Transformation in Communications

The adoption of the mobile phone is the most important technological event in Africa’s modern history. In terms of growth and income levels, it is comparable only to the Green Revolution’s impact on India in the 1960s. The pace of adoption has been astonishing, as shown in figure 2–8. Africa has picked up mobile telephone use almost entirely since 2000. In just seven years, 266 million connections were added. Today, that number has more than tripled

Figure 2–8: Total African mobile connections and penetration rate (million, % penetration)

Source: GSMA Wireless Intelligence, African Mobile Observatory, 2011. By permission.

While its effects are on businesses small and great, the mobile revolution is especially pronounced on the productivity and earning potential of individuals and small businesses. Vimal Shah reflects on two everyday occurrences that demonstrate this transformation:

I see the effect every day on my driver. To bring money home to his family and come back, he used to spend a fortune. Going and coming back meant three or four days not working. Today, he does it with one text message. He does not miss work, and he saves all the unnecessary travel expenses. Then consider the vegetable-vendor system here. The vegetables are sold by women who hawk their wares house to house. They would go to the wholesale market, collect a whole bunch of vegetables, and go house to house shouting, “Anybody want to buy vegetables? ” Today they have mobile phones. Their customers know their phones. So the lady of the house will ring and say, “I want one kilo of tomatoes. I want this, this, and this.” The vegetable woman will purchase just those goods from the market, deliver straight to the home, and get paid through the mobile phone. Imagine the amount of wastage there must have been going around house to house. Now it’s gone. It’s not required anymore.

Those two stories, multiplied by the 800 million cell phones in Africa today, give you a concrete picture of how the entire continent is recreated by this one technology.¹⁴

Connectivity has transformed not only small businesses but large ones as well, like Vimal’s own. Bidco was well established before he ever held a cell phone. It imported edible oils into Kenyan ports, processed them, and sold oil-based products in the country. That was the extent of Bidco’s operation. Vimal’s ambition was far more vast. Today his company operates throughout East Africa, serving a market of 140 million consumers. Vimal is unambiguous about what allows him to compete beyond his own borders: cheap and abundant phone service:

What it is doing is changing our speed of business. I am able to speak anytime to my managers in Uganda, Tanzania, anywhere. And when I travel, it is no problem for them to connect with me. A mobile phone call from here to the U.S. costs the same as what it costs for me to call the next-door office.^* To call China it is the same, and to India, even less. Before, we had two hundred thousand landlines in Kenya and as a nation we were unsuccessful, totally. Now we have eighteen million mobile phones, in a population of forty million. It removes the lack of communication that was holding us back.

Because mobile phones are so ubiquitous, their capabilities are being stretched and reinvented in Africa. The most notable example is mobile payment. Throughout Africa, a credit card (and for the most part, credit itself) is a luxury of the rich. Cash transactions are limiting and potentially dangerous. Mobile banking allows customers to send money to family and merchants via either prepaid credit on their phones or direct transfers between accounts. In 2011, Vimal’s driver and vegetable merchant were two of the more than forty million who multiplied their productivity through mobile payments.¹⁵

It’s hard to overstate how deeply mobile phones have penetrated Africa. In 2007, I worked with the Nigerian army’s chief of staff as he negotiated early ceasefires with antigovernment militant commanders. The militant camps were deep in the creeks of the Niger Delta, unreachable by the government and far off any grid. Each anti-government militant commander had a cell phone, and they would call each other (and also call the Army Chief of Staff, who had them on speed dial). In 2010, I worked on a mining project 400 miles inland from an already remote capital. It took a charter plane and three hours of unpaved road to get to the surrounding villages, nestled deep in mountainous territory. Everyone in those villages has access to a cell phone. Whether they are using it to get crop information or just to call their sons in the capital, that phone means their world is not limited to a day’s walk.

Mobile phones and connectivity are often described as “leapfrogging” technologies, because they leap over earlier technologies. Working in Africa and other frontier markets, I’ve found “leapfrog” technology has a meaning that runs deeper. The fact that cell phone technology leaps over the landline technology I used growing up in the Bronx doesn’t much matter to an African, or to African growth. What’s really meaningful is that it has allowed men and women in Nairobi, the Niger Delta, and that remote mining community to leap over the miles separating them, the boundaries of their previous lives, and the constraints of what they could be. That is the leap that has unleashed a torrent of productivity and opportunity in Africa.

Is It Still Morning?

So much growth has occurred in Africa in the last decade, some might wonder whether the future continues to be as bright. Quantitative data and CEO insight each indicates some confidence.

For businesses looking for growth, the world’s heat map is stark. Figure 2–9 shows where growth is expected over the next five years, based on Ernst & Young’s compilation of public and proprietary data.

Each of the internal drivers of growth in Africa to date is expected to continue. But there is one mega-driver whose impact has not yet been felt, and which business leaders all point to: demographics.

Africa has the youngest population in the world. Four out of ten Africans are below the age of fifteen. The median age is twenty. Today, that means a very high portion of Africa’s population is dependent on the adult workforce. Tomorrow, however, it means that the workforce will be massive, and the ratio of dependents to workers (the dependency ratio) will be the lowest in the world.

That trend is not without challenges, including training that workforce to meet the needs of the twenty-first century. However, most businesses and investors looking at the youth bulge see it as a massive driver of growth and opportunity. Emerging markets investment pioneer and Templeton Vice Chair Mark Mobius writes about Africa in his “Investing in the Cradle of Civilization” blog series. He describes this “great African resource: a huge and youthful population” as a key rationale for investing there.¹⁶

Figure 2–9: Five-year global outlooks for combined annual growth of GDP (November 2012)

Source: Ernst & Young, Africa CEO Forum Presentation. November 2012. By permission.

That confidence is shared by other global business leaders familiar with Africa. General Electric has more than $150 billion in revenue with a market capitalization of about $240 billion, making it the sixth-largest company in the Fortune 500. CEO Jeff Immelt sees enough opportunity in Africa to move the needle for his company. In 2011 he established an Africa business unit and installed one of GE’s top dozen executives, Jay Ireland, as the first CEO of the unit. Jay has held previous leadership positions in GE Plastics, NBC, and, most recently, was CEO of GE Asset Management, which oversees more than $120 billion in assets. He hardly needed the job of CEO Africa. I asked Jay why he took it.

“I didn’t just take the job, ” he said. “I sought out Jeff and told him I wanted it. We’re in the nascent phase with Africa. A lot of what is happening here now is reminiscent of what I saw in China when I worked there in the early 1990s. I remember being struck that the vice premier of China at that time went to Wharton. No one before him had that kind of background. It was guys like that that built the country, and you’re just beginning to see that in Africa now.”

Jay’s perspective is that opportunity is just beginning to open up in Africa for international and domestic firms alike. “The biggest opportunities are yet to come, ” he says. “The inflection point will be in the confidence of investors and businesspeople, combined with government policies that create a good business environment at the regional level. That combination will produce a tipping point here. It’s not here yet. It’s coming.”

Growth is prone to make a continent thirsty. London-based SABMiller is one of the world’s largest brewers, the maker of Miller, Pilsner Urquell, Fosters, and more than 150 other brands yielding $31 billion in global revenue and a market capitalization of about $54 billion. Executive Chairman Graham Mackay explained that “Fifteen years ago we set up an Africa business unit. In those fifteen years, we have had only two in which the Africa unit did not deliver double-digit growth in U.S. profits.” Today emerging Africa accounts for 13 percent of SABMiller’s earnings.^{*, 17} Graham only sees that figure growing:

There is a long, long runway ahead. The consumption levels for our products are so low that they’ve got to rise. You don’t find that in most of the world. In fact, there’s almost nowhere else in the world where you can say that. Even in Latin America it’s not true. Beer consumption in Africa, outside of South Africa, is below ten liters per person per year. The average for Latin America is probably four times that. In the U.S. it is eighty liters. Here in the U.K. it would be eighty-five or ninety. But Africa is at ten. Then you take cultural factors into account, and the rate of growth of the population, and there is much more potential in Africa than there is anywhere else in the world.

“Most everything grows on an S curve, ” Graham concluded, drawing the curve with his fingertip on the table. “There’s slow early adoption, then it really takes off and then when it’s bigger it begins to taper. For us, most countries of the world are at the top, ” he says, running his finger along the flattening line. “Even most growth countries, they’re coming to that leveling off point. Not Africa.”

Graham’s finger moved back down the curve, tapping right where the steepest growth starts. “This is Africa.”

CHAPTER 3

Becoming Africa

Once Rwanda hit the airwaves, I knew we were in trouble. We were all Rwanda.

Sam Jonah, CEO, AngloGold Ashanti (1986–2004)

Whenever I meet somebody from Africa, they will come to me as an African.

Mo Ibrahim, CEO, Celtel (1998–2005)

Is there “an Africa”?

How you answer defines not just how success in Africa is described but how it is achieved. Businesses falter in Africa because they fail to distinguish its parts, and because they fail to grasp its whole. There are the beginnings of a whole Africa today, and more of a whole Africa tomorrow. Africa is becoming.

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