Price controls can drive ICT boom in Africa, study says

African governments should regulate the prices of telephony and internet services to realise the benefits of improved international connectivity, says the annual African Economic Outlook annual report.

It says East Africa’s GDP growth dropped from an average 8.8 per cent in 2007 to 7.3 per cent in 2008, and is expected to drop further to 5.5 per cent in 2009 and 2010.

The report says Africa’s economy has been affected by the global recession. It says economic growth will drop to 2.8 per cent this year from 5.7 per cent in 2008, although this could reverse partially at 4.5 per cent in 2010.

The 2008/2009 report was produced jointly by the African Development Bank (ADB), the Organisation for Economic Co-operation and Development and the Economic Commission for Africa. It was launched in Kampala.

The continent’s partial recovery will be boosted substantially by an anticipated growth in the information and communication technologies sector.

Currently, the sector has low Internet penetration but it has registered innovative applications leading to growth in key areas like finance, trade, health, agriculture and education.

For instance, a money transfer service in Uganda dubbed Sente enables subscribers to send money using mobile telephone technology.

The person sending money credits a middleman’s telephone, who in turn sends the money to another person in a different location and retains a commission.

Safaricom’s M-Pesa service in Kenya is more advanced, allowing subscribers to transfer money using their mobile phones, without owning a bank account.

M-Pesa attracted five million subscribers in less than two years.

The Economic Outlook report with the theme: “Innovation and information communication technologies in Africa” detailed the status of the sector, recommending governments to improve regulation to the benefit of their economies.

The advice comes against the backdrop of persistently higher calling tariffs in Africa than in other parts of the world.

Yet, according to the report, capital and operating expenditures are lower in Africa than in Asia and the Caribbean where calling and internet connections are cheaper.

“Mobile operators in Africa perform well in terms of liquidity, with larger earnings than other regions. Returns are attractive for investors in African networks even if there is increasing competition,” reads the African Economic Outlook report.

It is understood that subscribers in some countries in North and sub-Saharan Africa generate the lowest average revenue per user (ARPU), followed by those in Latin America and the Caribbean; about $7 compared with about $13 by customers in resource rich-African countries and about $23 in Europe.