Expanding Internet Capacity In Africa: Best Opportunities For Private Investors In 2017

Written by Kurt Davis Jr.

Mobile, mobile, mobile.

The story of Africa leaping the landline phase for mobile phones is well known. Mobile penetration on the continent hovers around 50 percent – equivalent to more than half a billion people. The biggest pockets of users are in Egypt, Nigeria and South Africa. Some analysts estimate that Africa will have 725 million unique subscribers by 2020 — that’s 170 million new users between 2015 and 2020.

All these statistics speak to a growing connectivity between Africa and the rest of the world. The continent, however, remains quite unconnected without mobile phones. Less than 20 percent of Africa’s population is connected to the internet. Although the infrastructure investment have achieved major advancements — greater mobile broadband connection, fiber-optic connections to household — many Africans are regularly offline.

The internet multiplier effect

In the same way mobile phones changed the way business and life are conducted in Africa, greater internet access will do the same. Consider the following examples:

  • Education: A couple of doctors in Nigeria recently explained to me how bringing books into the country presented challenges. “Who wants to fly in dozens of books? Ship them? That would simply be a hassle,” an advisor to Nigerian government told me. Connecting Africans to the internet, especially in the classroom, presents an opportunity for teachers and students to leapfrog textbooks and go straight to tablets and Kindles. Teaching and diagnosing inside a hospital on a Kindle is the future, according to doctors from Nigeria to Ethiopia.
  • Health: The same doctors travel outside Lagos to serve remote communities. They gripe at the inability to break the digital divide with some patients. Some patients must wait a month or longer for the doctor to make his regular visit to town when a simple email with a prescription attached would take minutes.
  • Finance and business: The benefits of the internet are threefold. First, although mobile banking has created more financial mobility for many Africans, more must be done for those in remote (and urban) areas to can access a greater suite of financial services. In some towns, the closest bank branch may be more than two hours away. Second, while the growth in malls has created a form of socializing and entertainment for Africans, retailers would like to see a bump on their bottom line. E-commerce is a great way to achieve that. Third, business and finance have become online activities globally. Africa needs to get up to speed to compete on the international stage.

Finding the best opportunities in 2017

The favored countries for private investors in the past five years are Kenya, South Africa, and Nigeria with their high mobile and internet penetration rates, tech hub presence, and general attractiveness. There are other opportunities.

Ghana

Let’s start with the fact that Ghana has more tech hubs than Nigeria. While mobile data penetration is about 65 percent in the country, just 30 percent have access to internet. Some statistics suggest that only a third of those with mobile data access actually use it regularly. This has greatly hampered the Ghanaian internet experience. But Google’s Project Link, proposed for Ghanaian cities Accra, Kumasi, and Tema in 2015, provides the “last mile connectivity” in expanding the sub-sea fiber-optic cable inland to increase access (and internet speed) for businesses and individuals. Businesses, news agencies, and Google together see an obvious avenue for accessing Ghana’s digital potential and are paving a foundation for information and communication technology (ICT) entrepreneurs and investors.

Uganda

Uganda makes this list with the same assistance from Google. Project Links provides more than 600 kilometers of fiber-optic connection in Kampala. Using this expansion as a foundation, mobile companies have introduced 4G into the market. Businesses accordingly are slowly getting online with services, advertising, and ratings/feedback opportunities.

The education system in the country may be the biggest benefactor. The Ministry of Information Communication Technology has also partnered with the Research Education Network of Uganda to connect more than 50 campuses across the country. The next phase is to improve citizens’ abilities to conduct and manage financial transactions in a greater proportion (and at faster speeds) online, which is central to the Uganda boosting financial inclusion and participation.

Finance and business remain relatively offline in informal trade and by cash-in-hand in the current system.

Senegal

Senegal has nearly the same number of tech hubs as Nigeria as well as a similar 50 percent-plus penetration rate. Going beyond the numbers, Senegal presents a direct opportunity to access Francophone Africa. For example, past internet disruptions in Senegal have caused cross-border interruptions in Mauritania and Guinea. As the country becomes a greater regional hub, internet access will drive local and cross-border financial transactions, trading, and commerce. Senegal is also becoming a Francophone hub for many investors, competing with Cote d’Ivoire for market share and position.

Honorable mention goes to Cote d’Ivoire and Tanzania.

Kurt Davis Jr. is an investment banker focusing on the natural resources and energy sectors, with private equity experience in emerging economies. He earned a law degree in tax and commercial law at the University of Virginia’s School of Law and a master’s of business administration in finance, entrepreneurship and operations from the University of Chicago. He can be reached at kurt.davis.jr@gmail.com.

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