Enabling Africa to compete on a global scale

13 JANUARY 2023

Digital connectivity in Africa needs a long-term view on investment

Connectivity is increasingly being considered a basic human right, yet across Africa, some 800 million people have never accessed the internet. Addressing this challenge is critical to enabling the continent to compete on a global scale, but it will require significant investment with a long-term view, and unprecedented levels of collaboration between industry players.

This was the key message from a fireside chat about facilitating digital connectivity in Africa, which brought together some of Africa's tech leaders. Arun Varughese, Head of TMT Advisory at RMB, moderated a panel of experts including Nitin Gajria, MD sub-Saharan Africa at Google, Nic Rudnick, Group Deputy Executive Chairman at Liquid Intelligent Technologies, and Alex Masu, Head of Network Investments Africa & Middle East at Meta, as they discussed the challenges they face as well as their predictions and hopes for the future of digital connectivity in Africa.

Connectivity is the goal

Digital technology is an enabler for many things and connects people across the world, but it remains inaccessible to most of the population of Africa. The goal must be to facilitate connectivity for everyone in Africa and ensure access to affordable, fast and abundant internet, but this is fraught with challenges.

“We are working to increase capacity and access to networks and devices, but the cost remains problematic. The cost of manufacturing devices won’t come down as quickly as we’d like, so we need to explore new ways of financing. We also need to make networks more efficient and reduce the cost of infrastructure to make data cheaper, because Africa has some of the most expensive data available relative to income,” said Gajria.

Building out infrastructure is a capital-intensive process, but the returns generated are often not linear, which means investors need to think about this in a different way. There needs to be an understanding that digital infrastructure is not an end goal, but a constant evolution of an ever-changing ecosystem, where the focus needs to be on growth and inclusivity in order to bring more people online.

“Debt is relatively available if the business case is there, but the key is to attract new equity to build out next-generation fixed line networks. Mobile networks will not solve for bulk consumption, which is critical to creators and innovation, to the building of new things. Many parts of Africa remain unconnected simply because people cannot afford to use mobile data – a case in point being Kenya, where smartphone penetration is 100%, but less than half of these users are accessing the internet,” said Rudnick.

Build it and they will come

One recurring argument around investment in Africa is that the average revenue per user (ARPU) is low compared to developed countries, particularly the United States. However, the cohesive African market represents a massive addressable market.

 "From a high-level view, Africa is expected to reach 2 billion people by 2030 so better connectivity equals more business. Since connectivity builds higher penetration, we will see new products and services, new innovations coming into being. One classic example is the mobile money solution M-Pesa, which was born out of need and has grown into a full-blown financial services product covering money transfer, payments, and micro-financing services. Ecommerce has the potential for massive growth, but we need to address the basics first. People will build the use cases themselves if they have this access,” Masu added.

Investing in Africa needs a long-term view

Africa represents massive market potential, but it needs a multi-billion-dollar investment including construction of ground floor internet infrastructure, cabling, data centres, cloud enablement, and more. All panelists agreed that more investment and more infrastructure are essential and that a short-term view on the return on capital will not serve the continent.

“We are the starting line of a long journey, and players like Google will need to invest more seriously and aggressively going forward. Beyond the hard CapEx investment of hosting services and data centres, we also need to look at the ecosystem that will enable small businesses to get online. The growth of the startup ecosystem will in turn attract more investment, creating a cycle,” said Gajria.

Rudnick agreed: “This is just the beginning, the creation of data is still increasing exponentially, and we need a home for this, which is the data centre. Major cloud providers and hyperscalers must increase investment, but it is not realistic for them to absorb all the data into their clouds and content creators need to be able to host content locally. Carrier neutral co-location solutions are also an essential need to the strategy.”

Innovation for Africa

When it comes to the future, the three industry leaders agreed that Africa will not follow the same journey toward connectivity as the Western world but will forge its own path of uniquely African solutions for uniquely African problems.

Said Gajria: “If we can find ways to harmonise regulations and create a consolidated Africa marketplace made up of the 54 sovereign nation-states we can change the game for investors and pave the way for fintech, venture capital networks and greater financial inclusion. This is a many-headed problem, and we need to tackle the entire ecosystem in order to make it work.”

“People in Africa solve problems in unconventional ways, so if we can provide the platform to enable this we will see some amazing innovations come out of Africa. But we need to think about how we serve content differently, invest differently, drive this innovation, localise the problems, and find new solutions. The key to unlocking Africa’s future is to believe in the power of human capital and enable them,” Masu concluded.

Ends