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Telecoms and broadband are fuelling Africa's economic boom

By Peter Lange - posted Thursday, 16 August 2012

Telecommunications has played a defining role in Africa's economic boom in the past decade. Traditional fixed-line infrastructure is poor, but more than half of the continent's population of over one billion now have mobile phones. While this means that the market for mobile voice services still has enormous growth potential, the next wave is set to have an even bigger impact and truly transform entire economies and societies in Africa: Mobile broadband internet access. However, this brave new world also brings new problems with it such as increasing levels of cyber crime, and general issues of corruption and poor governance remain, but progress is being made on these fronts as well.

Last year saw the birth of the seven billionth Earth citizen. He or she and another one billion people are among the minority who are not yet mobile phone users, unlike the other six billion. More than a third of these one billion future customers are in Africa, where mobile market penetration currently stands at about 65% of the continent's one billion strong population, making it the region with the biggest remaining growth potential in the world.

But that's not where it ends: according to UN forecasts, the planet's population will swell to 9.3 billion by 2050. More than half of this growth in the next 38 years will take place in Africa, where the population is expected to more than double to 2.2 billion. In comparison, Asia and the Americas will grow by 25% and Europe will hardly grow at all.


While this growth will undoubtedly bring a range of challenges to Africa, it also means that by 2050 the market for telecom services (and for many other goods and services) will grow by an additional 1.5 billion people in Africa, representing almost half of the total market expansion worldwide.

Will most of those next 1.5 billion customers be in remote areas and hard to reach? No. By 2050 the majority of Africa's population will be living in urban areas, where telecom infrastructure is best and relatively easy to roll out and upgrade. An additional 800 million people will be living in Africa's cities by 2050 (taking the total to 1.2 billion), compared to 500 million in India and 340 million in China, representing 300% growth in urbanisation in Africa compared to 70% in Asia.

Will they be able to afford the goods and services? Yes. Some 30,000 Africans enter the middle class every day – again the highest growth rate in the world. These are 30,000 new customers every day who are able to afford not only basic telecommunication services but also the internet and all the services it brings, and are receptive to advertising through their mobile phones and internet connections for all kinds of products and services.

Billions of dollars have been invested in recent years into international submarine fibre optic cables along the African east and west coast. International internet bandwidth in sub-Saharan Africa has increased more than 100-fold in just the past three years, from 250Gb/s to more than 25Tb/s. Theoretically this is enough for each of the continent's one billion inhabitants to download 8GB of data every month. However, despite this plentiful new supply of international bandwidth, retail prices for broadband services have not yet come down everywhere, and only about 10% of the population are currently connected to the internet.

Demand in Africa is huge for internet access and all the things it brings with it – information, education, e-commerce and other services. The majority of the continent's 100 million internet users now access the web through their mobile phones, which means that hundreds of millions of mobile phone users are currently still prevented from using the internet by high prices.

What is needed now to make internet access more widely available and affordable in Africa is massive improvement of the region's terrestrial broadband backbone infrastructure, and more competition. This process has started, with many African telcos rolling out national and cross-border fibre backbone networks to take internet bandwidth from landing points on the coast to population centres in the interior. However, some countries still don't allow competition in national and international fibre infrastructure, which is inhibiting broadband development and lower prices in these markets.


On the access network level, given the poor fixed-line infrastructure in most of Africa, the playing field for broadband access has almost entirely been left to the mobile operators. With their huge subscriber bases and existing market power, they are in the best position to offer broadband services via their 3G/HSPA and 4G/LTE networks which are being rolled out in an increasing number of countries.

Africa's GDP is forecast to continue growing consistently at around 6% per annum, virtually unaffected by the global economic crises in recent years. To deliver the enormous benefits that broadband can bring to entire economies and societies in multiple ways, it is estimated that further investments of around US$20 billion are needed to develop Africa's broadband infrastructure, creating huge opportunities for investors, equipment vendors and service providers.

Corruption and poor governance remain issues in Africa, but progress is being made. It is less common now, for example, that telecom operator licences are awarded under non-transparent circumstances, and many of those that were have been retendered.

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Elements of this article previously published on BuddeComm's website. For more information on telecommunications and broadband in Africa, see BuddeComm Africa research.

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About the Author

Peter Lange is Senior Africa Analyst at BuddeComm, an independent research and consultancy company focusing on the telecommunications market and its role within the digital economy.

Creative Commons LicenseThis work is licensed under a Creative Commons License.

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