In the Ghanaian capital Accra, one government minister takes questions from citizens via Facebook. One journalist in Kenya uses his smart phone to e-mail breaking news instantly from a corporate press conference; his announcements affect share prices on the Nairobi Stock Exchange. Technology is rapidly changing Africa, and at the forefront of this change is rising access to broadband Internet. Broadband is even more critical to the 21st century economy than electricity was in the 19th century, according to Eric Osiakwan, Director of the consulting company Internet Research based in Accra. He makes the case for African governments to support broadband infrastructure as a critical part of their development agenda.
By Eric M.K. Osiakwan
In 2009, the World Bank released its Information and Communications for Development report that showed access to broadband boosts economic growth in all countries, but most especially in developing ones. The study showed that in developing countries, for every ten percentage points of broadband penetration, their economies grew by 1.38 percent. The report, conducted in 120 countries between 1980 and 2006, developed countries’ economies grew by 1.21 percent. Broadband access is key for economic growth and even more vital in developing countries. Africans are seizing the opportunity that it offers to move their economies forward.
What is Broadband?
Broadband is usually defined as any always-on, high-speed connection to the Internet, whether from a computer, television, cellphone or other mobile technology. The Organization for Economic Cooperation and Development (OECD) specifies a download speed of 256 kilobits per second or higher as constituting broadband. But recent studies have redefined broadband as an “ecosystem” that ranges from the networks, to the services the networks carry to the applications they deliver and the users.
Africa’s economic growth
Africa has sustained economic growth above five percent since the beginning of the 21st century with a peak in 2007 at 6.1 percent. Growth declined slightly in 2008 and 2009 due to the global financial and economic crisis.
Overall investment with private involvement represented an average 1.3 percent of Africa’s Gross Domestic Product (GDP) between 2004 and 2007.
In absolute terms, in 2004-2007 Africa attracted on average US$11.5 billion, behind OECD and Central Asia with US$19 billion and Latin America and the Caribbean with US$13.3 billion, and slightly ahead of South Asia with US$10.8 billion. East Asia and Pacific countries lagged behind with US$5.3 billion.
African telecommunications and GDP
McKinsey & Company estimates that “a 10 percent increase in broadband household penetration delivers a boost to a country’s GDP that ranges from 0.1 to 1.4 percent.” Booz & Company also found out that “ten percent higher broadband penetration in a specific year is correlated to 1.5 percent greater labor productivity growth over the following five years.”
Tunisia’s Ministry of Communication Technologies show that the ICT sector has grown by 17.8 percent in 2008. Its contribution to the country’s GDP reached ten percent that year, against just 3.9 percent in 2001. The ministry projects growth will reach 13 percent by 2011.
A World Bank report showed that between 1998 and 2008, mobile phone subscribers in Africa soared from two million voice users to 400 million with US$56 billion in investment. A total of 65 percent of the African population gets mobile phone coverage, but that only covers 30 percent of the Continent’s territory. And mobile phone companies make more money off African subscribers: The average revenue per user is US$12 each month, compared to $6 in India.
More broadband – faster economic growth
There may be more people using mobile phones than have broadband access, but the table above shows broadband has a much stronger direct correlation to economic growth than access to a cellphone, landline or other Internet platforms. More broadband means faster economic growth.
Investing in broadband is an investment in economic growth and an indirect investment in development. If broadband is made accessible and affordable, it would have a direct impact on health, education and standard of living; the three main indicators in the UNDP Human Development Index (HDI).
Broadband costs are coming down
With the arrival of new submarine cables, the cost of bandwidth has gone down significantly. East Africa which used to have no undersea cables two years ago now has three, and this has reduced the cost of a 2MEG broadband connection from US$5000 on satellite to US$400 on fiber.
West Africa which used to have one undersea cable now has two more, and the price has reduced from US$4,500 to US$500. Southern and North Africa have also seen significant reductions.
The general consensus is that two years ago, a 2MEG broadband connection used to cost thousands of dollars but now it is in the hundreds despite the lack of terrestrial fiber in some parts of the Continent. Given that the terrestrial fiber bottlenecks are being addressed and more submarine fiber cables are coming to the Continent, it is projected that broadband cost would be in the ten of dollars within the next two years.
This is going to increase the penetration levels with a ripple effect on GDP.
AfDB, AU, UNECA (2009), African Statistical Year Book
Booz & Company (2009), Digital Highways: The Role of Government In 21st Century Infrastructure
McKinsey & Company (Feb 2009), Mobile broadband for the masses
World Bank (Jan 2010), Building Broadband: Strategies and policies for the developing world.
World Bank/ Philippe Dongier, Opportunities and Challenges for Connecting Africa
World Bank (2007), Telecommunications Investments with Private Participation (PPI) in Africa, PPI Database
At eLearning Africa, Eric Osiakwan will present Broadband and Economic Growth in Africa as part of the session Affordable Bandwidth Solutions and Their Advantages for Economic Growth on Friday 27 May 2011, from 14:30-16:00.