Envisioning certain African regions developing into equivalents of California’s Silicon Valley may indeed appear as just “building castles in the air”. However, given that the understanding of the positive impact of ICT has grown over the years, more African governments have begun to prioritise the ICT sector.
A key focus area for governments has been in providing affordable ICT services to as many people as possible. “We have high expectations of ICT and its transformative effects in all areas of the economy and society. Communications technology has fundamentally changed the way people live, work, and interact socially, and we in Rwanda have no intention of being left behind or standing still as the rest of the globe moves forward at an ever increasing pace,” we quote Paul Kagame, the president of Rwanda, in a statement made in 2006.
One of Rwanda’s success stories has been the successful roll-out of its 2,300km national fibre-optic backbone. The Rwandan government signed a US$40 million deal with South Korean incumbent telco KT Corp in October 2008 to supply and install the national fibre-optic backbone. The network connects 317 institutions (97 in Kigali and 220 outside the capital) in all 30 districts, and connects all nine of Rwanda’s borders.
The infrastructure is expected to boost access to various broadband services, including government initiatives such as e-governance, e-banking, e-learning and e-health, and also facilitate IT-based foreign direct investment (FDI) in areas such as business outsourcing. In fact, recent news out of Rwanda indicates that payment processing company Visa has signed an agreement with the government of Rwanda to expand its electronic payments services in the African country.
Payment processors, such as Visa and MasterCard, have been increasingly looking for growth through new gateways, including mobile phones and the internet. Under the agreement, the San Francisco-based card processor will install basic infrastructure for electronic payments for issuance and acceptance of payment cards and localised clearing and settlement services.
Within Sub-Saharan Africa, an exciting development is that telecom companies are now moving towards the next generation long-term evolution (LTE) technology, which is expected to drive broadband penetration in the world’s least developed and fastest growing internet market. LTE, also known as 4G, allows download speeds more than double those of current 3G technology, better reception in urban areas and coverage of previously hard-to-reach remote areas.
Telecoms research firm Informa sees at least six African markets migrating to LTE for the first time in 2012, along with 39 other countries globally. Pan-African operators MTN and Vodacom are piloting the technology in South Africa, and Kenya’s biggest player, Safaricom, is also testing in its market.
Ericsson’s head for Sub-Saharan Africa Lars Linden told Reuters last month at a trade show that his company was in talks with MTN, Vodacom, and Bharti Airtel on commercial networks that could go live in 2012.
Overall, access to advanced ICT is a key factor in the economic and social development of Sub-Saharan Africa. In fact, the World Bank estimates that in Africa a 10% rise in broadband penetration is linked to a 1.3% increase in economic growth. At the level of small businesses, research also shows that access to basic ICT services can result in a sustained increase in the incomes of the poor in developing countries. East Africa, in particular, has made a lot of headway in as far as ICT development is concerned, particularly in the area of fibre optic backbones.
Imara is an investment banking and asset management group renowned for its knowledge of African markets.