29 June 2009

New Technologies Strengthening Africa’s Economy

A watermelon seller in Kenya talks on her cell phone. Increasingly, cell phone companies are turning their attention to Africa.

By Megan Neff
Staff Writer

Washington — Across Africa, new technologies are being joined with local customs to strengthen the continent’s infrastructure and economy.

Using information and communication technologies (ICTs), such as mobile phones and the Internet, Africans are finding business and trade to be easier and more affordable, said Sala Patterson, a policy analyst at the Paris-based Organisation for Economic Co-operation and Development (OECD).

Patterson, along with representatives of the U.S. Agency for International Development (USAID), the African Development Bank and Africare, spoke with Congressmen Donald Payne and Charles Rangel and the European Commission’s Ambassador John Bruton June 18 on Capitol Hill. The panel discussed the annual “African Economic Outlook,” a study that examines Africa’s economic development over the past year and makes projections for the coming year.

In Africa, where communications networks have been limited, things are beginning to change, according to Payne. New ICTs, such as text messaging, are surpassing old communication networks in Africa, which have been handicapped by geography and politics.

These new ICTs are enabling Africans to access information on health and agriculture and services such as online banking, and to connect more effectively with the rest of the world. European companies, such as the United Kingdom’s Vodafone and France’s Vivendi and Orange, are turning their attention to the African market, where only 40 percent of Africans own a cell phone. By contrast, cell phone usage in Europe is at nearly 100 percent, said Laura Recuero-Virto, an economist for the OECD. Nokia, Intel and Microsoft are also investing in the African ICTs.

Projected economic growth for Africa in 2009 is 3 percent, down from 6 percent last year, said Leonce Ndikumana, research director for the African Development Bank. A report cited by the African Economic Outlook study shows that increased use of ICTs in Africa is helping to sustain parts of the African economy during this time of economic turbulence.

For example, mobile phones in Niger, one of the poorest countries in Africa, are being used as marketing tools. Farmers are able to text and use the Internet to communicate with markets around their farm and find the best prices for their goods. This has helped to reduce prices and it allows farmers to bring goods where they are most needed and where they will get the highest profit.

Online banking has also helped to sustain African communities through the recession, and there have been significant strides in increasing the affordability of money transfers. Where a Western Union transfer of 1,000 Kenyan shillings (about $13) would cost the user a 500 shilling transaction fee, Patterson said, with M-Pesa, a new money-transfer service available between cell phones, Kenyans can send the same amount with a transaction fee of 30 shillings to 75 shillings (about 39 cents to 97 cents). The lower transaction fees offered by M-Pesa have attracted 5 million users to the service in the past two years. M-Pesa is seeking to expand in East Africa and Afghanistan.

Africa still faces challenges with Internet accessibility and technical infrastructure. According to the panel, less than 7 percent of Africans have Internet access, and the Internet that is available is inconvenient and expensive, accessible only along the fiber optic lines laid along the west coast of Africa or through satellites. Limited Internet resources and lack of competition among Internet providers have led to exorbitant costs, the panel said.

But, Patterson said, broadband connections should be more widely available in Africa as the infrastructure expands. It is hoped that a web of fiber optic cables will be able to connect all of the main metropolitan areas in African by 2012.

For this expansion to take place, the African Economic Outlook study found, local government involvement will be extremely important to ensure that price drops are passed on to the consumers, and that ICTs are properly integrated into overall infrastructure development.

The findings of African Economic Outlook are available on a Web site of the report’s sponsors.