Africa's Broadband Strategies In Focus

As a prelude to a forthcoming special report on national broadband strategies in Africa, BMI published an article last week giving a general overview of completed plans, and risks to our outlook.

Background

Africa has the least developed broadband market among the different regions we cover. According to BMI data, the broadband penetration rate in most countries in the region is below 5%, compared to 30-40% in developed markets and 15-30% in emerging markets in other regions.

The main reasons for the slow development of the broadband market in Africa include:

  • Lack of international bandwidth
  • High cost of devices
  • Weak demand, partly because of low literacy rates and lack of relevant content
  • Underinvestment in terrestrial broadband network infrastructure

Progress So Far

The region has made significant progress with respect to the first three limitations. Most countries now have access to international bandwidth supplied by multiple submarine cable systems. There are at least seven active cables, with more in the pipeline. The cost of PC ownership has also fallen in recent years, while the increasing availability of low-cost smartphones now means that a significant proportion of consumers can afford some form of a data-enabled device. Finally, a combination of young, educated consumers and relevant content from local and international providers, is driving demand for data connectivity.

However, not much progress has been made in the development of terrestrial network infrastructure, prompting governments to launch medium-term strategies to attract much needed investment in the sector. Nigeria and Kenya launched their national broadband plans in early 2013, while South Africa and Ghana plan to follow suit before the end of the year. Other countries with some form of broadband growth plans, albeit it less comprehensive compared to the 'big four', include Rwanda, Cote d'Ivoire, and Uganda.

BMI View

The broadband plans would spur in growth in countries where they are implemented. We believe the clarity they provide and the elimination of regulatory bottlenecks would encourage investors to support long-term projects in the broadband sector.

Risks To Development

The main risks to the development of broadband networks are as follows:

  • Issues with obtaining right of way for network infrastructure
  • Increasing taxation of the telecoms sector
  • Vandalism of fixed network infrastructure
  • Funding for fibre-optic backhaul infrastructure
  • Policy continuity on the part of the government
  • Timely allocation of spectrum for wireless data networks

Full coverage of Africa's telecommunications sector is available to subscribers at Business Monitor Online. Meanwhile, our special report on African national broadband strategies will be published in November. Stay tuned for further updates.

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