Knowing Africa’s markets in a digital divide

Where there’s a problem there’s a solution. Where there’s a solution there’s a business opportunity. Understanding what the gaps and success stories are in making a country ready for Information and Communications Technology (ICT) innovation and transformation is crucial for startups and potential investors alike. More relevant and better research could help define markets for potential entrepreneurs for example.

Location-based services are also good examples of how mobile internet connectivity could increase a company’s effectiveness and its market reach. The availability of internet stimulates both the creation and adoption of innovative applications to further progress economies. But in countries with low internet penetration, how can ventures adapt to markets in Africa where digital divides exists?

The gaps

Among other things, the monopolistic environment of ICT in Africa keeps prices and connectivity speeds low which slows down the market-entry rate of entrepreneurs. Also, as indicated in this Global Information Technology Report, “the impact of broadband is neither automatic nor homogeneous across the economic system.” In other words, the impact of broadband on the economy differs depending on the market.

The report found that developed nations with a stronger infrastructure and knowledge-focused economy will benefit more from greater internet penetration. This is mainly due to the fact that developing regions’ economies are more focused on domestic demands rather than trade. Technologies that disrupt are thus more likely to replace low-skilled workers if not successfully adopted. The report suggests that out of countries that are ICT ready “nine out of the bottom ten belong to the [African] region.”

Although the report doesn’t necessarily paint the continent’s internet adoption as successful in international terms, it does however give us a detailed picture of some of its crucial market features. Only as much as 15 per cent of the African population has access to the internet.

This digital divide and the reluctance to fully embrace ICT have led to the sprouting of innovation hubs and entrepreneurs across the African continent. Pockets of motivated, educated and technologically capable people who act as links between those caught in the divide. These innovations have broad and significant social impacts and have learned to adapt to an unique environment.

Stimulating economic activity by giving financial access

As noted in this ICT Competitiveness in Africa report of 2012, already “ICTs directly contribute around 7 per cent of Africa’s GDP, which is higher than the global average.” This is mainly due to the popular mobile usage in Africa. Figures like this give room for significant market opportunities.

Internet access via mobile technologies has made essential services available. A classic example would be where in Kenya “active bank accounts have grown fourfold since 2007 aided by some 17-million M-PESA mobile money accounts.” Even with Africa’s low fixed-line internet-penetration gap, initiatives like M-PESA have successfully made low-cost banking services available to many Africans. This in turn stimulates people’s economic activity via financial inclusion.

Supporting entrepreneurship through gender equality

Soko is an online marketplace where the international market is able to buy culturally relevant products directly from the producer. In a culture with a history of gender inequality, the company focuses on empowering female entrepreneurs. Formerly known as SasaAfrica, the company featured in DEMO Africa’s top five startups last year.

Ecommerce is commonly defined by the trading in luxury goods such as clothes, kitchen appliances, books and entertainment. Africa though seems to have a much-needed and exclusive market for low-cost goods. “Low-cost and pervasive connectivity, adaptable and more affordable tools are needed to address the needs and demands of smallholder farmers” for example.

Agricultural stimulation

In Nigeria, government lead “Growth Enhancement Support Scheme” uses mobile technology to reach out to small scale farmers. This provides farmers with critical support in obtaining fertilizer and seeds either via mobile phones or e-wallets.

In Kenya numerous examples show us how innovation has adapted to Africa’s unique environment. iCow, for example, is a service providing dairy farmers with vital information regarding market prices, gestation period or the closest vets available. FarmSupport gives information regarding weather forecasts and crowd-sourced information from farmers. These services use internet, but more importantly SMS, to provide farmers with vital information.

The ICT Competitiveness in Africa report makes an interesting point saying that ventures like non-profit Ushahidi for example prove “three things, the first is that among Africa’s billion people, there exist both creators and users, second that there is a hunger for tech resources and a true place in society for them, and third, that the scalable ICT story lies with mobile technology.” Technologies like these give innovators the ability to “leapfrog” and gain access to new markets.

Ventures in Africa have shown that, although emerging markets are mainly natural resource-based instead of knowledge-based, the availability of technology has enabled innovations to adapt in different ways to suit their specific environments. They also show the significance of “cross capability between the PC as a programming platform and the mobile phone as a data gathering and dissemination platform.” And, that in Africa where mobile is so popular for example, even a handful of driven entrepreneurs are able to reach millions via unique means and that hospitable business environments accelerate their development.