In our discussion of investment opportunities in Africa, we at Nile Capital focus on three key themes around which we seek to invest. One of these themes is the growth in infrastructure networks. While this means that we seek opportunities in Africa’s growing physical infrastructure, this focus also extends to Africa’s growing digital infrastructure and mobile technology sector. A recent article in the Wall Street Journal Technology blog helps explain why.
As we have written in the past, the opportunity to invest in Africa’s growing consumption power is substantial. Already Africa is a continent which contains over one billion people: put differently, about one out of every seven human beings currently lives in Africa. Based on population growth rates, the continent’s population is expected to grow to over two billion by 2040, at which time approximately one in every four people on the globe will be African.
In addition, Africa’s telecommunications land line network remains woefully inadequate. In many countries where populations climb into the millions, the number of land line phones barely breaks five figures. The challenge and prohibitive cost of maintaining a land-line network had for many years made it impossible for Africans to remain connected.
However, the introduction of cellular phone networks has caused a substantial shift in the landscape on the continent. Whereas at the turn of the century cell phones were still relatively uncommon, market penetration over the past ten years has been profoundly rapid. As we previously wrote:
Since the year 2000, McKinsey notes that 316 million new phone subscribers have signed up in Africa. However, they also note that in 2008 only 39% of Africa’s population had access to telecom services , 38% had access to modern retail, and 20% had access to banking (note that these statistics include South Africa, where the numbers are 92%, 68%, and 60% respectively, skewing the average up). It is amazing to think of the potential for growth in companies that are able to fill those gaps.
According to the Wall Street Journal’s Tech blog, cellular penetration across Africa has not only remained strong in the subsequent years, but it has actually overtaken Latin America as the world’s second largest cellular phone network, behind only the Asia-Pacific region. According to the GSM Association (the global mobile phone operator’s body), Africa’s cell phone market has grown by more than 20% annually over the past five years, bringing the total number of subscribers above 649 million through the fourth quarter of 2011. From 2007 through 2011, the number of cellular connections has more than doubled, rising from 283 million only five years ago. In addition, the Association noted that it expects this number to rise to 735 million by the end of 2012.
However, there remains a significant opportunity for further penetration in the cellular space. While access has continued to improve, the Association also noted that 36% of individuals in Africa’s 25 largest markets remain without access to cellular phones. In addition, 96% of phones are currently pre-paid, and data technology has only just begun to make inroads in the market.
Nile Capital, believes that there are a number of opportunities to participate in Africa’s growing mobile sector. While this may mean participating in the growth of some of Africa’s largest telecommunications firms, it also means understanding how cell phones can change the landscape of communication. For example, mobile banking is now making it possible for Africans who reside far from local branches to send and receive funds electronically, which helps to drive growth in retail bank deposits.
While cellular communication in Africa becomes more prevalent and services improve, we seek to identify trends and opportunities to help our clients share in the growth.
To read the full report by the GSM Association, please visit here.
For more information about investing in Africa, please contact Nile Capital Management at (646)367-2820 or email@example.com.
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