While on a trip to Africa recently, I visited my 84-year-old grandmother in the countryside. On arrival, I met her answering a call on her mobile phone while gardening. I was pleasantly surprised to see that mobile phone network has finally reached her in a rural village in West Africa.
It is on record that western investors came late to Africa telecommunication transformation because analysts and bookmakers failed to predict the mobile phone revolution when it started. For a continent with a population of over one billion and slightly over two million mobile phone subscribers a decade ago, having more than half a billion subscribers today is a remarkable economic achievement.
The success story of telecommunication in Africa is mostly driven by large-scale private investments. According to Public-Private Infrastructure Advisory Facility (PPIAF), Sub Saharan Africa ICT sector has attracted over $60 billion in investment, which translates to 97 projects in 37 countries. To make return on investment quicker, telecom networks in Africa introduced pre-paid services, which resulted in astronomical growth of subscribers across the continent.
The governments of African countries also contributed enormously to the success of the telecommunication investors in their countries. The governments not only deregulated the sector, some provided market entry incentives to lure private investors that have successfully transformed the communication ability of an entire continent.
Regulating the market:
Telecom regulatory bodies across Africa are gradually evolving a stable regulatory system that guarantees sustainable growth and increased foreign direct investment. According to Secretary General of International Telecommunication Union (ITU), Mr Hamadoun Toure, over 45 African countries have good regulatory authorities with stable and predictable policies.
The McKinsey Institute in their 2010 report suggested that telecom regulators and African governments could further drive the growth of the sector by making lower-spectrum bands available, encourage infrastructure sharing, provide rollout incentives and potentially reduce rural telephony license fees.
How to get involved:
Investors that arrived earlier and recent acquisitions dominate telecom markets in Africa.
Nevertheless, there are still growing opportunities for both big and small businesses in rural telephony, recharge card solutions among others. Companies that are aspiring to explore opportunities in the African telecom market should consider collaborating with a local player in their target market.There are several opportunities to meet African telecom experts in industry events in Africa or outside the continent.
The opportunities below are spread across countries in the continent.
The International Energy Agency (IEA) had projected that about $17 trillion new investments would be needed between now and 2025 in the emerging and developing economies, out of which $8 trillion is expected to be in Africa.
To a newcomer to the Africa oil & gas sector, the figures above could be daunting, but in real terms, 19 African countries are currently among significant contributors to the global oil and gas market. New African oil producers such as Ghana are on their way to join the global league of oil & gas exporters.
Some past African leaders signed 50 years exploration contracts with international oil companies not considering the long-term economic implications for their countries. These self-styled African leaders favourably preferred getting kickbacks of a few cents per barrel of oil sold by international oil companies; more rewarding than developing infrastructures with the oil proceeds. That is why some oil-producing African countries are still struggling with infrastructure deficit in the very sector that generated most revenue for their economies.
According to the McKinsey Global Institute 2010 report, African oil and gas have become important components of the world’s hydrocarbon supply-demand balance. By 2015, 13 percent of global oil production will take place in Africa, compared with nine percent in 1998 — a five percent compound annual growth rate (CAGR). African oil projects have attracted substantial investment thanks to their cost competitiveness compared to those in other regions.
In recent years, new kinds of competitors have entered and grown in Africa, once the domain of the large international oil companies. Smaller independent oil companies (such as Addax, Heritage Oil, and Tullow Oil) have made successful finds in emerging basins. National oil companies from outside Africa, including China (CNPC, CNOOC, Sinopec), Malaysia (Petronas), and Russia (Gazprom) have also aggressively invested in the continent, linking broader infrastructure investments and government-to-government relationships with access to resources.
In the last few decades, Africa’s hydrocarbon industry witnessed a renaissance with major new producing countries. These developments have thrown up tremendous opportunities for investment in the areas of exploration, production, refining and infrastructure in the oil and gas sector
Opportunities in the gas sector include:
Opportunities in the oil Sector include:
One key challenge ahead of new entrants in Africa’s hydrocarbon industry is to build sustainable enterprises and local capabilities beyond the scope of an individual project or investment.
According to the McKinsey Global Institute, Africa’s oil producers face the same challenges confronting other petroleum rich countries in the world. One of them is maintaining political momentum for the economic reforms necessary to spur more private business development in the sector.read more
Across leading African economies, the wind of economic optimism is blowing quietly. The optimism stems from the new generation of consumers now emerging across the continent. The purchasing power of these emerging consumers is positively different from what was obtainable in Africa a decade ago. In Nigeria, for instance, the collective buying power of households earning $1,000 to $5,000 a year doubled from 2000 to 2007, reaching $20 billion. Nearly seven million additional households have enough discretionary income to take their place as consumers as observed by Mckinsey report on Africa in 2010. By 2014, the number of such households across Africa could reach 106 million.
Africa’s labour force is a key source of this new generation of consumers. Productivity is expanding, in contrast to what is happening in much of the rest of the world. The continent has more than 500 million people of working age. By 2040, their number is projected to exceed 1.1 billion—more than in China or India—lifting GDP growth. Over the last 20 years, three-quarters of the continent’s increase in GDP per capita came from an expanding workforce, the rest from higher labour productivity. According to a Mckinsey report, Africa’s consumer-facing sectors are growing two to three times faster than those in the OECD countries.
The key factors that have contributed to the growth of new army of consumers in the continent include the African Government’s deliberate strategy to adopt policies designed to energise and open business space across markets. Many African countries have started privatising state-owned utilities, reduced restrictions on international trade, and strengthened regulatory and legal systems.
The paradigm shift across the continent opened the door for foreign investors to enter business sectors previously crippled by decades of Government monopoly. In the last decade, many African countries privatised their telecommunication/ICT sectors. Since the privatisation, teledensity in Africa has experienced exponential growth delivering over half a billion mobile phone subscribers and thousands of new jobs in less than a decade.
While you are here, we will appreciate if you could view the website of our upcoming international event, Africa-Australia Infrastructure Conference 2012:
The Conference is a 2-day event designed for Australasian investors and developers aspiring to invest in growing infrastructure opportunities in Sub-Saharan Africa.
The Conference will be held in Sydney (venue TBA) on Monday 3 and Tuesday 4 September 2012. Your views and comments on the Conference would be most appreciated.read more