Monday, January 08, 2007

A Mobile revolution in Africa!

I was frankly a bit sad to hear a few years ago that one f the fuels to the fire that is the civil strife in the Democratic Republic of the Congo was a mineral mines to make capacitors small enough for mobile phones. My luxury killing in Africa, plus la change.

However there is hope. There is something I did not think would ever happen, but it is. Africans are getting mobile phones, and not just the rich or the white, but lots of people.

I listened to a Radio 4 and now having just watched BBC two's Newsnight I am stunned to learn that in Kenya a third of the adult population have mobile phones. It is revolutionising peoples lives. They can where ever they are (Yes, pretty much where ever they are) pick up the phone and make a call. They can get text services and even surf the Internet.

The Newsnight reporter, Paul Mason, even tried to get off network by going to the bottom of the Rift Valley, and the the touristy bit with the Safari parks, but the bit with the Masai. These poor nomadic tribesmen wouldn't have a phone and probably no coverage.

Well, not so. The reporter could even surf the net their if he wanted to, and they had mobiles as well!

To give you some idea of the revolution, a farmer used to sell his goods to a middle man. he could pay what he liked as the farmer had no way of knowing what price was available elsewhere. Not so any more. He can get the price of tomatoes any where and any time, so he knows where to send his crops to market. This is already making a huge difference to people. No longer are they trapped with out contact with the outside world or the world in the next town.

Apparently most people in Africa's largest shanti town don't own mobile phones, but then 15 years ago you could have said the same about Kensington and Chelsea. The fact is some people in the slums DO have them! Some seem to use it for mutual political activism. Fantastic!

In fact Africa is the fastest growing mobile market in the world.

So how come Africa has mobile phones but otherwise crumbling infrastructure?

Straight answer is that all the mobile operator needs is a licence. The cleptocracy don't get their hands on the money so it grows. What is more, it is all private money. It is not yet revolutionising the poorest in Africa but it will as it is helping at all other levels.

You can read more here.

14 comments:

peter the punter said...

This report fills me with happiness, Benedict.

Until recently I worked as Tax Manager for CDC Group plc which invests heavily in Africa. One of its most successful investments was in Celtel, a pan-African mobile phone company. I have no doubt that the benefits you report are directly related to that investment.

When I first visited I stayed in the company’s beach cottage. It had a phone but it never worked. The housekeeper was apologetic and explained that it took about 3 months on average to get it fixed. It wasn’t a technical problem; the local exchange could have done it in a jiffy but CDC did not allow bribes so he couldn’t pay the man. Mobile phone technology has cut straight through all that graft.

Incidentally, I remember meeting up with some Masai warriors in the bush while on a short safari. After exchanging the usual greetings and taking photos they asked for my address. When I gave it to them they laughed. “No, silly, not your home address - don't you have email?"

That was January 2000. I still smile when I think of it.

Benedict White said...

Peter, When a Masai laughs at you for not having email you know the world is moving on! Fantastic!

You are right it is about cutting through the corruption and lies. Africans don’t want or need our charity, just a fair crack of the whip. Mobile phones seem to be dong that. Well, sisters were doing for themselves, now it is Africans. Fantastic!

Oh, and I am pleased you have got the hang of posting on my blog ;)

peter the punter said...

There’s a lot more good news in Africa than you might think, although the word the dealers at CDC tend to use is ‘patchy’. South Africa is obviously the strongest economy but there have notable improvements elsewhere, e.g., Tanzania,Uganda and many of the smaller States.

Kenya is critical and it’s hard to see which way it will go. Moi was a disaster but his successor has been disappointing. It has enormous potential but corruption and security are massive issues.

I was there recently to thrash out a deal with the Tax Authorities. They were a highly professional bunch, reasonable, likeable and no hint of graft anywhere, so I was much encouraged by what I found.

On the other hand, when I told my colleagues I was going to walk back from the office to the hotel (The Norfolk, a fine place which features in The Constant Gardener) they insisted on organising a car. “You might make it without being mugged”, they said, “but why take the chance?” The journey must have been all of two hundred yards.

Incidentally, anybody interested in the work of CDC can find their site at cdcgroup.com I recommend it.

Benedict White said...

Peter, yes there is some good new comming out of Africa, but I am convinced that the only thing that will actually help is Africans becomming wealthy. Only then will they have the power to question the bribary and corruption that goes on. The buety of the mobile phone thing for me is that it shifts and widens economic power.

As for the threat of mugging, my Father once had a house break in whilst in the Sudan. The Police tracked them for 3 days until they caught the culprits. Oh well.

Thanks for the link as well!

Peter the Punter said...

Free markets are indeed the answer, Benedict.

I do not see that as a political point; it’s just a fact. Aid should not be discouraged but the sheer scale and power of Capital dwarfs anything that can be achieved through charity. It also sweeps aside the dependency culture and other undesireable side-effects of soft money.

Conservative policies, Benedict? I don’t give a fig whose policies they are. There’s too much at stake for petty Party politics to enter into consideration. For what it is worth, I can tell you that CDC was founded in 1948 by the Atlee Government but has been supported by all administrations since, regardless of political colour.

The company pottered along quietly and unobtrusively for fifty years, making a small profit and doing much good, no doubt, but without setting the world alight. Its rebirth dates from a speech by Tony Blair in 1998 when he announced in effect proposals for its privatisation and a redirection of its strategy towards private equity investment. It was like turning round a supertanker and there was a bit of a false start. The privatisation idea was shelved and the company restructured along industry standard lines with CDC remaining as a ‘Fund of Funds’ (piggy bank to you and me) whilst the bulk of the staff transferred to a Fund Management Partnership which acted as its principal advisor.

The new arrangement has been spectacularly successful. (See website for evidence: cdcgroup.com ) Its profile has been elevated both within Government and the emerging markets investment industry. Hilary Benn writes nice letters to the Chairman and takes a keen interest. The company is winning the development argument hands down. Its own financial contribution is not small (assets under management of about £1.5bn) but the example it sets carries much more clout.

Believe me mate, it’s the way to go - whatever your politics.

Benedict White said...

Peter, sorry If I riled you ;)

Interesting to see how it has developed. You are also right that private equity can dwarf the power of charity.

Interestingly the UN ran a small money lending operation in Gaza that was very very succesfull. they got all their money back, mostly ahead of schedule and left a lot of small scale busineses behind (for the Israelies to come along and destroy later). It workd so much better than charity.

Mind you I hate the CAP as well. I resent being taxed to keep Africans whom I have nothing against poor, then being taxed again to put that a little right, and still feel the need to give to charity because that is not enough, when I never wanted to pay the bl**dy tax in the first place!

Peter the Punter said...

You certainly didn't rile me, Benedict. You just gave me the chance to bang on about a favorite subject. Many thanks.

Private equity capital works particularly well in the banking sector. CDC has also scored some big successes there. It seems to be especially effective in micro-banking, of which I think your Gaza example is an example. Africa needs that kind involvement badly but there are promising signs that the need is beginning to be met.

Incidentally, I mentioned Celtel. I believe that some of the original seed capital came from Yasser Arafat, no less! I don't know if he was still around when CDC stepped in but I know it took the company a long way forward before selling on to a private Kuwaiti investor who has carried it on with even greater success.

I think CDC paid about £50m for its original stake and realised a gross profit of about £150m a few years later. That kind of IRR will make any Fund Manager sit up and take notice.

The growth was in part a reflection of the Manager's care and custody of the investment. The Kuwaitis are now taking the company on to a new level. Meanwhile CDC's £150m profit is recirculating in further investments, mainly in sub-Saharan Africa and South Asia.

Of course CDC has its duds but when you see one come off, like Celtel, you've got to be impressed.

Benedict White said...

Yes Peter the gaza example was Micro banking and it can be very effective at starting economic balls rolling. Interesting what you say about yassir Arafat though, I did not know that. It is also interesting to know that you can make serious money out of Africa whilst making it a better place for those in it to live!

And yes, a fund manager has got to sit up and listen when he sees a 3 fold increase in capital.

Peter the Punter said...

CDC has been in South Asia for a very long time. It made a killing when the India Stock Market took off.

India was perfect for CDC because not only did it tick the right development boxes but it was easy to find big ticket investments. Ideally it wants projects upwards of $20m and India has plenty of those. The problem with finding investments in India now is that they tend to be overpriced.

Africa offers better opportunities now but there the problem is finding investments big enough. The need is more for medium to small. Banking is a good example. The kind of micro to medium finance institution the continent needs will only absorb investments of between about $5m to $20m - i.e. at the lower end of CDC's range. Of course, it is flexible and doesn't turn down good projects because they are a bit small but they take up a lot of management time and tend not to be terribly cost-effective.

I think this is where the company really fulfils a crucial role. Without the Development remit, a normal Private Equity house might not bother. CDC will. In doing so, it leads the way. I know for a fact that a lot of company's have followed just because they saw CDC had gone in and that was good enough for them. The importance of this 'pump-priming' role cannot be overstated.

You bored yet? I bet you're beginning to regret asking me about this! LOL! :-)

Peter the Punter said...

BTW...can you edit out the spelling error in the penultimate para of my previous entry?

Benedict White said...

Peter unfortunately I can't edit your post, I can only delete it which would be a shame.

On the issues you raise, the most interesting part is the nned for projects to be big enough. In many ways this is the issue with aid projects all over. The projects are too big to be useful to the small guy.

NGO's tend to work on a smaller scale and that is good.

That said CDC is clearly doing great work. Hopefuly it will pitch in at the lower end. Micro banks are going to be very important. (Or perhaps micro building and friendly societies?)

No I am not bored by the subject. Fixing Africa is important.

Ted said...

A good thread from both Benedict & Peter - I'm interested because it was a surprise to me when I went home to Zambia to see how pervasive mobile communications had become. Doubt it's cut out all graft - base stations still need to be set up, licences acquired and the elite are always attracted to any successful business. In Zimbabwe we have seen the Mugabe family trying to gain control of revenues and the same happens in other states.

Still its good to see that even in Somalia mobile networks are set up and operating. Gives you hope for the capacity for African countries to become less dependent.

Benedict White said...

ted, Many thanks for the kind words. Also interesting to note how mobiles are spreading to other countries including Somalia.

This graft of which we speak is of course just low level corruption. It is what is holding Africa back more than anything else. What is more it is a problem created by some Africans rather than the west.

I suspect as time moves on, and the mobile revolution spreads Africans will cease to accept it as part of everyday life. I hope so.

Peter the Punter said...

Thanks for your kind comments, Ted.