By: Leah Ngari & Shira Aliza Petrack

In June 2019 over half a billion Africans accessed the internet. 

The quickly evolving digital economy has made internet connectivity a necessity in today’s world. A fast and reliable internet connection not only creates new job opportunities; it also helps existing businesses perform better and expand their operational capacity.

But what is the internet? The internet is a web of connected pathways that enable the flow of data from any point on the network to any other point on the network. Initially, the internet signals flowed over the copper wire network that telephone companies had lain across most western countries throughout the 20th century. In 1986, the US National Science Foundation used fiber-optic cables to connect 170 smaller networks together to form the world’s first fiber-optic backbone, which was expanded through private ventures. The new internet backbone allowed huge amounts of data to travel quickly across the United States, while the old copper cable network was used to connect individual households to the new internet backbone.

By the 1990s, when the internet became popular, another network of cables – the coaxial cables laid by cable television companies – were also able to solve the “last mile problem” of connecting end users to the fiber backbone. Various telecommunication companies joined to race to offer consumers the fastest, most reliable internet, and companies began regularly upgrading their cables to keep up with the latest technological advances – even beginning to offer direct “home to fibre” connections.

Internet connectivity in Africa – how did we get here?

In the early 2000s, while the internet was already transforming almost every facet of the world we live in, landline penetration in Sub-Saharan Africa remained low – in 2003, for example, Sub-Saharan Africa had only 1.6 landline subscriptions for every 100 Sub-Saharan Africans! As a result, the region lacked a copper wire network backbone that could spread the internet.

The lack of a copper wire backbone did not only make it difficult to transmit data across the continent. Transferring internet data in and out of Africa was also a major challenge. In 2008, only three fiber-optic submarine cables connected the entire continent of Africa to the global internet, two of which landed in North Africa. Thus, until 2009, Sub-Saharan Africans wanting to go online needed to rely on a single, older-generation submarine cable for their connection. A boat accidentally colliding with the cable – as would happen frequently – could cause a months-long internet blackout.

Over the past decade, African connectivity has improved dramatically. Today, a number of submarine cables running up and down Africa’s coasts transfer the data to centrals servers from where the data gets beamed across the continent through a complex network of copper wires, fiber-optic cables, cellular towers, and satellites to an assortment of feature phones, smartphones, tablets, laptops, and industrial computers. The rapid rise in internet-enabled cell phones have allowed more Africans than ever to connect.

Nevertheless, more than 60% of Africans are still disconnected from the internet, with connectivity spread unevenly across the continent. And those who can connect often still only do so through expensive, unreliable connections.

Submarine cables

Today, 37 out of 38 African countries that have a seashore also have at least one submarine cable landing (the exception being Eritrea, and not counting the disputed territory of Western Sahara). While countries with a direct connection to submarine cables enjoy the benefits of high-speed internet such as higher internet use and higher employment, Africa’s sixteen landlocked countries are left to rely on wireless substitutes which do not work as well.

Even in the thirty-seven countries with a direct submarine landing port, nine countries have only a single submarine cable connecting the country, while another eight have a mere two. Thus, a stray anchor causing a small tear or even scheduled maintenance on the cable can lead to prolonged internet cuts. As a result, even countries with a direct submarine cable port still experience regular internet slow-downs and outages. In May 2020, a consortium of major companies such as China Mobile International, Facebook, and Telecom Egypt, announced their plan to build a new 37,000 km long subsea cable that will make twenty-one landings in sixteen countries in Africa. 

The advances in fibre-optic technology also give Africa a chance to leapfrog over the old hardware to design and build a modern and efficient fibre-optic terrestrial backbone. However, fiber-optic cables are also expensive to install and so are still largely absent from the African mainland as can be seen from this map.

By: Elenah Kimaru

Did you know that over 525 million people used the internet in Africa in 2019? If current growth trends continue, almost 75% of Africans are expected to come online by 2030.

There is still work to be done in connecting the continent. According to a report by the World Bank, achieving universal access by 2030 would require an investment of up to $100 billion. Nevertheless, the current state of connectivity in Africa has already paved the way for a digital transformation on the continent. In 2018 alone, mobile technologies and services generated 8.6% of the GDP in sub-Saharan Africa (equivalent to apx. US $144 billion in economic value) and contributed to the creation of apx. 3.5 million jobs.

Overcoming barriers to business through technology

The dramatic increase in access to mobile phones has been particularly transformative. Already, mobile phones are changing how people interact and do business in Africa. And since cellular connections are often the only internet connection available to users, savvy entrepreneurs are exploring the full potential of mobile connectivity and creating products and services specifically designed with the African consumer in mind. While there is still much room for progress, Africa’s digital transformation has opened Africa for business and created room for innovation, employment, new companies, and connectivity.

From commerce to fintech to tourism, below are some of the tech companies that are revolutionizing service delivery:

Commerce – MoWoza

In 2017, only 17% of exports in Africa were intra-African, meaning that it was conducted between African countries or businesses. (This is as opposed to inter-African commerce, which is conducted between an African country or business and another business or country outside the continent.) For comparison, in that same year, 69% of European trade; 59% of Asian trade; and 31% of North American trade was internal commerce conducted between economic players in the same region. Experts agree that increasing internal trade on the continent is crucial to Africa’s sustainable economic development.

Increasing intra-African trade requires overcoming several hurdles. One major obstacle is Africa’s infrastructure deficit, which hinders the travel of people and goods between countries. This in turn greatly restricts commerce on the continent by making it difficult for enterprising businesses to source their raw materials and secure their supply chain on the continent.

Since 2012, MoWoza has sought to solve this issue by combining the advances of digital technology with Mozambique’s strong community bonds. Suzanne Moreira founded the company as a mobile platform that allowed migrant workers coming to South Africa from Mozambique to send products to their families back home using text messaging and a logistical network of community members. Sensing the potential of the network she created, Moreira expanded the service to allow informal cross-border traders (ICBT) in Mozambique – 80% of whom are women – to purchase, arrange delivery, and track the shipment of inventory from the comfort of their village by using text messages. This allowed ICBT to run their businesses without wasting entire days on expensive and sometimes dangerous re-stocking trips to and from major cities.

Since then, the company has expanded to include a business training program for small-scale informal retailers as well as a business analytics service specializing in informal markets.

Fintech – Interswitch and M-Pesa

Africa holds a lot of promise for fintech entrepreneurs. A large share of the continent’s population remains unbanked, and therefore does not keep or manage its money through traditional financial institutions such as banks. The most common reason cited for lack of bank account ownership is lack of sufficient funds.

Even the poorest populations, however, save money, receive payments, and send money for commercial or personal reasons. The growing demand for affordable financial services and products on the continent is being met by innovative entrepreneurs. Thus, fintech companies who are able to leverage the demand for easy and cheap money management and payment tools can help drive financial inclusion in Africa while building successful and scalable businesses.

Interswitch was founded by Mitchell Elegbe in Lagos, Nigeria, as a digital payments company. Elegbe, an electrical engineer and entrepreneur, identified the business opportunity presented by Nigeria’s outdated financial system, which relied mainly on cash and paper ledgers. Since 2002, Interswitch has built much of the infrastructure supporting Nigeria’s online banking system, offering both personal and commercial financial products and services.

Following its success in its home country of Nigeria – currently Africa’s largest economy – Interswitch has expanded its operations to an additional 23 African countries, and maintains a physical presence in Uganda, Gambia, and Kenya. In 2019, Visa acquired a 20% stake in the company on the basis of a billion dollar valuation, making Interswitch the first home-grown “unicorn” on the continent.

M-Pesa is another African fintech company disrupting financial transactions in Africa. The increased mobile phone penetration along with the inadequate traditional financial inclusion created a strong demand for alternative money management and transacting tools, and M-Pesa has stepped in to fill this demand. In 2018, almost half of mobile money accounts worldwide were concentrated in Africa, a large portion of which are M-Pesa accounts.

M-Pesa was founded in 2007 by Safaricom, Kenya’s largest mobile network operator. The service allows users to use their mobile phone to deposit, withdraw, and transfer funds, as well as to buy airtime, ask for a loan, and link to a traditional bank account. Mobile money platforms have allowed for financial inclusion and empowered users to improve the management of their financial resources.

Today, around 40 million Africans use M-Pesa in Kenya, Tanzania, Lesotho, Democratic Republic of Congo, Ghana, Mozambique and Egypt. According to Makhtar Diop, the World Bank’s Vice President for Africa, mobile money platforms in Kenya has lifted around 2% of the population out of poverty, and has helped users – especially female users – transition out of subsistence agriculture and into business.

Conclusion

Digital innovations dramatically increase the ease of doing business. The companies featured in the article help business people operate more efficiently by streamlining payments and supply chain management, but African digital innovation is not limited to fintech and digital marketplaces. From tourism to agriculture to healthcare, the digital revolution has opened Africa for business.

Despite the growing African digital economy, there are still many opportunities that remain untapped. Investing in innovative start-ups and in ICT infrastructure in Africa will further unlock the continent’s economic potential.