E-Banking for Africa
In the absence of collateral to secure loans from banks, extended families in Africa create their own ‘family pot” of money. There are also revolving credit schemes called “susu” in Ghana, “esusus” in Yoruba, “tontines” or “chilembe” in Cameroon and “stokvel” in South Africa. In a typical scheme, each member of a group of perhaps 10 people agrees to contribute USD 100 to a fund. When the fund reaches a threshold, say USD 1 000, it is lent to one member. As soon as the money is repaid it can be lent to another member. This funding, which requires a lot of trusts, is often the primary source of capital in the informal sector and generally works well because of peer pressure. According to a Research ICT Africa survey in 2007/2008, around 30 percent of respondents in 17 Sub-Saharan countries, borrow from family and friends. The bill of exchange, which is a Western Union type of service, is also largely used in Africa to make remote payments from one individual to another.
Digital technology is helping traditional banking and payment practices in Africa. The Sente service is an informal practice in Uganda to send money from one individual to another using mobile technology. A person who wishes to send money buys a mobile top-up voucher from a local seller. This person charges the mobile of a local village middleman who passes an agreed amount of cash to someone else living in a different area. The middleman retains a commission on his phone in the form of pre-paid minutes that he sells to other villagers, becoming also a small-scale service provider. The M-Pesa service in Kenya formalizes the Sente service by allowing its customers to transfer money using their Safaricom mobile phones. M-Pesa users do not need a bank account – only about 26 percent of the population had a bank account in 2007, according to a household survey. M-Pesa has attracted 5 million customers, about 13 percent of the population in less than two years.
The M-Pesa model is being copied in different forms across Africa. The technologies and business models used vary considerably. SMS, voice or Interactive Voice Response (IVR), Unstructured Supplementary Services Data (USSD) and SIM toolkits can be used on standard mobile phones typically present on a large scale in Africa. SMS, voice, and USSD are used in South Africa by Wizzit, First National Bank (FNB) and Amalgamated Banks of South Africa (ABSA). These are open systems independent of the mobile network operator. SIM toolkits are used by M-Pesa in Kenya and MTN Banking in South Africa. These use proprietary systems where only members can transfer funds.
More advanced technologies such as Wireless Application Protocol (WAP) and HTTPS are being used by Nedbank, FNB, and ABSA in South Africa. These are only accessible to those who have enabled handsets. Payments are also being facilitated by Near Sound Data Transfers (NSDT) software developed by Tag Attitude which is compatible with standard mobile phones. NSDT is being tested in Zambia, South Africa, the Republic of Congo, and the Democratic Republic of Congo and is about to be launched in Ghana, Nigeria, and Mali.
The African business models provide new channels for payment and banking. When the services have the support of banks, they comply with banking regulations. Wizzit in South Africa belongs to the Bank of Athens and can be used by any mobile phone operator. A joint venture MTN Banking in South Africa between the mobile phone operator MTN and Standard Bank is another example.
There is a regulatory gap with banking services provided by mobile phone operators. While mobile phone operators are accountable to telecommunications authorities, the scope of intervention of financial regulation is often undefined. Central banks responsible for monetary and fiscal policy in Africa have not started looking at e-payments, e-banking, and other services. There is presently no mention of electronic transactions and e-currency in regulatory frameworks. M-Pesa in Kenya belongs to the telecommunications operator Safaricom and is not supported by any bank. M-Pesa was only able to start after lengthy discussions with local authorities. M-Pesa argued that it was transferring money, not taking deposits and so remains out of the scope of financial regulation.
However, the difference between a payment and a deposit is merely defined by the time the money remains in the system. Frontiers between telecommunications and financial services are easily blurred. And as African banks rely heavily on revenues from transaction fees, M-Pesa represents a strong competitor and has made a strong impact in its two years of operation. However, when the company announced in December 2008 that it would expand into initiating and receiving international remittances from the UK through an arrangement with Western Union, Kenya’s Ministry of Finance announced plans to audit M-Pesa arguing there was a risk to customers. It appears that much of the pressure for the audit originated from the 48 commercial banks in Kenya. Last year Kenya received approximately USD 1.6 billion in international remittances which is around 5 percent of GDP. At an estimated amount of USD 283 billion in 2008 according to the World Bank, global remittances attract much interest. Inward remittances are larger than ODA flows (excluding debt) in countries such as Botswana, Ghana and Kenya, six times larger in Nigeria and three times in South Africa in 2007. Orange, Zain, and MTN are already exploring the possibility of launching this service.
Mobile-payments and banking are quick and easy to use. This could enable rapid take-up by the unbanked population. According to the 2007/2008 Research ICT Africa survey, the main reason people do not have a bank account is that they do not have enough regular income. Zero transaction costs were highlighted by many respondents as a reason for sending air-time instead of cash. M-Pesa, for example, is particularly attractive for small transactions. In order to send KSH 1 000, Western Union would charge a fee of KSH 500 while M-Pesa would ask 30 KES if the money is sent to M-Pesa users and 75 KES if it is sent to non-users. The technology could eventually be used to collect the transaction history of customers, enabling them to obtain a favorable credit rating.
Recent entrants planning to expand or begin providing similar services are CelPay in Democratic Republic of Congo and Zambia, Orascom in Algeria, Tunisia, Egypt and Zimbabwe, Monitise in Uganda, Burundi, Democratic Republic of Congo, Ethiopia, Kenya, Rwanda, Tanzania and Zambia, Globacom in Nigeria, Zain in Kenya, Tanzania and Uganda, Orange in Mali, Côte d’Ivoire, Kenya and Egypt and the Cooperative Bank of Kenya in Kenya. With only 19.8 percent of individuals keeping their money in a bank account in a sample of 17 African countries and more than 30 percent worried about being robbed or losing the cash, the potential for developing mobile-banking seems high.
Sunny future for E-Agriculture
Market information is difficult to obtain in Africa and costly because of the poor state of telecommunications and transport. Market Information Systems (MIS) have long been established to collect data on prices and sometimes quantities of widely traded agricultural products. This is sent to farmers, traders, government officials, and consumers through message boards, radio and print media.
ICT-based systems have started to emerge in Africa, providing a fast and relatively affordable flow of information on agriculture and fisheries. There are two major initiatives in East Africa. In Kenya, SMS Sokini provides agricultural information through SMS text messages for a fee. The project is run by a partnership between the Kenyan Agricultural Commodities Exchange (KACE) and mobile operator Safaricom. Information kiosks are located near where agricultural commodity buyers and sellers meet, providing low-cost access to farmers. KACE workers collect the information from the kiosks and send it to farmers, buyers, and exporters on text messages. In 2005, in Uganda, the Women of Uganda Network (WOUGNET) started to send SMS texts with market prices to 400 rural farmers with financial support from the Technical Centre for Agricultural and Rural Cooperation ACP-EU (CTA). Workers collect information from markets and data is posted on the Busoga Rural Open Source Development Initiative (BROSDI) website. Other workers translate the information to Luo, a local language, and send it to farmers by SMS. Farmers can request more information by replying to the SMS. WOUGNET is providing free mobile phones and free access to this service.
In West Africa, two initiatives are expanding. Xam Marsé (“Know your market” in Wolof) in Senegal established by the Manobi Development Foundation provides commodity prices information for farmers. This was launched in 2002 after two years of research. It allows farmers in their fields to access market prices which are collected by specialists. For a small fee, farmers can receive market information for selected crops, mainly vegetables. Farmers can access information on their crops and the prices in markets where they normally sell as well as in other distant markets. Xam Marsé makes use of all currently available communication channels on mobile phones — SMS text messages, Multimedia Messaging Service (MMS) that includes images, video and audio and the Wireless Application Protocol (WAP) that enables access to the internet on a mobile phone.
Esoko Networks (known previously as TradeNet) was started in 2004 by the Ghanian software company BusyLab. Esoko has a website where more than 800 000 prices from hundreds of markets are quoted, with a focus on Sub-Saharan Africa. Because only a small percentage of users are active on the internet, Esoko has relied on an SMS platform. Users can sign up to receive weekly SMS alerts on commodities for a fee and the cost of the SMS. Users can also upload offers to buy and sell products via mobile phones and make precise price requests on commodities in a country receiving the information by SMS.
The SMS messages enable farmers to access accurate information at an affordable price, typically 1/7th of the cost of a call and up to an estimated 1/10th of the travel cost in some cases. The information has increased the bargaining power of farmers, who in the past had little alternative but to sell their goods to the wholesalers located nearest to them.
There are several obstacles to the wider use of e-agriculture technology, however. Even though 39.1 percent of the African population owned a mobile phone in 2008, many unprofitable rural areas are not covered by mobile services. E-agriculture cannot anyway answer all of the farmers’ problems such as poor transport.
The information systems are difficult to sustain. In Ghana, TradeNet has had to hire and train agents to collect information, which anyway can be easily pirated. Manobi subsidizes the collection of market data. Esoko has been subsidizing SMS alerts for individuals, but most people prepay for their text messages, so it is now only subsidizing SMS alerts for individuals in Ghana. The challenge is to provide information that farmers feel they have to pay for. Farmers and traders are not using radio-based MIS in Sub-Saharan Africa because the information does not meet their needs so the providers will have to tailor their services more to the needs of users.
Capacity building, even literacy programs for farmers, is also important for the internet and SMS usage. But e-farming is continuing to evolve and not just in Africa. In Cambodia, the Canada Agricultural Market Information Project (CAMIP) is developing an SMS system that enables farmers to access commodity price information. The difference with respect to existing initiatives in Africa is that in this case farmers are trained through Farmer Marketing Schools (FMS) not only to use the system but also to improve their operations by focusing on packaging, bargaining, post-harvest quality, and peer networking.
E-Education’s steep learning curve
The adoption of ICT technologies in education is moving from small projects to national government programs. With the exception of South Africa and Mauritius, ICT educational policies have only been developed in the last five years. By 2007, 39 countries had ICT education policies in place or under implementation. While in North Africa and countries such as Mauritius, Ghana, and Botswana, ICT education programs have made significant progress, in the rest of Africa the lack of accessibility to a mainstream network and the shortage of trained staff are acute and threaten the implementation.
National ICT educational policies in 53 countries surveyed by the World Bank in 2007, highlighted that beyond the need for connectivity and skills, technology training for teachers, development of digital content and increasing access to ICT tools are key factors to be reinforced10.<//sdfield> There are important regional initiatives on teacher training. The Teacher Training Initiative for Sub-Saharan Africa (TTISSA) is a 2006-2015 program coordinated by UNESCO that aims to increase the quantity and quality of teachers in 46 Sub-Saharan countries. Concentrating on mathematics and science, the African Virtual University teacher ICT education project has since 2006 involved 10 countries in partnership with the AfDB and NEPAD. The NEPAD e-schools initiative will focus on ICT training under its Teacher Professional Development and Training framework (see Box 28). Schoolnet Africa and World Links are also involved in ICT teacher development in 41 African countries. South Africa plans to introduce an Advanced Certificate for Education on ICT Integration that will be compulsory for school principals.
Among interesting initiatives, the Virtual University for the Small States of the Commonwealth (VUSSC) was set up to create post-secondary skills courses. Botswana, Comoros, Gambia, Lesotho, Namibia, Seychelles, Sierra Leone, and Swaziland are taking part. The courses were created with WikiEducator which enables materials to be adapted to local demands. Staff from universities are being trained to develop course content. The African Academy of Languages has been supported by the African Union to promote the use of African languages on the internet, with education as a special axis. Intel is developing the skools.com project to provide e-learning. Edubuntu, Learn things and Mindset Network organizations are also promoting local digital content in Africa.
Second hand and refurbished computers are widely used. Computer Aid International collects old computers from UK companies which are data-wiped, refurbished and tested. Nonprofit organizations can apply for refurbished computers and are charged a 39-pound sterling (GBP) handling fee plus shipping. More than 80 000 computers have been distributed in Eritrea, Kenya, Tanzania, Uganda, and Zambia. The UK based charity Computers for African Schools (CFAS) has similarly distributed 13 000 donated computers mostly in Zambia, Zimbabwe, Malawi, and Zanzibar. Digital Links, another UK-based entity, has distributed 50 000 refurbished computers. The US-based World Computer Exchange has sent more than 42 shipments of second-hand computers to 25 countries. The NGO SchoolNet Africa has distributed second-hand computers in Cameroon, Mali, Mozambique, Namibia, Nigeria, Senegal, Swaziland, Zambia, and Zimbabwe. Importantly, SchoolNet Namibia, Mozambique, Nigeria and Uganda, Computers for Schools Kenya and World Links Zimbabwe are creating computer refurbishment centers that support the installation and maintenance of projects. The shipment of refurbished and second-hand computers to Africa is nevertheless raising increasing environmental concerns since a high rate of imported devices are out of use and are improperly disposed of.
There are three large initiatives on new low-cost computers. The One Laptop per Child non-for-profit project distributes a low-power computer for USD 188. 31 000 devises are already present in Ethiopia, Ghana, and Rwanda. It targets poor children and uses free and open-source software, but the results have been disappointing. Education ministries in India and China saw the teaching materials as a challenge to their authority and cultural systems. Unlike Linux, the project did not develop innovative ways to attract independent developers to build up open-source software. In addition, the companies financing the project, Google, AMD, Qanta, Marvell and Red Hat are suffering from the crisis and 50 percent of One Laptop per Child workers will be fired in 2009. The project aims at creating now an educational hub in Sub-Saharan Africa. ClassMate PC is another initiative where low-cost USD 230 – USD 300 computers are being sold to Africa with greater success (see Box 29). The Indian Institute of Technology and the Indian Institute of Science were developing a USD 10 laptop, claiming that the One Laptop per Child USD 100 was still unaffordable for the population, but by 2008 the price was already at USD 100.
Almost all African countries are making use of open source and proprietary software. Despite a lack of qualified personnel, some initiatives such as the Free and Open Source Software Foundation for Africa (FOSSFA), Bokjang Bokjef in Senegal and LinuxChix Africa are still promoting the use of an open-source in Africa. The NGO SchoolNet has been a pioneer in promoting open source software through its OpenLab model in Namibia, soon to be copied in Mozambique.
Catching up on e-Government
E-governance is intended to improve government services but it has not yet got a big foothold in Africa. The United Nations has developed an e-government indicator that marks governments on their online presence, telecommunications infrastructure, and human capital. The survey shows that Africa is lagging behind other regions with less than two-thirds of the average scores obtained by the Americas, Asia, and Oceania and with less than half of the score obtained by Europe. There is a large gap between North Africa and Sub-Saharan Africa resource-poor landlocked countries as can be seen in Figure 23.
Some attempts are being made to advance government through the web, however. In Cape Verde, all government services are being integrated through a one-stop-shop that can be accessed physically, by mobile phone or internet. One of the major challenges, as acknowledged by the Operational Centre for the Information Society in Cape Verde, was to eliminate bureaucratic barriers to create a single front office. It required a lot of political will to create a portal that service-oriented rather than directly referring to the various government branches. The key element to support the transfer of powers and competences in this reduction of intermediation was strong political will.
A wide range of services is available, including electronic payments through mobile phones and the internet through a system developed with the Interbanking Society for Payment Systems, in which all commercial banks in the country are shareholders. All forms are available in electronic format. Birth, marriage and other certificates can be requested online and through mobile phones in a system that many OECD countries cannot match for the degree to which paperwork is cut out. All state systems are integrated through a unified information system. Individuals can now create a firm in 60 minutes, were in the past it took 63 days by visiting several offices and filling in many forms. A unified document for car registration is also accessible online.
The government says it no longer uses a paper format for any internal activity within or between ministries. Information is exchanged online through a unified system that integrates all activities, including registration, health, and education, notarial, electoral and municipal services. The principle is to record information once and then consult it as necessary through the information system. A database has been created with biometric information that is used by passport, security and criminal justice services. A new biometric identification card is being issued to citizens. E-government has also changed budget management.
The third Annual African E-Government forum held in Rwanda in March 2009 highlighted the growing interest in e-government services. In Nigeria, the government aims to use telephones and computers to automate government paper services. In the region around the capital, Abuja, authorities are starting to build a website so citizens can access information and send messages to the government. In Burkina Faso, the government is computerizing accounting services so officials can check how much money has been collected and how much government departments need each day. In Rwanda and Ghana, the World Bank is supporting e-government applications to improve efficiency and transparency. South Africa is developing a paper-free tax declaration and payment program and Ethiopia in revenue management.
Despite the initial success of e-government services, the performance depends a lot on a country’s institutional capacity and will to adapt to new ways, the transparency of processes seen as threatening jobs and cultural resistance to a broad change in many societies. A lack of power, low literacy rates, the high cost of telecommunications and the shortage of broadband networks can also hamper e-government. In Cape Verde, the government has sought to maximize the use of mobile phones for e-government services since the penetration rate for mobile subscribers is 40 percent, compared to 11.5 percent for computer usage, 6 percent for the internet and 0.35 percent for broadband. In addition, the government is creating special centers for service delivery. Private telecentres can also provide certain services. The wide range of services available electronically is likely to create business opportunities helping people who lack access and/or skills.
E-reforms are needed for e-trade
E-government applications should also transform customs clearance, an area in crucial need of attention in Africa. The EU and the United States are about to move to completely paperless trade and all exports from the EU will have to comply with paperless legislation by July 2009. EU importers will go paperless by January 2011, which could increase non-tariff trade barriers for African products, underscoring the need for African countries to accelerate the conversion to e-trade.
E-trade is present across the entire exporter-importer chain, from the time a product is bought and shipped, until it has been paid for and received. But there are also different customs procedures and regulations to comply with. A transaction typically involves 27 to 30 different parties, 40 documents for export, 90 percent of which are currently done on paper. In addition, each transaction requires 200 data elements, 30 of which are repeated 30 times at least, and the re-writing of 60 to 70 percent of the data at least once. As a result, 10 percent of the value of all goods shipped worldwide in 2008 was spent on administration, an estimated USD 550 billion. To reduce these costs there are several initiatives promoting e-trade such as the United Nations Electronic Documents (UNeDocs), the European Fiscal Program on Customs 2013, the US Customs and Border Protection and Canada’s and Australia’s Paperless Trade Adoption. These promote the development of a single-window where data is available in any way that a regulator wishes to view it.
Paperless trade in Africa could decrease the time and costs of commercial exchanges. While South Asia is the worst performer in terms of the number of documents for export/import activities, Sub-Saharan Africa leads in terms of the time and cost of exports and imports: on average 75.8 days and USD 4 157 per container, according to the World Bank Doing Business 2009 report. These costs are twice as high as for OECD countries, Latin American and North African countries. In North Africa, import and export transactions on average require 35.25 days and cost USD 1 881 per container. These burdens on Sub-Saharan trade, highlight the potential benefits of developing cross-frontier collaborative innovation. The extent to which SMEs can benefit from e-trade is not clear, however. According to a recent survey undertaken by UNECA, small and medium companies in Kenya, Egypt, South Africa, Ghana, Senegal, and Ethiopia have very varied levels of e-readiness and so their ability to integrate e-trade activities is compromised.
Another related issue is that of the health requirements of importing countries to prevent the spread of diseases. International food safety and food hygiene regulations now require all food to be traceable from the source. Radiofrequency identification (RFID) tracking systems are being used in Africa to comply with these regulations. In Botswana, there is one of the world’s largest RFID livestock tracking, monitoring and management systems, involving every cow in the country, 3 million in 2008. This Livestock Identification Trace-back System (LITS) has a database on the production, processing, and sale of meat. Although this project was set up to comply with EU regulations, it also allows livestock operators to optimize feeding regimes and to meet reporting requirements to health authorities. In Namibia, authorities are increasing the use of RFID to every cow in the country. In Kenya, a pilot RFID program is being developed for cows (see Box 33). In South Africa, sheep and ostrich farmers use RFID systems.
The traceability of agricultural products is a new requirement in international trade and there is a global shortage of experienced agricultural supply chain traceability analysts. In addition, new standards such as the Global Partnership for Good Agricultural Practice (GlobalGap) and the Hazard Analysis Critical Control Point System (HACCP), are still evolving which makes it difficult to develop a computerized application. Traceability also has to accommodate the needs of different government departments and private companies, increasing the cost for businesses. Experience in Kenya shows that the cost of certification and meet other requirements lead to smallholders dropping out. Community sites operated in Kenya and Senegal show that costs for external certification can be reduced significantly. A successful example of community group certification is the Fresh Food Trace web platform of the fruit-and-vegetable export company FRUILEMA GIE in Mali set up with Manobi and IICD in February 2008. This helps mango exporters in Mali to enhance the traceability of their products and to maintain GlobalGap certification standards. Farmers can use mobile phones to provide updates on their activities, information that is integrated into a system that can be accessed by buyers.
ICT could be cleaner
While ICTs account for 2.5 percent of total greenhouse gas emissions, according to the International Telecommunication Union, their potential to reduce their own emissions and those who account for the other 97.5 percent is large. The impact on Africa is not yet clear, however. New generation devices usually consume more energy for operating and cooling (for example third-generation mobile phones) though environment-friendly innovations are increasingly being developed so that temperature requirements and adaptative power needs are less demanding. ICTs could have the most impact in Africa by reducing the need for travel, which accounts for 14 percent of the total worldwide greenhouse gas emissions. There will also be a key role in supporting early-warning, climate change mitigation and relief systems in Africa. According to the Intergovernmental Panel on Climate Change (IPCC), temperatures are could increase by an average of 1.4 to 5.8˚C worldwide by 2100 in the absence of policies to stabilize and eventually reduce emissions, which will increase Sub-Saharan Africa’s desertification. Countries most at risk due to climate change are Malawi, Ethiopia, Zimbabwe, Mozambique, Niger, Mauritania, Eritrea, Sudan, Chad and Kenya (drought), Mozambique and Benin (floods) and Egypt, Tunisia, Mauritania and Senegal which have low lying coasts.
Information and communications technology can, however, have a negative environmental impact through e-waste, the biggest and fastest-growing segment of manufacturing waste with between 20 million and 50 million tonnes generated worldwide each year, according to the UN Environment Programme.
E-waste has been increasing in Africa since 2006, following dumps in China, India, and Pakistan. Nigeria is becoming one of the fastest-growing computer dumping grounds. At the port of Lagos trade-in used computers is flourishing with 500 40-foot containers per month, 75 percent of which are not repairable or resalable, according to the Basel Action Network (BAN), an environmental nongovernment organization. In addition, despite the growth of its ICT industries, Nigeria does not have the infrastructure for electronics recycling. So in shipyards, unprotected workers, many of them children, dismantle computers and televisions to find the copper, iron and other metals that can be sold. Workers earn about USD 2 a day this way. The remaining plastic, cables, and casings are burned or dumped. Agbobloshie dumpsite in Accra, Ghana, is another bad example. According to research by the environmental journalist Mike Anane, only 10 percent of imported computers are put into use, while 90 percent remain dumped at the site.
Nigeria’s University of Ibadan has found evidence of excess heavy metals in the soil, plants, and vegetables near dumps. In Ghana, Green Peace found toxic metals 100 times above regular levels. The organization also found chemicals such as phthalates that interfere with sexual reproduction and chlorinated dioxins that promote cancer. Even though the Basel Convention, a United Nations treaty, has banned the transfer of hazardous waste from developed to less developed countries since 1992, it has proven difficult to enforce. A 1995 Basel Ban Amendment prohibits the export of hazardous waste even for recycling.
In Ghana, European computer imports are often labeled “refurbished” or “usable second-hand goods”, even if they prove to be of no use. According to the Nigerian Environmental Ministry, most of the 500 tonnes of electronic equipment imported each day are accompanied by unclear documentation. Since measures set by Nigerian authorities to halt imports of old computers, telephones and other materials are not sufficient, the government is setting up a national committee. In South Africa, though levels of e-waste are not recorded, the Information Technology Association has partnered with the Swiss government to develop an e-waste model. African countries need to strengthen their own regulatory regimes to protect human health and the environment and donors are willing to help.
According to the US National Safety Council, in the United States alone there are more than 300 million obsolete computers, so policies that restrict hazardous materials in computers and stronger controls on re-exporting have to be pushed. Manufacturers must have recycling programs that cover the entire lifecycle of their products. The European Union recently adopted a directive to restrict the use of certain hazardous substances in electrical and electronic equipment sold in the EU. There are a lot of programs aimed at promoting the use of refurbished computers in Africa, which raises many questions especially when low-cost new computers are becoming more available.