The Internet as a development aid

Young Ugandans sit at a festival in Kampala (Picture by Yannick Tylle / Corbis / Dukas Technological progress and the spread of the Internet represent opportunities for developing countries. Particularly in Africa, experts see great potential. But is the road to progress really that simple?

As citizens of the western world it can be hard to imagine that two thirds of the world's population still do not have access to the Internet. Of the 2.5 billion people who regularly go online, almost all live in industrialised countries. Experts believe that it will take another five to ten years before the rest of the world's population has access to the vast expanses of the network. Potentially, on one hand, this trend will change the Internet and its content, but, most of all it gives developing countries the chance to progress.

The consequences could be particularly far reaching for the poorest continent in the world. Across the whole of Africa 16% of the population of 1 billion currently have access to the Internet. The differences urban and rural populations, as well as between countries, are large. In Kenya and Senegal almost 50 percent of the urban population are online daily, but only one to two percent of sub-Saharan Africa have their own Internet access.

Smartphones as a driver

This is likely to change dramatically in the coming years due to technological progress. The invention of smartphones has opened up Internet access for large population groups. It replaces the much more expensive desktop or laptop computer and thus opens the Internet for the masses. Like any mature technology, smartphones are becoming cheaper; with entry-level models already exist for less than $100. 20 to 30 percent of Africa’s population already own such a device. In addition, the development of the LTE mobile standard – otherwise known as 4G – enables high-speed broadband Internet access for mobile devices. In Africa, LTE networks are not widespread, but that should change with the rapidly growing number of smartphone users.

That is, at least, what the Swiss company YooMee Africa counts on happening. Although the telecommunications company is headquartered in Küsnacht, it focuses entirely on the laying of LTE infrastructure in Africa, because it is there the greatest boom in demand awaits. The growing middle class, rapid urbanisation and the relatively young population, will drive demand for internet connections, said Chairperson Anat Bar-Gera recently, as part of the “Stein-am-Rhein Symposium – Stars” an international network of young leaders. The Israeli is convinced that the spread of smartphones, and thus the Internet, will greatly contribute to economic growth in Africa.

Optimism occurs with a glance in the rear view mirror of history. The advent of mobile telephony in Africa has triggered significant social change. People who previously had no or only very limited access to telecommunications can now communicate with each other with 80 percent of the population now owning a mobile phone. Africa is the second largest mobile market worldwide, behind Asia. Sales in the mobile phone market now correspond to 3.7 percent of Gross Domestic Product (GDP) in Africa – three times as much as in many industrialised countries.

If smartphones take a similar impact on the African economy as mobile phones, economic progress is likely to be considerable. Currently, the Internet contributes only 18 billion, or 1.1 percent annually to GDP of the whole of the continent. The proportion varies greatly between African countries but in comparison to industrialised countries it is still low (see chart). Thanks to smartphones, the influence of the Internet is expected to grow by more than $300 billion by 2025, estimated the consulting firm McKinsey and Company, in their study “Lions go digital: The Internet’s transformative potential in Africa”. In the emerging economies of China, India and Brazil, the Internet had also been a catalyst for growth, the study explains. In the last five years, it had contributed more than 10 percent to GDP.

 

Fibre optic cable in Cameroon

At Yoomee they know that the developmental differences between the 54 African countries, as well as political frameworks, are enormous. The company is currently only represented in Cameroon and Côte d'Ivoire, but other countries will soon be targeted. Yoomee is clearly profit oriented, but the spread of the Internet also benefit society, says Bar-Gera. Fast Internet connections simplify the creation and expansion of medium-sized companies, which will in turn contribute to economic growth. In addition, the population could take online courses and learn foreign languages.

The authors of the McKinsey study also believe that the African education sector will benefit from the expansion of the Internet. Moreover, a strengthening of the Internet, it is stated in the study, would drive the health care, retail, agriculture, government and financial services sectors. When asked how much the Internet can actually affect economic growth in Africa, the World Bank provided a surprisingly precise answer. In low and middle-income countries, they would require a 10 percent improvement in broadband penetration to increase economic growth by 1.38 percent; more than in high-income countries and more than any other telecommunications service.

Is the key to growth actually just down to greater penetration of the Internet? In retail, for example, the situation is more complex; although the generally poor infrastructure in Africa, as well as a lack of large shopping centres are expected to drive the demand for e-commerce services, many people in rural areas have no postal address, only using characteristic landmarks. The lack of definitive residential addresses, and poor infrastructure, makes delivering goods ordered online difficult. In addition, the poorer section of society to not have bank accounts; salaries and goods are usually paid for in cash. Payments in advance, as is the norm in e-commerce, are not possible. The result is that the online retailer Amazon offers very limited supply to Africa.

New market solutions

The telecommunications company Vodafone found a possible solution to this problem. The payment system M-Pesa uses the fact that, although many Africans do not have a bank account, they have a mobile device. At authorised distributors customers can load M-Pesa credit on to their cell phone and can transfer money to other users. The system was launched in 2007 in Kenya and is now also available in Tanzania, South Africa, Mozambique, Lesotho and Congo.

It has proven that E-commerce in Africa is indeed possible - it just needs different solutions to those in industrialised countries.

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