September 29, 2020

Mobile Industry Driving Sub-Saharan Africa's Social Impact and Contributing to the Region's Economic Growth, Says GSMA Report

According to the GSMA, a UK-based organization representing the interests of mobile operators worldwide, the mobile market in Sub-Saharan Africa "will reach several important milestones over the next five years: half a billion mobile subscribers in 2021, 1 billion mobile connections in 2024, and 50% subscriber penetration by 2025." The Mobile Economy Sub-Saharan Africa 2020, which is authored by GSMA Intelligence, GSMA's research and consulting arm, says that "Despite the economic uncertainty brought about by the Covid-19 crisis, operators in the region will invest $52 billion in infrastructure rollouts  between 2019 and 2025."

Available in English and Fran├žais, below are the report's key findings:

Covid-19 casts a spotlight on digital connectivity

The report is accurate in explaining that the "Covid-19 pandemic has had a profound impact on the digital landscape in Sub-Saharan Africa and around the world." And I concur that that "pandemic has highlighted the importance of a robust and inclusive digital economy, underpinned by universal access to fast, reliable internet and a range of digital services for individuals and businesses."

What is more, "The mobile industry in Sub-Saharan Africa has largely risen to the challenge of keeping individuals and businesses connected during the pandemic, despite changes in data consumption patterns. However, with nearly 800 million people in the region still not connected to the mobile internet, it has never been more urgent to close the digital divide."

Nearly half a billion people subscribe to mobile services in Sub-Saharan Africa

Encouragingly, the report finds that "[s]martphone adoption continues to rise rapidly in the region, reaching 50% of total connections in 2020, as cheaper devices have become available. Smartphone financing models are gaining traction, demonstrated by the recent partnership between Safaricom and Google, allowing low-income consumers to pay for 4G devices in daily instalments. Over the next five years, the number of smartphone connections in Sub-Saharan Africa will almost double to reach 678 million by the end of 2025 – an adoption rate of 65%."

The 5G era has begun in Sub-Saharan Africa

"Vodacom and MTN launched the first major 5G networks in Sub-Saharan Africa in 2020," the report explains, "offering 5G mobile and fixed wireless access (FWA) services in several locations across South Africa." Furthermore, "5G trials have been conducted elsewhere in Sub-Saharan Africa, including in Gabon, Kenya, Nigeria and Uganda."

Despite the frequent media headlines about the deployment of 5G, GSMA asserts that "mass adoption of mobile 5G is not imminent in the region. With significant unused 4G capacity and 4G adoption still relatively low, the focus in the near term for operators and other stakeholders is to increase 4G uptake. This will involve strategies to make 4G devices more affordable and the provision of relevant digital content to drive demand for enhanced connectivity services. By 2025, there will be just under 30 million mobile 5G connections in Sub-Saharan Africa, equivalent to almost 3% of total mobile connections."

Mobile industry driving social impact and contributing to economic growth

"Beyond connectivity," the report points out that "the mobile industry has engaged with businesses and governments on initiatives to alleviate the impact of the Covid-19 pandemic on citizens. From mobile money transaction-fee waivers and discounts on data tariffs for educational and health sites, to cash and equipment donations, mobile operators and other industry players have supported the most vulnerable in society during the pandemic while also contributing to economic recovery efforts."

Moreover, "Mobile technologies and services generated 9% of GDP in Sub-Saharan Africa in 2019 – a contribution that amounted to more than $155 billion of economic value added. The mobile ecosystem also supported almost 3.8 million jobs (directly and indirectly) and made a substantial contribution to the funding of the public sector, with $17 billion raised through taxation. By 2024, mobile's contribution will reach around $184 billion as countries increasingly benefit from the improvements in productivity and efficiency brought about by the increased take-up of mobile services."

Policy actions for digital and fiscal resilience

I recently had the privilege to speak to a group of entrepreneurs residing in Africa, many of whom reside in Botswana. While I expressed my optimistic view on the long-term growth of Africa's digital economy, I also conveyed my concerns about governmental regulatory barriers that will impede business growth.

Therefore, I support the report's finding: "Access to digital services has been crucial to keep economies active and mitigate the socioeconomic repercussions of the Covid-19 pandemic. Consequently, governments and policymakers should implement policies to enhance access to connectivity and drive investment in more resilient digital infrastructure for the future. This is crucial to reactivating the region's economy post-Covid-19 as digital technologies play an even more important role in society."

The GSMA further maintains that "[t]o improve mobile adoption, policy measures should focus on encouraging investment in much-needed infrastructure and improving consumers' ability to access digital services. As such, policymakers should:
  • "rethink fiscal policy on mobile connectivity
  • "facilitate mobile infrastructure deployment
  • "prioritize digitization of person-to-government transactions."

What is more, "Efficient and effective management of spectrum is also key to maximize the opportunities that mobile connectivity can bring to society. Making sure the required spectrum resources are available under the right conditions will lower broadband costs, increase coverage and boost connectivity. The 2020s will see strong growth in the number of Africans connected to mobile broadband. As 4G and 5G grow together throughout the decade to come, spectrum preparation can drive cost efficiency and promote growth."

 
With investments in infrastructure to reduce the digital divide and increase capacity among mobile device users, together with the implementation of regulatory reform, Sub-Saharan Africa will see a rise of key sectors including digital identity, connected devices (IoT), and e-commerce and digital payments. 

"With half the global population now connected to the internet," the report explains, "the coming years will see a steady rise in online engagement as consumers take a digital-first approach to economic and social activities. For the majority of people in Sub-Saharan Africa, the lack of a verifiable identity remains a major barrier to participating fully in the digital economy. Sub-Saharan Africa is home to only a sixth of the world’s population – but half the global population without an ID live in the region."

Crucially, "Regional and national governments recognize the benefits of online digital identity. To this end, the Smart Africa Alliance has proposed a blueprint to assist public and private sector players with the design and implementation of digital identification schemes for individuals, which are trusted by all stakeholders based on shared rules and minimum requirements, thus facilitating mutual recognition. The Smart Africa Trust Alliance (SATA) is due to be piloted in three countries – Benin, Rwanda and Tunisia."

Regarding IoT, the report says development of the industry "in Sub-Saharan Africa is still at a nascent stage and faces several challenges. These include limited investment and innovation in solutions and devices that address local use cases, unreliable power supply and low purchasing power among consumers and enterprises. However, the outlook remains positive. The number of cellular IoT connections in the region has doubled over the last five years to 16.7 million at the end of 2019. Although this is only a fraction of the 1.7 billion global connections, the upward trend is expected to continue as commercial business models become more viable."

Moreover, "IoT has the potential to help address regionwide challenges in key sectors, such as energy, water, agriculture, transportation & logistics, manufacturing and healthcare. With many countries in the region lacking an efficient system to deliver these essentials, demand for IoT-enabled solutions is set to increase over the coming years."

As for e-commerce, the sector "is experiencing a renaissance as shopping behaviors change, in part due to social distancing measures introduced to curb the spread of the pandemic. A survey from Visa found that 71% of respondents in Nigeria and 64% in South Africa bought groceries online for the first time because of the pandemic. During the first half of 2020, pan-African online retailer Jumia also reported increased demand from sellers across the region to expand their business on its platform, as the Covid-19 crisis further established e-commerce as an important route to market. As online shopping grows in popularity across Sub-Saharan Africa, mobile operators will play a key role in enabling digital payments to replace cash transactions."

What do you think of the report's findings? Do you see opportunities in building digital identity, IoT or e-commerce and digital payment solutions?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

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