The economical situation in Africa and Middle East
Telecom industry
It is true that we may be tempted to draw parallels with the telecommunications sector. The adoption rate for mobile phones has shot up over the past few years, going from 73% in 2011 to 95% in 2016, but growth in the telecom services market slowed considerably during that time, dropping to 3.7% between 2015 and 2016 from the double-digit growth enjoyed in the early 2010s. Here, it is not so much the overall economic downturn that is to blame, but rather the influence of two other factors: the fi rst, for operators, is the challenge of successfully managing the transition from an efficient telephony business model to one that will withstand the move to an Internet and data-centric market. 3G and 4G cellular networks need to be deployed that are capable of providing access to applications under good conditions. Operators need to adapt to the fact that calling services are being usurped by VoIP applications, especially for international calls, while texting services are being replaced by OTT solutions, especially in those places where operators’ rates are still too high. In markets where ARPU (average revenue per user) is still low, the challenges that operators are facing today are the same ones that their counterparts in the West struggled with not that long ago. But there is a second factor to consider, which is tied to the sub-optimal way in which the markets are organised and regulated by public authorities. Even though the situation varies a great deal from market to market, there is a general trend of operator fragmentation, in some instances with inefficient competition and counter-productive tax rates.
These countries are lagging behind in the digital development
This edition of the DigiWorld Yearbook Africa nevertheless confirms our earlier optimism to some degree. First, because Africa still lags so far behind in Internet access, with adoption rates standing at roughly 20% of the population – albeit with enormous disparities between the different countries – versus more than 80% in Western economies, which means a tremendous growth potential that is expected to increase apace with the underlying surge in data traffic (close to 100% growth between 2015 and 2016 according to Cisco). Investments in the networks and, along with them, 3G/4G coverage rates are on the rise. The percentage of users who own a smartphone is increasing as prices drop: according to the GSMA, close to 50% of the sub-Saharan population will own a smartphone in 2020. Plus infrastructure sharing and outsourcing schemes are progressing and improving operators’ economics. Finally, we will in all likelihood see consolidation in both national markets and on a continental scale. Beyond those issues that relate directly to the economics of telecommunications, I want to stress the significance of the rise of the Internet economy in Africa – which we will delve into in some detail in this report. A great many hubs housing business incubators and start-up communities have emerged over the past few years, and not only in places like Nairobi, Lagos or Johannesburg, but also in French-speaking Africa and East Africa – not to mention the incredibly vital start-up ecosystem in Israel, and the Iranian sector which has been protected from foreign competition up to now. Some of these young ventures have become powerful companies, such as Jumia which was founded in Nigeria and today is developing an e-commerce business in over 20 countries in Africa. Nor must this dynamic retail market overshadow online applications’ potential to modernise government action in areas such as healthcare, agriculture and education. Lastly, let us note the first forays of smart city projects which, far from being mere marketing operations, can endow digital innovation with a crucial role in managing water and electricity, security, transportation, etc. Three years ago, IDATE DigiWorld decided to include Africa and the Middle East in its top priorities. Since then, our teams have performed a growing number of assignments in Maghreb, in sub-Saharan Africa and the Persian Gulf. This third edition of the Yearbook underscores the importance we attribute to digital developments in the region. I am convinced that, in the coming decades, Africa and the Middle East will make a tremendous contribution to our societies’ digital transformation.
