Whither the Internet in Africa? by Sami Chabenne, Alexandre Gorito, and Hans Kuipers
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The Connected World WhiTher The inTerneT in AfriCA? 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 Digital Divide 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. Nigeria, 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. Mauritius and South Africa, 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 $20,000 GDP per capita in 2011 2012 BCG e-Intensity score 80 Russia Romania Bulgaria Argentina 60 Brazil Turkey Croatia Costa Rica Chile Panama Ukraine Serbia China Malaysia Georgia Dominican Mexico 40 Republic Venezuela Ecuador Mauritius Vietnam Colombia Kazakhstan Paraguay Tunisia South Africa Uruguay Senegal Philippines Peru Algeria Rwanda Morocco Egypt Thailand Botswana 20 Angola Pakistan Bolivia Kenya India Indonesia Nigeria Ghana Cameroon 0 0 5 10 15 20 2011 GDP per capita ($thousands) Africa Latin America Eastern Europe Asia Eurasia Sources: ComScore; Economist Intelligence Unit; Euromonitor; Gartner; International Telecommunication Union; Magnaglobal; Ovum; Pyramid Research; Speedtest.net; United Nations; World Bank; 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 3G not act. coverage of 98 percent of the population by 2015.