Powering Africa into the Information Age

Posted on March 12, 2014

Filed under News    Tagged with Africa, economy, growth, GSMA, infrastructure, Investment, mobile, private equity, Upp

Africa is a honeypot for investment

The African economy and infrastructure are starting to become a real honeypot for investment. Over the past 10 years, the region's economic output has tripled to $2 trillion. Global fund management group T. Rowe Price says that, over the next five years, eight out of 10 of the fastest growing countries in the world will come from Africa and the Middle East. According to the World Bank, the African economy grew by 5.6% in 2013. This rapid growth, alongside the region's dynamism, huge potential consumer markets and reform programmes are attracting savvy Western investors away from more sluggish economies.

Private equity players are also piling in. Over the past five years, private equity firms have invested nearly $12 billion in Africa, according to a study by Ernst & Young and the African Private Equity & Venture Capital Association (AVCA). Last October, Carlyle Group raised nearly $600 million for its first sub-Saharan Africa fund. Sovereign borrowers have also benefited; African governments have raised a record $8 billion in global bonds, up from just $1 billion a decade ago, as international investors chase yields that are unavailable elsewhere.

Mobile phone uptake is a crucial theme in Africa's growth story. In a region beset by undeveloped infrastructure and limited access to fixed lines, it is perhaps not surprising that Africans have rushed to embrace wireless telephony. According to the GSMA, the global body for the mobile phone industry, subscriber numbers in sub-Saharan Africa have risen to 475 million from 90 million seven years ago, making it the fastest growing region in the world.

The link between mobile phone usage and economic growth is clear: an additional 10 phones per hundred people leads to a GDP per capita increase of as much as 0.6 per cent. The impact is even larger in developing countries, at between 0.8 and 1.2 percentage points.

In developing regions such as Africa, mobile phones aren't simply used for communicating with friends and relatives. They are the main medium for accessing the Internet and fulfill the social functions that we in the West take for granted. For instance, through a system known as mobile money, many Africans rely on their mobile phone to pay for goods and services and even make savings, because of the absence of physical bank branches. In Kenya, some two-thirds of the adult population uses this system and about a quarter of the country's GNP flows through it. Across sub-Saharan Africa, the mobile economy in its entirety generates 6 per cent of GDP, higher than in any other region worldwide.

With electricity blackouts commonplace and limited access to the local grid even when it is working, powering Africa's access to communications is crucial if recent impressive growth rates are to be maintained. With the advent of the Cloud and smart technology, individuals are demanding ever more from their mobile devices. All this needs greater amounts of energy and the current battery technology that Africans rely on to power their devices is struggling to keep up.

Working alongside incumbent African businesses, innovative Western companies can help solve such problems and play a part in assisting the continent's exciting growth story. In late 2013, we unveiled “UppTM”, a portable energy device which uses our hydrogen fuel cell technology and is aimed initially at the African consumer electronics market. The device will provide customers with a week's worth of power for USB-compatible electronic devices, such as smartphones, tablets and portable gaming consoles, without the requirement to recharge from an electricity grid and with the benefit of zero-emission energy. We launched Upp at AfricaCom 2013 and the reception received from press, customers, potential partners and network carriers was evidence that a device that gives customers energy freedom and power on the go is sorely needed.

For Western companies willing to grasp the continent's infrastructure and demographic challenges, Africa can be a land of opportunity.


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