UNECA

1. UNECA African Economic Outlook 2008/2009 Special theme: Innovation and ICT Richard Walker Senior Economist, AfDB Official Launch Kigali, 28 July 2009

2. UNECA AEO Measuring Africa’s economies since 2001 • Economic overview & annual thematic focus • 2006: Transport • 2007: Water and sanitation • 2008: Technical & vocational skills • 2009: Innovation & ICT • 47 country chapters • Statistical annex and indicators African think tanks Local consultants Lead partner Experts Network Partners Key financial backer

3. Presentation overview • Why Innovation and ICT? • Snapshot: some of the ICT success in Africa • Supporting infrastructure – where Africa stands • The expected impact of the Financial Crisis on ICT in Africa • Some of the innovations that are changing African’s lives • Key policy recommendations

4. Special Theme Why Innovation and ICT? • Innovation is increasingly an important element of economic growth and ICT is at the centre of this process • ICT in Africa has already proven to be an innovation frontier by combining state-of-the-art technologies with local customs and constraints to produce incremental innovations • ICT is helping to improve business environments by contributing to market development, overcoming traditional infrastructural constraints and reducing business costs • But, • Africa still lags behind global developments in science and technology • Efforts to promote an innovation and technologically driven growth are needed • Benefits of ICT apparent, yet there are constraints, including the need to create a more conducive environment for investment

5. Snapshot Information and Communication Technology • Africa is the fastest growing market in the world. Today, 4 out of 10 Africans have a mobile phone. • The exponential growth in ICT is enabling many African users to gain access to basic services (education, health, banking) for the first time. • ICT is a vector for innovation, stimulating both innovative products and business models. • ICT is helping to overcome traditional infrastructural constraints and reduce business costs • As an endogenous source of growth, ICT is particularly valuable in a time of external crisis. Africa’s Exponential Growth in Mobile Telephony Source: OECD Development Centre, based on Wireless Intelligence, 2009.

6. Presentation overview • Why Innovation and ICT? • Snapshot: some of the ICT success in Africa • Supporting infrastructure – where Africa stands • The expected impact of the Financial Crisis on ICT in Africa • Some of the innovations that are changing African’s lives • Key policy recommendations

7. Connecting Africa to the world in 2009/10 Infrastructure • The East coast will be connected to the world for the first time through fibre optic submarine cables on open access, TEAMS and SEACOM (EASSy is facing delays); the West coast will be connected by at least 3 fibre optic submarine cables on open access, GLO1, MaIN OnE and WACS, instead of having only SAT3 on closed access. • User prices should start decreasing between 4 to 10 times from June 2009, as inland high capacity networks are built and as wholesalers pass on price cuts, which can bring about an exponential uptake in ICT and Innovation in Africa. As of March 2009 MULTIPLE SOLUTIONS THE MISSING LINK SAT3 AT LEAST ONE LINK Source: World Bank Group 2008, www.manypossibilities.net (Steven Song).

8. Good prospects for inland networks Infrastructure • Connecting Africa’s capitals and major cities will require 66,000 km of fibre-optic cables. • Several major initiatives are already being planned: • Eastern and Southern African Backbone. • Central African Backbone. • Western African INTELCOM II Backbone. 7,200 km in Northern Africa 19,500 km in Western Africa 30,500 km in Eastern and Southern Africa 8,800 km in Central Africa Source: ITU, 2007 • Total expenditure commitments for telecoms in Africa are set to reach $56 billion as agreed in the Connect Africa Summit, Kigali, Rwanda in October 2007, by Governments, International Organisations and Private companies • Participants committed to completing the interconnection of all African capitals and major cities with ICT broadband infrastructure by 2012 and African villages by 2015

9. ICT in Africa remains attractive to investors Financial Crisis Healthy Mobile Business in Africa • Like in the dot.com burst in 2000-2001, ICT investment will be less affected by the crisis than other regions. • Big deals have continued through late 2008 and early 2009 (e.g. divestiture of Ghana Telecom, Millicom’s in Rwanda, Orange in Uganda) • Capital expenditures are decreasing and price competition for market share is rising steadily. • Cash-rich transnational operators are expected to further consolidate their presence (e.g. Zain in 15 countries, MTN in 13 countries) Source: Wireless Intelligence, 2008 Outlook: With publicly funded high capacity infrastructure projects underway & private investments resilient to the crisis, new products and business models should multiplydespite the crisis

10. Presentation overview • Why Innovation and ICT? • Snapshot: some of the ICT success in Africa • Supporting infrastructure – where Africa stands • The expected impact of the Financial Crisis on ICT in Africa • Some of the innovations that are changing African’s lives • Key policy recommendations

11. Innovation Africa first to implement free roaming • Africa is the first continent in the world to implement free roaming, allowing any user in a foreign country to receive and send calls and messages at local rates. • Zain launched the world’s first borderless network in 2006. • Free roaming is growing exponentially thanks to pan-African operators  6 operators account for 52 % of total mobile phone subscriptions in Africa in 2009: • Middle East-based: Zain present in 15 countries and Moov in 5. • South African-based: MTN present in 13 countries. • European-based: Orange present in 12 countries, Tigo and Vodacom in 6. Free roaming countries Zain MTN Safaricom - Vodacom - MTN Forthcoming Source: OECD Development Centre

12. Mobile banking lowering transaction costs Innovation • Excellent prospects with e-banking services growing quickly and already present/announced in 14 Sub-Saharan and 3 North African countries. • Overseas: Orascom and Vodafone have signed agreements with Western Union on remittances. Major development knowing that these amounts are similar or greater than ODA flows. • Mobile-payment and mobile-banking services rely on existing distribution networks – mobile users, village kiosk agents and, eventually, Western Union agents. • In Kenya, M-Pesa’s mobile-payment service for domestic transfers has lowered transaction costs sharply (e.g. to send 1,000 Ksh: Western Union asks 500 Ksh/M-Pesa between 30 and 75 Ksh) • M-Pesa has won over 5m users in less than 2 years only in Kenya and is seeking to expand in East Africa and beyond. Mobile Phone Transactions in Kenya (%) Source: Vodafone, 2009.

13. phoner~1.gif Innovation Agriculture: bringing people & markets together • E-services, such as messages and internet through mobile phones, have brought together farmers and buyers by enabling timely and affordable access to crop prices and quantities • These services reduce price differences across markets (e.g. 20% in Niger) due to reductions in search costs • Farmers are able to search over more markets and respond to surpluses and shortages (e.g. markets with mobile phone coverage, in food crisis regions of Niger in 2005, had lower consumer grain prices than those regions without mobile coverage) • These services are already present in West and Central Africa and starting to grow in East Africa Bakin Birgi (Monday) Zinder (Thursday) Tanout (Friday) Niamey (Sunday) Farmer in Niger Home market 65 km ~ from 3 hours to 2 mins 20 km ~ 1 hour 750 km ~ from not accessible to 2 mins Source: Does Digital Divide or Provide? The Impact of Cell Phones on Grain Markets in Niger, Jenny Aker, 2008.

14. Presentation overview • Why Innovation and ICT? • Snapshot: some of the ICT success in Africa • Supporting infrastructure – where Africa stands • The expected impact of the Financial Crisis on ICT in Africa • Some of the innovations that are changing African’s lives • Key policy recommendations

15. Innovation and ICT in Africa Policy recommendations ICT in Africa has proven to be an innovation frontier by combining state-of-the-art technologies with local customs and constraints to produce incremental innovations To sustain this success, and deliver more and better value added services to the poorest population • Policies on Innovation and ICT need to be well integrated into broader development strategies (incl. Donor targets, MDGs and PRSPs) • A clear and appropriate regulatoryframework, with a strong and independent regulator, will attract the right investments • Expensive inland high capacity networks require/merit Government support • Government’s have to ensure that wholesale price drops are passed on – if users are to benefit from being connected to the world by low cost solutions • With many fixed-line operators close to bankruptcy, governments must attract private investment and know-how to the fixed-line sector by: • Adapting convergent licensing regimes • Setting symmetric regulation of termination charges

16. To end • Innovation and ICT in East Africa are critical to turn some of these reds into oranges and, ultimately, oranges into greens • International broadband connectivity and inland networks are strong steps in this direction • More still needs to be done by numerous stakeholders, including: Government, Private Sector and Development Partners

17. Thank You