Necessity Calling

Over the past two years, a different kind of headline has dominated global media coverage of Africa. Media outlets have woken up to the fact that there is more to the continent than the stereotypical wildebeest migration across its grassland savannas, civil wars and famines. Instead, they are covering an economic boom spurred by higher commodity prices. The International Monetary Fund says that since 2003 the economies of 48 Sub-Saharan African countries have grown on average by five to seven percent per year. Over the past decade, six out of the ten fastest growing countries in the world were African. Last year, five countries outgrew China and only two, Gambia and Swaziland, expanded at a slower rate than Europe and the United States.

But the continent’s strong economic growth is not limited to high commodity prices. The continent has immersed itself into the mobile and Internet age just like any other region in the world.

Mobile penetration in Africa has risen to 67 percent as of 2012 and some of the world’s most interesting examples of low-cost smart phones are debuting on the continent. Samsung, Intel, Microsoft and Huawei are all embroiled in a race to tap into what McKinsey has described as a $1.3 trillion middle class emerging over the next ten years, for which handset makers design devices that retail for less than $80. Africa is considered to be the world’s fastest growing smartphone market. Some estimates suggest that by 2016 there will be one billion mobile phone subscriptions on the continent, equalling Africa’s total population.

The mobile phone is playing a central role in African society today as highlighted by the quirky factoid that believes the average Sub-Saharan woman touches her hair 37 times a day and touches her phone 82 times a day. Necessity is the mother of invention and there is hardly any place where this statement seems to ring more true than in Africa today. The lack of infrastructure and basic logistics in most parts of the continent can also be business opportunities that thanks to the spread of the mobile phone can now be exploited. In some regions in Africa, there are more people with mobile phones than have access to electricity. Africans don’t wait for for the power grid to reach them before plugging into the Internet. The mobile phone is the continent’s default device as in some areas computer penetration remains as low as fixed-line telephone penetration.

This turns airtime into a precious commodity across Africa where 99 percent of subscribers are pre-paid or pay-as-you-go users, to whom every cent and every second counts. A World Bank study recently said that for some of Kenya’s poor airtime ranks higher on their spending priorities than food or transportation. The study concluded that seven out of ten amongst Kenya’s poor rather cut down on food expenses than on airtime.

"Across the continent, the spread of mobile phones is accelerating collaboration, enterprise and society in a range of ways."

This has opened up opportunities to companies catering to the use of this commodity. The Kenyan firm Mobile Decisioning, or short MoDe, has introduced its solution to eight African countries. The service allows mobile network operators to offer their subscribers the ability to borrow airtime from the mobile network with a few keystrokes. In some cases this comes at a price. In Kenya for example the mobile network keeps ten percent of the requested amount. If a subscribers asks for airtime worth 100 Shillings, the subscriber would receive only the equivalent of 90 Shillings. The convenience to take this “nano finance” airtime advance has made it a hotly prized asset. It also caters to subscribers in remote regions outside the range of airtime distributors.

In South Africa and other markets, mobile phone operators provide a number of free text messages per day or month, which subscribers who can not afford more airtime can use to ask other users to call them back with a pre-defined text message such as „Please Call Me. Thank you.“

Network operators then sell advertisement space attached to these messages. It is estimated that in South Africa alone over 42 million such messages are received daily.

Across the continent, the spread of mobile phones is accelerating collaboration, enterprise and society in a range of ways. The industry that has felt the change induced by the mobile phone most is the Africa banking industry.

„The SIM card is the credit card of Africa,“ says Toby Shapshak, a South African technology writer.

>> Ch. 2 A Mobile Banking System