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The Next Wave: Can Africans afford it?

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The Spotify effect

MARCH 7, 2021

This newsletter is a weekly in-depth analysis of tech and innovation in Africa that will serve as a post-pandemic guide. Subscribe here to get it directly in your inbox every Sunday at 3 pm WAT

Hello,

This weekend, I was reminded of how powerful the internet can be for Africans’ financial independence. 

Short story: this librarian in southeast Nigeria set up Google alerts for news on crypto art. Four years and a pandemic later, he’s quietly minting USDs from an impressive catalogue of digital art through blockchain-powered marketplaces. He is a first-mover on the craze of the moment – NFTs.

I will tell the longer version of this story on TechCabal so look out for it!

For now, let’s talk about improving internet access and affordability in Africa. How do we get more Africans to take advantage of the possibilities on the web through low-cost data? The 2020 Affordability Report by the Alliance for Affordable Internet (A4AI) throws up some ideas.

Internet inequalities

Here’s one declaration from the report that doesn’t surprise: COVID-19 exposed “shocking inequalities” in internet access and affordability across the globe. For example, inequalities in the adoption of remote learning. 

Generally, many households struggled with remote learning, especially working mothers. But children from wealthier families were better equipped to tune in and benefit; others had to make do with radio

Like the pandemic-enabled boom in online shopping, increase in remote learning fuels optimism for Africa’s digital economy. More money was raised for edtech in 2020 than ever before. But affordable internet is crucial for edtech’s viability and how any digital economy performs. 

If expected users cannot afford data, even the best funded startups won’t be as successful as they can be. Lagos, Nairobi, Cairo and similar cities will remain the main markets, while people in Bakassi, Turkana and Matabeleland are cut off from the global village.

There’s a clear problem here. So, how do we solve it? By now, it is clear that Africa’s internet access and affordability aspirations cannot depend on charity from Big Tech – after Google’s internet balloons burst – or altruistic aid from nations fighting world-power wars.


[ Read: What went wrong with Google’s Loon project in Kenya? ]

Dear governments, have a plan

A4AI’s ‘affordability drivers index’ shows how countries are lowering internet costs through policies on infrastructure and access. Africa, Latin America and Caribbean, and the Asia-Pacific region are the focus regions.

The 2020 report hails Africa for making the most policy advances of any region. 11 of the top 30 countries on the index are African: Morocco, Botswana, Mauritius, Nigeria, Ghana, Tunisia, Senegal, South Africa, Benin, Kenya and Côte d’Ivoire.

Rwanda is singled out for praise; 1GB of data costs 20.2% of average monthly income in 2015. This number fell to 3.39% in 2020, thanks to national broadband planning (see their plan here). They are close to the UN Broadband Commission’s standard: 1GB data for no more than 2% of average monthly income.

But while improvements have been noteworthy, Africa’s average affordability score remains the lowest of any region in A4AI’s book. Funding will solve some problems but it must be backed by “effective policy, strong planning and effective implementation,” the report says

Two things to note: No government can cook up an effective broadband plan by itself without input from diverse private sector actors and civil society. Also, an effective policy must have clear targets on coverage and affordability. 

For example, Nigeria’s new five-year plan aims to provide 70% of the population with 10Mbps internet at no more than ₦390 (US$0.95) per 1GB by 2025. 33 African countries have national plans but only 14 have targets for data affordability.


[Read: Inside Nigeria’s new broadband plan for 2025 ]

With the pandemic showing how much of normal life now runs on the internet, the hope is for governments to wake up to the responsibility of actively reducing internet costs – not by any rocket science or socialist price engineering, but through inclusive, measurable policy. Perhaps even social-media-phobic governments in Uganda, Togo and Senegal will see the light. 

FROM THE CABAL
Deezer has slashed its susbcription fees and will now accept payments in naira. Call it the Spotify effect, where streaming platforms begin adjusting price and features to appease customers who might be enticed by the new giant’s appeal. Read Edwin’s piece on how this new music streaming games in Africa will play out.
OPay and MTN reported results for the last quarter. TL;DR both companies impressed investors and observers, but don’t take my word for it. OPay here. MTN here.
TC INSIGHTS

Right of Way

You’re visiting relatives in the village, and you decide to stream a movie. The film you want isn’t available on Netflix so you decide to download it instead. It’s a 2-hour movie but you think it will download in a few minutes at most. 

However, you doze off and when you wake up 30 minutes later, it’s only “30% complete.” That’s when you remember that only 2G network is available within that area.

Installing underground fiber networks is one way Nigeria is trying to improve internet penetration and consequently network quality. It is common to see internet providers or telcos often laying fiber, and it usually signifies that internet connection in that area is about to get better. 

However, the laying of fibers comes with complexities for internet providers, due to the regulatory hassle involved, especially regarding levies known as Right of Way (RoW) charges. The more expensive these charges are, the harder it is for internet providers to enable access, particularly in remote areas.

In Nigeria, laying 1 km of fiber attracts ₦145/meter ($0.35), this doesn’t apply to roads under the control of state governments, giving them the leeway to hike these charges as they wish, sometimes as much as ₦6,000/meter ($15). This is expensive considering that without regulatory charges it typically costs between $15,000 – $30,000 to lay 1 km of fiber in Africa. 

Although the Nigerian government has waived charges for laying fiber on federal highways, they are only a small fraction of highways in the country.

For a country with a plan to have 90% population broadband coverage by 2025, there needs to be more regulatory synergy. Otherwise, taxing internet providers so heavily could reduce the rate of internet penetration.

If these RoW charges are not effectively reviewed, it could set broadband coverage goals back by a few years. But this is only one side of the problem. It could also discourage startups looking to launch or expand within the country.

It’s short-term benefit versus long-term gains. While it pays state governments now to impose heavy levies, it’ll eventually cost them in terms of reduced productivity and activity in the digital economy.


Get
 TechCabal’s reports here and send us your custom research requests via tcinsights@bigcabal.com.


Written by Boluwatife Sanwo

Have a great week ahead!

Thank you for taking the time to read today’s edition of The Next Wave. Remember to stay safe when you are out in public places– protect others by wearing your mask and sanitizing your hands.

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– Alexander O. Onukwue, Staff Writer, TechCabal

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