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How Mobile Phones are Catalyzing an African Revolution

By Guest Writer on September 14, 2022

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The following is an excerpt from Russell Southwood’s new book, Africa 2.0 – Inside a Continent’s Communications Revolution, an ambitious 35-year history of the impact of mobile and internet on Sub-Saharan Africa.

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Prior to the start of mobile roll-out, investment in Africa had been focused on the extraction and export of natural resources. Telecommunications was a key part of the shift to a different kind of investment that had wider economic impacts.

The sector became the largest generator of foreign direct investment after the oil and gas industry (see Chapter 1) and was often a significant contributor to country gross domestic product (GDP). Even countries that would have previously frightened off international investors benefited:

‘The telecommunications sector can attract significant private investment, even in the immediate aftermath of conflict and during periods of conflict.’

Mobile operators seemed to be able to build their way around such obstacles such as civil war in Congo-Brazzaville, DRC, Liberia, Somalia and Sierra Leone. In an interesting paradox, despite the complete absence of telecoms regulation, Somalia became one of Africa’s better-connected countries.

Mobile Drives Widespread Employment

The impacts of these investments differed from what had gone before. They generated more jobs and a wider range of skills. Multinational and local cadres of skilled Africans grew as operators expanded. Africans returned from the diaspora to work for mobile operators and start new businesses with skills acquired elsewhere.

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In 2019, the mobile sector in sub-Saharan Africa directly employed 650,000 people and provided 1.4 million people with informal jobs. MTN’s experience illustrates one company’s contribution to those employment figures. When it launched in Nigeria in 2001, it had three hundred employees (ninety of whom were expatriates). By 2004, this had risen to three thousand, and by 2020 it was employing 19,288, the overwhelming proportion of whom were Nigerian.

In terms of indirect effects, the first wave of mobile voice roll-out resulted in millions of dollars of sales revenues going into the pockets of informal street sellers across the continent. As one mobile company manager observed:

‘When I arrived [in the country], everyone came to work on a bicycle or a motorbike. When I left, the car park was full of cars.’

The sector’s investments had other unanticipated side-effects: the advertising spend from competing mobile operators fuelled the growth of Africa’s newly privatised broadcasters and their sponsorship created new, popular TV programmes. New digital marketing agencies thrived on advertising spend from the same source, as well as from finance and consumer brands.

Mobile Drives Payments and Remittances

Two other sources of funding fuelled the changes described in this book: diaspora remittances from Africans, and aid funding from international donors. Remittance payments flowed in three different directions – from outside the continent into particular countries; between different countries on the continent; and within countries themselves, most often between the cities and rural areas.

The scale of diaspora funds was, and remains, huge. As estimated percentages of GDP in 2020, these vary from 0.9% in Cameroon to 5.5% in Mali and 9.8% in Liberia, to 14.9% in Gambia. From the latest data in 2019, the actual sums ranged from US$123 million into Guinea-Bissau to US$20.97 billion into Nigeria.

The introduction of mobile money services (Chapter 4) supported these financial transfers. On the one hand, it accelerated the direct receipt of payments and made the exchange of funds between countries much easier. This applied equally to Basotho miners in South Africa, or Burkinabe seasonal cocoa workers in Côte d’Ivoire.

On the other hand, competition between the money transfer services started by mobile operators drove down the fees charged to transfer cash and increased the amount arriving in Africa (Chapter 4). In 2020, the number of registered mobile money accounts in sub-Saharan Africa reached 548 million, of which 159 million were active accounts. The transformations brought about through this source of funding are best captured by an African mobile manager who was ‘scouting’ a village for a new network roll-out in Burkina Faso in the mid-2000s:

I went on market day and saw a pizza place. They don’t eat pizza [I thought]. Then I saw houses built of cement. I thought something fishy’s happening. I saw a Western Union office. People are sending money home. Fifteen per cent of the young people are working on tomato farms in Italy and sending money home. It’s why they had a pizza place, and they did a very good pizza.

Donors Supported the Mobile Revolution

Mobile money services facilitated these kinds of change. At its best, donor funding also contributed to significant parts of the shifts described in this book. Soft loans or investment funding made at favourable rates from the International Finance Corporation helped mobile operators such as Celtel (starting in 1994) and Africell (in 2015), and other related companies including Liquid Telecom (in 2021).

Since you’ve read this far, you really should RSVP Now to join Russell Southwood for an in-person debate in Washington DC.

Donor programmes (Chapter 6) encouraged liberalisation and privatisation in key markets in sub-Saharan Africa as well as opening up the internet. DfID’s support to Safaricom for M-Pesa enabled the creation of mobile money services. These continue to have help from both foundations and donors, particularly through the mobile industry body, the GSMA. World Bank policy and funding helped to create a much more equitable approach to the pricing of international cable capacity.

The counterfactual is not that these things would never have happened in Africa without donor support, but they might have taken considerably longer and would have been more likely to remain dominated by monopoly suppliers.

Mobile and Internet Development Impact

One of the recurring themes of this book is that technology change in the form of communications has brought about economic growth. From an early stage, there was much debate among sceptics and champions about what the impact of funding might be:

‘The World Bank at the time was trying to understand the broader macroeconomics of these technologies but wary of “shiny object syndrome”’ (see Chapters 2 and 6).

A 2009 report concluded that a 10% increase in fixed broadband would increase developing economies’ GDP growth by 1.38%. This assessment was written in support of funding international fibre cables (such as EASSy, Chapter 2), which were regarded as a ‘social-economic macro project’. The report focused on the relationship between broadband diffusion and GDP growth, although another factor – like government effectiveness – might have been as important, if harder to define.

The World Bank’s expectation of a ‘10% increase in broadband’ became a much-quoted phrase at international meetings until it published another report on the same subject in 2016: In contrast to other findings that broadband has the biggest economic impact of all ICTs, simple 2G mobile penetration was found to have a bigger and more significant impact than fixed broadband on the Senegalese economy.

Each 10 percentage point increase in mobile penetration was found to raise GDP growth by 0.44% (at a 10% significance level). A major difficulty with this kind of economic impact of technology work is that it is very hard to separate out the effects of specific technologies from other technologies and wider changes in society over time.

This is an excerpt from Russell Southwood’s new book, Africa 2.0 – Inside a Continent’s Communications Revolution, an ambitious 35-year history of the impact of mobile and internet on Sub-Saharan Africa.

Please RSVP Now and join us on September 28th for an in-person debate on the impact of mobiles across the African continent.

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