The Africa Policy Leaders Forum (PLF) returned to MWC Kigali from 17-19 October with pivotal discussions concerning the region’s digital advancement. Stakeholders from ministries, regulatory bodies and the broader mobile ecosystem highlighted the challenges, potential solutions, and the path ahead to catapult Africa to the digital economy.
The Usage Gap and Device Affordability
The Forum’s opening session focused on addressing the challenges and pinpointing potential solutions to increase the adoption of smartphones in the region. Following research done in Kenya, the discussion brought out findings of barriers to smartphone adoption including the cost of smartphones, smartphones features, poor internet connection, high cost of service, smartphone perceptions, cultural and religious aspects and relevant content. They also encompassed strategies for enhancing digital skills, increasing smartphone adoption, and bridging the usage gap.
In 2022, mobile connectivity played a key role in innovation, job creation, and economic growth, contributing US$170 billion to Sub-Saharan Africa’s (SSA) economy, representing just over 8% of its GDP. However, a significant usage gap exists in the region, with almost 60% of the population not utilising mobile connectivity. Speakers addressed the main barriers to this gap: device affordability, digital literacy, local content relevance, and safety concerns. Solutions include enhancing the transparency of ‘buy now, pay later’ financing, producing smartphones with dual SIM and 4G/5G capabilities, and localising online content. It was also noted that when people see value in smart devices, they will find the willingness and skills to adopt them. Hence, smartphones should be not just affordable but also useful and meaningful to the African consumer.
The importance of partnership and informed policymaking was emphasised, with a call for taxation reforms. There was a call for Africa to transition from merely assembling smartphones to becoming a manufacturing hub, which can dramatically decrease the cost of smartphones. It was also highlighted that a scaled approach, rather than piecemeal efforts, is essential to achieve a meaningful impact.
Financing Inclusive Connectivity in Africa
According to the World Bank, over US$100 billion is required for Africa to achieve its digital connectivity targets. Moreover, mobile data consumption in SSA will quadruple by 2027. This will require substantial investment from mobile network operators (MNOs), with returns on such investments increasingly challenging.
One of the key talking points at PLF was how to source these US$100 billion. It was suggested that every stakeholder, including MNOs and over-the-top providers (OTTs), should contribute to the cost of networks. The financing model demands an overhaul of the internet ecosystem’s economic and governance structure. There’s a pressing need to re-evaluate traditional financing channels like universal service funds (USFs), tax incentives, spectrum pricing and content monetisation. Regulators must also adapt their regulations in line with technological progression, viewing digitalisation as a fundamental human right and a utility.
Tax reforms could unlock substantial investments in mobile networks, enhance affordability, and promote mobile service adoption. For instance, a 10% boost in connectivity might yield a GDP growth of 1.8%-2%. Yet, the taxation landscape for the mobile sector remains uneven compared to other industries. In 2021, despite contributing 8% to the GDP, the mobile sector accounted for nearly US$8 billion in taxes and fees, approximately 35% of the sector’s total turnover in SSA. Achieving a balance in Africa’s tax objectives is essential. Policymakers were advised to be proactive, engage stakeholders effectively, and balance revenue mobilisation and digital development through strategies like reducing sector-specific taxes, fostering a positive investment atmosphere, and broadening the tax base.
Bridging the Digital Divide with Universal Service Funds (USFs)
USFs, primarily financed by levies on telecommunication providers and other governmental sources, are designed to help service providers expand their reach to rural and remote areas. With a coverage gap of nearly 200 million people and a usage gap of just over 800 million, the scale of the challenge to realise universal connectivity in Africa underlines the need for an effective use of USFs.
The hurdles to achieving rural connectivity are numerous, from inadequate infrastructure and soaring deployment and maintenance costs to a sparse population, limited power sources, and gaps in digital knowledge. Tower companies have emerged as critical players in addressing this disparity, as tower sharing presents numerous advantages, including cost reduction, enhanced competition, and accelerated network expansion in financially disadvantaged areas, all while lessening the carbon footprint. However, clarity and transparency regarding the use of USFs remain a concern. To optimise USFs’ effectiveness, it’s essential to simplify their structures, ensure their affordability and sustainability, and maintain transparency. Key recommendations include using evidence-based contribution rates, setting clear USF targets, prioritising consistent stakeholder involvement, selecting USF projects based on data, routinely monitoring performance, accounting for overheads in project costs, and looking into alternative funding routes.
Addressing Energy and Spectrum Challenges
The digital and energy sectors are interconnected, with mobile networks requiring stable and cost-effective energy to connect the vast SSA populace and businesses. However, the investment cost for renewables in SSA is considerably higher than in developed countries, posing a barrier to clean energy adoption. Despite possessing 60% of the world’s prime solar resources, Africa accounts for less than 1% of the installed solar PV capacity worldwide. Due to the prevalent energy deficiencies, mobile operators have resorted to diesel generators, on-site renewables, batteries, and energy-saving measures to sustain connectivity. These energy shortages could hinder the attainment of SSA’s digital and sustainability goals. Energy departments and regulatory bodies can significantly influence solutions by enacting policies promoting investments in renewables and grids. MNOs are also prepared to collaborate with governmental bodies, utility providers, and investors to fast-track access to clean energy. Emphasising the vast investment required, the need for partnerships was underscored, as no single entity can solve this challenge.
Just as energy, networks require spectrum to run. The final session of PLF emphasised the 49% connectivity gap between rural and urban areas, highlighting the need for more low-band spectrum to bridge this divide. The superior propagation characteristics of low bands make them particularly suitable for providing coverage in rural and remote areas. The upcoming ITU World Radiocommunication Conference (WRC-23) is a unique opportunity for governments to identify more spectrum for mobile services: low band for digital equality, 3.5 GHz for harmonisation, and 6 GHz for future 5G expansion. The session also delved into the transition towards a technology-neutral spectrum licensing approach and addressed the phasing out of older technologies. Technology neutrality enables mobile operators to refarm spectrum from older networks to newer ones. Nations adopting a technology-neutral licensing approach tend to have superior coverage, network quality, and double the uptake of 4G and 5G compared to those with technology-specific licensing. Legacy network sunsets present chances for spectrum refarming, energy efficiency, rationalised device portfolios, optimised network operations, and capex savings.
The Africa Policy Leaders Forum discussions underscored the importance of collaboration between stakeholders, the need for harmonised policies, and the urgency to address existing challenges. The path forward for digital advancement in Africa seems more apparent than ever, but it requires informed policy reforms, collective effort, adaptability, and a focus on sustainable solutions. As the continent progresses, the GSMA plays a pivotal role in shaping its digital future.
The Policy Leaders Forum will be back to MWC Kigali in 2024.