At the operator level, prior consolidations were mostly country specific (such as Airtel Kenya with Telkom Kenya) or sell-offs (Orange's withdrawal from East Africa).  More recently, independent tower company growth has been robust, along with government efforts to encourage infrastructure sharing.  Yet now the region may be facing another reversal as MTN announced its intent to buy back its towers in Nigeria, claiming it is paying more for accessing them. And attempts to build and use shared infrastructure have failed in Kenya, Rwanda, Senegal, South Africa, Tanzania, and elsewhere, despite China’s example of a very successful use of shared networks in deploying 5G (but two sets of competing shared networks. 

Meanwhile, capacity growth at the international level is strong, with more undersea cables being deployed around the continent.  Yet, possibly, overinvestment is occurring given the low internet use and competition from cross-border terrestrial networks (notably Liquid's). Yes, things can be confusing, given the contrasting trends seen in countries like Ethiopia and Kenya, where the business and government sectors may be digitizing fast, while con-sumers in these highly rural countries are disconnecting from their services (even from Starlink in the case of Kenya).

The above trends, along with potential regulatory developments like the introduction of technology sandboxes (see above), will punctuate the next few years.  No single answer is likely to apply across Africa's 55 countries.  However, countries with rare mineral resources may fare well as may those that have allowed viable market structures to prevail. At the same time, increased sector taxes and the presence of pirate video services will increase market stress, even as reduced service prices and implementation of regional roaming agreements should help limit it. 

Kalba International offers experience in 50+ of the region's countries

Focusing on Africa since 2008, our firm and consultants now offer sector experience in all but two of the continent's 55 countries.  Our consulting cases span the continent and include advising on a $4 billion operator acquisition and the formation of a broadband PPP as well as preparing the business model and strategy for a new wholesale entrant. We have also determined why six million individuals registered for a mobile money service but fewer than 5% of these used it in the year that followed.  And we have completed auction and training cases as well as the formation of a national digital economy strategy.

We have also authored more than 40 case studies on (1) the viability and investment im-pact of regulatory, spectrum and taxation frameworks for broadband development, (2) the prospects for 5G startup, (3) the soundness of licensing, universal service and e-waste management frameworks, (4) the effectiveness of various universal service projects (invol-ving free smartphones, digital literacy training, and public Wi-Fi, and (5) the introduction of MVNOs using different approaches. 

Overall, we have served 25 private and public clients across Africa, including operators, ministries, and satellite systems as well as GSMA, IFC, ITU and the World Bank.  And our consultants add their prior experience at  Airtel, Dark Fibre Africa, Djezzy, Ericsson, Ethio Telecom, Huawei, Nokia, Safaricom, Seacom, and Sonatel (Orange), along with fluency in Afrikaans, Amharic, Arabic, Ewe, French, Hausa, Kiswahili, Mesqanigna, Oromo, Portu-guese, Somali, Tigrinya, Twi and Wolof.