Presentation: Development Goes Wireless

Jasson Urbach | 12 Nov 2007
Africa Fighting Malaria

Development Goes Wireless
Jasson Urbach

Southern Africa Director, Africa Fighting Malaria
5th Africa Resource Bank Meeting
11-14 November 2007
Dar es Salaam, Tanzania

1. Introduction

The rapid spread of cellular telephones in many African countries has been a remarkable and unexpected phenomenon, particularly when one considers the high levels of poverty and social turmoil in many of these countries. Technology that has long been taken for granted by people in rich countries has made life easier, safer and more prosperous for many, including poor people, in developing countries. The result of the rapid diffusion of this technology is that a significant number of jobs and enterprises have been created, which has enabled many Africans to escape the poverty trap.

2. The John Templeton Foundation

In order to document the poverty alleviating aspects of cell phones in Botswana the Mercatus Centre based in the United States in partnership with the Free Market Foundation of South Africa and the Institute of Economic Affairs in London collaborated to form the team that comprised the Enterprise Africa! project. With some very generous funding from the Templeton Foundation the team set-off in early 2006 to capture the Botswana story.

3. Background

Until recently, communication was a vexing problem for the people scattered across the vast and dry land of Botswana. People working in urban areas, far from the rural villages where they were born and raised, might see their families once a year during their annual vacations, after long, arduous and expensive trips home. Between such visits they previously depended on postal communication or messages carried by friends and family. But technology has come to their rescue. The cellular telephone has given them everyday access to their families, as it has done for millions of people across the length and breadth of the African continent and indeed the entire globe.

4. Background contd.

The advent of cellular telecommunications in Botswana is a relatively new phenomenon but in recent years the subscriber base has grown significantly and cellular telephones that were once considered a luxury good have spread like wildfire across the country reaching virtually every home regardless of socioeconomic status. In 1998 the Botswana Telecommunications Authority (BTA) issued calls for tenders on two wireless network licences and five companies' submitted bids with the winning bids coming from Mascom Wireless and Vista Cellular (now Orange).

5. Graph - subscriber base

As a result of the arrival of the new service providers the number of cell phone subscribers jumped from zero in 1998, to over half a million in 2004 and to almost 1 million at the beginning of 2007. Compare this with the 136,900 fixed lines provided by the Botswana Telecommunications Company at the beginning of 2007.

6. The Poverty Alleviating Aspects of Mobiles

The most obvious benefit of cellular telephones is that they provide access to communication where none existed before. But mobile phones have also been an immediate success in areas already serviced by landlines, because they offered services like itemised billing, prepaid or contract options, and other value-added services. However, the greatest impact comes in the reduction of the costs of doing business. Better communication translates into higher productivity for large and medium-sized businesses, but it can mean a life changing difference for small businesses and businesses in remote areas.

7. Poverty alleviating aspects contd.

For instance, farmers, previously isolated by the long trips they had to make to reach markets, services and supplies, on foot or donkey-drawn carts, are now able to schedule appointments, request help for medical emergencies, and access news. With access to information about markets in villages and larger cities, farmers are able to increase productivity and expand their businesses. The Bika family we visited provide an example of this phenomenon.

8. Picture - Bika's

9. The Bika's

The Bika's own a vegetable farm in the village of Gakuto, a short distance outside the capital Gaborone. They began their business in 1997 growing peppers, onions, spinach, maize, tomatoes, and cucumbers. Prior to mobiles, the Bika's did not have access to a telephone and developed their business by supplying small buyers who came to the farm to purchase vegetables. Since then the business has expanded to include five full-time employees, and bigger customers. The farm now supplies various retail grocery stores as well as street vendors and other small buyers. While we were being shown around the vegetable gardens, Mr Bika's mobile phone rang. After completing his conversation Mr Bika explained that the call had been from a buyer looking for vegetables. Having a mobile meant that he could stay out in the fields all day and still be in instant contact with buyers, a facility that has contributed a great deal towards making the expansion of their business possible.

10. Mobiles as a tool for business

The advent of cellular telephones in Botswana has also helped to emancipate women by allowing small businesses run by women to thrive. We visited Ms. Stadile Manthe who runs a small retail 'tuck shop' and phone service in the village of Mmopane, a short drive from the capital. Ms. Manthe started her business in 1998 and slowly expanded her inventory. In 2000, she began to offer mobile phone services. She decided that it would be a good idea because the mobile public phone service was a new concept in Botswana. She now sells airtime scratch cards, and provides battery recharging and mobile public phone usage services. Despite the small size and location of Mmopane, Ms. Manthe was able to earn an additional P200 ($32.42) a day with the introduction of the various mobile public phone services.

11. Picture - Ms Stadile Manthe

12. Ms. Manthe contd.

With the profits from her tuck shop business, Ms. Manthe was able to build several rental houses. She now has five such houses and at the time of the study was in the process of building a sixth. She used local people to help her build the homes, providing work for local artisans. Although the success of Ms Manthe's business cannot entirely be attributed to the introduction of the mobile cellular services that she provides, the mobile phone has enabled her to place orders for her tuck shop, increased her efficiency, and has provided her with regular additional income. The additional money that she now earns as a direct result of the advent of the mobile phone is by no means insignificant. It is has raised her capacity for saving and investment and helped her to become the proud owner of half a dozen rental cottages and in the process improved her quality of life.

13. Serendipitous benefits of mobiles

Despite Botswana's relatively sound institutional and legal system the lack of adequate protection of intellectual property rights continues to impede the growth potential of the economy. But cellular telephones have once again come to the rescue by providing a serendipitous benefit to local musicians. We visited Mr. Solomon Monyame, a local music producer and entrepreneur, who produces buys and sells ring tones for mobiles.

14. Solomon Monyame.

Mr. Monyame keeps accurate records of the number of ring tones downloaded and pays a royalty through a profit sharing agreement to the local musicians responsible for producing the ring tones - making it possible for the musicians to receive the fruits of their labour. Mr Monyame says that, "In a country where intellectual property rights are loosely enforced, this is a major economic benefit for the local artists and provides an incentive for them to continue to produce and record their music".

15. Picture - Solomon Monyame

16. Policy Recommendations

Finally, cellular telephones are by no means the silver bullet or panacea to end poverty in Africa. Like most good ideas for alleviating poverty, the expansion and effectiveness of mobile telephony in Botswana depends to a large extent on the policies adopted by the government. Through its pro-market liberal policies, Botswana's government has played an important role in establishing the two multilateral service providers, which are currently fiercely competing for market share in the country. To this end it is important that the government continues to open up the market. However, despite the fact that Botswana's telecommunications policy supports full liberalisation, the Botswana Telecommunications Company (BTC) continues to have a de facto monopoly on certain segments of the market

17. Policy Recommendations contd.

The BTC remains the only fixed line operator and presently requires the two multilateral cell phone service providers to use existing BTC infrastructure for international calls. All outgoing international calls are routed through the BTC unless the BTC is unable to provide the connection. Furthermore, the BTC receives a portion of the revenue for all incoming international calls. Thus, it is imperative that the regulatory authority remains autonomous and continues along the path of liberalisation to the benefit of all the country's people.