The continent shows great promise for investors in the ICT sector

Reputably known as the world’s least wired continent, Africa has undergone a rewiring of its own and it would seem, not a moment too soon.

With the world’s big players in recession, Africa seems to be everybody’s last resort; fortunately it is believed to become a fabulous resort complete with cellphone reception, affordable high-speed Internet access and a host of venture capitalists eager to reap the returns on their good investments. Before there is sufficient healthcare, running water and food for everyone, there will be Google in many countries in Africa – particularly on the East and West African coastlines.

This is because of the arrival of undersea fibre optic cables on African shores that will alleviate some of the poverty that is synonymous with the continent. Despite the fact that most of the world’s 30 poorest countries are African, the continent is also making great strides toward political and financial stability. A report released by Goldman Sachs economists claim that sub-Saharan Africa in particular is experiencing its “best economic performance in years”. This positive expected growth and stability comes at a time when its seems the world has run of out A’s on the A-list of investment. With America in financial trouble and Asia believed to follow suit eventually, what better option than Africa?

The caution that was previously exercised about investing in Africa seems to have taken a more optimistic angle. It seems investors are looking more closely at Africa and finding less in the way of poor governance, corruption, financial dependency on foreign aid, and a lack of political transparency. The result is a list of impressive turnarounds in what was once believed to be a lost cause. Libya and Algeria are on the World Economic Forum’s list of stable countries; Botswana has been deemed as less corrupt than Italy and Greece by Transparency International; and countries like Uganda, Ghana, Egypt and South Africa have all shown a definite liberalisation of their economies and development in their capital markets. So along with the growing good news, Africa has become ‘investable’ and the safest bet in today’s troubled economic climate. History indicates that African markets have little bearing on global markets and can operate and grow independently. In the past, Africa was stunted by a lack of commodities. But non-commodity industries have proven the most profitable in recent years, tourism, telecommunications and financial sectors are expanding and making room for investment.

One of the problems plaguing Africa is the lack of supply in telecoms services – a service which would link Africa’s capital cities and make the art of doing business more profitable. The lack doesn’t reflect the demand, however, and so the rollout of investment and development in the sector begins. Kenya is one such country that will soon have access to cheaper, broadband Internet access with the arrival of fibre-optic cables thanks to a combination of Kenyan investors, Kenya Data Networks and a foreign company, Seacom. With the launch date set for June 2009, Kenya’s telecoms sector will be impacted hugely, in particular because third-generation (3G) mobile technology is spreading at a rapid rate. Speaking of which, mobile phones are another item on the ICT agenda that have and will continue benefit from combined efforts and mergers and acquisitions in the ICT sector. The International Telecommunications Union has determined that mobile phones overtook fixed telephone lines as far back as 2001 and the mobile phone industry is growing in Africa at twice the global rate.

Deep pocketed investors that are keen to invest in broadband infrastructure include the likes of UK-based Vodafone, Nokia, HP, Microsoft, Celtel International (which runs a number of projects across Africa) and MTN, Africa’s largest mobile operator. Satellites infrastructure is also being improved at a rapid pace. The New Dawn Satellite project has raised more than US$300 million to connect regional and local communication networks to global communication infrastructure. Known as a ‘pan-African’ satellite system, the project is one of many that is accelerating ICT in Africa and extending satellite coverage beyond major cities to rural areas as well. The ICT industry also creates job and skills, one of the main reasons why investors have started to seriously look at Africa for investment opportunities. Start-up call centres have begun to prove themselves as strong competition for Indian call centres currently serving US and European clients. The long-standing notion that foreign aid will be Africa’s life raft will soon be dismissed as the current 1% of private capital invested into sub-Saharan Africa begins to grow. A study released by the World Bank has further encouraged investment, stating that Africa offers the “highest returns on foreign direct investment of any other region in the world”. In combination with ICT developments, Africa is an attractive investment for Internet entrepreneurs from all over the world. With the good news continuing to build, investment doesn’t seem to be slowing down, particularly with the 2010 Fifa Soccer World Cup being hosted on the African continent for the first time in history. Investors all looking to earn their share of the profit pie have pinpointed ICT development as key to hosting a successful tournament to broadcast the games around the world. It is an exciting age of technical innovation and Africa seems to have caught on just in time. Closing what has been dubbed the ‘digital divide’, Africa’s transformation is set to turn around and take the continent from being ‘in line’ to ‘online’.

Taryn Springhall