The Connected World Whither the Internet in ? By Sami Chabenne, Alexandre Gorito, and Hans Kuipers

s the glass half empty or half full? online retail and online advertising?), and IThis is the question that the results of engagement (25 percent; how actively are the 2012 BCG e-Intensity Index pose to businesses, governments, and consumers governments across Africa. embracing the Internet?). The Index shows not only how one country compares with On the one hand, e-Intensity Index scores others but also where a country’s strengths are rising quickly for many of the 14 and weaknesses lie within the three nations on the African continent that are dimensions. included in the 2012 list—more so than those of developed nations and many other developing economies.1 On the other The Expanding hand, all of these nations are starting from Around the world, e-Intensity Index scores very small bases, and even those with continued to increase—but far from increased scores are barely staying even or evenly, with clear overperformers and are falling down the global rankings. South underperformers emerging. The average Africa, which has the most developed score in 2012 was 52, up from 44 in 2011 economy in Africa, ranked only sixty-fourth and 27 in 2009. The average score of the out of 85 countries on the e-Intensity countries in the Index’s lowest ten percent, Index. , the most populous, ranked which includes five African nations, rose eighty-third. from 5.7 to 14.4 between 2009 and 2012, whereas the average score of the leaders in The e-Intensity Index measures countries the top-10 percent improved from 115 to according to three gauges of Internet 184.3. and , the activity: enablement (50 percent weight- highest-ranking African countries, each ing; how well built is the infrastructure and had a score of 35 in 2012. (See the exhibit how available is access?), expenditure (25 “GDP Is Not a Good Predictor of e-Intensi- percent; how much money is spent on ty Performance.”)

For more on this topic, go to bcgperspectives.com GDP Is Not a Good Predictor of e-Intensity Performance

E-Intensity Index scores for countries with less than $20,000 GDP per capita in 2011 2012 BCG e-Intensity score 80

Russia Romania Bulgaria Argentina 60 Brazil Turkey Croatia Costa Rica Chile Panama Ukraine Serbia China Malaysia Georgia Dominican Mexico 40 Republic Venezuela Ecuador Mauritius Vietnam Colombia Kazakhstan Paraguay South Africa Uruguay Philippines Peru Thailand 20 Pakistan Bolivia India Indonesia Nigeria 0 0 5 10 15 20 2011 GDP per capita ($thousands) Africa Latin America Eastern Asia Eurasia Sources: ComScore; Economist Intelligence Unit; Euromonitor; Gartner; International Telecommunication Union; Magnaglobal; Ovum; Pyramid Research; Speedtest.net; United Nations; ; World Economic Forum; BCG analysis. Note: The index is scaled so that the geometric mean is 100 for 34 OECD countries in 2011. GDP is reported on a purchasing-power-parity basis.

The e-Intensity Index rankings are impor- Opportunities to Leapfrog tant indicators of more than just Internet It may seem counterintuitive, but the depth and breadth. Around the world, the relatively low state of Internet intensity in Internet is having a large and growing African nations gives these countries, and impact on national economic activity. other developing economies, a big oppor- Across the G-20, it accounted for 4.1 tunity. Unshackled by legacy infrastruc- percent of GDP in 2010, or $2.3 trillion, ture or embedded commercial interests, and will rise to 5.3 percent of GDP, or $4.2 they can leapfrog their developed counter- trillion, in 2016. The Internet economy in parts by taking advantage of the next South Africa contributed 1.9 percent to waves of innovation, including mobile overall GDP in 2010, a figure that is access and social networking. Around the expected to rise to 2.5 percent in 2016. In world, forward-thinking governments are Egypt, this figure was 1.1 percent in 2011 moving to seize these opportunities, and and should increase to 1.6 percent in the their rising e-Intensity Index scores reflect next five years. In most other African these efforts. African governments can do countries, the direct contribution of the the same. Internet to GDP is barely measurable. Mobile phones are increasingly helping In the coming years, developing-country Africans run businesses, find jobs, pay their growth rates will be more than twice those bills, transfer money, learn, share, bank, of developed economies—18 percent on and connect. Four out of five Internet average, far outpacing just about every users in sub-Saharan Africa go online using traditional economic sector. Since national mobile phones, compared with one in levels of Internet economic activity gener- three globally, according to TNS, a market ally track the e-Intensity Index, countries research firm. Three-quarters of sub-Saha- that are slipping on the Index are also ran Africans say that they are content to losing out on economic growth and job do all their Internet surfing on a mobile creation. phone, compared with about one-quarter

| Whither the Internet in Africa? 2 in developed countries. Between 2012 and websites were profitable, while only 60 per- 2016, mobile connections in Africa are cent of those without a website reported projected to grow at an annual rate of 21 profitable operations. percent. There is an increasing number of examples Smartphone penetration is increasing, too. of local applications, including mobile Samsung, the largest smartphone maker, technology that helps farmers share best recently announced plans to double its practices in order to increase crop yields sales and marketing efforts in Africa, and a Ghana based not-for-profit organiza- which it sees as the world’s second-biggest tion using an SMS-platform to fight the and fastest-growing market after China. spread of counterfeit medication. Google is Kenya, Nigeria, and Ghana lead in smart- working in Africa to make the Internet phone sales. As feature phones are re- local by providing language translation for placed by smartphones in the coming many of the continent’s more than 2,000 years, the Internet will be redefined across languages. the continent. Governments and compa- nies alike need to think “mobile first” As in developed economies, consumers when planning their Internet strategies. place a considerable value on the Internet. In South Africa, for example, consumers Social networks play a key role in the believe that they receive value amounting Internet experience in emerging markets to $1,215 over and above what they pay and are fast becoming important sources for devices, applications, services, and of information and commerce. Facebook access—not far below the $1,430 average has about 50 million users in Africa, “consumer surplus” of the G-20. By com- according to analytics firm socialbakers. parison, Brazil’s consumer surplus is Facebook’s penetration is 13 percent in $1,287, Russia’s $1,002, Indonesia’s $364, South Africa and around 30 percent in and India’s $414. Tunisia and Mauritius. Egypt is Facebook’s most important country, with close to 12 million users, or 14 percent of the popula- Inconsistency Remains an Issue tion. Mxit, a South Africa-based mobile- In Africa, unfortunately, the picture messaging platform, has rapidly developed painted by the e-Intensity Index is one of itself into a content distribution platform inconsistency for now. Several countries— and claims to be Africa’s biggest social including Egypt, Angola, Morocco, and network with 50 million users. Almost 60 Rwanda—are experiencing rapid growth in percent of sub-Saharan African Internet online expenditure—but, again, the bases users think social networking is the most are very small. At the same time, two- important reason to use the Internet, thirds of Kenyans use mobile-money compared with 26 percent worldwide, technology, far more than in Kansas, according to TNS. Kazakhstan, or Copenhagen. According to mobile operator Safaricom, the M-Pesa Growing Internet use brings increasing service has 15 million users and handles benefits to both businesses and consumers. some KSH 1.8 billion (US$21 million) a Our research shows that across 11 G-20 day. Mobile money has met with less countries over the past three years, small success elsewhere, however, and the lack of and medium-sized enterprises (SMEs) with effective online-payment systems in most high Internet use experienced revenue countries still hampers Internet-based growth that was up to 22 percent higher economic activity. than that achieved by SMEs with low or no use of the Web. And they created more Some countries are boosting their e-Inten- jobs. A 2012 survey of South African SMEs sity rankings by pursuing Internet enable- by World Wide Worx, a South African ment and engagement programs. The technology-research firm, found that government of Rwanda hopes to establish almost 80 percent of those SMEs with that country as a regional information- and

| Whither the Internet in Africa? 3 communications-technology hub by 2020 e-Intensity Index rankings look to encour- and has embarked on building a fiber optic age Internet use among consumers, network and an advanced data center. businesses, and within government itself Senegal has built a digital-telecommunica- because they recognize that it can be a tions infrastructure and a widespread powerful edge in the competitive global network of “telecentres” and Internet economy. Countries further down the list cafés. The Egyptian government’s eMisr risk falling increasingly behind if they do National Broadband Plan targets not act. coverage of 98 percent of the population by 2015. What’s a country to do? One suggestion is to look at what has worked elsewhere. Even given rapid advances in mobile Many countries that are leading the technology, enablement remains a big e-Intensity Index, or are moving fast up the issue for most African countries. In Angola, rankings, have long pursued explicit for example, while business broadband strategies to boost Internet growth. Swe- penetration is 60 percent—high by African den was the first country in Europe to terms—only 15 percent of individuals use develop a broadband policy. South Korea the Internet (through any connection), has used ICT technologies to turn that ranking the country ninth of the 14 includ- country into an economic powerhouse. ed in the Index on this metric. There are Estonia’s EstWin program aims to provide only 1.5 active mobile-broadband subscrip- every household and business with fast tions per 100 inhabitants in Angola, fiber-optic access by 2015 and has helped compared with 21 in Egypt and 23 in that country move up ten places in the Ghana. 2012 enablement rankings and four spots in the overall e-Intensity Index rankings Things are improving, though. EASSy, the since 2011. African policymakers should East African Submarine Cable System, look to successful policies that they can went live in 2010 and delivers nearly adopt, adapt, and amplify. 5 terabit-per-second access to 21 countries, making it increasingly affordable for A key area of focus should be infrastruc- Africans to have access to the global ture. After water, energy, and transport, Internet. New services are starting up. In broadband is now the fourth essential October 2012, Net One launched YahClick infrastructure element in developed in Angola with the goal “to deliver an countries. For the last decade or so, many Internet service through satellite at a low governments have been encouraging price, providing an easy access to all private investment to build this infrastruc- Angolans.” In June 2012, Angola’s Educa- ture, but the private sector delivers only tion Ministry mobile-network operator patchy broadband coverage in many Unitel partnered with Huawei to launch countries. Governments have stepped in “E-net,” a project designed to provide free with public money and sponsored partner- for selected groups of ships to increase speeds in densely popu- public and private secondary-school lated areas and to ensure sufficient access students across all of the country’s 18 in remote ones. provinces. Fiber optic connections in Kenya have brought down prices and expanded Governments Can Make a broadband access. Nearly 12 million of the Difference… country’s 40 million people now use the It is increasingly clear that in Africa, as Internet—three times the number in 2009. elsewhere, some countries “get” the Nairobi, developing into a center of Internet—and its impact on economic technology incubation, has earned the activity—while others are failing to fulfill nickname “Silicon Savannah.” Its technolo- its potential. Governments of the countries gy-related exports grew to $360 million in at the top of, or rapidly moving up, the 2010 from less than $20 million eight years

| Whither the Internet in Africa? 4 earlier. One Nairobi-based start-up, Planet •• Play an aggressive role in spectrum Rackus, released a game last year in which planning and spectrum usage, the players try to avoid running over pedestri- fastest way to drive mass mobile-Inter- ans with their matatu minibuses. Within a net adoption. month, The Economist reports, some 250,000 people in more than 150 countries •• Take a long-term view on investments had downloaded a copy. in broadband infrastructure based on a clear understanding of how good and training is another high-im- infrastructure helps increase education pact area. Today’s challenge is not whether levels and drives economic growth. to use the Internet in education; it is how to do so effectively. Developing countries •• Think strategically about how and such as Thailand, Chile, and Peru have where to build scale. The natural established programs to connect schools inclination is to focus on political and and build digital literacy. As BCG has financial capitals, but faster growth may argued before, schools and school districts come from investing in existing wired need to reorganize their instructional hot spots and expanding from this base. models, using digital technology to raise the productivity of teaching staff and to •• Regulate deftly. Government can help improve educational outcomes through kick-start use, but it should be careful high-quality, individualized instruction at a not to keep the private sector from more affordable cost. Use of the Internet taking the ball and running with it. can also help reduce unemployment by Smart policies can assist the private better matching available jobs with job sector, as well as governments, to seekers. increase Internet penetration, use, and activity, bringing benefits to consumers In emerging and developed markets alike, and businesses. putting government services online can encourage Internet use. As the UN recently Economic development has long chal- argued, “E-government has strongly shifted lenged much of the African continent. The expectations of what governments can and Internet can help generate growth. The should do, using modern information and rest of the world, developing world includ- communication technologies, to strengthen ed, is not standing still, however. Winners public service and advance equitable, will determine the policies that can move people-centred development.” The govern- them forward now. ment of Botswana has launched a National Broadband Plan with the aim that all appropriate government information and Note services (more than 300 services in all) will 1. The African countries included in the 2012 be available through a single government e-Intensity Index are Algeria, Angola, Botswana, Cameroon, Egypt, Ghana, Kenya, Mauritius, Morocco, portal by 2016. Nigeria, Rwanda, Senegal, South Africa, and Tunisia.

…But They Must Get Engaged About the Authors Sami Chabenne is a partner and managing direc- In sectors such as agriculture, finance, tor in the Casablanca office of The Boston Consult- health care, and education, the Internet ing Group. You may contact him by e-mail at can boost development in Africa. The fact [email protected]. that so many connections will be mobile— taking place anytime, anywhere—magni- Alexandre Gorito is a partner and managing fies the degree to which consumers and director in the firm’s Lisbon office and is responsi- businesses can benefit. Smart government ble for the soon-to-be-opened Luanda office. You policies can help make sure that this may contact him by e-mail at gorito.alexandre@ bcg.com. opportunity is realized. For example, governments can do the following:

| Whither the Internet in Africa? 5 Hans Kuipers is a principal in BCG’s Johannes- burg office. You may contact him by e-mail at [email protected].

Acknowledgments The authors are grateful to the following col- leagues for their insights and assistance: David Dean, Tenbite Ermias, James Purnell, Amy Stevens, and Paul Zwillenberg. They are also grateful to Da- vid Duffy for his help with writing this article and Katherine Andrews, Gary Callahan, Sarah Davis, Kim Friedman, and Sara Strassenreiter for their assistance with its editing, design, and production.

The Boston Consulting Group (BCG) is a global management consulting firm and the world’s lead- ing advisor on business strategy. We partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challeng- es, and transform their enterprises. Our custom- ized approach combines deep in­sight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable compet­itive advantage, build more capable organi- zations, and secure lasting results. Founded in 1963, BCG is a private company with 77 offices in 42 countries. For more information, please visit bcg.com.

© The Boston Consulting Group, Inc. 2012. All rights reserved. 11/12

| Whither the Internet in Africa? 6