Africa’s three decades-long communications revolution and South Africa’s contribution to making it happen — an outsider’s view
Africa 2.0 – Inside a Continent’s Communications Revolution is an ambitious 35-year history of the impact of mobile and internet on Sub-Saharan Africa. It starts with the launch of Miko Rwayitare and Joe Gatt’s Telecel in 1986 in what was then Zaire (now DRC) and comes right up to date with the development of Africa’s digital life and digitally-based start-ups. In the article below its author Russell Southwood looks at some of the highlights of South Africa’s important contribution to Africa’s communications revolution, both positive and negative.
Mobile operations started in Sub-Saharan Africa before South Africa licensed three new operators but the level of investment interest in communications was very low: more or less everything was controlled by Government.
It was the new South African mobile operators — MTN and Vodacom — that pulled in sizeable international funding.
Both were to go on to become the first pan-continental operators, with MTN making a massive investment in Nigeria.
The amount of money it invested in this license made worldwide telecoms investors sit up and pay attention.
After a cancelled flawed license process in Nigeria, the regulator NCC ran a ‘clean’ internationally supervised auction in which MTN won one of the new licences and pledged to invest US$1.4 billion over the next ten years.
As MTN’s first Nigerian CEO told me: “It was a huge amount of cash for the company…Vodafone had said you can’t do business in Nigeria, it’s too corrupt. MTN’s share price went down dramatically.”
Both MTN and Vodacom established a pan-continental presence and bought skills and investment with them. When MTN launched in Nigeria in 2001, it had 300 employees, 90 of whom were expatriates. By 2020, it was employing 19,288, the overwhelming proportion of whom were Nigerian.
In the early days mobile operators were innovative and MTN introduced the key change that made subscriber numbers increase so rapidly: pre-paid vouchers at ever lower prices.
The introduction of pre-paid calling was almost a case study in how to address ‘bottom-of-the-pyramid’ markets and there has not been anything with quite the same impact since.
South Africa was the first country to install a TCP/IP connection in Sub-Saharan Africa, only two years after the World Wide Web started. It took nine years to get the forty-nine countries of Sub-Saharan Africa connected.
What started with South Africa in 1991 ended with Eritrea in 2000. In contrast to its telecoms space, the country had and continues to have a lively internet space with trade association WISPA having over 800 members.
Less positively, South Africa’s Telkom was the ‘bad guy’ when it came to the introduction of international fibre cables needed to ‘fuel’ the internet.
The first of these cables – SAT3 – was set up by Telkom, as the managing agent, as a monopoly for all of the African countries that were involved in investing in it.
A long and at times very bitter struggle to avoid these monopoly cables ensued with subsequent cable projects.
The EASSy cable for the east coast of the continent pitched Telkom against MTN which supported a non-monopoly cable, both verbally with cash to others to help ensure its independence.
Telkom and the South African Government leant hard on everyone to create only a single cable and for it to be controlled by Government.
Disagreements around the EASSy cable led to Kenya leaving the project to build TEAMS and an independently financed cable called Seacom being built.
The latter signed a contract with university networking organization TENET for 10 Gbps for US$20 million provided it did not resell it commercially.
As Tenet’s then-CEO remembered it: “Telkom was very opposed to the deal and approached all the universities, saying there’s not going to be a Seacom cable and this is what we’re going to do for you.”
Another observer recalled during the EASSy process that: “South Africa started pushing its weight about. It was christened the America of Africa.” The Kenyan representative “stood up to that kind of bullying.”
To the pioneers of liberalization elsewhere on the continent like Ghana, Kenya and Nigeria, South Africa often seemed much less liberalized and more state-controlled.
However, even after the non-monopoly cables were connected in 2009, it took five years for the retail price of mobile internet to fall significantly.
Across nine countries for which there is full research data, all fell to around US$2-3 per 1 GB by the end of 2019. And who was the exception? South African mobile operators were still charging US$6.81 per 1 GB at that point.
Nevertheless, despite the slow reduction in data prices, subscriber numbers continued to climb and even rural areas had at least 30% of people making some use of the internet, based on data from the country’s Household Survey in 2015.
According to Finmark research, 90% of South Africans have existing bank accounts and around 40% of them are dormant and unused.
It also found that 90% of informal enterprises only use cash. Whilst this might seem like the ideal conditions for mobile money services, South Africa has yet to have anyone launch a successful service of this kind.
In 2004 Wizzit launched to provide basic banking services for the unbanked. In 2005 MTN and Standard Bank created a joint venture to provide a mobile money service. Neither of them stayed the course.
Many explanations are given as to why mobile money in South Africa has failed, including the requirement for service providers to be a bank.
It’s interesting that while M-Pesa in Kenya catered for both middle-class and low-income users, in South Africa most middle-class potential users have access to bank accounts.
In terms of the history of start-ups, Cape Town was for many years almost a separate country unrelated to Africa in terms of their development.
In 1995 Mark Shuttleworth founded Thawte Consulting which specialized in digital certificates and internet security. Four years later in 1999, he sold the company to Verisign for US$575 million.
Breaking the rather inward-looking pattern of South African digital services and start-ups, Naspers went out to Sub-Saharan Africa with e-commerce, online classified ads and business directories. Too early in, it opened them in several African countries in 2009 but had closed them all by 2011.
Later South Africa almost launched a successful regional social media platform (MXit) but several missteps later it went out of business: it tried to expand globally before it established itself outside of South Africa on the continent.
One South African start-up founder expressed this dilemma for South African tech businesses very clearly: “A lot of South African start-ups aren’t doing well across Africa — but they’re doing well globally. We don’t look to imitate; we innovate. I think we should be asking how we can get our companies to penetrate global markets.”
Some part of South Africa is in the richer part of the globe whereas a large part remains at the bottom of the income pyramid.
It’s always been hard for South African tech companies to make a good return in Sub-Saharan Africa, but several have succeeded, and doubtless more will do so in the future.
Author Russell Southwood is a long-standing industry analyst of Sub-Saharan communications markets and founded his consultancy and research company Balancing Act 22 years ago.
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