Cell phones may help "save" Africa
By Rhett Butler, mongabay.com
July 11, 2005 [Corrected July 18, 2005]
For all the talk about "making poverty history" through aid and debt relief at the G8 meeting in Scotland and among aging rock stars at Live8 concerts, perhaps the best tool for poverty alleviation on the continent is the mobile phone. Yes, that ubiquitous handheld device has done wonders for the poor around the world.
It all started in Bangladesh
The success of Bangladesh's microphone operators has not gone unnoticed. In Uganda, Grameen Foundation USA [web site] worked with mobile operator MTN to develop villagePhone, an initiative that enables poor rural individuals to become "Village Phone Operators" through partnerships with Ugandan microfinance institutions. MTN boasts on its web site that "these Village Phone businesses can be established in areas where electricity is unavailable and in areas where the MTN network can only be accessed with a booster antenna." Grameen Foundation USA has since piloted another program in Rwanda in partnership with MTN Rwanda and is publishing a free manual to encourage microfinance institutions and telecoms to create joint ventures for establishing cell phone franchise businesses for microloan clients.
Cell phones have become a prime example of a technology that helps many different user groups. There are several beneficiaries of mobile phones at the village level:
- Entrepreneurs who make money by selling phone services to villages on a per use basis.
- Sellers of prepaid phone cards including poor urban youths and small business owners.
- Users of phones who gain business and employment opportunities mentioned above.
- Mobiles save people living in rural communities the financial costs and time involved with travel. As a result, 85 percent of people in Tanzania and 79 percent in South Africa said they had greater contact and improved relationships with families and friends as a result of mobile phones
- 62 percent of small businesses in South Africa and 59 percent in Egypt said they had increased their profits as a result of mobile phones, in spite of increased call costs
- Over 85 percent of small businesses run by black individuals in South Africa rely solely on a mobile phone for telecommunications The results of this study suggest that growth in the African telecom market will continue to pay off African economies.
Number of cell phone users in Africa
In 2001, Africa became the first region where the number of mobile subscribers exceeded those using fixed lines
Source: International Telecommunication Union (ITU), The Economist
The recent growth in the African telecom market hasn't only benefited local economies -- it has also generated significant amounts of revenue for mobile giants. Going after the African market is not a money-losing proposition for firms: according to the July 1, 2005 issue of The Economist, MTN, a South African mobile-phone operator with networks in Nigeria, Cameroon, Uganda, Rwanda and Swaziland had an operating margin of around 50% outside South Africa.
Wider growth still faces challenges -- the cost of handsets
While Africa has experienced tremendous growth in the mobile services market and still has room for growth with only 50% of Sub-Saharan Africa covered by a mobile signal, future expansion faces some hurdles. The largest of these is the cost of handsets. Mobile operators in Africa generally do not subsidize handsets like their counterparts in Europe and the United States and few rural Africans can afford the prices of the latest mobile gadgets. The solution of the African mobile majors was to band together in 2004 and invite international handset-makers to bid for a contract to supply up to 6 million handsets for less than $40 each. Motorola won the contract and handset delivery began in April 2005.
Despite their low cost, the handsets are profitable for Motorola and the phones do not lack features. Motorola, following a page out of C.K. Prahalad's book, The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits, knew that a low level of income doesn't make a consumer any less demanding about the functionality and value of their purchases, and accordingly has provided features appropriate for African consumers. For example, in a region where access to electricity is often in question, Motorola has built a low-cost handset has a standby time of two weeks.
The Economist also points out that lower costs of handsets address another barrier to widespread adoption of cell phone: the high tariffs imposed on products and services by many African governments. Since taxes and duties are based on the cost of the good or service, lower prices will mean less of a tax burden on consumers.
Anything that reduces the burden on the rural poor in developing countries should be considered a good thing. Rural poverty is probably not going away on its own anytime soon and stimulating sustainable economic growth through microenterprises and information technology is a better solution than direct aid. Too often direct aid has not only bred corruption and the misallocation of resources away from those who need it most, but has also fostered dependency and skewed the perceived value of goods and services. Private sector investment -- through vehicles such as mobile phones -- may do a better job eradicating poverty, building dignity and respect, encouraging entrepreneurship, and reducing dependency than handouts under traditional aid programs. That's not to say that aid dollars have no role under such a development schema, but it is important to consider using donor funds for nontraditional programs such as microloans that will stimulate sound long-term economic growth. With this consideration, Africa may well again be a land of opportunity.
This article used information from The Economist, Reuters, Vodaphone, The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits, The Centre for Economic Policy Research, MTN Uganda Ltd, International Telecommunication Union (ITU), Grameen Bank, and mongabay.com.
A long-term approach to helping the poor in Africa through private enterprise - 5-July-2005
This past Saturday millions of people watched the anti-poverty "Live 8" concerts held in London, Tokyo, Johannesburg, Paris, Rome, Berlin, Moscow, Philadelphia and Barrie, Canada. Live 8 coincides with tomorrow's G8 summit of world leaders and aims to raise awareness of the need for aid, debt relief and fairer trade for Africa. While the cancellation of debt and delivery of aid to Africa is a noble and needed cause for a desparately poor continent, policy makers will need to ensure that funds are spent wisely to maximize the benefits for the largest number of Africans
Mobilizing seniors to fight poverty in Africa - 4-July-2005
One program that could have potential for real poverty alleviation in Africa is a "Gray Corps" concept which would take advantage of the experience and expertise of aging Americans (aged 65 and older), a segment of the population that is expected to grow from approximately 35 million in 2000 to an estimated 71 million in 2030. This group could be key to addressing a number of looming social issues both here in the United States and abroad.
A look at why is Madagascar so poor - 22-May-2005
Madagascar is one of the world's poorest countries. In the Human Development Index of 2003, an indicator created by the United Nations Development Programme which measures achievements in terms of life expectancy, educational attainment and adjusted real income, Madagascar was ranked #149 out of 175 counties. Most Malagasy live on less than a dollar per day and nearly half of the country's children under five years of age are malnourished.