Presentation made at the ​​​​​​​​​ITU 2018 Regional Human Capacity Building Workshop on “Strengthening Capacities in Internet Governance in Africa” describing ways to create an enabling environment for the development of the digital economy in the African region; how legal frameworks are aiming to facilitate e-commerce and the development of related services, such as local online marketplaces and e-payment mechanisms, as well as digital financial services.

1. DIGITAL ECONOMY AND REGIONAL DEVELOPMENT:
ITU Annual Regional Human Capacity Building Workshop Session 8
Presentation by
Fola Odufuwa
Independent ICT & Technology Business Consultant
Country Partner – Nigeria, Research ICT Africa, Cape Town
Shehu Musa Yar’adua Centre
Abuja, Nigeria
Wednesday, August 29, 2018

2. 2
BROAD OUTLINE OF PRESENTATION
Legal Framework
• eCommerce
• Cybersecurity
• Data protection &
privacy
• Consumer protection
• ICT policies
Payment Platforms
• Mobile money
• Internet banking
• Debit/credit cards uptake
• Access to finance
• Investments
Infrastructure
• Mobile networks (3G/4G/5G)
• Fibre connectivity
• Broadband penetration
• Devices
Applications &
Services
• Cloud services
• eGovernment
• eCommerce platforms
• Advanced technologies
• Software services
DIGITAL ECONOMY

3. Regional Developments
INFRASTRUCTURE

4. Mobile phones dominate, however internet
penetration is comparatively low
Source: After Access 2018 survey of 16 global south countries in Africa, Asia & Latin America
87%
84%
74%
64%
59%
48%
40%
26%
50%
26%
30%
14%
8% 10%
Kenya South Africa Ghana Nigeria Tanzania Rwanda Mozambique
Mobile Phone Ownership vs Internet Penetration in Africa 2018
Mobile as % of population Internet as % of population
Large segments of the
population do not own a
mobile phone yet mobile is
at the base of the African
digital economy

5. One reason for this trend: weak smartphone
adoption - as low as 9% or less in many countries
36%
53%
58%
30%
67%
78%
66%
8%
13%
14%
46%
11%
5% 25%
56%
34%
28% 24% 22%
17%
9%
South Africa Ghana Kenya Nigeria Tanzania Mozambique Rwanda
Basic phones Feature phones Smartphones
Correlation
between
smartphone
penetration
& internet
penetration
Positively,
smartphone
prices have
dropped from
c. $165 to $96
since 2014
Source: After Access 2018 survey of 16 global south countries in Africa, Asia & Latin America

6. Africa continues to lag the rest of the globe, only
20% pop covered by 4G even with growing roll-outs
Source: GSMA Intelligence 2016
97 operational 4G
networks in 39 countries
as at March 2017
Data policies &
regulation yet
to deliver the
promise of
broadband.

7. Average retail broadband costs are gradually
reducing though there is still a wide disparity
• Sub-sahara Africa average - $127, Africa
($113), global average $74
• Iran ($4), Ukraine ($6) & Russia ($9)
cheapest countries for broadband
globally
• USA ($66), UK ($40) & France ($36)
averagely
$29.65
$35.82
$58.84
$71.28
$80.14
$88.28
$117.00
$170.00
$953.56
$0.00 $100.00 $200.00 $300.00 $400.00 $500.00 $600.00 $700.00 $800.00 $900.00 $1,000.00
Réunion
Sudan
Mauritius
Mayotte
South Africa
Côte d'Ivoire
Mauritania
Gambia
Ethiopia
Cameroon
Mozambique
Swaziland
Benin
Botswana
Nigeria
Saint Helena
Kenya
Angola
Djibouti
Seychelles
Gabon
Tanzania
Sierra Leone
Comoros
Lesotho
Somalia
Niger
Mali
Zimbabwe
Namibia
Burkina Faso
Source: Worldwide Broadband League 2018; monthly residential (ADSL or fibre) broadband package, prices in USD

8. Cost of data is the biggest limitation to
internet adoption & usage in the region
Source: After Access 2018 survey of 16 global south countries in Africa, Asia & Latin America

9. Another factor is average download speeds,
improving but continues to lag the globe
Top 20 African countries by download speeds. Source: Worldwide Broadband Speed League 2018, entries in Mbps
1.50
1.86
2.39
2.64
2.86
6.38
10.11
24.87
0.00 5.00 10.00 15.00 20.00 25.00 30.00
Botswana
Sierra Leone
Liberia
Ivory Coast
Seychelles
Mozambique
Nigeria
Tanzania
Zambia
Uganda
Mauritius
Burundi
Namibia
Rwanda
Zimbabwe
Ghana
Cape Verde
South Africa
Kenya
Madagascar
Global average 9.1Mbps
contrasts with Africa
average of 2.59Mbps.
Average download speeds
in 2017 was 6.96Mbps and
1.97Mbps respectively.
Impact of newly installed
undersea cable systems
visible but national
backbone networks yet
to take off in most
countries

10. Regional Developments
LEGAL FRAMEWORK

11. Only half of the continent have adopted laws
covering e-transactions & cybercrime
Source: Worldwide Broadband League 2018, prices in USD
Imperative that laws & policies need to be created or updated to support the digital economy

12. Can African Continental Free Trade Agreement
(CFTA) lift ecommerce on the continent?
• CFTA seeks to create a single African market for goods and services by
liberalising the movement of people, businesses and investments.
• Signed by 49 of 54 countries 1Q2018, the agreement hopes to bring
together a combined pop. >1billion with a GDP in excess of $50tn.
• Post-agreement actions include finalizing dispute mechanisms and
implementation programme.
• Nigeria & South Africa, representing 30% of economic activity on the
continent, yet to adopt agreement.
• It is presently unclear what specific implementation steps would be
adopted to positively impact African ecommerce, if at all.

13. Regional Developments
PAYMENT PLATFORMS

14. Payment systems are generally nascent though
mobile money is very popular in EAC
• Less than 1% credit card penetration across Africa, except in South Africa (31%),
Egypt (5%) and Angola (4%), according to Lafferty Research (2015).
• Only a third of adults own and operate a bank account and <10-15% of the
population utilise mobile payment solutions. They typically have limited access to
international marketplaces and have relatively weak purchasing power.
• Yet African electronic payments grows at 13% per annum, the fastest on the
globe. Nigeria, Kenya & Morocco set to take-off.
• International card companies, MasterCard, Visa, are experiencing higher growth
rates in Africa though card usage is said to be low.
• Recent surveys show online users have yet to fully develop trust for electronic
transactions. 60-80% of shoppers on local platforms e.g. Jumia, Konga pay with
cash on delivery. About 200,000 active card users in Nigeria.
• Minimal regulatory understanding of how this sector should develop.
Sources: Lafferty (2015), World Bank (2018), SWIFT (2017), Interswitch (2016)

15. Regional Developments
APPLICATIONS & SERVICES: eCOMMERCE

16. e-Commerce opportunities abound but the
business environment is very challenging
• African economies are growing and democratising with increase in wealth
and opportunities (particularly for the middle-class) driving ecommerce.
• Various estimates value market size in the $50-80b range with around 264
active players including Jumia, Takealot, Kilimall, Konga, Iroko, OLX, etc.
• Over 300 tech hubs in 42 countries across the continent developing new
apps & services (GSMA 2017).
• Biggest countries are Nigeria, South Africa & Kenya. Internet retailing in
Nigeria is estimated at c. $7b.
• In 2016 Jumia, online retailer with presence in 11 countries, became the
first ecommerce company to exceed $1b in market value.
• It is however important to separate fact from fiction and reality from
illusion.
Sources: Euromonitor, International Trade Center, Frost & Sullivan, Disrupt Africa

17. African ecommerce space gradually becoming
a graveyard for emergent business ventures
• Less than a third of business are profitable. Examples of this trend:
• Konga acquired by Yudala 4Q2017 for c. $10m, about a tenth of invested equity.
• Jumia declared a full year loss of $140m for 2017 alone.
• Naspers closed its e-businesses Mocality (2013) & OLX (2018) in Kenya & Nigeria.
• Kalahari (2011) & WeChat (2016) moved operations out of Nigeria.
• eCommerce ventures seem not to be actively supported by policymaking.
Indeed, many ecommerce businesses operate INSPITE of policy, whether
present or absent.
• How can ecommerce businesses become profitable if the business
environment causes them to ramp up unanticipated costs?
• It’s up in the air whether (and when) African policymakers will deliver on
the promise of a digital economy, which ought to be a natural forward step
from the success of mobile communications.
Sources: EIU (2017), Disrupt Africa (2018)

18. Country Case Study: South Sudan
Summary of Recent Market Study
• Technology revolution of post-PC era visible in South Sudan with mobile,
broadband and social media.
• Institutional arrangements governing the sector is basic but the 2014
establishment of a national ICT regulatory authority (NCA) has helped structure
the communications sector.
• Nearly all private players are multinational in ownership and staffing.
• Adequate room for innovation within the sector - 100% electronic top-up since
2016 places the country as a leader in this ICT sub-category on the continent,
inadvertent policy ‘success’ that appears irreversible.
• Widespread adoption of smartphones, MNOs say about 90% of devices on their
networks are smartphones.
• Negligible ecommerce activity though communications sector has good potential
if existing policies are implemented.

19. Policy Implications

20. Africa’s digital economy faces many challenges
Trust Environment
• In Africa, cash is king! How will policymakers encourage cash societies to make the vital shift to
electronic transactions?
• Accessibility and reliability of available infrastructure
• Data access, speeds of delivery and quality of service.
• Lack of sophisticated (or even efficient) payment systems, outside a handful of countries with
advanced connectivity e.g. South Africa.
• Hacking, scamming, phishing and general fear of fraud
Regulations & Policies
• Disconnect between regulatory initiatives and rapidly changing consumer demand, innovation
and the dynamism of internet evolution
• Politicisation and inconsistency of application of internet policies e.g. Uganda social media tax.
• Limited regulatory pressure on service providers for growth and to encourage digital inclusion
Business Environment
• Limited household or personal incomes and low appetite for goods and services as these are
considered unaffordable.
• Weak literacy rates of indigenous populations hindering their ability to participate in a digital
world
• Limited pool, depth and sophistication of businesses providing supporting services, making for
inefficient supply chains
• Underdevelopment of capital markets limiting primary and secondary stock activity in internet-
related businesses
• Inadequate focus by policy makers on investment facilitation and real economic growth

21. Africa’s growth seems ‘natural’ and unabating
• However, real growth has to be helped along primarily through
meticulous improvements to the local business environment.
• So policymakers and regulators have to raise their game by acquiring
the tools that would equip them to deeply understand the fast-
changing digital world in order to frame the most optimal policies on
a whole-of-government basis.
• This is the only path that can push the continent to a higher level of
growth.
• The implications of doing nothing or adopting contrary actions in the
light of the region’s explosive population growth and pervasive
poverty may be tough to visualize otherwise.

22. Thank you for your time and
attention
fola.odufuwa@gmail.com