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Mobile ecosystem adds $150bn to Africa's economy

Regina Pazvakavambwa
By Regina Pazvakavambwa, ITWeb portals journalist.
Johannesburg, 27 Jul 2016
The mobile ecosystem makes a significant contribution to the economies in Africa, in terms of economic growth, job creation and public funding, says GSMA.
The mobile ecosystem makes a significant contribution to the economies in Africa, in terms of economic growth, job creation and public funding, says GSMA.

The mobile ecosystem currently adds more than $150 billion in economy value to Africa and more than half a billion people across Africa are now subscribed to mobile services as the continent continues to migrate rapidly to mobile broadband networks.

This is according to GSMA's report: The Mobile Economy: Africa 2016, released this week at the GSMA Mobile 360 event in Dar es Salaam, Tanzania. The study is authored by GSMA Intelligence, the research arm of the GSMA.

The report notes mobile has emerged as the platform of choice for creating, distributing and consuming innovative digital solutions and services in Africa.

According to the report, the trend is being driven by several factors, including the expansion of advanced mobile networks, the growing adoption of smart devices, the convenience of accessing real-time, feature-rich content and services on the go, and the underdevelopment of alternative technologies, notably fixed-line connectivity in the region.

Mobile subscribers

It further states there were 557 million unique mobile subscribers across Africa at the end of 2015, equivalent to 46% of the continent's population, making Africa the second-largest - but least penetrated - mobile market in the world.

The region's three dominant markets - Egypt, Nigeria and South Africa - together accounted for about a third of the region's total subscriber base, it adds.

However, it warns subscriber growth rates are now beginning to slow and will increasingly converge with the global average, as affordability challenges become a key barrier.

On the other hand, mobile Internet adoption in Africa continues to grow rapidly, the number of mobile Internet subscribers tripled in the last five years to 300 million by the end of 2015, with an additional 250 million expected by 2020, it says.

The report further reveals that over the next five years, an additional 168 million people will be connected by mobile services across Africa, reaching 725 million unique subscribers by 2020.

Eight markets will account for the majority of this growth, most notably Nigeria, Ethiopia and Tanzania, which will together contribute more than a third of new subscribers, it says.

3G technology will account for the vast majority of mobile broadband connections for the foreseeable future, but 4G network launches are gaining traction, adds the report.

As of June 2016, there were 74 live LTE networks in 32 countries across Africa, half of which have launched in the last two years, it notes.

The launch of new LTE networks across the region is expected to lead to a further boost in mobile data traffic growth, repeating the trend seen in other regions.

However, echoing the issues affecting the overall uptake of mobile services in Africa, high device and service costs relative to income levels, as well as limited network coverage, are holding back 4G adoption growth in most markets.

Revenue growth

According to the study, the mobile ecosystem makes a significant contribution to the economies in Africa, in terms of economic growth, job creation and public funding.

In 2015, the mobile ecosystem was around $50 billion GDP (or 2.1% of GDP), with network operators accounting for well over half of this, it adds. In the same year, mobile operators and the ecosystem provided direct employment to approximately 1.3 million people in Africa.

The study further reveals the mobile ecosystem makes a significant contribution to the funding of public sector activity in the region through general taxation. For most countries, this includes value-added tax, corporation tax, income tax and social security from firms and employees, it says.

"We estimate that the ecosystem made a tax contribution to the public finances of the region's governments of $17 billion in 2015.

"We expect the economic contribution of the mobile industry in Africa to continue to increase in both relative and absolute terms. In value-added terms, we estimate the ecosystem will generate $214 billion by 2020 (7.6% of GDP). The majority of this increase will be driven by improved productivity."

Innovation and entrepreneurship

The report also explains how mobile is powering innovation and entrepreneurship across Africa.

Technology hubs springing up across Africa represent a key source of locally developed applications, it says.

There are approximately 310 active tech hubs across the region, including 180 accelerators/incubators, according to research by the GSMA Ecosystem Accelerator programme.

The top three countries in terms of tech hubs are: South Africa (51), Kenya (26), and Nigeria (23).

The tech start-up investment ecosystem in Africa is increasingly active, with the range of tech start-ups funded and size of deals reflecting the accelerating development of the ecosystem, says the study.

In 2015, 125 African tech start-ups raised approximately $185 million, with Kenya, Nigeria and SA receiving more than 80% of the funding.

However, this amount pales in comparison to the $27.3 billion raised by start-ups globally in the same year, underlining the need for more investment to fund start-ups in the region as well as diversification of target markets to enable broader development of the start-up ecosystem.

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