This series on technology in Africa is written by Involution friends and emerging markets experts Niti Bhan and Muchiri Nyaggah.
It wasn't so long ago that if you wanted to post a letter from Ghana, a former British colony, to any of the countries that border us — Cote d'Ivoire, Togo or Burkina Faso, all former French colonies — it would be routed through Europe first before finally arriving at its destination. The same was true of telephone calls, and it was virtually impossible to travel by air from one African country directly to another. Now all you need to be connected via computer or mobile phone to anyone anywhere in the world is a signal.
- Former Minister of Communications, Ghana
Sub Saharan Africa's embrace and adoption of mobile devices began turning heads about five years ago, with growth of almost 60% a year. Buoyed by this growth, the world's second largest handset maker sent us out to take a closer look at the emerging market opportunities in the region:
In early 2008, the focus was primarily on the killer apps of voice and text – basic communication across time and space that leapfrogged the legacy of inadequate infrastructure and high costs. The lower 75% of the market by income had just begun showing signs of this crazy growth, as low cost devices and prepaid business models lowered the barriers to access. Everything has changed since then. The African market now shows all the signs of imminent maturity rather than simply the potential for growth. New phone users increase total handset sales each quarter, but hardware is not the primary focus anymore. It took 25 years to reach the landmark figure of 200 million mobile phone subscribers in Africa but the next 200 million have been reached in the last three. What these numbers don't show is that the mobile platform is very diverse, fragmented and evolving quickly.
The African mobile market is growing in absolute numbers and leapfrogging the traditional “market analysis curve and behaviour” we expect to see in a nascent situation. It is sophisticated far beyond its youthful years in many ways, and underestimating this aspect of its development sets up a cognitive dissonance when attempting to address the challenges and opportunities through an “Africa strategy”. As soon as services and devices reached a critical mass, experimentation and invention ran rampant. Here was a ubiquitous technology platform the homegrown hacker could finally afford to play with. Afrigadget's Erik Hersman has documented everything from SMS controlled home automation systems, to remote controlled porridge makers, to full on security systems for houses and cars. Even as some were making their first phone call, others were pushing the limits of innovation on the wireless platform. The future is indeed unevenly distributed, as we're discovering in Africa.
Kenya is considered a beacon of innovation in the region, and a pioneer of everyday services. The best-known is mPesa, the mobile money transfer system. Such mobile-based solutions around financial services, healthcare and agriculture have grown in popularity, but the majority rely on core network services like SMS in order to maintain device independence. The majority of subscribers (at least 90% across the continent) are on prepaid plans and not tied to any particular service operator. Multiple SIM cards are the norm, as customers seek the lowest calling rates and - while mobile phones may be the primary device for browsing the internet (approximately 80% of internet users use only their phones) - data enabled phones still tend to be purchased primarily for single features, such as a camera or SD card.
A shift away from SMS-based solutions is expected, as user habits change and Internet-based, apps-driven services become more popular. It's clear that an appetite for mobile content exists and continues to grow but it is not yet the mass market norm. That day, however, is not too far away. A first time buyer can now pick up an Alcatel for US$25 that includes FM radio, an SD card, a camera and mobile browsing. The next two or three years will be interesting times in the battle for handset dominance at this mass majority price point.
The competition is increasingly about the customers, and what tasks they seek to complete on their devices. Simply building the right apps/content/service to meet that need won't be enough: it will become a matter of getting the purpose, the platform and the price just right for each demographic. Market creation and customer education will drive each other in tandem. Operators such as Safaricom in Kenya and MTN in Uganda are trying to hit just such a sweet spot with the launch of the IDEOS, an Android based, Huawei built smartphone available for less than US$100. Easy to use and bundled with enough airtime and data to last a couple of months of regular use, its popularity in Africa is already beginning to resemble that of the latest iPad in the United States. On the other hand, Facebook has taken the democratic approach of attempting to reach every single GSM phone in the world with the recent launch of a SIM embedded application that works by SMS, while Twitter is slowly enabling SMS-based access again in Africa.
Mobile is considered the equivalent of the personal computer in Africa, but there are still no standards for operating systems nor consistency for applications and services. Nokia's significant existing brand equity and market share of mobile phone users pointed to Symbian as a potential dominant platform, but its future is uncertain. With the average phone being replaced every 2 to 4 years, this is an interim approach at best given the range of features now available on handsets at the low end of the market. Java-enabled handsets are expected to reach the US$20-25 price point that their non-data enabled counterparts currently dominate. While Android devices might drop further to between US$50-70, this price range only reaches the upper third of the African market. If South African social network Mxit's popularity is anything to go by, Java applications will thrive on increased demand as long as there is meaningful local content. The versatility of Android makes it an attractive option, allowing for more functional applications that offer a better user experience. An increase in great content for this platform could result in a contraction of the time it takes for Android to gain significant market share in Africa. Such increased demand would offer economies of scale, allowing price points to drop further and attracting Chinese white box manufacturers.
The next phase of Africa's digital age is going to be shaped by the software, the services and the content, not the hardware.
Niti Bhan and Muchiri Nyaggah collaborate to offer real world expertise and a holistic understanding of the emerging markets of Africa. Semacraft Consulting Group focuses on understanding the mindset and customer behaviour, market segmentation and archetypes that drive effective product and service concept design as well as the supporting business and transaction models.