The Cell Phone Industry in Africa

William Reed | 11/20/2009, 11:53 p.m.

Business Exchange by William Reed

World-wide sales of cell phones exceed one billion handsets a year, making mobile phones the most widespread consumer electronics device above personal computers and televisions. The ubiquitous handheld device has done wonders for the poor around the world and proven to be a timely tool toward mitigating poverty in Africa.

Cell phones have become the platform of the masses in Africa. Cell phones not only offer opportunity through voice services but emerging technologies that bring Internet access to phones, bypassing the need for a computer for connecting to the World Wide Web. Computers are rare in much of the continent due to poor wire-line infrastructure (a recent study found 97 percent of people in Tanzania could access a mobile phone, while only 28 percent could access a landline) and unreliable electrical grids; therefore, a technology that offers Internet access without a costly PC is paying Africans dividends.
An army of Africans are wired-up - an estimated 100 million of the continent's 900 million people use the technology. The devices are not only used in cities, but villages as well. South Africans and Kenyans sling cell phones around necks of elephants to track them through bush and jungle. As cell-phone relay towers sprout on slopes of Mount Kilimanjaro and the Serengeti Plain, service providers are racing to keep up with the exploding market. Internet connectivity is improving lives and wealth by giving access to information and Internet access has simplified interactions with government institutions for tasks like acquiring an identity card and other such transactions.

Calling Plans are key because they are pre-paid and eliminate any need for a bank account or credit check. The cell phone industry in Africa is a prime example of a technology that helps many different user groups. The business is big. Billionaires have been made from the business, and there are layers of beneficiaries of mobile-phone related enterprises at the village level: 1) Entrepreneurs make money selling phone services to villages on a per use basis; 2) People sell prepaid phone cards, and 3) Others gain business and employment opportunities in the industry.

Continent-wide, cell phone practices and opportunities are evolving in €Mobile payment systems€, €Social Networks€ and €Content Platforms€. Phone factories make 35 devices every second, every day and these products made up 74.6 percent of all African phone subscriptions last year. The leading Black entrepreneur in the industry says: €Cell phone subscriptions jumped 67 percent south of the Sahara in 2004, compared with 10 percent in cell-phone-saturated Western Europe€.

He means that sales are declining in the West and on the upswing in Africa. According to Mo Ibrahim, a billionaire from Sudan who chairs Celtel, a leading African provider that employs thousands of people, €An industry that barely existed 10 years ago is now worth $25 billion€. Prepaid air minutes are preferred by the populous and have spawned a $2 billion-a-year industry of small vendors. The cell phone business in Africa made Dr. Mohamed €Mo€ Ibrahim one of the wealthiest men in the world. According to Forbes€ €Rich List€, Ibrahim is worth $2.5 billion.

Air minutes are a form of currency particularly useful in Africa, where transferring small amounts of money through banks is costly. Ibrahim is not the single billionaire expanding the availability of financial services to more people in the Third World through technology. The Bill & Melinda Gates Foundation is supporting a Mobile Money for the Unbanked program with $125 million. The project works with mobile operators, banks, microfinance institutions, government and development organizations to encourage expansion of reliable, affordable mobile financial services to the unbanked.

This grant to the MMU program is part of the foundation€s Financial Services for the Poor initiative, which works with a wide range of public and private partners to harness technology and innovation to bring quality, affordable savings accounts and other financial services to the doorsteps of the poor in the developing world. Ibrahim€s, and the Gates€ Foundation€s activities laudable, because they are allowing Third World people to guard against risks, build assets, and provide opportunities for the next generation.