The world is eager to do business with Africa but finds it difficult to access African markets because of poor infrastructure.
Without a doubt, Africa is the world’s fastest-growing economic hubs, says Tonny Tuggee, MD at SEACOM East Africa. But, as he points out, crucial to this rate of development is the ability to meet the demand for key infrastructure.
Tuggee sees Kenya’s economic growth as a microcosm for explaining Africa’s stunted economic growth. However, he cautions investors not to look at the continent’s different countries as a homogenous block but do their research to understand the nuances and unique opportunities available in each region and individual country.
At the end of last year, a World Bank economic update reported that Kenya has seen its Information and Communications Technology (ICT) sector grow at an average of 10.8% annually since 2016, becoming a significant source of economic development and job creation with spillover effects in almost every sector of the economy.
“While this is hugely encouraging news for Kenyans, it also raises questions about the factors which might impact the ongoing positive trajectory of infrastructure development, both in Kenya and the rest of the continent,” said Tuggee.
Fixed line networks and mobile network coverage
Kenya’s multi-million US dollar investment in the Djibouti Africa Regional Express (DARE) submarine fibre-optic cable system, SEACOM, East African Marine System, Eastern African Submarine Cable System, and Lion2 systems all point to the government’s desire to improve the country’s position as a regional IT hub.
The investment guarantees companies and individuals’ access to faster, secure and reliable internet and the revenue generated by the digital economy should reach $23,000 billion by 2026 because of investments 6.7 times higher than those in other sectors.
Terrestrial fibre networks continue to expand but remain underused because of high prices and a failure to establish an enabling environment.
Telecommunications continue to register positive growth with increased uptake and usage of mobile phones services.
An increase in the mobile network coverage thanks to high-bandwidth internet infrastructure and the rollout of 4G infrastructure has led to a decline in fixed-line networks related to voice calls.
“Alternative solutions need to be considered to ensure a stable internet connection through Kenya to bridge the rural and urban digital divide,” said Tuggee.
So, while the world is eager to do business with Africa, it finds it difficult to access African markets because of poor infrastructure. “Greater economic activity, enhanced efficiency and increased competitiveness are hampered by inadequate transport, communication, water and power infrastructure.
“The World Bank economic update highlighted challenges relating to the inadequate power supply, transport networks and communication systems as crucial to ensuring ongoing connectivity, and continental economic development. It found that the poor state of infrastructure in sub-Saharan Africa reduced national economic growth by two percentage points every year and cut business productivity by as much as 40%,” said Tuggee.
The report estimated that about $93 billion is needed annually over the next decade to overhaul sub-Saharan African infrastructure. About two-thirds or $60 billion of that is needed for entirely new infrastructure and $30 billion for the maintenance of existing infrastructure. “Only about $25 billion annually is being spent on capital expenditure, leaving a substantial shortfall that must be financed,” explained Tuggee.
With governments across the continent committing billions of dollars to infrastructure, Africa is at the start of a 20 to 30-year infrastructure development boom. “Fortunately, we have access to a global network of exports, which we need to be utilising optimally to ensure a stable infrastructure, both digital and physical,” said Tuggee.
However, he thinks to prepare for this boom the only way to clear Africa’s infrastructure and to unlock connectivity and communications in Kenya is through globally competitive, growth-oriented, mobile, and digital technology businesses. “It is imperative to establish partnerships with trusted private sector players who already cater to the local and international communications market with reliable connectivity solutions,” said Tuggee.