Innovation & ICT in Africa

The African Economic Outlook (AEO) 2009 on Innovation and New Technologies in Africa uses information collected during country missions undergone by the AfDB, the OECD Development Centre, the UNECA and African think tanks in 47 African countries. Consultations with Governments, regulatory agencies, universities, donors and civil society, as well as data collected on ICT sector performance are reported in each country note.

Africa needs laptops PCs and mobile phones

Africa needs laptops, PCs, fiber optic cables and mobile phones to fuel a communications revolution.

It is a revolution that proves no one Information and Communication Technology (ICT) system fits the entire globalized world. Companies and governments are having to adapt to people who want phones that adapt to their often limited resources.

Fixed-line telephones have never been a fixture in Africa. The mixture of far-flung villages and huge cities teeming with low wage families was too much for companies who could easily lay or hang copper wire cables across Europe and North America. The mobile phone, easy to carry around, and whose infrastructure is cheaper to deploy, has led Africa’s revolution. It is the only continent in the world where mobile phone revenues are higher than fixed-line. 

African regulators need more muscle

Telecoms regulators who watch over the market structure and the proliferation of new technology are now a fact of life around the world.

In Africa, the number of countries with an ICT regulatory agency has grown from 26 in 2000, to 44 in 2007. As most investment comes from the private sector, governments should set the basic goals of telecommunications policy, the regulatory agency should implement and enforce them, and the courts should review them rather than other government branches. According to the International Telecommunication Union (ITU), 60 percent of regulatory agencies in Africa have been granted autonomy from the executive and become ‘independent’.

Some experts say Africa’s regulatory agencies should have attracted more private investment. In Latin America and the Caribbean, private investment in telecommunications rose from USD 13.7 billion in 1991 to USD 47.1 billion in 1998. 

People in villages and packed cities want to send SMS — Short Message Service — texts and they want to talk, but they want to do it cheaply. So telecoms companies are offering free roaming packages between countries, a world first, and technology to meet the demand. There is e-banking and farmers get market prices on text messages.

So Africa has proved that mobile phones can be acquired and run on limited wages, but the spread of the internet has been far slower and general access to ICT services is much lower than the rest of the world and this report will look at the bottlenecks impeding growth. The global economic crisis, lack of connectivity to the rest of the world, inadequate regulation that impedes the spread of innovative business models and financing all need to be studied. Africa needs to build the skills that drive the innovation behind the African-style e-revolution.

The European Union’s Lisbon Strategy has identified Research and Development (R&D) expenditure, structural reforms and labor market de-regulation as the key to the rapid uptake of new technology. Improving education to speed up the move to the knowledge economy and boost growth is also crucial to the strategy.

In Africa, it is now believed that knowledge does not just come from R & D, but also the interaction between indigenous practices and customs and new technology which can inspire new products and services, such as e-banking. Liberalization has helped this trend. Major corporations such as Intel, Microsoft, and Nokia have used anthropologists who work with local people to help develop new services.

In line with trends in the Organisation for Economic Development (OECD) and Latin American countries, information and communications technology policies are being integrated into broader science, technology and innovation programs in Africa. A 2007 African Union (AU) summit adopted a science and technology plan of action. The New Partnership for Africa’s Development (NEPAD) is developing a science and technology program. The AU summit asked the UN Educational, Scientific and Cultural Organisation (UNESCO) to help and talks are now being held between the OECD, UNESCO, and the World Bank. UNESCO is supporting a review of the science, technology, and innovation in 20 countries. It also co-ordinates United Nations (UN) – wide efforts through the UN Science & Technology Cluster – to support NEPAD (see Box 1 for the UN Economic Commission for Africa’s (UNECA) contribution). Countries are pushing their own programs, some with international organizations. Tanzania worked out a science and technology program with UNESCO and the UN Industrial Development Organisation (UNIDO). Kenya, Mozambique and South Africa also have ambitious programs while Algeria, Botswana, Mauritius, and Rwanda have each set a goal of becoming regional information and communications technology hubs.

Some science and technology advocates say innovation does not get a high enough priority when donor nations are pressing policies. The UN’s Millennium Development Goals do not explicitly mention innovation but do acknowledge its importance by including indicators related to technology access such as the number of fixed-lines, mobile phone subscribers and internet users. Most Poverty Reduction Strategy Papers (PRSPs) for heavily indebted countries do not make full use of innovation and information and communications technology policies unless there is strong local support. In Ghana, for example, with the support of the Kwame Nkrumah University of Science and Technology, innovation was included in the country’s PRSP. The 47 countries reviewed in this AEO have national ICT policies but they will need support from the donor community and private sector to get them implemented and to help, NEPAD is working on an African Science, Technology and Innovation Indicators Initiative (ASTII).

There are conditions to be taken advantage of and faults to be addressed, however, in the Africa technology debate:

  • Science, technology, and innovation (STI) policies must be integrated into broader strategies. Innovation and ICT are not effectively integrated into the policy priorities of the donor community. Poverty Reduction Strategy Papers (PRSPs) fail to fully include innovation unless there is strong local support. Development partners must strengthen national ICT policies in Africa.
  • Regulatory systems need to improve. Government regulation plays a key role in information and communications technology since most investment comes from the private sector. Regulatory authorities too often favor incumbent fixed-line operators, who have typical problems to make profits, over new entrants and this impedes competition and private investment. However, many countries have introduced better practices to favor incumbent operators through “converged licenses”, which allow wider flexibility in choosing the technology and through the use of symmetric termination charges. These have created more equality in the regulatory arena between fixed-line and mobile operators.
  • Despite the international financial crisis, telecommunications in Africa remains an attractive business. Preliminary evidence suggests that ICT investment in Africa will be less affected by the crisis than other regions, as was the case after the Internet bubble burst in 2000-2001. Several deals were concluded in late 2008 and early 2009. However, the prospects for new deals are fading and total capital expenditure is falling. Price competition will intensify in the coming months and most multinational operators will consolidate their presence.
  • New infrastructure connecting Africa to the rest of the world will soon be operational. Many high capacity international backbone network projects are being built to connect Africa to the rest of the world on an open-access basis. Wholesale tariffs now at USD 2 000-10 000 for the West coast fiber optic submarine cable, SAT3 and at USD 3 000-5 000 for satellite connection, will start falling to within the range of USD 500-1 000 by late 2009. On the east coast, the first fiber optic submarine cables will be ready in the third quarter of 2009. On the west coast, five fiber optic submarine cable projects and two satellite projects have been announced. Private African capital is behind much of this but there are also public-private partnerships with international investors.
  • Improved connectivity will not be enough to reach more users. On top of better international networks, inland backbone trunk networks will be needed and retail prices will have to come down as wholesale tariffs have. Some experts fear that fixed-line operators in Africa will not pass on cost reductions to customers, using them instead to bolster revenues.
  • In terms of regional integration, inland regional backbone networks are being built to link major cities in eastern and southern Africa and in landlocked central Africa. Algeria, Botswana, Mauritius, and Rwanda are implementing projects to become ICT regional hubs. Pan-African mobile operators are promoting free roaming services, making Africa the first region in the world to offer this innovative service.
  • Innovative business models prove it is possible to reach the poor on a commercial basis. Most mobile phone communications in Africa are pre-paid. Micropayments (less than USD 1) to charge mobile accounts are also widespread in Africa. Microfinance business models have been developed in Uganda and Rwanda, and phone sharing is common. SMS messages allow communications for a fraction of ZAR one cent. Advertising-funded services are very successful in South Africa. New and environmentally friendly technology and energy are enabling operators to reach new areas in Africa.
  • Governments should privatize the remaining state-owned fixed-line incumbents since private investors can bring the technological know-how necessary to upgrade their networks. This reform has to be coupled with a regulatory environment that is conducive to attracting private investment in order to reverse the fixed-line’s tendency to steadily lose business. Innovative good practice in the form of “converged licenses”, which are technology-neutral, and the symmetric regulation of termination charges, could assist fixed-line operators in their constrained financial situation while sustaining a level-playing field between fixed and mobile operators.
  • International co-operation helps technology and innovation. Telecommunications investment is increasingly dominated by countries such as Kuwait, South Africa, and Egypt. China has been providing low-cost hardware and credit to under-capitalized state-owned operators, while Indian institutions are building a 53-nation Pan-African E-Network under an African Union initiative. US-style prepaid deals and European SMS messages are extremely popular. E-trade co-operation with the European Union and the United States is increasingly important to meeting trade regulations. UK and French companies have also been making large telecommunications investments in Africa. But South-North innovation can also work the other way. Low-cost “classmate computers” which were first sold in Nigeria are now available in Europe and the United States.
  • New technology is improving government service efficiency and education quality and cutting the cost of doing business. Under a NEPAD initiative, all primary and secondary schools are to become e-schools with computers, software and internet access by 2025. E-banking and e-agriculture, both building on indigenous practices, have reduced transaction costs and improved the balance of supply and demand in farmers’ markets.