Africa Forum, Paris

5 June, 2009

“Innovation and ICTs to build tomorrow’s Africa”

Laura Recuero Virto Economist

OECD Development Centre

African innovation is building tomorrow’s Africa

Key issuesKey issues

• Attainment of the Millennium Development Objectives

• Creation of new business models

• Establishment of simplified public Financial Management Information Systems

• Attraction of large volumes of investment, extending reach to poorest populations

ICTs contribute to Africa’s development by overcoming traditional infrastructural constraints

and reducing business costs

African innovation to build tomorrow’s Africa

Innovation Innovation ICTs and the Millennium Development Goals

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Best Practice

Innovation in ICTs is enabling many African to access basic services for the first time and hence, to increase countries’ performance on the Millennium Development Goals for 2015

• The Pan-African e-Network initiative

InnovationInnovation Bringing people and markets together in agriculture

Source: Does Digital Divide or Provide? The Impact of Cell Phones on Grain Markets in Niger, Jenny Aker, 2008, African Economic Outlook 2009, OECD Development Center, 2009.

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Bakin Birgi(Monday)

Zinder(Thursday)

Tanout(Friday)

Niamey(Sunday)

65 km ~ 3 hours

20 km ~ 1 hour

750 km ~ not accessible

Home market

Farmer in Niger

• Esoko collects price information on crops in local markets and distributes it using SMS and internet to farmers and buyers in 10 West and Central African countries

2 mins

2 mins

Demographic bank branchesDemographic cash machinesMobile phones

InnovationInnovation Mobile payments for migrants

The key success of mobile payments is the size of their distribution networks

%

Source: Wireless Intelligence (2008), Beck, Demirguc-Kunt and Martinez Peria (2005)

Size of distribution networks

InnovationInnovation Mobile payments drop transaction costs

Source: World Bank (2008), OECD Development Center 2009

Transactions costs in Africa (% for USD 200)

• Transaction costs for domestic transfers have been cut by 10 times in Kenya with mobile-payments

To send 9 €, Western Union asks a commission of 50 %, M-Pesa mobile service requests 5 %

M-Pesa has won over 5 million users in less than two years

12 % 10 %

InnovationInnovation

• On paperless trade

• In Ethiopia, with the EU CP3 group the time between the initial transmission of data from the exporter to the permission from the importer will be minutes rather than 30 days

• In Senegal, the local company Gainde2000 provides full end-to-end secure paperless customs

European importers are going paperless from January 2011 African countries must convert to e-trade to continue exporting to Europe

E-trade: The reform not to miss

• On health requirements of importing countries

• Radio tracking systems for cows in Botswana, Namibia and Kenya avoid the spread of diseases

InnovationInnovation E-trade: Sub-Saharan Africa can benefit the most

Sub-Saharan Africa is currently the worse in terms of cost and time in trade activities

Import and exports

Source: World Bank 2009

InnovationInnovation E-Government for donor support

United Nations E-Government Readiness Indicator (2008)

Source: United Nations (2008), “The United Nations E-Government Survey 2008: From E-Government to Connected Governance,” United Nations Press

• Aid Management Systems (AMS) are found in Ethiopia, Egypt, Rwanda, Sudan, Tanzania and Zambia

• Cape Verde’s government exchanges with citizens are paperless

• South Africa, Kenya and Rwanda implement e-taxation with positive impacts on revenue collection

Sub-Saharan Africa is lagging behind in e-governance

governments’ ICT skills, ICT infrastructure access and online presence

InvestmentInvestment Innovation in ICTs enables to reach the poor

Africa’s Exponential Growth in Mobile Telephony

Source: OECD Development Centre, based on Wireless Intelligence, 2009.

Africa is the fastest growing mobile market in the world

Today, 4 out of 10 Africans have a mobile phone line; by 2012 they will 6 out of 10

Source: Wireless Intelligence (www. wirelessintelligence.com), 08, African Economic Outlook 2009

Innovation Reaching the poor through new business modelsReaching the poor through new business models

Trickling down the Global Income Pyramid

Post

paid

1.3 billion people with US$1/day

1.4 billion people with US$2/day

1.5 billion people with US$4-40/day

0.8 billion >US$40/day

2 billion mobile users in 2005

3 billion mobile users in 2007

4 billion mobile users in 2008

1.3 billion people with US$4/day

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By 2012, there will be 6,1 billion mobile subscribers reaching ever lower income populations

Source: New Growth Markets, Nokia Siemens Networks, 2008, Wireless Intelligence, 2009

6.1 billion mobile users in 2012

Innovation Africa pioneer in networks without boundaries

Source: African Economic Outlook 2009

Africa is the first continent in the world to implement a

service where any user in a foreign country to receive and

send calls and messages at local rates

Zain

MTN

Safaricom - Vodacom - MTN

Forthcoming

Networks without boundaries

Impact of the crisis on ICT investment commitments

Source: World Bank, 2009, African Economic Outlook 2009

• Like in the dot.com burst in 2000-2001, ICT investment will be less affected by the crisis in Africa than other regions

• Big deals in late 2008 and early 2009

• About half of ICT investments are from the South: Kuwait, China, India, Egypt and South Africa

• User mobile phone consumption still increases in Africa

InvestmenInvestmentt

ICTs are resilient to the global financial crisis in Africa

With private investments resilient to the crisis, new business models should multiply despite the crisis

%

InvestmentInvestment Connecting Africa to the worldConnecting Africa to the world in 2009-10

Source: World Bank Group 2008, www.manypossibilities.net (Steven Song), African Economic Outlook 2009

SAT3

THE MISSING LINK

As of March 2009

How to further reach the poor

InvestmentInvestment Connecting Africa to the worldConnecting Africa to the world in 2009-10

Source: World Bank Group 2008, www.manypossibilities.net (Steven Song), African Economic Outlook 2009

MULTIPLE SOLUTIONS

AT LEAST ONE LINK

How to further reach the poor

Wholesale prices will start decreasing between 4 to 10 times from June 2009!

InvestmentInvestment Connecting Africa to the worldConnecting Africa to the world in 2009-10Business climate has room for improvement

While it is legitimate to raise taxes through mobile phone revenues in countries with on average 70 % of informal labour force,

private investment has not to be neglected for this strategy to be sustainable

Contribution of taxation on mobile operators (% of government revenues)

Perceived ICT regulatory environment

Source: Esselaar, S., Gillwald, A. and C. Stork (2007), “Towards an Africa e-Index: Telecommunications Sector Performance in 16 African Countries,” Research ICT Africa, GSM World, 2006, “Taxation and Growth of Mobile Services in Sub-Saharan Africa”.

InvestmentInvestment Connecting Africa to the worldConnecting Africa to the world in 2009-10Will Africa ever be connected to Internet?

Urgent need to attract private investment and knowhow to fixed-line operators if Africa is to be connected to high speed internet

many fixed-line operators are close to bankruptcy in Sub-Saharan Africa!

In Africa, there are extremely few fixed lines..

%

Source: International Telecommunications Union 2009, African Economic Outlook 2009

Policy Policy recommendations 1recommendations 1

The role of governments

ICTs in Africa are at the innovation frontier, combiningstate-of-art technologies with African reality through incremental innovations

This has been possible through ICT investment, and still more can be done to move forward in delivering value added services to the poorest population :

• Inland high capacity networks need to be supported

• Wholesale price drops have to be passed on to consumers

• Connect Africa Summit

• Private investment and knowhow has to attracted to the fixed-line

Policy Policy recommendations 2recommendations 2

The role of donors and NGOs

ICT and Innovation are not fully integrated in broader development strategies: Donor targets, Poverty Reduction Strategy Papers

and Millennium Development Goals

Donors and NGOs have a key role in..

• Complementing private initiatives in the provision of access to basic services

• Raising awareness on regulatory bottlenecks to..

• drop user prices in the short run

• continue attracting private investment

• allow the growth of mobile payments

• Raising awareness on financing bottlenecks to provide service to all, not only to urban population in profitable areas