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2 | WELCOME TO THE FORBES AFRICA ICT OUTLOOK
4 | ICT INTEGRATION ESSENTIAL TO AFRICA’S DEVELOPMENT
The future of television viewing is digital, but in some African countries, the present is still analogue. Migration to digital is, and will continue to be, evolutionary, not revolutionary. BY AKOREDE SHAKIR Founder and CEO of Naija Leadership Builder
Visions of a better-connected African continent are in ample supply, but so are the challenges. These must be overcome for Africa to harness the benefits of a digital world. BY TEBOGO MOGAPI Executive Chairman at Uniq Axxess
10 | THE NEED FOR A NEUTRAL REGULATORY FRAMEWORK With the rapid development of new sensors, faster Internet connectivity and lower data costs, the Internet of Things will continue to evolve rapidly. BY RICH MKHONDO Marketing Director at Uniq Axxess
30 | USING INNOVATION TO SOLVE AFRICA’S PROBLEMS
16 | AFRICA’S DIGITAL MIGRATION IS HERE TO STAY
Although Africa is leading the way when it comes to mobile money, for it to be truly revolutionary it needs to move beyond remittances and air-time top-ups and, at last, more companies are doing just that. BY BRYAN CHURCH Senior Analyst at Mondato
25 | DIGITAL MIGRATION CAN SOLVE AFRICA’S UNEMPLOYMENT CRISIS There can be no broadcast development in Africa without digital transition and African governments need to take action fast or risk an ever-widening digital divide between the continent and the rest of the world. BY GODFREY OHUABUNWA Managing Director of Gospel Nigeria and CEO of Multimesh
38 | THE ‘INTERNET OF THINGS’ IS FAST BECOMING THE NORM
40 | JUST AS THE INTERNET HAS EVOLVED, SO TOO HAVE CYBER CRIMINALS The digital revolution is storming ahead, alongside the incredible benefits that the Internet brings, comes ever-increasing risk of cyber attacks. BY BONTLE HEADBUSH Independent Commentator
42 | DATA CENTRES: CRITICAL TO THE GROWTH OF ICT IN AFRICA
22 | PREPARING FOR BROADBAND EXPANSION ACROSS AFRICA A more collaborative and disciplined approach needs to be adopted to enable broadband expansion. BY JUDAH J. LEVINE CEO of Hip Consult
Free Wi-Fi for all provides Africa with the opportunity to develop ‘smart cities’ and compete on an equal footing. BY THAMI MTSHALI CEO of Galela Holdings and the founder and former CEO of iBurst
With the rapid development of new sensors, faster Internet connectivity and lower data costs, the Internet of Things will continue to evolve rapidly. BY WAYNE DE NOBREGA CEO of Tracker
Digital migration is an idea whose time has come, and no amount of primordial protectionist tendencies will circumvent it. BY DR GEORGE ODERA OUTA Academic in Legal Studies
18 | A MOBILE MONEY REVOLUTION?
ICT has a way of adding value by delivering financial inclusion for those previously unbanked, especially those living in poverty. BY CALIXTHUS OKORUWA XLR8
32 | CONNECTED CITIES: ARE BREEDING GROUNDS FOR SMART CITIES
12 | MOBILE PAYMENTS: TRANSFORMING THE WAY AFRICA BANKS Mobile money is literally transforming Africa, taking the risk out of cash payments and delivering financial inclusion for many. Kenya is leading the way, with M-PESA transforming the way Kenyan’s bank. BY BOB COLLYMORE CEO of Safaricom
26 | DIGITAL MIGRATION: DESTINED TO GIVE AUDIENCES A NEW AND NOBLE EXPERIENCE
A more collaborative and disciplined approach needs to be adopted to enable broadband expansion.
BY CHIEKEZI DOZIE Sales Director at IS Solutions, Nigeria
44 | FACING THE REALITY OF ‘OTT’ PLAYERS ‘Over-the-top’ players are here to stay and telcos have to develop the right strategies to co-exist with them. BY MICHAEL IKPOKI, CEO of Africa Context Consulting PRINTED BY PAARL MEDIA
DECEMBER 2016 / JANAURY 2017 FORBES AFRICA | 1
Welcome To The Forbes Africa ICT Outlook
elcome to Forbes Africa ICT Outlook, a magazine which looks at the information, communications and technology (ICT) industry’s activities and operations across the continent and its contribution to the economic development of the continent. Access to ICT, particularly broadband, has the potential to serve as a major accelerator for Africa’s economic growth. Africans have embraced mobile communication technologies faster than any other part of the world and continent is being recognised as the next potential enabler of sustainable economic growth, driving innovation for the developing world. Global interconnectedness is rapidly expanding, however more needs to be done to bridge the digital divide and bring the more than half of the global population, the majority of them not using the Internet in Africa, into the digital economy. The digital revolution of Africa has great potential for the continent, but is also a source of risk and uncertainty. Stakeholders across the continent need to ensure a greater degree of focus on empowering the next generation with the right skills and digital infrastructure to usher the African continent into a world of ICT opportunities.
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Statistics from various ICT related organisations reveal that a huge untapped potential remain services. Projections indicate that reaching 100% mobile penetration could add over $35 billion in aggregate GDP – an increase of 2% – but only if governments and operators work together to bring mobile communication to the entire African population. The ICT industry encompasses a lot of technology-related businesses. Besides modern network providers, the legacy local and long-distance wire line phone services and telecommunications also include wireless communications, Internet services, fibre optics networks, cable TV networks and commercial satellite communications. In this magazine, we will annually profile telecommunications companies, technology-driven and related businesses, network providers, handset manufacturers, wireless communications, Internet services, fibre optics networks, cable TV networks and commercial satellite communications, the enablers of sustainable economic growth. Happy reading! Regards, The Forbes Africa ICT Outlook Team
ICT IN AFRICA
ICT Integration Essential To Africa’s Development Visions of a better-connected African continent are in ample supply, but so are the challenges. These must be overcome for Africa to harness the benefits of a digital world. BY TEBOGO MOGAPI, FORMER CEO OF MTN SWAZILAND AND MTN LIBERIA
s effective regulations and policies become crucial to economic growth across all sectors, two broad themes emerge: the ubiquity of Information Communication Technology (ICT), and the critical role telecommucations and ICT regulators play in creating an enabling digital environment. From job creation, economic growth and health, to education and personal security, no discussion of major societal issues is complete without close examination of the role of ICTs in creating, managing, and resolving these issues. The annual GMSA Mobile World Congress, held in Barcelona every February, has recognised Africa as the world’s
second largest mobile market by connections after Asia, and the fastest growing mobile market in the world. The mobile ecosystem in Africa currently generates approximately $56 billion or 3.5% of total GDP, with mobile operators alone contributing $49 billion. In recent studies by the World Bank and others, it has been shown that there is a direct relationship between mobile penetration and GDP. In developing countries, for every 10% increase in mobile penetration, there is a 0.81 percentage point increase in a country’s GDP. The mobile industry contributes $15 billion in government revenues and is a significant contributor to employment in Africa.
The mobile ecosystem in Africa currently generates approximately $56 billion or 3.5% of total GDP, with mobile operators alone contributing $49 billion 4 | FORBES AFRICA
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Because ICTs touch all aspects of society, when setting sound policies and regulations, the link between ICTs and all major social, political and economic issues have to be taken into account. More than ever, it is vital to consider the appropriate scope of an African ICT regulator’s mandate in creating an enabling digital world, a world where no citizen is left out of the digital society. While the benefits of an information society are manifest, the broadband revolution has raised new issues and challenges. Consumers of all ages are very much pioneers in the information age, reaping the benefits of their new world but also exposing themselves to the risks if the right measures are not taken.
From job creation, economic growth and health, to education and personal security and others, no discussion of major societal issues is complete without close examination of the role of ICTs in creating, managing, and resolving these issues.
African Continent Profile
• Unique Mobile Subscriptions: 557 Million, 2015 • Total Mobile Connections: 965 Million, 2015
• Mobile Penetration Rate West Coast Population 1.2 Billion
5 Individual Internet
Users: 193 Million, 2015 Subscriptions: 11 Million, 2015 Active Submarine Cables >>>
The extent to which the promise of mobile connectivity’s positive impact on socioeconomic development is realised and converted into sustainable gains is contingent on all stakeholders
While we must all embrace the information age, we must not forget that the interconnectedness of ICTs facilitates the distribution of viruses and malware on a global basis making it easier to perpetrate various forms of cybercrime, while at the same time making it difficult to track, investigate, and prosecute cybercriminals. Despite the dangers of cybercrime, the ICT infrastructure that Africa needs is steadily falling into place. Governments across African emerging markets are modernising ICT infrastructure. Submarine cables such as Main One, Seacom, WACS, Glo-1 and ACE have improved internet penetration and adoption dramatically. Africa’s ICT infrastructure has transformed dramatically over the last few years. Improved connectivity and connec-
tivity infrastructure investments continue to enhance hardware, software and IT services adoption. Indeed, a Seacom undersea cable has linked South Africa, Mozambique, Tanzania and Kenya to international European and Asian routes. The Eastern Africa Submarine Cable System delivers better connection to East Africa. The West African Cable System, has done the same on the West end of the continent. According to Terabit Consulting, sub-Saharan Africa has witnessed the biggest growth in undersea capacity in the world and average growth over the last five years has been 71%. In contrast, the figure is just 27% for the transatlantic route. According to Analysys Mason, investment in submarine cables in Africa
has reached $3.8 billion, generating new capacity of 24 Gbit/s while capital pumped into terrestrial networks has reached $8 billion. Moreover countries which were without submarine cable leading stations, now have one at the very least. Further improvements are on the horizon for Africa. Much of the interest focuses on connecting the Lusophone African country Angola to Portuguese-speaking Brazil. Telebras, Brazil’s state-run telecommunications firm, and Angola Cables have built the 6,000 km connection between Fortaleza in Brazil and Luanda in Angola. This has meant improved connection for data and phone calls between South America and Africa, which in the past had to first travel via Europe and North DECEMBER 2016 / JANUARY 2017 FORBES AFRICA | 5
ICT IN AFRICA
There is a growing concern whether the Internet can help African countries to realise development potential or whether Internet technologies are widening the gap between the haves and have-nots
America first. Data traffic costs were slashed by as much as 80% as a result of the connection. Indeed, many African countries are taking a number of measures to improve their ICT infrastructure. Their aim is that by 2030, all sectors of the economy will be 100% connected. The countries are also developing national cloud computing platforms and rolling out LTE projects. Telecoms firms are pumping billions into infrastructure over the next few years. Smaller countries are keen to work together to improve their mobile broadband. For example, Botswana, Lesotho, Tanzania, Mozambique, Malawi and Zambia have pledged their common commitment to speeding up the roll-out of mobile broadband in their countries. The raft of measures they agreed on included the establishment of a Joint Task Force. It is hoped that the latter will spell tighter regional cooperation, which will, in turn, stimulate greater investment. Interest in integrating cloud computing into African ICT infrastructures is also building. Improved fibre-optic cable access is enhancing connectivity services across Africa and is a definite factor in reducing the cost of doing business across various sectors. Easier and less costly access to the fibre infrastructure will drive adoption of connectivity services as well as investments in IT services. Cloud adoption in the African market is unquestionably gathering pace, with many service providers and enterprises currently considering deploying cloud-based networks, in one form or another. While some companies are ahead in their cloud plans compared to others, there is in general a strong understanding 6 | FORBES AFRICA
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among enterprises in the region of the power, benefits and advantages of moving towards the cloud. Harnessing the benefits It is a well-known fact that ICT enables inclusive socio-economic development, whether access to the Internet is derived from broadband in homes and offices, or via the mobile telephone, which is growing in popularity as the number one method to getting online. Connectivity has demonstrated its ability to ignite socio-economic development time and again. African governments know they need to expand existing infrastructure and introduce new technologies to connect Africans, especially those in rural areas, with Africans and with the world. African governments know and recognise that connected regions produce increased economic growth that a thriving information society drives. ICT is a development tool to reduce poverty, build capacities, enrich skills, and inspire new approaches to governance and conflict resolution. Heeding the challenges Although many countries are investing heavily in ICT infrastructure necessary to pave and widen economic growth, there are discrepancies among nations and regions. Some African countries are struggling to get on the information highway bandwagon.
There is a growing concern whether the Internet can help African countries to realise development potential or whether Internet technologies are widening the gap between the haves and have-nots. New data released today by ITU, shows that 3.9 billion people remain cut-off from the vast resources available on the Internet, despite falling prices for ICT services. ICT Facts and Figures 2016 shows that developing countries now account for the vast majority of Internet users, with 2.5 billion users compared with one billion in developed countries. But Internet penetration rates tell a different story, with 81% in developed countries, compared with 40% in developing countries and 15% in the least developed countries. The new edition of ITU’s ICT Facts and Figures reveals that mobile phone coverage is now near-ubiquitous, with an estimated 95% of the global population – or some seven billion people – living in an area covered by a basic 2G mobile-cellular network.
Advanced mobile-broadband networks Long Term Evolution (LTE) have spread quickly over the last three years and reach almost four billion people today - corresponding to 53% of the global population. But while the number of mobile-broadband subscriptions continues to grow at double digit rates in developing countries to reach a penetration rate of close to 41%, mobile-broadband penetration growth has slowed overall. Globally, the total number of mobile-broadband subscriptions is expected to reach 3.6 billion by end 2016, compared with 3.2 billion at end 2015. Global fixed-broadband subscriptions are expected to reach around 12 per 100 inhabitants in 2016, with Europe, the Americas and the Commonwealth of Independent States regions having the highest rates of penetration. Strong growth in China is driving fixed-broadband in Asia and the Pacific, where penetration is expected to surpass 10% by end of 2016. Mobile-broadband services have now become more affordable than fixed-broad-
band services, with the average price for a basic fixed-broadband plan more than twice as high as the average price of a comparable mobile-broadband plan. By the end of 2016, more than half of the world’s population - 3.9 billion people - will not yet be using the Internet. While almost one billion households in the world now have Internet access (of which 230 million are in China, 60 million in India and 20 million in the world’s 48 Least Developed Countries), figures for household access reveal the extent of the digital divide, with 84% of households connected in Europe, compared with 15.4% in the African region. Internet penetration rates are higher for men than for women in all regions of the world. The global Internet user gender gap grew from 11% in 2013 to 12% in 2016. The regional gender gap is largest in Africa, at 23%, and smallest in the Americas, at 2%. Most researchers agree that unless African countries become full actors in the global information revolution, the gap between the haves and have-nots will
Finding a skilled workforce, which is key to any ICT sector’s infrastructure, has been an area which many African countries are struggling with DECEMBER 2016 / JANUARY 2017 FORBES AFRICA | 7
ICT IN AFRICA
widen, opening the possibility to increased marginalization of the continent. Finding a skilled workforce, which is key to any ICT sector’s infrastructure, has been an area which many African countries are struggling with. Even in South Africa, complaints that there is a shortage of skilled ICT labour are common. Last year, a survey by the South African ICT news site IT Web found that two thirds of firms felt there was a lack of labour skilled in ICT. Furthermore, a report by Nigeria’s BusinessDay newspaper found that the ICT sector ranked third in terms of labour shortage in the country. It also found that ICT qualifications will be the second-most-sought-after qualifications in Nigeria after engineering. A study by the University of Nairobi School of Computing and Informatics has found that the country’s ICT sector is suffering from a skills mismatch – whereby ICT degree students are not learning the right skills for the job market and firms are hiring ICT graduates with the wrong skill sets for their companies’ needs. Despite the fact that Africa is embracing the information age, ICT commentators have warned that Africa must open up to competition and investment or wait decades to fully benefit from the Internet age. The continent must shed its weight of state-run enterprises and initiate more liberal regulatory policies and tax regimes.
The ICT commentators, further point out that the global statistics on the continent’s readiness for the e-economy paint a distinctly negative picture. Africa has the lowest Internet penetration and the most inadequate communications and technology infrastructure in the world. Regrettably, many countries in Africa continue to lag behind, with some having teledensities still less than 0.1%. African countries must work to close the digital divide now. Governments in Africa are under obligation to articulate clear-cut policies that would stimulate growth of the ICT sector. But despite some positive attempts at stimulating telecommunication competition, such as the establishment of legal frameworks and independent regulatory bodies including the Independent Communication of South Africa (ICASA), Nigeria Communication Commission, and the Uganda Communication Commission, these regulators often lack willpower and teeth and are constantly mired in red-tape and political interference. African countries have currently allocated considerably less resources to mobile services than Europe, the Americas and Asia, which is inhibiting connectivity to large swathes of rural Africa. Sufficient spectrum should be provided for mobile broadband services to enable the mobile industry to ‘connect the unconnected’ and continue to act as a catalyst for growth.
Furthermore, taxes imposed on the mobile industry in many African states should be reduced to drive an increase in mobile penetration, supported by shared vision by all key stakeholders. Indeed, harmonised ICT policies will not only promote collaboration between operators, telecommunication companies and other stakeholders, but also support the proliferation of digital ecosystems, promote widespread broadband deployment and adoption and build new revenue streams for operators. However, some experts and telecommunication officials are more confident that Africa can catch up to the benefits of ICT, which has improved quality of life worldwide and acted as a key driver of economic growth for both developed and developing economies. All in all, every African agrees that integrating ICT into the economy and society is essential for development and growth. We are at a critical juncture in history where technology is changing every aspect of life. Caught in the cradle of information and communication technology the world has lost its traditional boundaries, and the very way people converse and interact is changing. Thankfully there are leaders in Africa aware of the role of telecommunications and many are initiating measures to develop policy frameworks and implement ICT related projects at regional and national levels, making ICT a catalyst for growth.
The courage to grow is business. mtnbusiness.com/za 8 | FORBES AFRICA
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Presented by: By Alpheus Mangale, Chief Enterprise Officer at MTN Business South Africa
Technology Turns Challenges Into Opportunities
n a recent Robert Half Management Resources survey, only 4% of executives said their challenges have eased. Sixty-six per cent indicated that it is more challenging to be a company leader today than it was five years ago. With the increasingly fast pace and globalised nature of business, who can blame them? Technology, which used to be a support only function of running a business is now the key differentiator that is not only separating the leaders from the laggards, but is creating the very opportunities that companies continually look for in order to grow. Whether a start-up turned global giant like Uber or a more traditional company, every business in the world hoping to achieve some measure of success must leverage the technology solutions available to them. “Every business is unique, but they all have similar needs and desires,” says Alpheus Mangale, Chief Enterprise Officer at MTN Business South Africa. “They all want to be the best at what they do; they all want to grow; they all want to increase profits and reduce costs; and they all want to stay ahead of competitors. Each of these things offers opportunities, but each brings with it its own challenges.” Having the right technology in place is therefore essential to sustainable business. And staying ahead of technology trends is equally important, Mangale adds. “Many business leaders have heard terms like cloud computing and the Internet of Things (IoT) bandied about, but fewer understand the value these types of solutions can bring. Cloud computing, for example, offers unparalleled cost-efficiencies and scalability. By allowing
companies to securely access all of the applications they need, when they need them, and providing a safe repository for all their data, the cloud opens up operational flexibility at a fraction of the cost of on premise solutions.” Cloud services such as web-based collaboration platforms, virtualised desktops, storage and backup, as well as on-demand applications, are being used the world over as a means of gaining operational and cost efficiencies. For African executives, the cloud offers an added bonus: The ability to centrally manage all of these elements across multiple regions. “The MTN Business Cloud Services platform is being used for expansion across the continent. A pan-African solution designed to meet the needs of African customers, our platform is being used for everything from flexible, optimised payment options and secure, in-house data centres to security, storage and backup, email marketing, contacts management and accounting applications,” says Mangale. “By virtue of the fact that MTN Business Cloud is available across the continent, and the fact that it is backed by a pan-African network designed to support growth, African companies are gaining the benefits of agility and efficiency.” The network, MTN’s Global Multiprotocol Label Switching Virtual Private Network (Global MPLS VPN), connects key network points across Africa and the United Kingdom. Optimised to deliver global scale, high-quality connectivity and world-class support, the MPLS VPN allows companies to completely outsource their Wide Area Network (WAN), Local Area Network (LAN) and Customer Premises Equipment management requirements.
A single, global managed network solution, the MPLS VPN offers an easy way for businesses to connect their different local and international operations using one world-class, seamless, managed network. With the ability to prioritise customer traffic on an application by application basis, companies are able to rank their connectivity needs between voice and data, as and when required, and can also combine different types of data onto a single network. “The quality of our network ensures that cloud services are accessible – fast – at any time, and anywhere. We have focused on ensuring that our infrastructure meets the needs of today’s – and tomorrow’s – businesses, and the increasing uptake of our managed services such as the Global MPLS VPN and our cloud offerings point to our success in this,” Mangale says. He adds that this focus is also evident in the company’s IoT offering. Connecting an otherwise fragmented population of devices and systems through an open platform, MTN Business has opened Africa up to the value offered by Machine2Machine (M2M) solutions. Responding intelligently to their environments without human intervention, these smart machines empower businesses to monitor and improve their operational performance, enhance productivity, and impact management activities. “With these types of technologies, challenges fast become opportunities. Thanks to cutting-edge technologies, African businesses are not only holding their own against their international counterparts, they are growing faster. Africa’s future has never looked brighter,” Mangale concludes.
The Need For A Neutral Regulatory Framework Evolving the current regulatory framework, from a top-down to a bottom-up approach. BY RICH MKHONDO, MARKETING DIRECTOR AT UNIQ AXXESS
obile connectivity continues to play a pivotal role in the transformation of societies and in contributing to socioeconomic development in developing countries. Its impact is widely acknowledged in the effect mobile communications has had on many African countries. A recent GSMA Mobile World Congress report confirms that sub-Saharan Africa now has more than half a billion people subscribed to mobile services. More are poised to be connected through the next wave spurred by the growth of mobile broadband networks, data services and uptake of low-cost smartphones. According to the GSMA 2015 sub-Saharan Africa Mobile Economy research findings, the mobile industry remains a key driver of economic growth and employment across the region, making an important contribution given the population growth and high unemployment levels. In 2014, the broader mobile ecosystem generated 5.7% of GDP in sub-Sa-
haran Africa, a contribution of just over $100 billion in economic value. Migration to mobile broadband and the growth of new services will see this figure increase to 8.2% of GDP by 2020, reflecting how increased access to mobile services generates regional growth and development. However, the extent to which the promise of mobile connectivity’s positive impact on socioeconomic development is realised and converted into sustainable gains is contingent on all stakeholders, especially continental regulators, playing their part in loosening legacy regulation drafted in a by-gone era, to accommodate today’s dynamic and converged digital ecosystem. Today’s operating landscape and regulation The landscape is evolving rapidly. Operators now face competitors and disruption from innovative use of technologies, that linear regulatory frameworks developed decades ago never envisaged.
Mobile Telephone Subscriptions per 100 Inhabitants. Source: ITU 10 | FORBES AFRICA
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For instance, the dynamic and competitive telecommunications landscape we find ourselves in features new players – media companies, software vendors, and Internet companies. The old separation of sectors has disappeared and there are no clearcut turfs that the old regulation provisioned for. New players operate seemingly unregulated while the ability of network operators to respond to the challenges is hamstrung by outdated regulations. All this happens while there is still an expectation for network operators to rollout infrastructure to cater for data demands by consumers, whilst managing the challenge of dwindling revenues as cannibalisation by unregulated players continues unabated. These changes have created two challenges; discriminatory regulation of similar services and competing companies, and ineffective legacy ex ante (before the event) regulatory regimes traditionally governing communications markets, that are no longer effective in the face of rapid innovation. The GSMA report points out that regulation has failed to adapt to the evolving telecommunications ecosystem – new entry of suppliers of applications, content and devices thus discriminating against fixed and mobile network operators. It further notes that services provided by companies like Amazon, Facebook, Google, Microsoft, and Netflix are directly competing successfully with services provided by fixed and mobile network operators. The first group of companies and the services they provide typically are regulated only under general antitrust and consum-
What we need is a marked departure from old top-down regulatory frameworks to a ‘bottom-up’ approach.
The extent to which the promise of mobile connectivity’s positive impact on socioeconomic development is realised and converted into sustainable gains is contingent on all stakeholders
er protection regimes, while the second group of companies and their offerings are generally subject to industry-specific rules and institutions. Thus, telecommunications carriers (but not other voice and data communications providers) are still subject to rules designed for telephone companies. Traditional audio and video distributors (but not OTT providers) are still subject to rules designed for ‘broadcasters’. Mobile carriers and their services face many of the same rules as wireline telephone companies (and often even more that come attached to their spectrum licences), while other wireless ecosystem participants face much lower burdens. (Source: 2016 GMSA report ‘Designing a new regulatory framework’). Legacy regulation has, unintendedly, hamstrung operators and limited their ability to effectively respond to dynamic changes and their ability to play a role in enabling digital societies. Operators are well placed to act as catalysts of transformation in a fast-changing digital society through capital investments. This role, while limited by legacy regulation that has not kept up, is distorting markets and consequently putting increased investments infrastructure at risk.
The real opportunity of new regulatory frameworks What we need is a marked departure from old top-down regulatory frameworks to a bottom-up approach. This calls for reviewing regulatory objectives and pursuing them through new regulations that suit current market dynamics and pending trends. This will mean disregarding legacy regulatory regimes and approaches that are incompatible with the times, and evolving technologies that have blurred the lines. In the face of inflexible regulatory frameworks, others may adopt anarchical tendencies choosing to ignore existing rules and institutions. However, a new wholesome regulatory framework based on the principles of functionality is needed. The current and ever-evolving digital ecosystem demands that regulation be similarly dynamic and flexible. The emerging regulatory framework will need to be market and technology neutral, in that it applies to all elements of the internet ecosystem; cost-effective, in that it will achieve regulatory goals and objectives at the lowest possible cost; and flexible, in that it will allow markets and technologies to evolve while preserving and enhancing
regulators’ ability to achieve their functional regulatory objectives. What is being proposed is that policy makers ensure that the right and relevant conditions are in place for the full transformational potential of mobile services to be realised. As the digital ecosystem gets entrenched in sub-Saharan Africa, policy and regulatory changes are required to ensure that adequate investment and innovation comes from all ecosystem players. Operators need a conducive regulatory environment that encourages sustained investment and growth that extends coverage to more remote areas and meets the growing demand for higher speed connectivity. The benefits of the new regulatory framework will accrue to customers who will not only have a variety of competitive products, they will also access these at competitive price points. Moreover, countries will benefit from increased mobile broadband penetration resulting from increased capital investment. Such mobile broadband penetration will have a positive domino effect on entrenching and growing digital societies and further contribute to socioeconomic development that creates a win-win for all stakeholders. DECEMBER 2016 / JANUARY 2017 FORBES AFRICA | 11
Mobile Payments: Transforming The Way Africa Banks
Mobile money is literally transforming Africa, taking the risk out of cash payments and delivering financial inclusion for many. Kenya is leading the way, with M-PESA transforming the way Kenyan’s bank. BY BOB COLLYMORE, CEO OF SAFARICOM
One of the important threads in this transformative Kenyan story has been mobile money. This has literally created a new economic model, pushing the country to the top of the pile in Africa in rankings for ease in accessing financial services, driven by the exponential uptake of mobile money.
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hile these days we take the mobile phone for granted, it was only two decades ago that making a telephone call was costly and time-consuming. For the vast majority this involved finding the right coins and then queuing at a public payphone booth. Sending money home for migrant labourers and urban dwellers was just as challenging, and it took days to arrive, whether sent via the post office or dispatched as cash payments delivered by the bus crew that travelled the country. How times have changed. Today the mobile phone is ubiquitous. While initially developed for voice calls, it has also enabled the delivery of mobile payments. For Africa this has been revolutionary, enabling the speedy and secure delivery of money across the continent without the hassle of standing in queues or filling out forms. Africa is mobile-only The mobile industry in sub-Saharan Africa continues to scale rapidly, with mobile connections expected to reach 518 million by 2020 delivering a 49% mobile penetration rate says research from the GSMA. With this growth rate it is expected that the mobile industry will contribute $166 billion by 2020 and make up 8% of GDP in sub-Saharan Africa. The mobile ecosystem, whose combined value in Africa is expected to cross the $100 billion mark by 2020, currently contributes an estimated 5.4% of the continent’s GDP. What is clear is that Africa is not just a mobile-first continent; it is mobile-only. The mobile phone has proven to be transformative technology – breaking down intra-Africa
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trade barriers by removing obstacles, increasing efficiency, and encouraging transparency. The adoption of cellular and Internet technologies has enabled Africa to leapfrog some of the infrastructural challenges that it previously faced. Mobile phones have become the connective tissue helping to drive economic growth. Kenya leads the world in mobile payments Nowhere has this transformative power of the mobile been felt as much as it has in Kenya. Today, the country has more mobile phones than toilets or water taps. Mobile penetration has increased Internet access, with nine out of ten new Internet connections being made via mobile devices. Kenya’s mobile penetration rate is 88%, with 37.8 million active subscribers. The number of Internet users continues to grow, recent stats from the Communications Authority of Kenya (CA) record just over 31 million registered Internet users. Through mobile, citizens can connect to the world, to government services, to businesses, and to each other in ways that were previously unimaginable. This has enabled new ways of doing business. One of the important threads in this transformative Kenyan story has been the rise of mobile money, creating a new economic model that has helped elevate Kenya in rankings as the top country in Africa for ease in accessing financial services. This has been driven by the exponential uptake of mobile money. On any given day, an estimated KSh7.7 billion is transferred via the six mobile money platforms in Kenya. Kenya has also been catapulted into global prominence as the cradle of mobile money inno-
vation as a result of its M-PESA solution. M-PESA was launched by mobile operator Safaricom and has become the world’s best known and successful mobile money platform. M-PESA is at the centre of Kenyan life. It has crafted a fresh economic model, making it easier, cheaper, faster and convenient to send money across distances, pay for bills, buy goods and even contribute to fundraising causes. In fact, M-PESA keeps evolving and has now facilitated saving and borrowing on mobile phone. Kenya runs on M-PESA, literally. The innovation that would eventually become M-PESA, started as a trial mobile phone loan service for female farmers in the outskirts of Nairobi. The premise was simple - using SMS technology, users could exchange cash for electronic money, which could then be sent to other mobile phone users to redeem for cash. This was
before the possibility of a more commercial application was discovered. M-PESA delivers more than money Since its launch in March 2007, M-PESA has grown its subscriber base rapidly. Within the first month, 20,000 customers had signed up, rising to two million by the end of the year and 10 million by its third birthday. Today, there are 22.1 million M-PESA users out of the 28.7 million mobile money subscribers in Kenya, according to statistics from CA, the industry regulator. Four out of five adults in Kenya are M-PESA subscribers. This has translated into huge economic benefits – not only for Safaricom, which generates the second largest revenues from M-PESA (after voice), but also the Kenyan society. By 2012, the Central Bank of Kenya estimated that the equivalent of 43.5% of Kenya’s GDP was transferred
via M-PESA. On any given day, over eight million transactions are conducted daily on M-PESA, accounting for about 80% of the world’s mobile money transactions. The value of transactions on the platform has also been substantial – cumulatively, this is estimated at over KSh4 trillion since its launch. The ‘True Value’ analysis conducted by KPMG for the 2014/15 financial year shows for every M-PESA transaction that takes place, KSh79 worth of value is created for the Kenyan society. M-PESA has moved beyond being a person-to-person transfer product to a platform that enables financial inclusion. Now, it is inspiring new ways to provide access to essential services. Its retinue of services include: P2P, ATM withdrawal, Lipa Na M-PESA (Pay Bill and Buy Goods and Services), Bulk Payments, Bank to M-PESA and vice versa, M-Ticketing,
Mobile Financial Services Globally, there are 271 mobile services of which 141 are in sub-Saharan Africa. Countries in Africa with Live Interoperable Mobile Money Services: • Madagascar • Tanzania • Rwanda DECEMBER 2016 / JANUARY 2017 FORBES AFRICA | 13
Lipa Karo, M-PESA Prepay Visa card, International Money Transfer, Lipa Na M-PESA Online and M-Shwari. Indeed, it is actively transforming lives. The success and growth of M-PESA has been partly driven by its agents, who facilitate the transfer – converting cash into electronic money and vice versa. Presently, there are 91,246 M-PESA agents across Kenya serving as the backbone on which the service operates. In addition to transacting locally, M-PESA subscribers can also receive funds internationally from over 100 countries. Strategic partnership have helped M-PESA drive the growth of mobile payments. So far, over 42,000 merchant outlets have signed up to accept M-PESA as a mode of payment. In addition to this, over 35 banks have integrated to offer M-PESA services. All this has contributed to M-PESA’s provision of greater convenience, safety, speed and lower costs of transferring cash. Over time, it has innovatively evolved to suit customer needs. For instance, lower bands and tariffs to meet the needs of our customers has led to increased transactions. M-PESA has found myriad applications – from facilitating delivery of aid to refugees to accessing solar power, paying tea farmers for their crop, disbursing fertilizer subsidies and ensuring that patients take their medicines as prescribed. In Dadaab camp, home to one of the world’s biggest refugee populations, mobile connectivity has made it easier to deliver aid directly to beneficiaries’ phones. This has solved the challenge of providing financial services through the traditional concept of brick-and-mortar. Donor organisations no longer have to conduct air-drops to get aid and other essential services to residents of the camp. Apart from the ease in getting aid to where it is needed most, sending it via M-PESA also enables the funding organization to place restrictions on where the money can be spent, introducing transparency and accountability for a less than a $1 a day. M-PESA has also facilitated access to clean energy for many Kenyan communities. With a deposit of around $35, a 14 | FORBES AFRICA
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company called M-KOPA gives M-PESA customers access to a solar system to install at their homes. They then top it up every day to the tune of around 45 cents in order to get energy – creating a Pay-asyou-Go power model. The M-PESA platform offers a cashless payment service for tea farmers – who no longer have to travel to the nearest urban tea centre, queue for hours and receive a hand-written piece of paper with instructions on how much they would be paid. This has also boosted efficiency in operations of the 66 factories across the country and addressed long-standing concerns regarding security of factory employees who handle cash. M-PESA is the backbone of a government fertilizer subsidy. The e-Input subsidy management system has improved the disbursement of subsidies. This has enabled millions of smallholder farmers who grow food crops and cash crops such as tea, coffee and sugarcane to easily access quality assured input supplies. This
has translated into an increase in yield and productivity. Applications have also been found in health, for instance M-Tiba, an android-based mobile application that has automated the Ministry of Health Tuberculosis patient management system. The application manages accounts of all patients suffering from TB by verifying whether the patients are taking their drugs as they should as well as checking in at all facilities that treat TB across the country. M-PESA allows facilities and patients to access shared wallets through which payments for medicines and other supplies that can be processed, creating a closed loop and secure system. These are just a few examples of the ways that M-PESA has been applied so far. Opportunities for further expansion abound, considering that up to 90% of transaction use a cash mode of payment. As the revolution continues unfolding, it will keep transforming lives, which is its core mission.
M-PESA has found myriad applications – from facilitating delivery of aid to refugees to accessing solar power, paying tea farmers for their crop, disbursing fertilizer subsidies and ensuring that patients take their medicines as prescribed
Africa’s Digital Migration Is Here To Stay Digital migration is an idea whose time has come, and no amount of primordial protectionist tendencies will circumvent it. BY DR GEORGE ODERA OUTA, ACADEMIC IN LEGAL STUDIES The views expressed herein are entirely personal and do not represent the thinking of any institution or organisation that Dr Outa has been associated with over the last two decades
ere one to offer an opinion on the state of play around the migration from analogue to digital broadcasting in Africa, the position, without much hesitation would be this; yet another major and transformative agenda is unfolding without much thought given to the challenge of knowledge and understanding. For it to be successful, a dedicated public Information, Education and Communication (IEC) programme remains the necessary evil, without which far too many initiatives get completely undermined in Africa. When the International Communications Union (ITU) reached consensus in 2006 for the necessity of digital migration (DM), and set timelines for delivery some progress has been made, however more so in developed countries. For instance, the Netherlands switched off all its analogue systems by the December 2006 deadline. However, for Africa, it has been a rather mixed bag and the few gains are those that are propelled by independent motions and inevitabilities, rather than the conscious planning by men. A Kenyan case study What happened in Kenya between 2007 and 2012 partly illustrates the bane of Africa when it comes to the imperative of ‘domesticating’ critical international obligations that are also quite often conceptualised and then pushed by the industrialised nations. Thus, what may have been a fairly straight forward pro16 | FORBES AFRICA
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It’s clear the digital migration is definitely an idea whose time has come
cess of technological growth resulted in a plethora of court injunctions and cases. In retrospect, most of the cases were inspired by a poverty of knowledge coupled with the fear of the unknown future. One claim was that Kenya’s regulatory authority had favoured a company named the ‘Pan Africa Network Group’ for the initial Broadcast Signal Distribution (BSD) licence; which the complainants roughly generalised as a Chinese backed company. Immediately lost here is not just the important questions relating to the financial and technical competence that were deemed the urgent pre-requisites for the layout of the switch-over infrastructure, but the complainants who also swiftly mutated into a ‘consortium’ bringing
There are some undeniable benefits of a full DM regime, notably the conferment of a real ‘freedom of choice’ for consumers.
together some of Kenya’s traditional private sector players (ordinarily business competitors), were now cleverly invoking nationalist sentiment and other hallowed provisions of the national constitution to reject the early transition. Whereas in outright legal terms it was the tendering process being questioned, the subtle sub-text was clearly that even these private media houses were not ready for digital migration. Yet, even with the legal merits aside, it would be clear that digital migration was definitely an idea whose time had come, and no amount of primordial protectionist tendencies would circumvent it. The cases that ended up in Kenya’s courts as well as interventions by the Public Procurement Review Board partly explains the stymied progress in realising the original dream the ITU may have had in mind. The fact would be that the short-lived “marriage of convenience” between the ‘Nation Group’ and ‘Royal Media’ was clearly a mistaken attempt at perpetuating a fast-receding era of monopoly and control over broadcast content. If truth were extrapolated, the DM clearly implied disruptive shifts with as much potential to dislodge other wider economic and political hegemonies which some were not ready to let go. What benefits does digital migration offer Africa? There are some undeniable benefits of a full DM regime, notably the conferment of a real freedom of choice for consumers. Additionally, content production is generally more cost-effective and inclusive, enabling the industry to open up to smalltime players and enterprising individuals. Broadcast programmes are made available in a format that is accessible on simple handsets, and no longer just from traditional television and radio stations. As is already happening, a plethora of ‘free to air content’ has evolved circulating from all manner of sources, including from personal websites. Ultimately though, beneficiaries are the more innovative producers whose mass appeal may perhaps, alter the viewing and listening landscape in ways yet to be contemplated. In short, the era
of just riding on the appeal of a single broadcast commodity such as a news bulletin would never suffice and I suspect the full blossoming of Kenya’s own version of ‘Afro-cinema’ is best predicated on an undeterred DM. In the language of famed New York columnist and writer, Thomas Friedman, the world (Africa) would be truly ‘flat’ and that it is only in such an environment that the ‘mumbo-jumbo’ usually called ‘freeing of airwaves’ would make sense to the less ‘technorate’ communities. The big picture issues Even from this cursory interrogation, one sees at least three ‘big picture’ issues worthy of serious reflection. The first is that there is a major challenge relating to the lack of knowledge and understanding about DM. As already alluded to, without a robust IEC strategy, for many in Africa; including its much-talked about emerging middle class, DM remains a foreign language best left for the ICT geeks. Like many other United Nations (UN) declarations, localisation has not been clearly thought through. Experience shows that there has to be investment in fairly long-drawn processes before change is accepted. In similar breath the United Nations Framework Convention for Climate Change (UNFCCC) has quietly slipped by in spite of the effort that made ‘information and communication’ a key clause in the 1992 agreement. One may even say that the most successful UN campaigns have rather, ironically, related to topics on Human Rights, women and children’s emancipation, sometimes almost fright-
eningly to the exclusion of other issues. It is against such a background, that the fate of ITU’s DM vision has to be understood, with the considered view being that what is required is to scale up the communication around the full benefits of DM. The second issue is that it is time to review the role of the communication regulatory agencies. As we have seen in the case of Kenya, one legal question concerned the validity of a ‘bid security fee’ of 120 days as opposed to 53 days, with the complainants averring that this was largely immaterial and insignificant. Other questions concerned allegations of contradictions within the tendering documents suggesting inadequate technical capacities. Closely related is the question around costs. In Kenya, the Kshs2.1 billion licencing fees was vigorously challenged by a mobile telephony service provider. The Kenyan regulator routinely places levies and an application fee that is separate from licencing fees, not to mention the spectrum fees and tax on all accrued profits. The long and short is that there appears to be an arbitrary and capricious exercise of regulatory authority in environments where even major stakeholders do not seem to appreciate their basis. DECEMBER 2016 / JANUARY 2017 FORBES AFRICA | 17
A Mobile Money Revolution? Although Africa is leading the way when it comes to mobile money, for it to be truly revolutionary it needs to move beyond remittances and air-time top-ups and, at last, more companies are doing just that. BY BRYAN CHURCH, SENIOR ANALYST AT MONDATO
obile money in Africa is big news. The mobile operator association GSMA estimates that there were almost three times as many active accounts across the continent than there are in South Asia, the region with the next largest group of users, as of at the end of 2015. There is good reason for all of the excitement. Mobile money has great promise to be a transformative force. The digitisation of financial services brings cost-efficiencies that make previously marginal customer segments much more attractive. This promises to advance financial inclusion amongst the hundreds of millions that are currently under-banked. Yet this is becoming a tired story in some respects. Mobile money has now been around for 15 years since its original introduction in the Philippines, and nearly 10 years in Africa since its launch in Kenya. Governments and development organisations have both watched hopefully for cash-based economies and their associated inefficiencies to benefit from digitisation. But progress has been slow other than for remittances and airtime top-ups. The most recent World Bank Findex shows that only 34% of adults in sub-Saharan Africa have any type of account, including mobile money. The need for new use cases But these high-level statistics hide much of the innovation that is swelling up. The development of new use cases and value propositions are what is going to drive future adoption. There is an inherent cap to the volume of transactions when there are few widely offered use cases. Beginning to emerge now are more advanced financial products and services such as interest-bearing savings accounts, micro-insurance and payment service provider APIs for developers to integrate mobile money into an endless range of new services. Consumer credit is one such use case. For a US$35 deposit, a company called M-KOPA Solar provides kits containing a solar panel, a charger for multiple devices, a radio, lights and a SIM card to clients in East Africa. These kits can be used to generate 18 | FORBES AFRICA
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solar electricity in the home, and in many cases, are also used to begin small entrepreneurial ventures charging phones. The users pay for the kits via mobile payments each month. Thousands of customers are signing up across Kenya, Uganda and Tanzania, and there are a number of other companies offering similar propositions elsewhere. Longer term, as providers establish financial identities for their customers, this model could potentially be extended to other household consumer durables as credit is extended beyond home power generation. An example of establishing credit histories, albeit for smaller sums, is the recent launch of Tigo Nivushe in Tanzania. Subscribers are able to take out loans without putting up any collateral, with available credit increasing through time upon establishing a solid repayment track record. New borrowers can access credit of up to around $9 initially, depending on their eWallet and airtime usage, with the funds then deposited directly into their mobile money account for immediate use. Translating success across borders has not always proven to be an easy exercise, however. Many multi-national mobile network operators (MNOs) have a mixed track record across their OpCos in the various markets. Implementation needs to be much more than just a copy-and-paste exercise. The GSMA estimates that only a small fraction of mobile money services have achieved monthly revenues of greater than $1 million. In some cases they face strong competition from existing over-the-counter services that already have an established presence at merchant locations. Others come up against unfavorable regulatory regimes. While challenges may abound, those who are most diligent about distribution and product innovation can see beyond such constraints. Yet the biggest success stories show the extent to which these services can open the door to a number of more sophisticated financial services beyond sending money, which can lead to greater economic opportunity and development. The challenge now is scaling these services across a wider array of use cases to provide an incentive for users to maintain account balances.
Building out an ecosystem It does not always make the headlines like other markets, but Zimbabwe has one of the most developed and thriving mobile money ecosystems in the world. Econet, the country’s incumbent mobile operator, recognised from the get go that by offering its customers a range of value-added products and services built upon a mobile money platform (or at least which can be paid for using EcoCash) it could take a proactive approach to mobile money ecosystem building, while simultaneously meeting the objective of diversifying and expanding Econet’s business interests. Since 2012, EcoCash customers have been able to use mobile money to hire and purchase home electricity kits directly from Econet Solar. Indicative of the company’s vision, it also bought a majority stake in the US-based water technology company Seldon Water and jointly launched Seldon Water Africa offering DIY kits for home installation of activated carbon filtration
systems. The latter, however, eventually had to close up shop showing the risks involved in trying to pick winners, especially for services that fall outside one’s core competencies. Econet even purchased its own bank, Steward Bank (“the Bank for people who hate Banks”), for the provision of a range of digital finance products. Steward Bank itself has been pursuing an aggressive branchless banking strategy to establish a presence for itself in rural areas using Econet’s agent network, as well as partnering with the Zimbabwean Post Office. Econet has also partnered with big names in the international remittance business to ensure that ‘Econet Diaspora’ users can send money to and from EcoCash wallets via Chitoro, Western Union, WorldRemit and MoneyGram. Having invested heavily in building out a portfolio of use cases, the provider has taken a centralised approach to the overall value proposition, and it certainly benefits
from its dominant position in Zimbabwe. Less clear is how well similar initiatives might succeed elsewhere. But it does show how the development of value-added services can become a major revenue opportunity. Bottom-up innovation While centralised planning and a topdown approach may have its place, mobile money is potentially at its most powerful in facilitating the disaggregation and disintermediation of value chains across sectors. While this may threaten traditional business models to some extent, it also brings companies the ability to evolve quickly and become disruptive forces that both take market share and increase the overall addressable market. The fintech vision, after all, is modularity and integration. It promises more personalised service for transforming latent demand into new revenue streams and to bring efficiencies to existing operations.
Mobile money is potentially at its most powerful in facilitating the disaggregation and disintermediation of value chains across sectors DECEMBER 2016 / JANUARY 2017 FORBES AFRICA | 19
This can be seen globally with the emergence of pure-play entrants targeting specific product categories in trying to do one thing very well rather than being all things to all people and take a step back from the well-capitalised universal banks. CommonBond provides an interesting example from the United States and the vast student loan market there. The lender tries to foster ongoing engagement with the borrower, essentially taking an active interest in their career development, providing a member community for networking, employment assistance for those that lose their jobs and even consulting opportunities. The tailored value proposition brings together a portfolio of services with compelling synergies, and encourages engagement for customers experiencing financial distress. Many competing student loan companies seem to offer little more than a payment gateway and a debt schedule. Africa has shown similar innovation in specialised financial products and ancillary services. National Microfinance Bank of Tanzania provides one such example bringing together small plot farmers, licensed warehouses across the country and larger agribusiness exporters. The initiative offers post-harvest digital credit to farmers using inventories of certified commodities held at the approved warehouses. The programme is structured to minimize risks across the ecosystem from performance
bonds to address operational risks and insurance against fire and burglary for storage to utilising put and call options to mitigate price volatility. Also in Tanzania, AccessBank sees similar potential for more advanced financial services and has even stopped charging fees for farmers making person-to-person transfers in the hope of upselling additional services to them down the road. But there have been challenges in scaling targeted services to date. In the case of mAgri, small-plot farmers have very limited financial capability and mobile networks tend to have poorer quality of service in rural areas. Illiteracy, financial education, limited agent networks and liquidity, and cumbersome end-user interfaces have all been obstacles. Changing entrenched behaviours to adopt and trust the underlying digital financial platform is also a consideration for many services. These experiences perhaps partially explain the success of large mobile network operators and their familiar brands in bringing new services to market, such as the Econet example. Both the top-down and bottom-up approaches have their benefits and challenges, so a fine balance may be required in opening platforms for wider innovation, while ensuring that those investing in agent networks or regulatory compliance can earn a sufficient return.
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It does not always make the headlines like other markets, but Zimbabwe has one of the most developed and thriving mobile money ecosystems in the world.
Preparing For Broadband Expansion Across Africa A more collaborative and disciplined approach needs to be adopted to enable broadband expansion. BY JUDAH J. LEVINE, CEO OF HIP CONSULT
t may be that you’re reading these words on your mobile phone, or perhaps on a tablet or laptop connected to the Internet via a wireless connection. If so, you’re like many others across the world, who have come to consume much of their business and general interest content via their wireless devices. The access to zippy data which so many of us take for granted and download without a second thought is a relatively recent phenomenon in Africa, only a few years ago connectivity was highly variable even in its largest cities. Emails with modest sized attachments could take minutes to send and receive, and the cost of data was prohibitive to most. Variability exists everywhere, of course, but the situation these days is much improved. Time navigating between meetings in Lagos or Dar es Salaam can be as productive as in the office, with nothing more than a laptop connected via a data dongle or smart device needed for conference calls, to exchange files, and surf the Web. Connectivity-dependent services, such as Uber’s ride sharing, are mushrooming across Africa. A better-connected continent As it were, cellular coverage now extends to most pockets of population in Africa. This coupled with a steady decline in service tariffs helped the number of unique subscriptions to reach 557 million by the end of 2015, equivalent to 46% of the continent’s population, according to a recent GSMA study, while the number of mobile subscribers that access the mobile internet hit 300 million. The study predicts that the number of unique mobile subscribers will reach 725 million by 2020, accounting for 54% of the expected population by then, while an additional 250 million subscribers are expected to become mobile 22 | FORBES AFRICA
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internet users over that period, bringing the total to 550 million. Still, it would be a gross exaggeration to declare broadband in Africa as being ubiquitous and accessible to all. HIP Consult estimates that the percentage of Africans living within five kilometers of fiber optic cables, which can be thought of as the prime traffic arteries of the Internet, at 35% today. While this represents an impressive increase from the estimated 5% it was in 2005, it is still a far cry from the fiber penetration required to support 4G/LTE, Wi-Fi and other forms of robust connectivity throughout the continent. The simple fact is that a majority of Africans do not yet have access to broadband, and this situation is unlikely to improve dramatically without the promulgation of new investment and operating models. Prevailing challenges The “build it and they will come” days of explosive subscriber driven growth in Africa are mostly over. Average revenue per user (ARPU) has been declining as lower-income users account for an increasing share of subscriber base growth. At the same time, traditional voice and SMS services are increasingly being commoditised, leading to price compression. Regulatory policy is also limiting revenue from mobile termination rates and unregistered SIM cards. These and other broader headwinds have muted the bottom-line boost from increasing data revenues. Yet even data poses an operational and business challenge, as traffic accelerates faster than the associated revenue. This creates a situation where the requirement and cost for network expansion may outpace associated data revenue growth.
Regulators need to also take another look at radio spectrum licensing. Delays in licensing sometimes mean that new technologies are not deployed until well through their lifecycles. This can constrain investment as providers have shorter time horizons over which to earn a return on their investment.
At the same time, over-the-top (OTT) services such as WhatsApp or Skype that leverage this infrastructure also threaten to fundamentally disrupt the foundations of the telecom sector. There is already some jostling between telecommunication companies and some OTT providers, including attempts in some countries to regulate such services. And there is not always a clear-cut answer as to how the various players should position themselves in the increasingly complex ecosystem of data services. While innovative applications drive data usage, others fear losing out and becoming low-margin “dumb pipes.” In the early days, things were much simpler. Fixed line networks in Africa were limited and had poor quality of service (QoS) in many areas. Mobile network operators (MNOs) filled this gap, and focused on building proprietary networks as strategic differentiators to compete. Duplication of infrastructure was less of a concern at that time given the relatively low Capex requirements for transmission links and switching centers, and moreover the well-defined and margin-rich revenue models in place. Broadband, however, is proving to be a very different story. Finding new models for infrastructure investment is becoming increasingly urgent. As old habits have died hard, large sums have been invested in fiber deployments by competing providers resulting in potential overinvestment on key routes, while other areas and requirements remain ignored. Network duplication and a lack of integrated planning adversely impacts cost structures and QoS. We estimate that less than a third of Africa’s population are regular internet users, with the majority of these being limited to 2G mobile service. If the sector were to continue with the current business as usual approach, HIP Consult projects that almost US$20 billion would be required to double the percentage of Africans within 5km of fiber infrastructure. This is substantially more than what might be needed under a more optimal approach.
Active Fixed Broadband Subscribers per 100 Inhabitants (Source: ITU)
NORTH AFRICA COAST 10,56 15,46
EAST AFRICA COAST WEST AFRICA COAST
Active Submarine Cable Capacity in Terabits: Africa (ManyPossibilities, June 2016, Version 45)
Foundations for more ubiquitous broadband It is doubtful that overall sector revenues can support the levels of network duplication seen previously. A combination of value chain disaggregation and horizontal consolidation may be required to create a more sustainable economic foundation for broadband expansion. Co-builds and the increasing role of wholesale providers point in this direction. For example, operators in South Africa banded together in deploying a national backbone that benefitted from cost sharing, while Liquid and FibreCo are just two of a growing number of wholesale capacity providers. Government can also play a role through public-private partnerships. These can be beneficial even in the absence of significant financial contributions such as where rights-of-way are provided in kind. Regulators need to also take another look at radio spectrum licensing. Delays
in licensing sometimes mean that new technologies are not deployed until well through their lifecycles. This can constrain investment as providers have shorter time horizons over which to earn a return on their investment. In fact, some markets in Africa have only begun rolling out 3G services over the past few years, while LTE has already become the expected standard elsewhere. Allocations of scarce spectrum can also be reviewed to make sure it is held by those who value it the most, and are thus more willing to invest in network expansion. Non-traditional players could also have an increasing role to play. OTT service providers, which are dependent on network prevalence and affordability in order to grow their user base, have a real interest in seeing improved broadband connectivity. However, they have traditionally been reliant on others to provide broadband access. Generating new revenue streams from value-added DECEMBER 2016 / JANUARY 2017 FORBES AFRICA | 23
services such as data analytics and advertising, these companies can help catalyze sector revenue growth that extends beyond simple access fees for connectivity. Recent metro fiber deployments by Google in Accra and Kampala and the Facebook drone initiative are examples of how an increasing pool of available funds for investment could contribute to and spur broadband coverage. Importantly, given their wide reach, deep pockets, and technical expertise, these OTT providers are investing across a range of sectors to drive industry efficiencies and promote innovation. Evolving perceptions of value Given a choice between competing providers, customers are no longer willing to pay a premium for simple access. Margins will need to progressively be driven through segmented value propositions that generate a greater willingness to pay for services. Expanding product portfolios will often require more collaboration among players to leverage complimentary assets and expertise. Examples of such collaboration abound at the top and bottom of the market, ranging from vertical-specific enterprise services such as digital oil fields to targeted consumer offerings such as financing of solar power kits for homes. Africa is already a thriving market for such innovation with digital finance & commerce (DFC) taking off across the continent. Some of the highest levels of mobile money usage in the world can be found in select African markets. As the masses become ever more comfortable transacting in mobile money for person-to-person remittances, utility bill payments, and airtime
top-ups, this shapes demand for more advanced mobile financial services to continue to grow. The expanding DFC ecosystems now include savings vehicles, insurance, and working capital credit for SMEs. But despite the great progress, and with many of the puzzle pieces in place, including world-class data centers, key bottlenecks remain. Fiber in metro areas is only a fraction of what it could be, and often lacks a robust ring structure that ensures reliable broadband service. This is one of several factors why enterprises may hesitate in shifting to more efficient cloud-hosted services. And lacking this key driver of traffic, internet services providers do not reach the scale that could make them great anchor tenants for infrastructure business cases. A virtuous cycle awaits those able to bridge this supply-demand gap. While yesterdayâ€™s story was about international and long distance connectivity, the focus today is on achieving scaled metro and access deployments, with a view towards enabling many of the exciting technologies coming down the pike, such as 5G and augmented reality. Past turf wars need to be forgotten and a more collaborative approach adopted. As the sector matures, those able to spread fixed costs over multiple investors and a large number of customers may gain an advantage in taking a greater share of the growing broadband market A disciplined approach is needed, and providers must selectively target those blockages having the greatest incremental impact on broadband market development to get ahead of the revenue-cost equation.
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Digital Migration Can Solve Africa’s Unemployment Crisis There can be no broadcast development in Africa without digital transition and African governments need to take action fast or risk an ever-widening digital divide between the continent and the rest of the world. BY AKOREDE SHAKIR, FOUNDER AND CEO OF NAIJA LEADERSHIP BUILDER
frica has failed to meet the 2015 deadline for digital television transition (migration from analogue to digital television broadcast) as declared by the International Telecommunications Union (ITU). According to Digital Television Action Group (DIGITAG), only 19 African countries have launched national digital television transition (DTT) from which only four (Kenya, Namibia, Rwanda and Tanzania) have completed the process. This report, unfortunately, reaffirms Africa’s laggardness in the ICT world. With the obsolete analogue broadcasting still in use, the digital divide between Africa and the rest of the world grows. How can broadcasting development happen on a continent where signal space (on analogue) is virtually full to the brim? No new TV station can be set up without taking over an existing one. The switchover enables more channels; gives better wireless broadband services and brings about expansion of signal coverage area within a country. Perhaps most importantly, digital also offers a high definition (HD) view, dramatically improving the viewer’s experience. Despite the backlogs, assertive decisions are being taken by governments and private investors (particularly foreign-owned satellite firms) to make digital a reality. The challenges facing countries are substantial given the sums of money required to secure the necessary technological apparatuses and license fees. Further-
more, most free-to-air broadcasters do not have the finances needed to operate multiple channels with the same quality of content on all channels. The cost of set-top boxes for the receipt of digital TV signals is also a hurdle. According to the ITU, There are 90% more free-to-air analogue television viewers than pay-television subscribers on the continent making bridging this gap an arduous task. Producing quality content that will spark consumers’ interest is another bridge that must be crossed in the journey towards the digital migration. Furthermore, not all media houses can be sure of landing a licensed signal carrier. This is one of the main reasons why many have challenged the move to digital television in court. Government policies and regulations have to be well tailored and never inimical to any party in the industry. Most significantly, the greatest bottleneck hampering the switch is the insufficient political will to drive the revolution.
tainties and discrepancies in government policies, is vital. The above, arguably, are the most critical points for the accomplishment of the digital switch in Africa. By and large, it is noteworthy that pay television providers such as Multichoice – owner and operator of the Digital Satellite Television (DStv)– are already championing the digital revolution in parts of Africa. Another example is StarTimes –a Chinese firm jointly owned by the state-controlled Nigerian Television Authority (NTA)– which also broadcasts digitally. No doubt, the advantages of digital migration outweigh the negatives. Added spinoffs are the jobs that the migration will create for the myriads of broadcasters, technicians and engineers searching for jobs, every moment. In Africa, a successful digital migration has an impactful role to play in increasing human capacity building.
So what’s the bottom line? For the desired results, going forward, all regulatory frameworks must be tailored in result-driven leaps that will match-make both customers’ needs and business interests without any downside. Meanwhile, communicating the potential benefits of digital broadcasting is crucial (for the purpose of mobilizing public interests and investors’). It must be re-emphasized that a level playing ground for broadcast operators, who have been fearful of uncer-
How can broadcasting development happen on a continent where signal space (on analogue) is virtually full to the brim? DECEMBER 2016 / JANUARY 2017 FORBES AFRICA | 25
Destined To Give Audiences A New And Noble Experience The future of television viewing is digital, but in some African countries, the present is still analogue. Migration to digital is, and will continue to be, evolutionary, not revolutionary. BY GODFREY OHUABUNWA, MANAGING DIRECTOR OF GOSPEL NIGERIA AND CEO OF MULTIMESH
Advances in communications technology, including digital television, wireless phones, satellite-fed services and unlicensed devices, offer the opportunity to improve the quality of life and to promote economic development in rural African communities.
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ven though by agreement with the International Telecommunications Union (ITU), most countries were supposed to have switched off their analogue signals and replaced them with digital signals by June 2015, the international migration from analogue broadcasting to digital terrestrial television (DTT) slowly marches on. It’s no secret that far too much dithering has taken place across the African continent since the ITU, the organisation with jurisdiction over the information and communication technologies worldwide, set the date and called it “a major landmark towards establishing a more equitable, just and people-centred information society.” However, 10 years on, Africa lags to the rest of the world in its migration from analogue to digital. The most controversial issues revolve around regulatory measures and the decision on the functionality of the set-top box (STB) – the device required to transfer analogue signals to reception in digital. This has had a debilitating effect, with implementation varying from country to country. Some cash-strapped African governments do not have the money to build new transmission infrastructure or infrastructure upgrades. Others are simply mired in red tape and governance delays. Many countries have asked for extensions on the deadlines. In other countries, government departments and bodies are haggling over who has ultimate responsibility for overseeing the process. For example, Kenya’s digital migration saga has been in and out of court. Other countries are way ahead. Tanzania completed its digital migration last year. Internationally, a number of countries including the US, Japan and other European nations were the
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first to implement digital broadcasting. They terminated analogue TV services and are now broadcasting in full digital TV. Benefits of digital terrestrial television Despite the dithering and delays, the benefits are obvious. Advances in communications technology, including digital television, wireless phones, satellite-fed services and unlicensed devices, offer the opportunity to improve the quality of life and to promote economic development in rural African communities. Digital migration will eventually bridge the digital divide, bridge the content divide, promote local content development, enhance the television production industry, promote local manufacturing, diversify the television landscape and strengthen free-to-air television in the interest of the public. Moving onto digital TV brings better-quality viewing, allows more channels on the same networks, and frees up radio spectrum, which can be used to roll out broadband services to underserved areas. The introduction of digital television presents an opportunity to protect and strengthen free-toair broadcasters by giving them a multi-channel platform to meet the content needs of the public and diversity needs. Digital migration connotes an advance in quantity and quality. Citizens will be spoilt for choice with the increase in the number of stations, thereby enabling all citizens to have access to diversity of premium content. Lastly digital broadcasting is roughly six times more efficient than analogue, allowing more channels to be carried across fewer airwaves. The
digital switchover will therefore allow for an increase in the efficiency with which the spectrum is used, a digital dividend, which will open the way for wireless innovation and the potential for new services. Economic benefits African governments are working hard to ensure that all economic opportunities of the migration are explored and exploited to the benefit of Africans. The migration would also benefit sectors such as electronic manufacturers and producers. The plan is for each country to produce set-top boxes which have simple security mechanisms that would prevent the sale and use of it outside the borders of the country. Furthermore, the possibility of illegal imports of boxes are being carefully monitored. Despite the slow and evolutionary and not revolutionary process, the electronic media sector is on the brink of a massive shift, not only in Africa but across the world. Critics Some critics say while the days of pure analogue video systems are numbered and the advantages of DTT are obvious, the analogue systems still have some advantages over digital technology. For example, there can be slight delays in real-time video run over a network. Depending on network design, number of cameras, camera resolution and images per second, those delays could be 700 milliseconds or more – possibly a critical amount of time for an application that requires operator interaction. The critics say the analogue control mechanisms for pan-tilt units are probably still better than what is available in the digital environment and analogue cameras are still generally superior in low-light situations, although some of the more expensive IP cameras can now match that performance. Despite the delays, analogue receivers and equipment will be eventually phased out. Exciting times ahead According to Digital TV Research, these are exciting times for television in Africa. The research notes that aub-Saharan Africa’s household totals 148 million, which
will rise by 20 million over the next six years, fast approaching Western Europe totals. Sub-Saharan Africa will have 50 million TV households by 2017 - or 30% of total homes. According to the Digital TV Sub-Saharan Africa report, Nigeria will account for about a quarter of the region’s TV households (for the 42 countries covered in the report) in 2017, with South Africa contributing a further 15%. Three-quarters of the region’s TV households still received analogue terrestrial signals by the end of 2015, though this proportion will drop to 46% (23 million TV households) in 2017. Analysts doubts that South Africa will meet the deadline of mid-2017. They say even if things go well, it is likely to take a minimum of four years before that happens, despite South Africa’s commitment to an internationally agreed deadline. South Africa’s process has been delayed by, among other things, a squabble between the government, broadcasters and black electronic manufacturers over technology to be included in set-top boxes, funded by taxpayers, dividing the industry. There has also been a disagreement over the inclusion of an encryption mechanism in government-subsidised set-top boxes which will be distributed to house-
holds who cannot afford to buy a digital television set. The set-top boxes convert the digital signal so that older television sets can receive digital signals. Some experts say there is also a risk that the analogue signal that currently allows most South Africans to receive free television services will be switched off before everyone who qualifies has received a government-sponsored set-top box that will enable them to receive the new digital signal. Proportions in the other countries will be much lower, though Nigeria will have 7 million digital homes by 2017. Pay TV penetration of TV households will grow from 19% to 28% in 2017. The pay TV total will double to 14.1 million by 2017, with DTH contributing 8.2 million and pay DTT chiming in with 5.2 million. South Africa pay television will grow to 5.1 million in 2017. Nigeria will climb from 1.2 million in 2011 to 3.1 million in 2017. Digital terrestrial television broadcasting represents a significant step in the future development of information and communication technologies. This will go a long way in connecting remote communities, close the digital divide and improve communications worldwide. Digital migration is destined to give audiences a new and noble experience.
Advances in communications technology, including digital television, wireless phones, satellite-fed services and unlicensed devices, offer the opportunity to improve the quality of life and to promote economic development in rural African communities DECEMBER 2016 / JANUARY 2017 FORBES AFRICA | 27
Promoting Spectrum Sharing In The Wireless Broadband Era It is now evident that broadband connectivity is closely linked to Gross Domestic Product (GDP) growth of a country, therefore network operators across the globe are clamouring for more radio frequency spectrum allocations to handle the exponentially increasing data traffic and broadband connectivity demands in underserved regions. BY DR FISSEHA MEKURIA, CHIEF RESEARCHER AT THE COUNCIL FOR SCIENTIFIC AND INDUSTRIAL RESEARCH
ith only few usable spectrum bands left to free up, telecom regulators are pushing network operators to find new ways and techniques, to make the best use of currently allocated spectrum bands to achieve maximum wireless network capacity and address the broadband gap. Governments in emerging economy countries, which generally lack landline communications infrastructure, are putting pressure on network providers to provide affordable wireless broadband internet connectivity covering all regions. These countries, including South Africa, are experimenting with new and emerging wireless network technologies and innovative techniques to utilise network and spectrum resources. This is expected to provide affordable information & communication technology (ICT) based societal services to rural as well as urban communities. The Council for Scientific & Industrial Research (CSIR) in South Africa has been a pioneering research and innovation institution for affordable broadband networks, starting from the wireless mesh deployments in rural communities, to the recent dynamic spectrum network test-beds in several places in South Africa and regionally. Recently, a CSIR technology for smart spectrum sharing, known as a geo-location based dynamic spectrum allocation system (GL-DSA), has been promoted and tested in a global qualification process, led by the Office of Communications (OFCOM) in the UK. The CSIR research group has developed an innovative smart spectrum sharing geo-location spectrum database (GL-DSA), which is now hosted at the national centre for high performance computing (CHPC). The GL-DSA technology models existing transmitter radio parameters and identifies spectrum holes (socalled white space spectrum channels). With recent research and development, the technology will integrate spectrum sensing and new regulatory tools to make the technology adapt to the changing radio frequency environment. The GL-DSA system is the first African spectrum channel allocation system that can identify unused spectrum regions, or white spaces, of the radio frequency spectrum and assign, through a standard communications protocol, the necessary white space spectrum channels to secondary broadband network operators. It 28 | FORBES AFRICA
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also sets the network parameter rules to guarantee that no interfering signals are generated on legacy networks. For this reason the GL-DSA system is also termed as white space spectrum database (WSDB) by other organisations. The CSIR has developed a coverage map of all South African regions according to television white space channel availability. Emerging dynamic spectrum network operators (DSNOs) can utilise these new spectrum sharing based network technologies, in such a way that radio frequency spectrum resources are shared without causing interference and loss of connectivity to existing licenced networks. DSNOs using smart spectrum sharing are expected to lower the cost of network rollout and broadband services in underserved rural areas in Africa and emerging markets. The GL-DSA system then takes over and allocates white space channels to DSNO network devices through a standard protocol called PAWS to minimise signal interference (PAWS termed: protocol for accessing white spaces by Internet Engineering Task Force â€“ IETF standard). The GL-DSA system can also be used as a tool for national telecom regulators to manage national spectrum resources in a controlled and co-existent manner. Thereby enabling national telecom regulators meet their universal access mandate by accelerating broadband Internet connectivity and service development. Spectrum scarcity is also one of the drivers for adapting smart spectrum sharing for emerging wireless services such as LTE-Advanced and fifth generation mobile standards (so-called 5G). Therefore the technology of smart spectrum sharing and white space spectrum communications networks are relevant solutions for future wireless networks. Investment in white space spectrum networks and co-existence tools such as the GL-DSA are necessary to enable new techniques of spectrum sharing between licensed legacy networks and secondary broadband networks. Regulators including the Federal Communications Commission (FCC) in the US and OFCOM in the UK have opened up portions of spectrum for use by white space network applications. White space communication networks based on the television band of frequencies (so called TVWS) are being tested globally
and other countries are expected to follow suit. The key challenge in using white space spectrum for wireless communication is the need to avoid interference with existing services like TV broadcasting. The GLSD is the technology that comes to the rescue to enable early stage cognitive radio techniques use distributed decision making and intelligent channel allocation to allow dynamic spectrum access for communications devices. The use of the GL-DSA system will enable intelligent geo-location based decisions to be made on network routing and spectrum resource usage. These technologies have allowed the CSIR and its partners to pilot TV white space networks in the Tygerberg area in the Western Cape province of South Africa. The Tygerberg white space network provided broadband Internet connectivity to 10 under-privileged schools, at an average of 8MB/s rate. It also proved that dynamic spectrum white space networks can co-exist with legacy licensed network services without interfering and service disturbance for the past three years. The technology is thus proven enough for a commercial launch, however, what is lacking is the boldness from industry and legacy network and service providers to invest in this new technology and standards allowing increased industrial production
DSNOs using smart spectrum sharing are expected to lower the cost of network rollout and broadband services in underserved rural areas in Africa and emerging markets.
of white space network devices. Finally, an innovative spectrum regulatory policy is needed to allow such networks to operate commercially and complement existing networks to meet the ever increasing demand for broadband connectivity and ICT based services The CSIR is taking this seriously and working with the Independent Communications Authority of South Africa (ICASA) and other regional regulators to develop an enabling spectrum sharing regulation to allow development of affordable broadband network services in underserved rural areas, in the first place and also in the new 5G mobile standard to cater for the exponential data traffic increase due to new services such as the Internet of Things (IoT). ICT infrastructure sharing is another area that has been promoted to reduce the cost of broadband connectivity and associated ICT based services. These include both active and passive infrastructure sharing including base-stations, network power systems, base station towers and others. This is an area that requires much debate. As can be seen in many African communities, operators are not obliged to share broadband infrastructure, which could have otherwise reduced the cost of network rollout, thereby reducing the service costs to end-customers. In Europe these rules are strictly followed, and therefore operators are applying both active and passive ICT infrastructure sharing, thereby reducing the cost of services and fulfilling the environmental impact requirements. The UN’s 2030 Agenda, involving the 17 sustainable development goals (SDGs) and the International Telecom Union (ITU) Broadband Commission (composed of the telco industry, public organisations and NGO leaders) regard broadband Internet as a vehicle to leapfrog developmental roadblocks. Broadband Internet is expected to leverage access to new ways of providing societal services in sectors such as education, healthcare, energy systems, transportation, and agriculture and help accelerate the creation of new startups and job opportunities for young entrepreneurs. Furthermore, such ICT interventions enable countries and regions to attract investment for business and industrialisation of emerging economies of Africa. It is thus
of high importance if broadband ICT networks and affordable broadband Internet services are promoted by investing in new technologies, standards and policies such as spectrum sharing to create tomorrow’s spectrum highways for wireless broadband Internet services. Such actions will in the end allow us to attain the UN sustainable development goals with the three pillars being economic development, social inclusion and environmental protection in Africa and the world. Finally, the CSIR as an emerging economy science & technology research institution and the mandate it has to support the national development plan NDP and South Africa Connect, is considering a number of technology innovation based industrialization and job creation opportunities with the GL-DSA technology. New technologies and intellectual properties such as the patented GL-DSA system developed at the CSIR can attract investment opportunities for South African industry to utilize this innovative and patented technology to create a new knowledge based industry. These knowledge based industrialisation opportunities can be listed as follows: 1. “Network device manufacturing for the DSNO operators”. Since the GL-DSA system and WSDB technology are new, the standards for it are on development. CSIR is involved in these global technology standards forums and hence have knowledge of the technology research and development process. As the technology is relevant for emerging economies and developing countries, it is believed that it opens up an opportunity to establish dynamic spectrum network device (DSND) industry in South Africa, which could be able to address the next billion broadband Internet subscribers in markets such as emerging economies of Africa, Asia and Latin America. 2. Industry creation in commercial geo-location based spectrum databases, serving local municipalities and service providers, to accelerate low cost broadband network deployments. 3. Geo-location based dynamic spectrum network operators (DSNOs), rural network operator industry and Internet service industry for job creation in rural communities. DECEMBER 2016 / JANUARY 2017 FORBES AFRICA | 29
Using Innovation to Solve Africaâ€™s Problems ICT has a way of adding value by delivering financial inclusion for those previously unbanked, especially those living in poverty. BY CALIXTHUS OKORUWA, XLR8
iding the wave of the digital revolution across the continent, digitally empowered Africans are driving change on different fronts. SMS authentication of medicines, mobile money, smart schools, digital villages, music streaming, are just a few examples which show how information and communication technology (ICT) is catalysing social change in Africa. SMS authentication of medicines When buying antibiotics in Nigeria today, the pack is most likely to include a hologram to scratch, which reveals a PIN number. Once the PIN is sent to a dedicated short code as indicated on the pack, a return SMS message is delivered confirming whether the medicines bought are genuine or fake. Drug adulteration has been a problem in Nigeria since the 1980s. This resulted in issues around the authenticity of certain prescribed medicines, and whether a patient was taking fake or altered medication. In some cases the medication contained a mere fraction of the required active ingredient and were often bolstered with starch. This presented a huge concern for the healthcare industry and health practitioners. In the face of a rather disorganised drug distribution system, fraudster traders had come to realize that there was money to be made, lots of it, from trading in counterfeit medicines. These traders were reputed to collaborate with offshore drug companies to manufacture substandard medicines. While cases of fatalities arising from the consumption of counterfeit medi-
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cines have not been comprehensively documented, anecdotal evidence shows that over the years, many lives have been lost. Further infectious diseases may have become more widespread on account of repeated treatment with sub-optimal doses of medications. Drug resistance, which implies increasing difficulty and cost of treating diseases, would certainly have risen in the circumstances. Local pharmaceutical firms bore the brunt of these problems as many struggled with the looming spectre of drug counterfeiting on their products, hallmarked by poor and worsening economic returns. In the face of additional socio-economic difficulties, many, especially multinational pharmaceutical corporations, closed shop altogether. Drug counterfeiting meant that the Nigerian government needed to increase oversight of drug manufacturing and distribution in Nigeria, this lead to the establishment of a National Agency for Food and Drugs Administration and Control, NAFDAC, modelled after Americaâ€™s Food and Drug Administration, in the early 1990s. The problem of counterfeit medicine, has however, never been fully eradicated. ICT innovation led to the development of SMS-based authentication of medicines, as pioneered by mPedigree. Since then mPedigree has expanded authentication beyond medicines to include cosmetics for which counterfeiting has also been a growing problem, to agricultural inputs, packaged foods and even automotive components. In addition, the technology, referred to as Goldkeys technologies by the company, has been
expanded into other industries including logistics management. Using technologies to solve real life problems Goldkeys technologies reflect an innovative and practical application of technology to solving real life problems on the continent. Its success relies on collaboration with telecom companies, including the delivery of a toll-free network for SMS short-codes in many countries across the continent. Nigeriaâ€™s NAFDAC has since mandated pharmaceutical companies to compulsorily adopt the drug SMS authentication service for antibiotics and antimalarial medicines, as these are typically the main target of the drug counterfeiters. Pharmaceutical company executives are of the view that the initiative has been useful at curbing the adulteration of medicines, with attendant positive impact on the bottom line. However, insufficient public awareness poses a threat to the drug authentication scheme. For instance, according to Bunmi Adimula, Sales Director for Glaxo Smith Kline (GSK) Nigeria, promoters of fake and adulterated medicines quickly departed the big cities like Lagos, Port Harcourt and Abuja, soon after GSK commenced its authentication scheme. Instead they focussed their efforts on the remoter cities and villages in the hinterlands where public awareness of the scheme is comparatively very low. In addition, while initially over 20% of patients actively took the pains to authenticate their medicine purchases via SMS, the number soon declined to half, this is in part due to the
Today, information and communications technology has availed the country of yet another innovative means of curtailing the problem. SMS-based authentication of medicines was pioneered by a company called mPedigree.
Drug adulteration has been a problem in Nigeria since the 1980s resulting in issues around the authenticity of certain prescribed medicines
assumption that the presence of the hologram was a seal of quality. Not surprisingly, drug counterfeiters have since emerged with fake holograms on fake products. The implication is that while the innovation has been pivotal at creating a social good, it must be accompanied with aggressive public awareness campaigns if it is to be optimally effective. It is imperative that government plays a visible role in helping to radically entrench this innovation, which offers considerable good across the entire value chain. Enhancing financial inclusion: The M-PESA example Beyond fighting disease, ICT has also found a way of adding value in reducing the barriers to financial inclusion amongst the poor. Mobile money has been a huge success story in bringing millions of people under the canopy of the formal financial services sector. M-PESA, the mobile money product of Safaricom in Kenya, is an iconic example. The World Bank describes M-PESA as a small-value electronic payment and store of value system that is accessible via the regular feature phone as well as smartphones. All a customer needs is an M-PESA account to send and receive money, this can be delivered to those with or without
M-PESA accounts. Additional services such as purchasing airtime are available. It enables the secure delivery of money across the country, often in less than a minute. The M-PESA service is reasonably affordable and hugely popular in Kenya. One of its key advantages is that it enables structured access to finance for the poor. Access to finance is an opportunity to invest in starting a small business or even boosting productivity of an existing one. M-PESA is used by over nine million customers says the World Bank. By 2015 it was facilitating an average of $320 million per month in person-to-person transfers. Since its launch it has evolved and is now used for institutional payments including salary payments and bill payments. Riding the wave of the popularity and pervasiveness of mobile phones on the continent and the innovative marketing of telecom operators, M-PESA represents a creative deployment of ICT at delivering real value for the continent. Enhancing transparency, minimizing financial opacity in governance Enhanced transparency in the national budgeting process with the public playing a critical oversight role can indeed provide a better likelihood that funds may be properly channelled to projects for which they are earmarked. This way, wastage, project duplication, inadequate project completion and of course the rather deep-seated problem of stealing of funds, all of which pose huge obstacles to economic development, can be reduced.
BudgIT is a NGO based in Nigeria. It uses digital solutions to encourage citizens to demand accountability from government. For instance, BudgIT uses data to present the government’s budget and public spending in easy to understand infographics so that the country’s citizens can see how the government is using taxpayers’ money, placing pressure on the government to be more accountable. To date BudgIT has reached over 750,000 Nigerians via digital and physical spaces, leading online and offline conversations on government finance and public sector efficiency. It receives over 2,000 unique data requests each month from corporate entities and individuals, and has become a trusted hub for public finance data in Nigeria. Smart schools, digital villages, music streaming Elsewhere, companies like Samsung are deploying smart schools across the continent. These are helping to encourage technical skills development in young people, helping to improve educational outcomes. Furthermore, Ericsson’s digital villages are providing people in rural areas with connectivity to the Internet. Cisco’s network academies provide technical training and certifications to people across the continent. Other telecommunications companies, such as MTN, provide digital streaming platforms for the creative industry and upcoming artists. There is no doubt that the digital revolution is changing the face of Africa. From enabling financial inclusion, to driving improved accountability, innovation is helping to solve some of Africa’s stickiest problems. DECEMBER 2016 / JANUARY 2017 FORBES AFRICA | 31
Are Breeding Grounds For Smart Cities Free Wi-Fi for all provides Africa with the opportunity to develop ‘smart cities’ and compete on an equal footing. BY THAMI MTSHALI, CEO OF GALELA HOLDINGS AND THE FOUNDER AND FORMER CEO OF IBURST
s a man hailing from apartheid-era Soweto where access to technology was the preserve of those from affluent suburbs, I never imagined that there would one day be a force that could be an equalizer for youth, business and city development, not only in South Africa, but for the rest of the continent. This ingenious force is looming technological accessibility for all and the seeds that it sows for smart cities in our very near future. By technological accessibility for all I am referring to the rollout of free WiFi, not only in Africa’s plush areas and developed cities, but also in its townships and in far flung rural towns which up until now have not been privy to this phenomenon. And although the uptake and development of smart cities in Africa is still likely to lag a bit behind the developed world, these connected cities will one day provide breeding grounds for smart cities. What is compelling is that this unwiring revolution looks set to be a leveller for Africa on the global stage if it is adopted more widely across the continent. According to Ericsson’s Mobility Report (2015), Africa continues to lag behind the developed world with extremely low internet penetration even though the expectation is that mobile data traffic in the region will grow up to 15 times its current levels between 2015 and 2021. South Africa’s average gigabytes domestic product (GGDP), which is the amount of information consumed by a nation in gigabytes per capita, sits at
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around 1 gigabyte per person per month, while the rest of the continent trails behind at roughly 0,1 gigabytes per person per month. This compared to South Korea, the global leader, at 60 gigabytes per person per month and the US, which sits at around 38 gigabytes per person per month. The global average currently sits at 27 gigabytes per person per month. GGDP is essentially a measure of the smartness of a nation if one had to use the amount of information consumed electronically per person per month as the yardstick. And if one looks at the GGDP of a nation you find that there tends to be a direct correlation between its GDP and GGDP. That is, once a country’s GGDP is above a certain amount, its GDP per capita is also likely to be higher than average. This therefore, reinforces what we already know - that information is power and contributes to the socioeconomic wellbeing of any country. For this reason, the African average is of huge concern and places us in danger of being usurped by the “smarter” nations at every turn where smart city solutions like Uber and smart gadgets are commonplace. These innovative and efficient solutions are very rapidly assimilated into the everyday lives of citizens in developing nations causing serious resistance from existing service providers whose products and services are basically then rendered obsolete. The lesson here is that Africa needs to get onto the information highway very fast or risk being left behind in this global technological revolution.
So what has been holding Africa back? Quite simply: affordability. However, the good news is that the new wave of free Internet connectivity (largely via mobile phone) currently taking the continent by storm could be the most effective panacea to this ill. And should the broadband rollout continue at the rate that it is going, we look set to disprove many of the lukewarm projections being bandied about where our Internet usage rates are concerned, and edge closer to those of the developed nations. More exciting though, is the door that this will open for the integration of multiple ICT and ‘Internet of Things’ (IoT) solutions to improve the efficiency of services offered by these cities to their residents, and boost economic activity within them. Additionally, unwiring can take care of the affordability issue. For example, if we had to look at typical consumption by a child, using one of my own children at home who consumes 100GB of data per month as a guide, a parent in a township or a village in the rural areas would be looking to pay anything between R1,000 (calculated at 1c per MB) – R10,000(calculated at 10c per MB) a month for their child to consume the same as mine. This price escalates even further in the developed world with countries like the US and Germany charging approximately €5 per GB, or €500 for 100GB . Using South Africa as an example, where an average black household earns just over R5,000 a month (2011 Census) and unemployment stands at over 25% (2015), a large percentage of the country
Who would have thought that a resident of Potchefstroom would one day be able to enjoy more access to the Internet than most across the globe?
The lesson here is that Africa needs to get onto the information highway very fast or risk being left behind in this global technological revolution
could not afford to spend this much money on the Internet. But the recent push by government and some in the private sector for increased accessibility is helping to make where you come from a non-determinant in this particular equation. These public private partnerships are key because experience has shown that this kind of empowerment of whole nations is not the priority or prerogative of your larger, profit-driven private sector companies but can rather be achieved through collaboration between government and some private sector players. Africa has seen a number of such partnerships in recent times with Rwanda launching free Wi-Fi in Kigali two years ago, and Kenya becoming the second country in East Africa to enjoy free Wi-Fi after local company Liquid Telecom partnered with the Nakuru County Government to launch in Nakuru last year.
In South Africa, we have seen a number of municipalities launching free Wi-Fi. Galela Technologies is leading this drive, launching the country’s very first free Wi-Fi networks in the Northern Cape’s Joe Morolong Municipality, as well as in the Tlokwe Municipality (North West Province). We have since seen launches in the bigger Metros including Tshwane Metro, Ethekwini, the Nelson Mandela Bay Metro, and the Dr KK Kaunda District Municipality (Potchefstroom). The dynamics of these locations are so different and yet their common free access to the Internet now places their prospects for development at an almost equal footing. With this newfound access to the Internet will come increases in GGDP. We have already seen in some of the areas where Galela has partnered with government individuals consuming an average of 30 gigabytes a month – just a bit above the
global average. Who would have thought that a resident of Potchefstroom would one day be able to enjoy more access to the Internet than most across the globe? This is what the unwiring revolution is doing and the increases in GDP with their numerous socioeconomic benefits are sure to follow. With these “smarter” citizens, the continent will then be poised to take its place amongst the best globally as everyone uses new technologies to drastically cut costs for consumers, create and expand economies of scale, gain global market share, and boost the general economic wellbeing of all those who live in these cities. My assertion is that Africa needs to keep making the expansion of access to the Internet an imperative for its communities because the consequences of failing to unwire to create wired cities could be dire for the meaningful development of our continent. DECEMBER 2016 / JANAURY 2017 FORBES AFRICA | 33
INTERNET OF THINGS
Achieving Africa’s ‘Internet of Things’ Potential The Internet of Things (IoT) will change the way industries function and shape the provisioning of products and services for governments, businesses, and consumers across Africa. BY JOHN BEAUMONT AND CHRISTOPHER MITCHELL, BAIN & COMPANY
he IoT, in which everyday objects have network connectivity, allowing them to send and receive data, will help shorten supply chains, increase crop yields and improve resource allocation decisions. As a result, IoT will provide a new tool in the war against some of the most undesirable and difficult aspects of doing business in Africa: woeful infrastructure, lax security and endemic corruption. Shaping these outcomes requires investment from telecommunications firms and businesses, as well as supportive politicians and thoughtful regulation. In Africa, creating this environment is not easy, but if stakeholders work together the payoff is substantial. According to four organisations, Ovum, Gartner Forecast Analysis, the Independent Development Corporation and Bain Brief, globally, forecasters predict that there will be over 20 billion IoT devices within a few years, generating five trillion gigabytes of data every year and creating more than $450 billion in annual revenues for vendors, software and solutions providers by 2020. In Africa, it is expected that by 2020 there will be over 45 million machine-to-machine IoT connections and over $3 billion in revenues for telecommunications players and almost $2 billion for system integrators. CEOs and shareholders need to be careful: companies that invest smartly will benefit from the rise of IoT; however, throwing money at every cause, or sitting
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on the sidelines while competitors invest thoughtfully, could greatly undermine a company’s competitiveness. The ‘Internet of Things’ is not a single product, but rather an ecosystem of overlapping technologies that gives rise to a range of services. An IoT application typically requires integration across four separate layers: sensors and devices that gather data from either humans or machines; wireless and fixed networks (connectivity) to transmit this data; analytic platforms (often in the cloud) to make sense of the data (commonly referred to as ‘Big Data’); and the application or service itself. If one part of the chain is absent, either through lack of investment, non-interoperable standards, or local regulatory interference, then the IoT ecosystem will not deliver its full potential.
Apps & Services
IoT is already in Africa Although an IoT application can generate gigabytes of data, individual sensors often only need to transmit small amounts of information. Therefore, provided a country has decent 2G infrastructure, an IoT-based ecosystem can flourish. Moreover, as the cost of computing, connectivity and sensors tumbles – a typical sensor costs about $0.60 now versus $1.30 10 years ago – IoT becomes more viable, making deployments in even poverty-stricken areas feasible. Indeed, IoT deployments can already be seen across Africa. In transportation, Tanzanian Usangu Logistics uses the technology to monitor the seals on trucks transporting oil, to prevent driver pilferage; and Echo Mobile in Kenya has tested providing taxi (matatu) owners with data on a drivers’ New analytics and data services (predictive maintenance, personalized medicine, store shelf optimization, etc.)
Consumers, Businesses, Government
Cloud & Analytics
Data Improved efficiency; Enhanced or deeper, new insights; new services disruptive offerings
Enterprise & Industrial
Mobile | Devices | Equipment | Infrastructure
Personal | Home | Transportation | Retail | Buildings or Cities Automotive | Healthcare | Financial Services | Industrial | Infrastructure
Internet of Things and Analytics are inter-related opportunities (Source: Bain & Company)
Successfully deploying IoT solutions across Africa will require collaboration among global vendors, governments, telecommunications companies, and local businesses.
Successfully deploying IoT solutions across Africa will require collaboration among global vendors, governments, telecommunications companies and local businesses speed, acceleration, and breaking, which helps owners reduce unsafe driving. In large-scale conventional energy, South Africa’s Eskom has installed prepaid smart meters to better monitor load usage and to force customers to pay for energy usage in advance, reducing revenue lost from unpaid bills. Similarly, in off-grid home solar systems, Kenya’s M-Kopa installs systems that not only provide the company with detailed usage information but also allows it to remotely shut down the unit if a customer does not pay. Reducing revenue leakage incentivises energy providers to develop solutions for the 65% of people in subSaharan Africa who are not connected to the grid. In insurance, South Africa’s Discovery offers to par-fund the purchase of an Apple Watch for its customers. It then uses health data from the wearable to incentivise customers to do more exercise. Customers may get a free coffee or juice, but Discovery is better able to assess and underwrite risk, therefore increasing profits. Finally, in agriculture, there are many examples of businesses across
the continent using the combination of sensors (to measure soil moisture and mineral content) and weather data to help farmers increase crop yields. Despite the enormous potential IoT presents, there are still barriers that could hinder adoption. Some of these are not unique to Africa, such as the technical trade-offs between cost, reliability, power usage, and connectivity and industry-wide issues related to standards, security, and interoperability. Others are localised, particularly those related to policies regulating access to data and privacy. In Africa, limited resources (capital, energy, and expertise), relatively small market size opportunities, and the fact that many areas lack mobile connectivity work against the broad, near-term adoption of this promising technology. Call to action Successfully deploying IoT solutions across Africa will require collaboration among global vendors, governments, telecommunications companies and local businesses. African companies investing in IoT technologies must understand the global
vendor landscape to decide whether they should invest or form partnerships. Particularly in the ‘analytics and cloud’ layer, the global firms will have a scale and cost advantage that local players can’t match. The government has a crucial role to play as catalyst. It must start by establishing regulatory frameworks that incentivise capital deployments and IoT adoption. In some instances, regulation needs to be at the regional level, particularly when the case traverses borders, as it does in transport and logistics solutions. Government needs to provide investment capital for largescale projects, especially where it has an outsized role in the provision of products or services and can benefit from better decision-making and resource allocation. A good example is healthcare delivery where IoT could dramatically increase the quality of outcomes and control crises by ensuring resources were efficiently and urgently channelled where most needed. This was aptly demonstrated during the Ebola outbreak across West Africa. ‘Smart band aids’ were used in Ebola stricken areas to gather data on temperature, oxygen saturation, and respiration and could alert medical personnel of changes that may indicate whether a person is infected. Tests of this technology were run at small scale, but could make a sizeable difference when the next outbreak strikes. Another area of focus should be DECEMBER 2016 / JANUARY 2017 FORBES AFRICA | 35
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agriculture. Tens of millions of smallholder farming families across the continent could benefit from soil sensors and automatic weather updates to mobile phones, which would help them plant crops at optimal times and use scarce water resources better to increase productivity and incomes. Finally, it is crucial that governments invest in ensuring data integrity and security. Otherwise, there is a risk that IoT can yield itself to snooping on citizens and businesses to the detriment of vital investments in IoT technologies. Unsurprisingly, telcos are a critical link in the delivery of IoT solutions. While connectivity is the lifeblood of sensors, telcos can also choose to extend their reach across the entire ecosystem to provide one-stop-shop solutions to customers. This is somewhat different from the situation in Europe or America, where IT firms are better placed to develop applications that encourage telcos to focus on connectivity. In Africa, the opportunity for telcos lies in creating a managed service that provides the device, connectivity, network management and cloud-based analytics
for an IoT solution. Solutions can then be plugged in to this platform, which either the telco or other enterprising entrepreneurs can develop and deploy. In addition, African telcos have outsized scale relative to other African businesses, and they should use this to drive costs down, particularly for sensors. Finally, there will be a temptation to drive short-term revenue through excessive data pricing rather than to incentivise volume. This is especially true across borders where roaming charges are often exorbitant and interoperability poor. To achieve scale, businesses will need to invest in the technology and create applications for end users. While the manufacturing of sensors, cloud hosting, and data analytics will be done by global giants like Siemens, Amazon Web Services, and IBM, local firms will play a substantial role in application development, solution deployment and integration. Many global IoT firms will look to partners in Africa to exploit opportunities: local know-how and relationships are usually key to success and it is precisely
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here that African companies have a substantial competitive advantage. Also, IoT solutions that are built for developed countries or even other emerging economies, will need to be tailored to the realities of doing business in Africa. Reciprocally, African companies should use the substantial investments already made in global computing platforms to turbocharge solution deployment. Finally, African businesses, whether serving other companies or consumers, are in the privileged position of knowing their customers and their needs best. IoT can provide enormous benefits to Africa but to realise this potential the ecosystem of necessary players must work together, and quickly, while making the most of the rapidly changing global technology landscape. There is no question as to the destination, but the speed of arrival depends on how global vendors, governments, telcos and businesses invest in the IoT ecosystem. With luck, the IoT will underpin a significant rise in quality of life across the continent sooner rather than later.
Internet of Things:
Changing The Face Of Business In Africa IoT adoption and innovation in Africa is on the rise, changing the way business is done on the continent. BY FUNMI LAWAL, ICT CONSULTANT WITH SIDMACH TECHNOLOGIES NIGERIA LIMITED
he African continent historically has not been at the forefront of technology advancement and leveraging technology to improve quality of lives, business processes and the economy. The good news is that the tides are changing and opportunities are arising to encourage Internet of Things (IoT) adoption and innovation in Africa. The IoT shifts the way we interact, communicate and process data. With the IoT, humans can interact with machines and machines can interact directly with machines (M2M). This is driven by the connectivity of devices and things that are sensor enabled, producing data from the environment and things that can be accessed in real time by computing systems. The harnessing of this real time data brings data analysis and decision making to a whole new level. It also enhances situational awareness and the optimisation of processes and resources. IoT can be built to manage real time data for several sectors, such as traffic controls and electricity grids in the power sector, green houses in the agricultural sector and industries such as trade and commerce and the pharmaceutical industry. The best approach to IoT implementation is to tailor solutions to address current challenges facing African nations with a view to enhancing processes, maximising resources and increasing profitability. Power is one such example. Generation and distribution of power has been a major challenge in many countries in Africa. Though this is still a major setback, some
IoT sensors have been made to be low energy consuming and can be powered by a small cell battery lasting for up to 15 months. The sensor is the core part of IoT. Just as the human sense organs help in understanding and relating to the environment, sensors do the same to things, thereby bringing things alive. With the boost of power generation and supply, the adoption of IoT will definitely shoot up. Another option being championed is the use of solar energy to power sensors for the devices. All these salient solutions to the power generation problem encourage the development of embedded systems projects with IoT based solutions coupled with sensors and microcontrollers running in the cloud. According to International Telecommunication Union (ITU), by the end of 2015, 3.2 billion people were using the Internet globally of which 2 billion were from developing countries. This shows that, for every internet user in the developed world there are two in the developing world. Although there is still more to be done to improve the numbers and penetration of Internet services to rural areas of Africa, there is optimism that the implementation of IoT will tackle this issue. When it comes to mobile broadband coverage, developing countries are experiencing rapid internet penetration with rural communities being reached as a result of falling cost of smartphones and mobile broadband devices.
IoT adoption by power utlity companies Thanks to the IoT, smart meters have already been introduced in South Africa and Nigeria, helping consumers to remotely monitor their energy power consumption via different channels. This helps consumers in understanding their consumption rate and enables them to make informed data-based decisions and projections. With more technological advancements, customers should be able to save energy and remotely switch off their meters when out of their offices or homes. IoT can assist power distribution companies in monitoring power consumption in real-time with heat maps and geotagging to prevent fraudulent wiring and theft of energy devices. Data gathered over time will allow the power distribution companies take better decisions on the distribution of power based on consumption. IoT adoption in agriculture Smart, sustainable farming applications are becoming popular promising 24/7 remote visibility of soil and crop health, machinery in use, energy consumption levels, animal behaviour and storage conditions for open fields and greenhouses. This will in turn enable increased overall crop yields and quality of crops. With every challenge lies an opportunity. Infrastructural challenges in Africa provide an opportunity to build platforms and automate processes using IoT, improve the quality of lives, business processes and ensuring quality decision making. DECEMBER 2016 / JANUARY 2017 FORBES AFRICA | 37
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The ‘Internet of Things’ Is Fast Becoming The Norm With the rapid development of new sensors, faster Internet connectivity and lower data costs, the Internet of Things will continue to evolve rapidly. BY WAYNE DE NOBREGA, CEO OF TRACKER
he great science fiction writer, Arthur C. Clark formulated three laws in his time. The third of these claim that “any sufficiently advanced technology is indistinguishable from magic.” Clarke passed away in 2008, just as the Internet of Things (IoT) was beginning to evolve, but the visionary science fiction writer may have been referring to exactly that technology when he penned his insight. But what exactly is the Internet of Things? The term was first coined by the Massachusetts Institute of Technology’s Kevin Ashton in 1999, when he referred to the way that a wide variety of objects can be connected to the Internet, using existing technologies. Ashton was a bit of a visionary himself, as the technology he predicted is really only gaining traction now – 17 years after he first foresaw the possibilities. But the very term, Internet of Things, is fairly vague, and makes it hard to define the exact technology. Some real-world examples may help: In the USA and Europe, so-called smart thermostats are becoming common. These devices allow users to adjust the temperature inside their homes remotely, using their smartphones or Internet browsers. Home weather stations have also come of age, under the guidance of Netatmo, a company that manufactures a host of weather monitoring devices. These devices all connect to each other, with a central
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module that transmits the combined data to a user’s phone or tablet via the Internet. As nebulous as the term is, more and more ‘things’ are becoming connected. Smart fridges may be the poster boys for the technology, but the Internet of Things is fast becoming the norm rather than the exception. As a matter of fact, the technology is often found where you least expect it. Connectivity to track cars and deliver data Tracker, South Africa’s premier vehicle tracking and stolen vehicle recovery company, founded their entire business was built on the connectedness of things. While the company did not rely on the Internet as their primary data network, the principles are the same. Those principles being that a variety of objects – mainly cars in the case of Tracker – can be connected to a network in order to share information. As a matter of fact, Ashton himself was working on radio-frequency identification (RFID) modules when he came up with the concept of the IoT. And that’s really where things started for Tracker too. To most people, Tracker is a Stolen Vehicle Recovery (SVR) company, and while the business has evolved significantly since its inception in 1996, it still has the SVR business at its core. As such, the company relies heavily on a variety of network services, all of which combine to supply a mass of data that has seen Tracker change tack in recent years.
Tracker’s systems have evolved from simple tracking devices to smart devices that supply it with a total of nearly 35 million packets of data per day. This data is pooled from one million subscribers, and gives Tracker the ability to draw significant insights from the data in real time. The amount of data gathered is staggering, but raw data is worthless unless you are able to interrogate and extrapolate meaning from it. Developing and defining the algorithms that allow Tracker to understand and act on the incoming data has been a focus point for the company in the last decade, and as a result Tracker has grown into one of the largest data companies in southern Africa. Mitch Kapor, the man behind the modern spreadsheet, once famously said that that ‘getting information off the Internet is like taking a drink from a fire hydrant’. And that is very much the way it is with the data Tracker collects every day. There’s just so much of it that the challenge lies not in collecting it but filtering it, enhancing it and finally utilising it to solve a problem. As such it is not the data itself that has an economic impact, but rather what is done with the data that can have a meaningful result on the economy. But how does Tracker’s data tie into the IoT? The key lies in closing the loop, back to consumers and clients – the original source of the data. At its most basic level, Tracker’s traffic flow data is fed back to GPS manufacturer TomTom, who send real-time traffic updates to their GPS receivers. As a result,
users can avoid traffic congestion, thus saving time and money. But beyond simple traffic monitoring, Tracker believes there are a vast number of items that can benefit from becoming connected – especially once the company’s impressive data interpretation is applied. Traffic lights, for instance, would be able to report system faults over the Internet, automatically notifying the relevant roads agencies, and informing motorists to avoid the area. One step further, would be to be able to change the timing of traffic lights at intersections, based on real-time traffic flow data. This would enable traffic flow to be monitored and changed according to current road circumstances. This could be
applied to other mechanisms used for traffic flow including automated bridge timings. To a degree, while the future might feel a bit Orwellian with sensors everywhere, monitoring the world around us, it is a realistic picture of what the IoT can deliver. Data can support locations for new shopping malls, hospitals or schools, and it can help automotive manufacturers to fine-tune their dealer networks. But linked to the IoT, data trends can also manifest in surprising ways. Imagine digital advertising, for instance. These large-scale boards can be programmed to display different advertisements on the fly. By connecting them to a data source such as data gathered by companies like Tracker, advertisements can be
400 MILLION INTERNET USERS
3.2 BILLION INTERNET USERS
100 million people (rounded values)
flighted according to the various age, gender or even income groups that travel past such boards at different times of the day. Again, it isn’t the data that has an economic influence, but rather the way that data is applied. Whatever way we look at it, faster Internet connectivity, lower data costs and emerging innovation is almost a guarantee that the IoT will continue to evolve rapidly delivering a more-connected and potentially more exciting world. Clarke also penned a second law, and maybe it is this one that best describes the way the IoT is evolving even as you read this; ‘the only way of discovering the limits of the possible, is to venture a little way past them into the impossible’.
Globally 3.2 billion people are using the Internet by end 2015, of which 2 billion are from developing countries.
Offline Source: ITU Note: *Estimates
For every Internet user in the developed world there are 2 in the developing world.
However, 4 billion people from developing countries remain offline, representing 2/3 of the population residing in developing countries.
Of the 940 million people living in the least developed countries (LDCs), only 89 million use the Internet, corresponding to a 9.5% penetration rate.
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Just As The Internet Has Evolved, So Too Have Cyber Criminals
The digital revolution is storming ahead, alongside the incredible benefits that the Internet brings, comes ever-increasing risk of cyber attacks. BY BONTLE HEADBUSH, INDEPENDENT COMMENTATOR
he whole notion of cyber security may conjure up images of James Bond - like scenes of a villain caught up in the act of attempting to destabilise countries or multinational corporations through some form of cyber attack, forcing the ever-resourceful Bond (who has since morphed into a cyber whiz of course) to then spend the next hour and a half devising some online solution for this conundrum. A bit far fetched? Well that seems to be how we as a continent are inclined to view cyber security. We appear to be stuck in a mind-set that tells us that this belongs in the realm of the movies, or at least in the more advanced countries of the West where movies such as these originate. However, this is a mind-set that we need to discard because cyber threats are a reality the world over. And Africa is not immune to cyber attacks. However, we appear to have no meaningful approach as individual countries or as a region to disarm these attacks, let alone any significant resources dedicated towards tackling cyber security threats. This is a recipe for disaster. Cyber criminals just got smarter Global Internet usage has grown exponentially. In 1995 there were 16 million users consuming 180,000 gigabytes of data a month; these days over 3.6 billion users consume over 72.5 billion gigabytes of data per month.
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Just as the internet has evolved to such a point that it has changed life as we know it, so too have the cyber criminals sharpened their skills to a point where there are now close to one million malware (computer virusâ€™ or other malicious software) threats every day. In many cases the next malware is more harmful than its predecessor. We need to step up our game where crime prevention in the cyber world is concerned, or risk experiencing crippling cyber attacks such as the Standard Bank R300 million fraud scam in Japan, and the JP Morgan Chase data breach which compromised the personal data of more than 83 million customers. These cyber attacks are not exclusive to the corporate world. With our homes now being virtual offices housing multiple devices all linked to the Internet, cyber criminals are easily able to access our sensitive information if we donâ€™t have appropriate security measures in place. Lack of adequate security also places our children at risk of exposure to potentially harmful content and inappropriate websites. It is no longer enough to simply use one antivirus solution; this should be bolstered by a firewall to scan Internet traffic that warns of potential threats, as well as one that blocks access to servers controlled by hackers. One can better understand the increased need for cyber security by using residential security as an example. With the multitude of new residences burgeoning everywhere in South Africa, we have
seen that this has led to the corresponding growth of the local security industry as homeowners invest in private security guards to secure their complexes. Like traditional security measures, we need apply a similar approach and view the online environment as a space that needs to be secured. The numbers stack-up The estimated annual cost for cyber crime committed globally is US$100 billion. This should serve as the impetus for individuals, corporates and governments to invest more resources towards cyber security. In the US, the Pentagon has a designated cyber warfare budget of $5.1 billion. Perhaps for them the Snowden disclosures, and the 2,6 terabyte Panama Papers leak hit closer to home. Whatever the reason, the US is digging deep in their pockets to find ways to counter the effectiveness of cyber warriors and ensure that it protects itself from them. The world needs more cyber security experts The demand for cyber security specialists is growing, with projections for cyber security software engineers expected to rise to six million globally by 2019, however even at this rate it will leave an expected shortfall of 1,5 million industry experts. Nation states under attack Recent history has shown that cyber warfare also occurs between nation states
The increasing currency of cyber-attacks as the preferred weapon to interfere in the politics of other nation states, discredit their political systems and sow general disarray within them. and has become an integral part of certain governments’ military strategies. Nation states are at risk of cyber espionage and sabotage as we’ve seen with the Iranian experience where a joint US/Israeli operation resulted in the creation of the Stuxnet virus. This malware was then used to stymie Iran’s nuclear fuel enrichment programme. In another incident of malware that spread from one computer to many others, the personal computer that German Chancellor Angela Merkel uses in her Bundestag office was used to spread malware to the computers of other Bundestag employees by suspected Russian state-sponsored hackers.
The estimated annual cost for cyber crime committed globally is US$100 billion. This should serve as the impetus for individuals, corporates and governments to invest more resources towards cyber security
More recently, the upcoming US elections have also been dogged by talk of a possible cyber attack following a spate of attacks on the networks of the Democratic National Committee, Hillary Clinton’s Presidential Campaign, and the Democrats’ Congressional Fundraising Committee. Fears now abound that with the higher stakes that are the elections, we may see a move from mere data theft to the possible manipulation of election data. Such incidents show the increasing currency of cyber attacks as the preferred weapon to interfere in the politics of other nation states, discredit their political systems and sow general disarray within them. What also seems to appeal to cyber warriors is that these kinds of attacks are not easily attributable to the offender. In such a world where cyber attacks and cyber weapons are becoming more numerous and far less expensive than traditional weaponry, the best defence for any country against being a potential cyber attack victim is to join the cyber armament race and reduce its vulnerability accordingly. Africa needs to start heeding these lessons from the recent past. We should intensify our efforts to build our cyber war chest; we need to develop our own army of cyber security engineers to effectively fight this war. DECEMBER 2016 / JANUARY 2017 FORBES AFRICA | 41
Data Centres: Critical To The Growth Of ICT In Africa A more collaborative and disciplined approach needs to be adopted to enable broadband expansion. BY CHIEKEZI DOZIE, SALES DIRECTOR AT IS SOLUTIONS NIGERIA
s enterprise organisations grapple with the neverending race to drive competitive advantage and operational efficiencies in the wake of global competition in their industries, they are increasingly reliant on electronic data. Governments and related institutions are also beginning to rely more and more on electronic data to ensure fair allocation of scarce resources amongst competing socio-economic needs and to drive service delivery. Each day voluminous amounts of data are fed into data centres from individuals and companies from a variety of sources including toll gates, online shopping, social media and banking. As such, these data centres are playing an increasingly important role in driving the ICT value chain in Africa. These sources of data could be audio, video, social media or simple web logs and trying to sort them out could be a computing nightmare. This, coupled with the speed at which this data is generated, drives home the argument for the adoption of data centres. In order for organisations to maintain their competitive advantage and earn above average returns and increase efficiencies, African chief information officers are turning on to these data centres to automate their business processes, improve the customer experience, meet users increasing demands, their mobility needs whilst at the same ensuring compliance with the ever-increasing regulatory environment of doing business in Africa. Data centre adoption allows organisations to achieve operational efficiency at minimal costs, enabling an organisation to focus on its core business competencies. In light of the growing number of Internet users in Africa uploading and downloading a never-ending stream of images and videos, enterprises are now also using big data to make decisions. ICT impact in Africa has begun to allow African businesses to at least compete with some degree of parity on a global scale. This has been a direct result of the increased investment in undersea cable systems connecting Africa to the rest of the
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world such as West Africa Cable System (WACS), MainOne Cable, GLO-1, ACE, SAT-3, SeaCOM, EASSy and others. These advances in African connectivity, together with the reduction in cost are pushing down the barriers to increased ICT adoption. Cloud and central email, Enterprise CRM and ERP systems help facilitate global operations by increasing the organisational span of controls and support the rise of mobile connected workers. All these advances contribute to the amount of data created and shared and also contribute to the increased importance of data centres in Africa. The last four years have seen a marked increase in Tier III data centre build in Africa. Nigeria alone has seen four Tier III certified data centres built during this time. Data centres will also spur the growth of Internet of Things adoption in Africa – massive data being generated from connected ‘things’ needs to be analysed and processed in order to achieve the desired outcomes of perfect coordination and efficiency of communication. According to Lenovo, the smartphone penetration in Nigeria reached 30% in 2016. With brands such as Techno Mobile, Samsung, Apple and Huawei releasing electronic wearable devices that generate data stored in data centres around the world, the need and impact for data centres cannot be more apparent. Data centres have begun to and will continue to change the socio-economic landscape forever. From the e-toll system used in Gauteng, South Africa, which has reduced the incidence of traffic on the highway, to the RFID tag system adopted by the Nigerian food and drug regulator (NAFDAC) to track and arrest peddlers of unapproved or counterfeit drugs; the Internet of Things (IoT) is slowly but surely contributing to effective governance in Africa. Cisco Inc. forecasts that IoT services – both in public and private sectors – will generate up to US$19 trillion by 2020. These connected things will generate big data that needs to be warehoused and analysed in data centres. A precursor for Africa
to get a fair share of this value is to begin to grow its data centre footprint. The Nigerian government has begun the digital consolidation of the database of its entire populace. Led by the Nigerian Identity Management Commission (NIMC); Ministries, Departments and Agencies (MDA) will rely more and more on a central database to enhance effective governance and the fair allocation of resources. The Nigerian government is working with some nonprofit organisations to leverage ICT to effectively administer its newly developed social welfare policies to vulnerable Nigerians. Tier IV Certified Data Centers in Africa Uptime Institute, Oct 2016
Africa has been plagued by diseases such as malaria and typhoid. Health Maintenance Organisations (HMOs) use central ERP systems hosted in data centres to harness administration of crowd-funded, health insurance cover by different corporate organisations. These HMOs enable citizens and their dependents to access affordable healthcare at any time from the nearest hospital as long as the hospital is on the HMO list. This will eventually increase the number of healthy citizens who are now able to contribute directly to their countries’ economies. The number of social media platforms that have started hosting their cloud servers in data centres in Africa is also growing. Facebook, Twitter and LinkedIn have increased social interactions and effectively bridged the digital divide between Africa and the rest of the world. African youth are better informed as they leverage these social platforms to keep up to date with the
Data centres have begun to and will continue to change the socio-economic landscape forever.
South Africa, 4
latest trends worldwide. These trends are beginning to create positive impacts in empowering young entrepreneurs who are better informed as to how to start up businesses in different areas such as technology, fashion and arts. Improved ICT has also impacted the African educational sector positively as a growing number of university students access course content online while also taking part in virtual classes via online web-video conference. This indirectly addresses the issue of a brain drain as students can now remain in Africa and enroll at foreign colleges studing online. This indirectly enhances Africa’s economy as more of its skilled youth who contribute to overall output will remain in country and still have access to the best of the world’s thought leaders and global educational content. One of the most obvious pieces of advice is to pick your data centre partner wisely. Businesses need a partner with a proven track record in data centre management and integration, a partner that is well-versed in individual country’s data sovereignty regulations, which determine where data is generated, stored and handled. This cannot be over emphasised as the role of the data centre in African ICT is probably as critical to the growth of ICT as the adoption of mobile phone technology.
Colocation Data Centres in Africa (www.DataCenterMap.com, Oct 2016) SOUTH AFRICA
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Facing the Reality of ‘OTT’ Players ‘Over-the-top’ players are here to stay and telcos have to develop the right strategies to co-exist with them. BY MICHAEL IKPOKI, CEO OF AFRICA CONTEXT CONSULTING
t’s no longer news that the Internet has given rise to a plethora of overthe-top (OTT) applications: Skype, Viber, Whatsapp and others, which continue to grow exponentially. By June 2016, Whatsapp and Messenger had over one billion monthly active users. It’s also no longer news that with increasing data penetration and significant adoption of these OTT services, telecommunication companies’ (telcos) voice and messaging revenues have been severely impacted. This is expected to worsen as more customers own smartphones. The mobile operator association GSMA projects that smartphone connections in Africa will have more than tripled by 2020, rising from 226 million in 2015 to 720 million in 2020. The significant spike in data traffic necessitates telcos spending more capital expenditure to improve the customer data experience at a time when subscribers around the world are increasingly enjoying services on these expansive networks literally for free. But then isn’t this all counter-intuitive? Should the OTTs not be the very best friends of operators? After all, they are developing products and services that should increase traffic on mobile networks. The problem is aggressive pricing competition on voice and data offers, supported to some extent by regulatory interventions, have put significant downward pressures on tariffs, which has directly affected operators’ overall revenues in spite of massive data traffic growth. In a recent McKinsey & Co Report titled “Telecommunications Industry at cliff’s edge: Time for bold decisions” the point is strongly made about slowing growth in tele44 | FORBES AFRICA
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com markets. Middle East & Africa (MEA) regional annual growth rate for the past six years slowed to 3.5% per annum as against 0.3% in other regions of the world. Over 50% of growth in the MEA region was attributable to penetration in nascent low-income markets. In the MEA, the industry has monetized half of the voice growth but less than 15% of data growth. This is also worsened by other factors – number and profile of operators competing in a market and some macroeconomic realities (GDP per capita, inflation, other economic indicators). So all of this is no longer news. OTT players are here to stay and telcos have to develop the right strategies to co-exist with them to generate more profitable traffic on their networks or, better still, create new revenue growth streams in spite of them. So what appears to be the problem? It would seem that the biggest problem is the mindset of the operators themselves. Telcos must accept that much has changed and must liberate themselves from the fixations of the past and develop a whole new mindset to adapt to the new realities of the day. In the old order with a captive voice market, the old growth model was primarily on acquiring customers and selling airtime while in the new order, the new growth model is translating exploding data demand from data-centric and digital savvy customers to shape their everyday lives and provide solutions to power the economy. Innovation in developing relevant consumer ICT products and services to meet changing needs of customers is primarily what drives usage of the networks. This is a significant shift.
Without a doubt, the heart of the telco strategy should be translating customer relationships into continuous value streams. This will involve ensuring a great customer experience, deriving insights through analytics, promoting engagements which are translated into new relevant services and solutions for sustained value. What is also clear is that in this new model telcos cannot do it alone, they will need to partner with players within their ecosystem or outside their core business to bring to life the new services and models that will drive profitable traffic or whole new revenue streams. This is generally a cultural challenge for most telcos. Telcos are traditionally poor at managing partners simply because they did not need them as much in the early days. This has to change if they want to be successful going forward. In the old order, the key enablers were network coverage and distribution while in the new order it will be customer experience and innovation management. Partnerships with OTTs and the rest of the innovation ecosystem is now an imperative. The leadership mindset of telcos in the old order of astronomic commoditised organic growth surely cannot be same as the present age of maturing growth requiring customer-driven innovation thinking to create differentiation and unlock new growth. There has to be a much stronger customer-oriented and strategic leadership mindset. This new order will require new skills, new thinking, new operational metrics, new operational models... indeed a whole new organisation! This requires courage and this is where most telcos fall short. Also, all of this is transformational in na-
Smartphone Adoption World
60% 50% 40% 30% 20% 10% 0% 2015
Smart phones as percentage of connections (GSMA Mobile Economy, Africa 2016)
Middle East and Africa smartphone share of Global Markets: units shipped (IDC, March 2016)
ture and will require a more deliberate medium- to long-term view of the business. Again, this is where most telcos do not meet expectations. The telco business is no longer a short-term growth story, it is a now more deliberate long-term growth story marked by a rigorous continuous understanding of the consumer, socio-eco-
nomic, technology and policy/regulatory environment. Some recent examples in the global telco space come to mind. Verizon recently agreed to buy Yahooâ€™s web assets for $4.83 billion, which together with an earlier acquisition in AOL will create a global advertisement and media enterprise. Softbank also recently
agreed to buy ARM (UK chip designer) for $32 billion to position itself to lead the Internet of Things (IoT) revolutionary growth. Verizon and Softbank have focused on these new investments to mitigate the impact of their maturing core telecom businesses. There is a real risk that telcos who persist in the old order of thinking and operating will at best become huge utility providers (like the PTT relics of old) or at worst, face contracting revenues and consolidate or die. Telcos have always played a key role in respective economies. This is now being fully amplified in the new digital economy where underlying infrastructure will enable new business models and unleash entrepreneurial energy across the African continent. In the old order, telcos had an insular view of life as a predominantly operational organisation. That should change. Telcos are now central in the socio-economic existence of citizens and economies alike. It means telcos are now a key partner in the development of African economies. It means telcos must be bolder in image, outlook and strategy. They must become real thought leaders in their economies, not bystanders. Organisational positioning must change from being a network for today to DECEMBER 2016 / JANUARY 2017 FORBES AFRICA | 45
The new growth model is translating exploding data demand from data-centric and digital savvy customers to shape their everyday lives and provide solutions to power the economy
being a partner for long-term socio-economic progress tomorrow. GSMA posits that mobile networks have a critical role in addressing some of the United Nationâ€™s 17 Sustainable Development Goals, designed to end poverty, combat climate change and fight justice and inequality. Telcos must make much more strategic deliberate and genuine efforts to work with governments and other stakeholders to support positive socio-economic progress. This can only endear telcos more to governments and hopefully assist to manage policy and regulatory issues which telcos are persistenly facing in Africa. Some companies have adopted similar forward-looking strategic thinking to promote positive socio-economic impact at the same time as growing their businesses such as Unilever 46 | FORBES AFRICA
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(Unilever Sustainable Living Plan) and Nestle (Shared Value concept). These are traditional consumer goods businesses, telcos have a much more dramatic socio-economic impact and could do much better in this regard. Telcos must position themselves to be more influential in the public space. This challenges the leadership mindset and thinking in telcos who want to have a secure stake in the future. Thankfully, there are some positive moves by African telcos. We are seeing more partnerships with OTTs to launch video, gaming and music related services. We are also seeing some bold investments by telcos in the e-commerce space. Safaricom has, in partnership with a Kenyan local software firm, just launched
Without a doubt, the heart of the telco strategy should be translating customer relationships into continuous value streams. This will involve ensuring a great customer experience, deriving insights through analytics, promoting engagements which are translated into new relevant services and solutions for sustained value. a ride-hailing company that will rival Uber. Safaricom will help to develop the application, offer the network connectivity, put Wi-Fi in vehicles that will be signed on the cabs and use its mobile-phone based financial service, M-Pesa, to process payments. By creatively using their existing platforms and assets, African telcos can play a leading role to facilitate, support and participate actively in developing exciting services and solutions best suited for our markets. This can energize the innovation ecosystems in our respective markets. No doubt, there is much to do, especially with the huge Internet growth expected in most markets in Africa. This represents exciting new opportunities for African telcos. So enough of the debates on the OTTs, letâ€™s make some progress.
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The Forbes Africa ICT Outlook Team wish to thank the following contributors for providing information and insights about the continent’s ICT as the next potential enabler of sustainable economic growth, driving innovation for the developing world.
Core Team Sid Wahi: Quinton Scholes: Mauro Black: Shanna Jacobsen: Tebogo Mogapi: Rich Mkhondo: Victor Rakhale:
Executive Director, ABN Publishing Business Development and Strategy Director, ABN Group General Manager: Sales, ABN Group Operations Manager, ABN Publishing Executive Chairman, Uniq Axxess Marketing Director, Uniq Axxess Managing Director, Uniq Axxess
Contributors John Beaumont
Member of the firm’s Telecommunications, Media and Technology (TMT) practices at Partner at Bain & Company’s Johannesburg office.
A principal in the Johannesburg office of Bain & Company and an expert on Sustainability & Corporate Responsibility and Economic Development practices.
CEO of Galela Holdings and the founder and former CEO of iBurst.
CEO of Africa Context Consulting Limited, an emerging markets business advisory company. He was previously of MTN Group’s country operations in Nigeria and Ghana.
Senior Analyst at Mondato, a specialist advisory firm providing strategic, regulatory and operational support to businesses navigating the fast evolving digital finance & commerce space.
Executive Chairman at Uniq Axxess and former CEO of MTN Swaziland and MTN 48 | FORBES AFRICA
DECEMBER 2016 / JANAURY 2017
Liberia, a telecommunications analyst and South African businessman.
Sales Director of IS Internet Solutions Nigeria, a pan-African organisation advancing the frontiers of ICT in Africa.
Cloud Service Provider and ICT Consultant with Sidmach Technologies Nigeria Limited.
Independent ICT commentator.
CEO of Safaricom, headquartered in Nairobi, Kenya.
Judah J. Levine
CEO of HIP Consult, a consultancy specializing in ICT in emerging markets, particularly Africa.
Dr. George Outa
Kenya-based academic. He previously co-edited ‘Mainstreaming ICTs: Research Perspectives from Kenya’ (2005) and has also worked in various communication advisory positions (courtesy of UNDP).
Wayne de Nobrega CEO of Tracker.
Managing Director of Gospel Nigeria and CEO of Multimesh, a leading African ICT company.
Dr Fisseha Mekuria
Chief Researcher at the Council for Scientific and Industrial Research. Pretoria, South Africa.
Former Editor, Corporate Affairs Executive, now content developer and marketing director at telecoms consulting firm, UniqAxxess.
Founder and CEO of Naija Leadership Builder, an avid learner, blogger and strategist.
Works for XLR8, a Lagos-headquartered communications consultancy.
With special thanks to our inaugural sponsor, MTN Business South Africa.
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