Is there a high-tech boom in Africa? It depends on where you look.
Since 1998, the number of cell phone subscribers has increased at a compound annual growth rate of 80 percent, second only to Eastern Europe. But a developing infrastructure and poverty put most forms of technology well out of reach of the general population.
A panel of African professionals mapped the challenging landscape of the IT and communications sector at the African Business Conference held at Harvard Business School on February 28.
From their perspective, the fact of Africa as a high-tech destination is a given—but succeeding there requires the same careful, targeted approach that any market demands.
Moderator Fola Ogunsiakan (HBS '00) asked the question that no doubt topped the list for the audience of MBAs: What are some of the sector's most interesting growth opportunities?
As the mobile phone industry matures, companies will need to compete through value-added services, said Ache Leke, an associate principal in McKinsey's Johannesburg office. VoIP is always an interesting area, he added, noting that the current lack of regulation could be a good or bad thing, depending on one's point of view.
| Provide value-added services to companies that have already done the legwork. |
| — Olukunle Malomo, Application Technologies |
There's some buzz around outsourcing as well, with Ghana attempting to position itself as one of the leading players in West Africa for English-language call centers. India, however, remains the proven concept in this area.
"What is your value proposition relative to India?" asked Leke. "If you can answer that, it's a good opportunity."
As chief marketing officer of mobile phone company MTN Nigeria, Afam Edozie said that early legislation, good management, and strong capital all have contributed to the industry's rapid growth. And as more land lines become available, businesses will change they way they service customers, leading to the growth of local call centers for local businesses.
Trends and opportunities aside, many Africans can't access any technology if they don't have the means, said Casper Chigwedere, executive chair of Computer Services Unlimited Holdings, an organization that provides technology consulting and services.
"The real opportunity is in reducing cost," he said. Africans buy most consumer goods (many of which are imported) at two times the cost paid by Americans, said Chigwedere, who called for a greater investment in companies—low- or high-tech—that manufacture products in Africa.
"Provide value-added services to companies that have already done the legwork," said Olukunle Malomo, chief strategy officer for Application Technologies and CEO of the company's Mobile Application Technologies unit. There are little pockets of opportunity—the trick is identifying and targeting them. "Right now we're hoping to introduce some middleware payment systems," said Malomo. Another project involves building enterprise tools for Oracle.
Business for the people
Access to capital and a shaky sociopolitical environment are a couple of factors that could potentially inhibit the IT sector's growth, said Chigwedere of Zimbabwe. ("Yes, Zimbabwe," he said, wryly acknowledging his country's ongoing instability under President Robert Mugabe.) Yet the fact that he started a company that now has long-term projects in Malawi, Namibia, Botswana, and Ethiopia is evidence that the government in which a company operates can be nothing more than a distraction. "Business is done for people," Chigwedere said. In terms of capital, a good basic strategy is to start small in areas that don't require a lot of upfront investment and prove yourself from there.
| We'll recruit about 1,500 people over the next year, and the great majority of them will come from Nigerian schools. |
| — Afam Edozie, MTN Nigeria |
Challenges specific to MTN Nigeria that are common to other IT companies include a regulatory environment that makes it difficult to expand to other regions, currency depreciation, and a lack of management and technical skills, said Edozie.
Another obstacle is lack of vendor support. "Many companies don't see Africa as an opportunity at all, and require payment upfront in cash," he noted. Lately this has become less of an issue, at least for his company. With close to nine million subscribers, revenues for the MTN Group as a whole (with operations across Africa) topped $1.7 billion in the last six months.
How much of MTN's profit is being reinvested into its networks, asked one audience member. One hundred percent, Edozie responded. "When you enter a telecom market, the rich people are the first to buy the product."
Revenues from those early customers can be combined with money from the bank and shareholders to decrease rates and expand the network so others can afford to hop on. "The earnings we made in South Africa became equity in countries like Uganda, Rwanda, Cameroon, and Nigeria," he said.
Many African telecoms are beginning to ask how they can fundamentally change their business model so that even extremely low-paying customers are profitable, added Leke.
Training back home
Not all Africans have the opportunity to go abroad for college or graduate school, said an audience member. What are technology companies doing to influence the curricula of learning institutions back home to better prepare students for jobs requiring technical and management expertise?
"We'll recruit about 1,500 people over the next year, and the great majority of them will come from Nigerian schools," said Edozie. MTN has launched a volunteer tutoring program at primary and secondary institutions ("The foundations are built there," he noted) and is involved in a project to influence the electrical engineering program at the University of Lagos. "We've also engaged with the government to an extent to help shape policy related to education," he said. 