Information Technology Business in sub-Saharan Africa

At the Berkman Center last Tuesday, Ethan Zuckerman and Eric Osiakwan gave a talk on The Climate of Innovation Around Information Technology in sub-Saharan Africa. Here is my summary of Eric's portion of the talk. [Ethan's is here]

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Eric tells two stories of innovation in Africa.

The ONE Network
In 1997, Sudanese Entrepreneur Mo Ibrahim was running MSI Cellular, at a time when there were only 2 million mobiles on the African continent. His goal was to develop a European quality mobile network without paying a bribe. He developed a model called incremental infrastructure, where instead of building out a national network, you invest in a single base station, get handsets to many people, and develop the network once more capital becomes available. He used this strategy to build a substantial network in 14 countries. In April 2005, Celtel bought MTC for $3.4 billion, which later rebranded as ZAIN's ONE Network.

The TEAMS Submarine Cable
Eric is a believer [and an investor] in SEACOM, one the major submarine fiber cables [slowly] racing to bring connectivity to East Africa in the coming few years. He predicts TEAMS will bring costs down from $7000 to $500 for a 2mbps connection. This will be critical to meeting the pent-up demand for Internet connectivity, driving both economic and social growth.

What do these stories say about the state of innovation in Africa? The main take away is that while projects like this seem like 'slam dunk' investments [earning 40%/year at some points], they are not getting the type of attention from the capital markets that they deserve. The TEAMS cable, for example, has the Government of Kenya as a major investor, which is a fine enough stop-gap measure, but prevents interest from others who are concerned with nationalization. Investors continue to be unfamiliar with Africa, and thwarted by major disasters like the one in Kenya.