The Technology, Media & Telecommunications sector in South Africa

The telecoms sector in South Africa is one of the most mature on the continent – the voice market is saturated and mobile broadband is not far behind[i] – 17% of South African have a smartphone.  As a result, subscriber growth is slower than elsewhere in Africa but net revenue potential is high, what with higher incomes, a large and increasing population and continued economic growth.[ii]

Recent liberalisation has revolutionised the tech arena, leading to lower prices and a surge of new entrants into the market.  Teraco is the biggest provider of carrier neutral data centres in Africa, with data centres in Cape Town, Durban and Johannesburg.[iii] Submarine cables are no longer subject to a monopoly and this has boosted industry no end. Current regulatory hurdles include WiMAX and LTE spectrum licensing and the unbundling of the local loop,[iv] but overall the outlook is bright.

Digital social media are advanced enough to support an online advertising and marketing sector. South Africa is leading in Africa in online shopping, banking, social media and cloud computing.[v] MVNOs are a growing proposition, and there’s scope for regional platforms to spread across borders. A recent Deloitte study predicts a second wave of “more mature mobile banking services: mobile-only banks, micro-finance, insurance. Banking could take a new shape with mobile-only banks such as TYME in South Africa (MTN, SABA, retailers Pic’n’Pay and Boxer).”[vi]

A diverse range of businesses are thriving in this space. In terms of business services, you have companies like Panda Security, which offers a collection of free antivirus tools on a “freemium” basis.[vii] FaxFX provides a free fax to email service subsidised by corporate fax customers[viii] and Everlytic produces cloud marketing software that manages campaigns across email, mobile and social media.[ix] The company has experienced an astonishing 606% growth rate since 2010.[x] Another fast grower, Adapt IT provides technology services to other businesses and has grown by 295% in the last five years.[xi] And then there’s Afrihost, an ISP providing broadband, web hosting mobile data, domain registration, and the like.[xii]

In banking, a subsidiary of the Bank of Athens,[xiii] since 2004, WIZZIT has offered South Africans a low-cost, transactional bank account that uses any mobile on any network for making and receiving payments, together with a MasterCard debit card.[xiv] Likewise, FNB’s eWallet allows anyone to send money to anyone with a South African mobile number; the money is transferred instantly and can be used to withdraw cash from FNB ATMs, buy prepaid airtime or electricity.[xv]

In the education sector, Spark Schools are an affordable private school network in South Africa which operation on a “blended-learning model”, where students spend a quarter of each day learning online or with educational software. This keeps costs down and ensures children gain a good understanding of technology and are more independent in their learning. Spark Schools plans to open 64 schools over the next 10 years, educating 64,000 students. Eventually they hope to bring their unique learning model into established and new schools in South Africa and the rest of the continent.[xvi]

But it’s not all plain sailing.  Homegrown social network Mxit, launched in 2005 by Herman Heunis, rocketed in popularity to become the top social network in South Africa, with (it claimed) 50 million registered users worldwide – including 17 million in South Africa.  These figures are not entirely believable, but even on Mxit’s own figures by 2014 they were down to 4.9 million users.  They have, unsurprisingly, not released numbers since then.[xvii]

Mxit appears to have failed to evolve; it was based on pre-smartphone mobile platforms and was abandoned as its core users switched to newer models.[xviii] That said, as recently as November 2014 it reportedly still has very highly engaged users in South Africa – the average user signs in five times a day, and spends 105 minutes a day online.[xix]

Is the success of the tech sector in South Africa a consequence of exaggerated wishful thinking though?  It has been argued that behind the hype are actually surprisingly few key players or thought leaders, a reliance on grants and NGO funding rather than proper, genuine investment in start-ups and a bureaucratic culture that strangles entrepreneurship at birth.[xx] Lack of security, democracy and the rule of law undoubtedly hinder true prosperity and South Africa’s brain drain has not helped.

South Africa’s schools have not truly recovered from apartheid era inequalities and deficiencies.  Witwatersrand University recently published the results of its sixth consecutive skills trend survey on South Africa’s ICT sector. The report’s author, Adrian Schofield believes South Africa is running the risk of lagging behind countries like Kenya, Nigeria and Egypt, which are much more focused on harnessing technology to grow their economies. Conversely, South Africa suffers a shortfall in graduates in science, technology, engineering, and mathematics disciplines and a long list of failed government technology projects. South Africa’s enormous pool of unemployed young people needs to be nurtured and given the opportunities to explore their own talent.[xxi]

[i] South Africa – Key Statistics, Telecom Market and Regulatory Overviews, Budde Reports, 4 May 2015, http://www.budde.com.au/Research/South-Africa-Key-Statistics-Telecom-Market-and-Regulatory-Overviews.html

[ii] The future of Telecoms in Africa: The “blueprint for the brave”, Deloitte, 29 April 2014, http://www2.deloitte.com/content/dam/Deloitte/za/Documents/technology-media-telecommunications/ZA_TheFutureOfTelecomsInAfricaFinal_29042014.pdf

[iii] Permira makes first African investment in data centre firm Teraco, Reuters, 4 December 2014, http://uk.reuters.com/article/2014/12/04/permira-africa-teraco-idUSL6N0TO3R320141204

[iv] South Africa – Key Statistics, Telecom Market and Regulatory Overviews, Budde Reports, 4 May 2015, http://www.budde.com.au/Research/South-Africa-Key-Statistics-Telecom-Market-and-Regulatory-Overviews.html

[v] South Africa – Digital Economy and Media Markets – Insights and Statistics, Budde Reports, 4 May 2015, http://www.budde.com.au/Research/South-Africa-Digital-Economy-and-Media-Markets-Insights-and-Statistics.html

[vi] The future of Telecoms in Africa: The “blueprint for the brave”, Deloitte, 29 April 2014, http://www2.deloitte.com/content/dam/Deloitte/za/Documents/technology-media-telecommunications/ZA_TheFutureOfTelecomsInAfricaFinal_29042014.pdf

[vii] The future of Telecoms in Africa: The “blueprint for the brave”, Deloitte, 29 April 2014, http://www2.deloitte.com/content/dam/Deloitte/za/Documents/technology-media-telecommunications/ZA_TheFutureOfTelecomsInAfricaFinal_29042014.pdf

[viii] The future of Telecoms in Africa: The “blueprint for the brave”, Deloitte, 29 April 2014, http://www2.deloitte.com/content/dam/Deloitte/za/Documents/technology-media-telecommunications/ZA_TheFutureOfTelecomsInAfricaFinal_29042014.pdf

[ix] Everlytic, http://www.everlytic.co.za/

[x] Technology: Fast 50 Africa winners announced, Deloitte, 24 November 2014, http://deloitteblog.co.za/2014/11/24/technology-fast-50-africa-winners-announced/

[xi] Technology: Fast 50 Africa winners announced, Deloitte, 24 November 2014, http://deloitteblog.co.za/2014/11/24/technology-fast-50-africa-winners-announced/

[xii] Afrihost, https://www.afrihost.com/

[xiii] The future of Telecoms in Africa: The “blueprint for the brave”, Deloitte, 29 April 2014, http://www2.deloitte.com/content/dam/Deloitte/za/Documents/technology-media-telecommunications/ZA_TheFutureOfTelecomsInAfricaFinal_29042014.pdf

[xiv] AdvisoryStories from the Field – WIZZIT Micro-lending Pilot (South Africa), IFC, 28 September 2011, http://www.ifc.org/wps/wcm/connect/8e150880487ebb4b855bed51e3a7223f/IFC+Wizzit_MobileMoneyMicro-LendingCaseStudy.pdf?MOD=AJPERES

[xv] eWallet, FNB, 2015, https://www.fnb.co.za/ways-to-bank/ewallet.html

[xvi] Spark Schools, Clayton Christensen Institute, 2013, http://www.christenseninstitute.org/spark-schools/

[xvii] Mxit: the rise and collapse of ‘Africa’s largest social network’, Memeburn, 27 February 2015, http://memeburn.com/2015/02/mxit-the-rise-and-collapse-of-africas-largest-social-network/

[xviii] Mxit: the rise and collapse of ‘Africa’s largest social network’, Memeburn, 27 February 2015, http://memeburn.com/2015/02/mxit-the-rise-and-collapse-of-africas-largest-social-network/

[xix] South African Social Media Landscape 2015, World Wide Worx, November 2014, http://www.worldwideworx.com/wp-content/uploads/2014/11/Exec-Summary-Social-Media-2015.pdf

[xx] 2014 LSE Africa Summit: Africa tech hubs – A tale of hope or hype?, Africa at LSE, 5 March 2014, http://blogs.lse.ac.uk/africaatlse/2014/03/05/2014-lse-africa-summit-africa-tech-hubs-a-tale-of-hope-or-hype/

[xxi] S.Africa’s ICT sector lacks critical skills, CNBC, 12 February 2015

http://www.cnbcafrica.com/news/southern-africa/2014/11/18/south-africa-ict-skills-shortage/

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Circles in the sand?

The West African Rail Loop is a part of a mammoth project aiming to connect Abidjan in Cote d’Ivoire to Cotonou in Benin, via Niamey in Niger and Ouagadougou in Burkina Faso.  It’s being built in sections: a seven-year effort was announced in 2013 to build the Cote d’Ivoire-Niger section[i]; work started on the Niger-Benin section in February this year.  The first phase will connect Cotonou and Niamey. Work will then move on to extend the line 137km from Parakou to Gaya.  It will eventually reach all the way to Niamey and link up with the West Africa Railway and a coastal line running through Nigeria, Benin, Togo and Ghana,[ii] an incredibly exciting prospect for anyone who loves to travel in the region.

The main aim of the railway is to boost trade – a 2011 study by the Economic Community of West African States reported that road freight across the region travels at an excruciating 1.6km an hour,[iii] hardly surprising to anyone who has passed along these often narrow, dusty, potholed roads, despite the improvements in recent years.

One beneficiary will be a profitable manganese mine at Tambao in north east Burkina Faso – French engineers have dreamt for years of linking the raw materials to ports on the coast. The extension of the line on to Niger will be a massive improvement to the infrastructure of the country, which currently has no working railways[iv] and no easy access to the sea.  Niger depends on its neighbours’ ports and roads to move its main export – uranium – to the coast, and the government hopes to quadruple the revenue earned from this trade over the next ten years.  The uranium industry made up only 5.8% of GDP in 2010, despite comprising over 70% of Niger’s exports. Reducing transportation costs will play an important part in redressing the balance here.

But the benefits will be felt more widely, it’s hoped, with reductions in transit times leading to a decrease in consumer prices as most imports will come by train. The coastal countries ought to prosper too – the passage of goods from the centre accounts for a whopping 90% of Cotonou’s work alone.[v]

For the Benin to Niger section, up to 40% of the cost of the project is likely to come from partners, 10% each from the governments concerned and 20% from Nigerian and Beninese private sector partners, according to officials in Nigeria.[vi] Bolloré Africa Logistics has won the contract for this part of the line, thought to be costing some $1.6 billion, under a build, operate, transfer arrangement, where private investors put in the initial investment and run the project at first, before passing ownership to the government.[vii] The company also plans to restore the track between Abidjan in Côte d’Ivoire to Kaya in Burkina Faso.[viii]

The Niger to Ivory Coast section is reportedly being paid for by France and the EU – with substantial investment coming from Romanian financier Frank Timiş, who owns the mining rights at Tambao and will benefit exponentially from the railway.

The project has apparently been delayed in part due to a conflict between Timiş and Vincent Bolloré, the man behind the aforementioned Bolloré Africa Logistics, as they battle for control of the line.[ix] It’s thought that Niger’s upcoming elections (due next year) will move things on though as the government seeks to demonstrate its ability to get things done.[x]  Plans have been mooted for these continental rail networks since in the 1950s so this will be quite an achievement!

A West African rail loop will really boost trade, competition, cooperation and tourism in West Africa, let’s hope the governments of the region can maintain the momentum to keep this thing on track.

[i] Niger to Ivory Coast rail link lays tracks for African infrastructure expansion, The Guardian, 19 August 2013, http://www.theguardian.com/global-development/2013/aug/19/niger-ivory-coast-rail-link

[ii] Benin-Niger railway project launched, Rail Journal, 20 March 2015, http://www.railjournal.com/index.php/africa/benin-niger-railway-project-launched.html

[iii] West Africa: New railway network aims to boost inter-regional trade, Africa Renewal Online, December 2014, http://www.un.org/africarenewal/magazine/december-2014/west-africa-new-railway-network-aims-boost-inter-regional-trade

[iv] Niger to Ivory Coast rail link lays tracks for African infrastructure expansion, The Guardian, 19 August 2013, http://www.theguardian.com/global-development/2013/aug/19/niger-ivory-coast-rail-link

[v] West Africa: New railway network aims to boost inter-regional trade, Africa Renewal Online, December 2014, http://www.un.org/africarenewal/magazine/december-2014/west-africa-new-railway-network-aims-boost-inter-regional-trade

[vi] Rail line work between Niger and Benin to begin next month, African Review, 25 March 2014, http://www.africanreview.com/transport-a-logistics/rail/construction-on-railway-line-between-niger-and-benin-to-begin-in-april-2014

[vii] West Africa: New railway network aims to boost inter-regional trade, Africa Renewal Online, December 2014, http://www.un.org/africarenewal/magazine/december-2014/west-africa-new-railway-network-aims-boost-inter-regional-trade

[viii] Rail infrastructures in Africa: Sitarail rehabilitates the railway between Abidjan and Kaya, Bolloré Africa Logistics, 17 May 2014, http://www.bollore-africa-logistics.com/en/media/medianews/rail-infrastructures-in-africa.html

[ix] Niger to Ivory Coast rail link lays tracks for African infrastructure expansion, The Guardian, 19 August 2013, http://www.theguardian.com/global-development/2013/aug/19/niger-ivory-coast-rail-link

[x] West Africa: New railway network aims to boost inter-regional trade, Africa Renewal Online, December 2014, http://www.un.org/africarenewal/magazine/december-2014/west-africa-new-railway-network-aims-boost-inter-regional-trade