By George Osodi A Lagos man repairs a computer from scrap components in the Ikeja computer village, West Africa’s largest IT marketplace. News Focus Syria Thinks Small Damascus turns to microfinance to combat poverty An Industry Unraveling Once a symbol of national pride, cotton’s prospects are coming apart at the seams A New Way of Doing Business Non-profit group promotes economic development by giving companies a helping hand The Science of Buying Marketers examine the brain to find out what makes consumers tick Digital Booty With electronic piracy plaguing the music business,legitimate media companies scramble for a business model that pays A Rocky Start Theft, corruption and a little chaos mark the launch of a new property levy meant to haul the country’s tax system into the modern era Highway Robbery Reputation of white taxi program takes a hit as drivers caught rigging meters By George Osodi Telecom revenue makes up 5% of Africa’s total GDP By Omar Mohsen Microsoft’s Karim Ramadan hopes to access low-income families through a new PC initiative. By Khaled Habib Intel’s General Manager for Egypt, Levant and North Africa Khaled El-Amrawi By Kate Curran GAID hopes to utilize IT in Africa to set up the infrastructure for integrating all levels of education services, from the classroom to Ministries of Education.

By Megan Detrie

In 2000, 192 nations convened for a conference in South Africa where they agreed to combine resources with the United Nations to meet eight key Millennium Development Goals (MDGs) by 2015, ranging from increasing women’s equality to halting the spread of HIV/AIDS. This year marked the mid-point of the 15-year experiment, and while Egypt has had some success — specifically in decreasing child mortality rates — progress in Africa as a whole remains behind schedule. With the successes so far mostly small, many are considering alternative routes to reaching the goals, in particular through the development of information technology (IT).

IT development in Africa, from the private sector to government to international agencies, is as much a viable business model as it is a social development exercise. When high-quality cellular networks and internet infrastructure is made available to previously-underserved areas, promoting development is a positive byproduct, but commercial interests are almost always the motivator.

Adam Smith’s Wealth of Nations made the claim that creating wealth is about appealing to people’s self-interest, and that the weaker members of society benefit from the self-interest of the strong. Connecting such economic rationalism to the MDGs might seem abstract; nevertheless, it is becoming a defining tenet of African IT development. Multinational technology companies are investing major sums in universal primary education. If successful, that effort will translate into more adults seeing the value of informations and communications technologies. In short: smarter people are better customers.

Given that much of Africa lives off a few pounds a day, these kind of calculations fall more into a 10-15 year vision for development — education doesn’t feed the starving or heal the sick today. However, such long-term investments are an absolute necessity to ensure the sustainability of short-term investments in food aid and disease control.

As developing countries race to catch up with the developed world, IT plays a huge role, and the digital divide is still large enough that closing the gap is a game that plenty of enlightened entrepreneurs are all too keen to play.

Africa’s population makes up roughly 15% of the world. However the continent as a whole remains woefully behind other regions in terms of IT — particularly in access to high-speed internet. There is currently a less than 4% internet penetration rate throughout the continent and most users are in South Africa and Egypt. According to the International Telecommunication Union (ITU), fewer than 1% of those users have broadband.

Despite the millions of aid dollars funneled into the IT sector across the continent, providers still struggle to make the internet accessible and affordable. Broadband prices in Sub-Saharan Africa remain among the highest in the world, with many users paying as much as $200-350 per month for a high-speed connection that in Egypt would cost less than LE 100.

As most of the continent still lacks the basics — access to health care, clean water, competitive education, roads and electricity — one cannot help but wonder whether Africa is ever going to catch up with the rest of the world. Many now believe that the best chance for Africa is to create a knowledge-based economy through the use of internet technology. International organizations like the World Bank, the UN and the European Commission have made their mission clear: Close the digital divide between Africa and the rest of the world.

“The goal is, in the next four to five years we should be able to obtain full coverage of the African continent with affordable broadband access,” says Sarbuland Khan, executive coordinator of the Global Alliance for ICT and Development (GAID), a UN task force.

But Khan and other international stakeholders have a lot of work ahead of them. Of Africa’s 48 countries, 28 are connected to the internet through slow, unreliable and overpriced satellite technology only. The existing telecommunications system is bogged down because of low competition and high transmission costs. The undersea cable connecting West Africa to the world, SAT-3, has allowed for higher speeds at lower costs, but the companies that built the cable hold a monopoly over access, and have been accused of keeping prices artificially high. The Eastern Africa Submarine Cable System, better known as EASSy, will run from South Africa to Sudan along the Indian Ocean floor, but it is unlikely to be operational before 2009. Until then, prices will remain high, and internet access limited.

“The problem in Africa is that there is a vicious cycle: There is not enough demand for ICT services, therefore there is not enough investment to bring high-speed broadband or wireless and satellite connectivity to Sub-Saharan Africa, except for very few exceptions, and there are big gaps,” says Khan. He adds that GAID is currently helping countries analyze what IT policies will be the most effective.

“There are gaps in the land coverage and ‘last mile’ [getting internet connections from high-speed backbones to the end user] issues are there,” he notes. “So we’re identifying the gaps and what are the projects and policies needed.”

Beyond the question of how to reach rural areas, the use of international routing for local internet service providers (ISPs) will need to be addressed. Almost all ISPs are connected through foreign countries: E-mail sent by a student at the University of Lagos with an ISP in Nigeria travels first to Europe or the United States before getting back to Nigeria. In other words, Africa is paying oversea carriers to exchange local traffic, which contributes to the high cost of access. Currently only 11 countries have internet exchange points for handling local ISP traffic instead of sending it overseas.

International actors are ready to take the stage to encourage IT policy development. According to Khan, the World Bank, after a five year “hiatus,” along with the European Commission, has committed $417 million in loans to improve connectivity to countries that have “a good [IT] policy and regulate the [IT] environment.” The funding comes alongside increased pressure for African governments to cut the cost of internet access by encouraging competition, as well as getting hospitals, schools and ministries computerized and online by 2012, Khan’s ideal deadline for widespread broadband access.

No one is assuming IT will be an answer in itself, although the powers that be point to its indirect impact, particularly in assisting other development projects.

“ICT is not an end, it’s a platform,” says Barbara Kreissler, an industrial development specialist for the UN Industrial Development Organization (UNIDO). “It’s a vehicle to transport our development systems and programs to the largest possible audience in developing countries.”

Stakeholders hope that IT will encourage investment from both foreign and local capital. The money that comes in will ideally help countries create e-commerce, e-government and e-health programs, increasing the efficiency and transparency of governments and economies.

“Governments need to develop local private sector civil society applications for e-education, e-health, e-government driven systems,” Khan says. “But there are also e-services that the private sector can use for connecting local enterprises with the international market, or making available e-commerce training programs, training enterprises, incubation of small enterprises, linking the agricultural, rural markets with the market in the cities.”

For Khan, Africa has some advantages over regions with long-established communication technology policies. The developed world’s adoption of the internet has been bogged down by pre-existing telecom infrastructure. In developed countries, according to Khan, the technology has surpassed the policies that regulate it, and these existing regulations now block reform.

In contrast, the lack of an established regulatory structure means that African countries can tailor their telecom systems to best suit local needs and guide investors into what could be considered an intimidating market.

“This will help them to roll out other investments better, because this will help them to get connected with the world markets much better, and people will see that there is an opportunity in building highways or power lines — these are going [to be done] by the private sector,” Khan says, noting that governments by themselves will never have the resources to modernize highways, ports and power facilities.

Despite lacking modern infrastructure, technology has revolutionized the lives of many Africans, particularly through the use of mobile telephones. Over the past five years mobile usage has sky rocketed. A survey mentioned in the ITU’s World Communication/ICT Development Report 2006 showed that people in Namibia, Ethiopia, and Zambia, for example, are willing to spend more than 10% of their monthly household budget on owning a mobile. Africans are inclined to spend so much because their mobile phones save them money elsewhere.

In Nigeria, job seekers get text messages when work is available; in Kenya, where ATMs don’t exist, people can transfer money through their phones; everywhere, farmers can check weather reports; and in South Africa, rural students, who previously had to leave their farms to attend university, use their mobiles for distance learning — taking exams and getting their results over the phone. The innovation is unsurprising — mobile phones make business easier, reduce the physical cost of transportation and ease the labor burden.

According to the report, mobile phones have had a huge growth rate in the past five years, and telecommunication revenues now comprise 5% of Africa’s GDP, the highest such percentage in the world. The African telecommunications market is now the world’s fastest growing and most profitable.

Many hope that the internet will act as a companion to mobile technology, allowing the integration of mobile and internet services. But setting up the middleware to combine the technologies is a daunting task.

“What has happened in mobile telephones is really the result of policy [implemented] in five or six years, but the results are visible now,” says Khan. “Getting the strong, solid policy framework in place, and institution building to implement it [is necessary for internet]. But unless you have the people to implement it, it’s not going to work, and there are still very big problems in that area,”

Considering the boom in mobile technology and its subsequent effects on African employment, productivity and GDP, a framework to integrate the two technologies seems inevitable. In Nigeria, the telecommunications industry is the fastest growing employer. In the month of March 2004 alone, the mobile sector created 400,000 new jobs, according to estimates by the Nigerian Communications Commission, the national telecom regulator. The jobs weren’t limited to the mobile provider companies, but in spin-off employment such as handset retail outlets as well. One-man phone booth operations also added to the high number of freshly employed. Along the supply chain, the new equipment industries have also thrived, as has the content creation sector.

While job creation is important, mobile technology impact goes deeper: Telecommunication changes business models and transforms economic relationships in both the private and public sectors.

While mobile phones have already created new means of communication, providing previously underserved areas with broader choices, better information flow and increased ease of doing business, broadband access is capable of penetrating new markets.

However, even proponents of broadband admit that in countries with such sparsely populated areas, traditional cable broadband access will not be a profitable venture. A way out of the dilemma could be a service known as Worldwide Interoperability for Microwave Access, or WiMax. WiMax can be installed as an add-on technology to existing mobile towers, nullifying the need for a copper fixed-line network and allowing the millions of people in rural areas without roads, but with mobile towers, to get online.

WiMax’s bandwidth provides video, voice and data over wireless mobile signal, and the cost of entry is low because the technology is standardized. The vast, relatively unpopulated, flat terrain in much of Africa is particularly suited for WiMax technology. Considering the lack of infrastructure and flexible regulatory environments found throughout Sub-Saharan Africa, the costs to install a WiMax station alongside an existing cellular tower or even as a solitary hub will be considerably less expensive than the developed world’s attempt to integrate WiMax into their pre-existing wireless infrastructure. Africa may have a chance to get wired in after all.

The convergence of affordable highspeed internet and the model of the newly created mobile industry could be revolutionary

Last month in Rwanda, the ITU, the African Union and the UN, along with key players in African IT investment, met with African leaders at the Connect Africa summit, aimed at developing strategies for internet technology that can replicate the success of mobile telephones. The ITU approved WiMax for use as a 3G (third generation) mobile technology last month. Many governments in developing countries take the ITU’s lead when investing in technology, meaning the nod to WiMax will likely encourage utilization of the technology.

Some NGO workers in Africa remain skeptical of international approaches to IT development. Winnie, an IT specialist with the Youth Education and Self Reliance (YES) Project in Uganda, works with IT, public health and women’s empowerment. Her organization visits various rural towns to make health announcements about avoiding malaria, and it has set up a farming cooperative for women who are then trained in computer technology.

“The first thing we need to do is ensure the villagers’ health,” she says. “If they haven’t had dinner in two days and don’t know where their food will come from, they aren’t going to care about ICT. But, after putting their health right, we can give them the knowledge they need through computer trainings. We try as much as we can to let them know that what we’re teaching them is important and a necessity.

“We all are becoming a global village, and everyone needs to acquire that knowledge, whether you have a computer or not. No matter whether you have hopes of getting the job tomorrow or not, you need that knowledge.”

Even the elite in Africa struggle to access up-to-date education. Nigeria has one of the higher internet penetration rates on the continent (5%), but computer education for engineers there lags behind the rest of the world. Ibraheem Sanusi, a volunteer with The Intellectual Group, an NGO in Nigeria, says that even at the University of Lagos, computer science majors are forced to take private classes on top of their studies because colleges do not offer skills training that is competitive in the marketplace. According to Sanusi, while there is a large market demand for computer-trained employees, the schools are not supplying the right people.

“There is a disconnect because when companies want to employ somebody, they look for somebody who has experience, with a Cisco certificate,” the 21-year-old volunteer says, “but my school does not do that — no school does that.”

“What you’re taught in school was COBOL and Pascal” — programming languages developed decades ago. “It’s a question of the quality of graduates that we have. There is actually a lot of demand for programmers. So I think the curriculum needs to be designed in a way where it moves with the global trend.”

Khan says that education and health must both get on-board with IT development. He believes it “will require integrating and creating IT systems or linking up the education policy level, the Ministry of Education, the boards of education, the universities, the training institutions, the curriculum development, the training of teachers for schools and the schools themselves.

“They are working with them, and the other partners, to develop an educational system built on IT networks, IT platforms, so that is the kind of thing that needs to happen in all countries. And the outcome of that is it will generate a demand for IT services, so the [countries] need to invest, there is no other option,” says Khan. “If the government wants to invest, say, $100 million, on education in a small country, in a given budget cycle instead of saying we’re going to build 500 schools, they should say, we are going to invest this million dollars to improve the educational system and link up all the phases and stages of our educational services that are delivered with the use of ICT. So, the investment of ICT may be only $50 million, but the result of that $50 million will be far greater than if you just spend $50 million dollars making 500 schools.”

Many of the big-name IT companies agree with Khan’s sentiment, happily spending millions in online teacher training and exposing youth to computers, with hopes of creating an IT-savvy market. The impact is twofold: teachers learn new, more effective teaching styles, while projects such as Microsoft’s Home PC Initiative get children and their entire family using the computer.

In fact, multiple international players have begun investing in IT development projects in Egypt. Egypt has one of the highest internet penetration rates in the continent and is a regional leader in technology development, yet an Alexandria University professor recently told a seminar on digital culture that 94% of Egyptians are still computer illiterate.

According to Karim Ramadan, general manager of Microsoft Egypt, 10% of the population is currently online through kiosks, cafés, universities or at home. He estimates that there are over 7.5 million internet users, and 3-4 million PC owners. Players like Microsoft, Intel and Cisco are looking to access those who have not yet found their way online.

Cisco has two training facilities in Egypt that provide professional training certificates in designing and maintaining computer networks. The company has been actively investing in emerging markets, hoping to speed what it calls “country transformation” by working with governments on ICT agendas to help them leverage the technology. Meanwhile, Intel is at the 100,000 mark for its project to train 650,000 teachers by 2012.

In order to reach the 90% of Egypt that is offline, Microsoft has set up innovation centers and community development programs. The government has worked in partnership with Microsoft, Intel and local industries to put about 350,000 PCs in Egyptian homes over the past four years. The Home PC Initiative, started in 2002, has helped lower-income families purchase subsidized PCs.

Microsoft is also developing projects in partnership with the government to target students in rural locations, offering heavily subsidized computers to those who have excelled in the field of education. Ramadan says the program will put 10,000 PCs into the homes of students who are an income bracket below those participating in the older initiative.

“There are a lot of people in Egypt who can’t afford to pay LE 50 a month [the cost of the Home PC Initiative computers], and a lot of them live in rural areas outside the major cities. They are students in schools, and they are distinguished academically, and we want to give the opportunity to have a PC as well. So that’s why we’ve created the program,” says Ramadan.

Beyond the Home PC Initiative and other earlier classroom trainings and development projects, Microsoft is putting together a package called the Student Innovation Suite, which includes Windows XP Starter Edition, Microsoft Office Home and Student 2007, as well as other educational software. The program will allow governments to purchase the low-cost package for $3, as long as they provide free PCs for schools.

According to Ramadan, Microsoft wants to launch the initiative soon in Egypt, possibly making it “one of, if not the very first country” to have benefit from the Microsoft Student Innovation Suite. The program is set to begin worldwide before the end of 2007.

Scalability remains an issue. Intel takes a different approach from Microsoft by focusing on encouraging industry, individuals and governments to invest in IT by showing them the benefits through pilot projects. Along with the Digital Village initiative in Oseem, which blanketed the town with WiMax coverage and provided residents with free computer hardware, Intel has also provided the Omar Ibn Al-Khattab Public School in Heliopolis with a laptop computer for each student and teacher. The company calls it the “1:1 eLearning environment,” allowing for more interaction between students, teachers and technology. However, Khaled El-Amrawi, Intel’s general manager for Egypt, Levant and North Africa, was quick to note that with pilot programs like this in Egypt, “it would be hard to get below the social class A or even social class B,” expecting that the pilots would only catch on in the top 20% of the market.

“So the idea [is] Intel will not scale these pilots into 40,000 schools or how many hospitals in the country. Our role is to showcase the technology to the local industry and to the government. Our role is to provide the basic ingredients, the know-how, partial funding for these projects, but we expect the local industry to start developing the business models and ideas to start providing the services to the citizens and, in return, make money,” says El-Amrawi.

“And, at the same time, when we show these technologies to the government we show them what’s needed, what policies and what regulation and what spectrum policies are needed in order to develop and deploy the solution.”

Whatever their means, international IT companies seem to agree that helping less developed nations create and implement ICT policy and programs will eventually let them tap into the huge potential of these markets that are not yet as saturated as Western markets.

“This is about catering to the next five billion people, because if you look at the population of the planet, 6 billion, [and] we only have a billion PCs out there, the other five billion people that need to have PCs and access to technology live the same experience that the one billion people are living,” says Jean-Philippe Courtois, CEO of Microsoft EMEA.

Multinational IT giants like Intel and Microsoft were ready to sign on the dotted line at the Connect Africa summit, and officials from both China and India were also present. (The two countries have been investing heavily in Africa in recent years, and are expected to lead the region’s IT growth.) Regardless of the involvement of global giants, it is possible that the most likely investors are right under our noses. Egyptian entrepreneurs have proven extremely capable of leveraging the opportunities and potential of technology in emerging markets.

Two of the three big mobile service providers in Egypt have already gotten their foot in the door in Africa. Vodafone, which has 47% market share in Egypt, owns a stake in mobile providers in Kenya, Lesotho, Mozambique, South Africa and Tanzania. Etisalat, the United Arab Emerites mobile and internet provider, is relying on its internet savvy from the Gulf region to build a broadband market in Kenya.

In 2006, Kenya got approval from its cabinet to build an alternative undersea cable to EASSy. Etisalat, which this year became Egypt’s third mobile service provider, signed a memorandum with the Kenyan government to create a high-capacity $110 million fiber optic submarine cable system between Mombassa, Kenya and Fujairah in the UAE.

Khan sees an emerging technology sector in Egypt and across Africa that is capable of playing a significant role in the development of the continent. “Here in Egypt, call centers and so forth are developing. They are also developing in Ghana, and here are the companies who can really also teach the others how to do it. And not only teach, but also to take advantage of creating the market; then they can expand in that market,” he says. “So I think the opportunity is there. It is a turning point, I believe, in Africa now that countries are ready, but there are significant obstacles that need to be overcome.”

Small-scale projects may be the key to getting Egypt’s foot in Sub-Saharan Africa’s door. Already a regional leader in computer technology, development projects in Egypt are in part responsible for turning a fledgling manufacturing market for IT into a regional exporter.

“Not only have you provided access to technology to citizens, but you have also provided a local industry, because before the PC initiative, there were no local companies that assemble and manufacture PCs,” says Ramadan. “Now we have 25 companies which not only manufacture and assemble PCs, but they now export — so Egypt has become a hub in terms of manufacturing and assembling PCs for the Middle East, for countries like Libya, Nigeria and other places that are buying PCs out of Egypt.”

Just as international companies’ programs created new markets in Egypt, so too could Egyptian expansion into Africa foster a new market of IT users. For Khan, it’s “cross-fertilizing” the technology that is important. “Even some of the other countries, we have learnt, Ghana for example, with ISPs working there you can also go into neighboring countries and teach locals to incubate them and give them confidence,” he says.

But Egyptian investment in African ICTs has had its rough patches. In 2000, Orascom Telecom acquired an 80% stake in Telecel, the leading GSM provider in sub-Saharian Africa. The deal valued OT’s stake at around $270 million. Unfortunately, the venture left OT with burnt fingers. OT, overall, lost LE 435 million in 2001, and losses in Telecel accounted for nearly LE 204 million.

Naguib Sawiris, CEO of OT, told Business Today Egypt in a June 2003 interview that the capacity for a market was too low, too mixed with political upheavals (a civil war broke out in the Democratic Republic of Congo), management problems and other regulatory issues.

OT divested in May 2003 from Benin, Gabon, Burkina Faso, Niger and Togo, selling the stakes to Banque Alantique for a total of $80 million in debt reduction and $23.1 million in cash. In the same month, the company sold interests in Zambia, Uganda, Burundi and the South African management company Telecom PYT to Gloria Trust for the equivalent of $47 million in debt reduction. This move, along with other sales throughout the region, brought OT back in the black by the end of May.

Whether or not Khan’s optimism is justified remains to be seen.

The motivation for getting Africa online are not, thus, solely altruistic: Companies want to turn a profit from their African endeavors. As Courtois alluded to, the debate is no longer about why IT is important; businesses and governments are now increasingly focused on building a broad base of IT usage and literacy, making Africa not just a recipient, but a market.

“We need to go beyond the first billion people who use the internet and we need to think about, and do something about, the next billion people. We all understand after the last 20 years of the industry that ICT is an incredibly powerful tool to enable not just the development of the ICT industry, but to enable the development of the economy and society,” says Courtois.

The millions of people in rural Africa who are the targets of today’s MDGs will, if the ambitious goals are met, be tomorrow’s customers. Seeing this transition from impoverished recipients of Western aid to educated, demanding consumers is in the best interest of all.

Two hundred and thirty years ago, Smith wrote “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own self-interest.”

Replace butcher, brewer and baker with internet cafe owner, software maker and mobile phone vendor, and you can see how powerful a force technology can be in bringing jobs, investment and knowledge to society.

As more companies see Africa as the next big market, social entrepreneurship and technological innovation within the continent become increasingly attractive endeavors. The baker’s bread is slowly rising in the oven, and many hope that it will be able to feed the masses to the benefit of all bt