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Out of Africa - the transformative power of mobile

Cath Everett Profile picture for user catheverett November 19, 2014
Summary:
The innovative ways that Africa is using mobile technology in areas such as m-payment is already far ahead of the US and Europe and are set to explode over the next 18 months.

Mobile technology and the innovative uses to which it is already being put could bring about enormous transformation and “help set Africa free”.

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This is because “the stuff coming out of the continent is well ahead of anywhere else”, particularly in areas such as education and payment technology, according to Mark Walker, regional director of sub-Saharan Africa for market research firm IDC.

Another key focus is m-health, which a 2013 PricewaterhouseCoopers study indicated could potentially save one million lives in sub-Saharan Africa by 2017.

Part of the reason for this innovation though is that it is often necessary to figure out ways to get things done in environments that are not always straightforward. This means that, in many cases, necessity has become the mother of invention.

Moreover, unlike in western markets, most African consumers tend to be very cost-conscious and so need a good reason to fork out for paid-for apps. Walker explains:

Unlike in the West, where the focus is more on leisure and entertainment, Africans want more serious, practical apps to help them get things done. So they want information on their environment, things that will help with education and the like.

And it is this dynamic that has led to high levels of innovation in the field of mobile payment technology. Only around 20% of Africans have bank accounts, which means that mobile money apps such as M-Pesa have enabled millions of people, who were formerly excluded from the formal financial system, to pay bills and send or receive money cheaply, reliably and securely.

The service, which while not the only one on the continent, is perhaps its most well-known, was launched in 2007 by Vodafone for Safaricom and Vodacom, Kenya and Tanzania’s largest mobile phone operators respectively.

It has since been rolled out into numerous other African countries including South Africa as well as Afghanistan, India and even Romania.

But the high adoption levels of such technology in Africa are startling in a continent where only 20% of the population has access to mobile broadband - although uptake is growing at over 40% year-on-year, which is twice the global average. Penetration was a mere 2% four years ago.

M-payment

As a result, according to the International Telecommunications Union (ITU), 16% of adults in sub-Saharan Africa have used a mobile phone to make a financial transaction over the last 12 months.

In Kenya alone, such transactions are now worth more than $375 million per month and save users up to $3 in service charges for each one. As Walker says:

We’re not seeing anything as ground-breaking coming out of the US and Europe. So I’d say that we’re getting to the point where Africa can demonstrate to the rest of the world what can be done if you’ve got a clean sheet infrastructure-wise.

The issue is that most African countries have few copper, let alone fibre optic, telecoms pipes at a distance of more than 20km outside of their major urban centres, meaning that fixed line broadband access is limited.

Even as little as five years ago, the continent was still reliant on expensive and weather-dependent VSAT satellite systems to communicate with the outside world.


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But the arrival of undersea fibre optic cables have since opened it up and led to the creation of innovative tech hubs in urban centres across the region. Many of the start-ups that such hubs have spawned focus on mobile as their foundational technology and are starting to leapfrog their western counterparts in terms of innovation.

One example of just this kind of inventiveness is M-Kopa Solar. The Kenyan-based firm provides solar home lighting systems, which are managed and maintained using machine-to-machine (M2M) technology and paid for using the M-Pesa payment engine.

The firm’s M-Kopanet proprietary software, which is layered on top of M-Pesa to manage payment instructions and simplify sign-up and payment processes, enables customers to hand over an initial deposit of $35, followed by 365 instalments of $0.47.

The money can either be paid daily or in batches when extra cash becomes available and all that interested parties require to register with one of the firm’s 1,000 agents around the country is a valid M-Pesa account and ID card.

African innovation

In return, they receive two LED lights with a phone-charging USB, one LED portable solar radio and torch as well as an 8W solar panel. The kit, which becomes theirs after a year’s worth of payments, comes with a 24-month warranty and access to a 24-hour helpline should things go wrong.

Embedded M2M technology means that it is possible to monitor and trouble-shoot any issues with the equipment remotely as well as disable (or reactivate) systems if payments are missed. There are also 75 customer service centres around the country where kit can be replaced if necessary.

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Pricing, meanwhile, appears to compare favourably with the $0.60 per day that the average off-grid household earning $2 per day (or $730 per annum) forks out for dirty and dangerous kerosene, candles and batteries to power lights, radio and device charging.

This means that customers should be able to save a massive $750 - more than a year’s wages - over the anticipated five-year lifecycle of the product, which can be channelled into other vital areas such as education.

The system has already been purchased by 100,000 households across Kenya and Uganda, but the aim is to hit the one million mark across East Africa and elsewhere by 2018.

Elsewhere, the regional focus on mobile technology would appear equally as justified. By the end of 2014, the ITU expects mobile penetration in Africa to hit 69%, while IDC’s Walker expects most people to own a smartphone within four years as prices start to fall.

At the moment, adoption is being seriously inhibited not only by mobile broadband fees, which cost between 40-60% of the average sub-Saharan Africans’ wage, but also by the price of the handsets themselves.

If rumours are true that Microsoft intends to launch a sub-$50 smartphone over the next four months though, it should go some way to alleviating the problem.

The next stage will then be about encouraging entrepreneurs to come up with relevant content and services in order to take advantage of the new functionality. Walker concludes:

Smartphone penetration in Africa is growing by leaps and bounds and when it catches up with the rest of the world in about 18 months time, when it reaches that cross-over point, then it’s anyone’s game.

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