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Telecoms opportunities (Part 2): Africa infrastructure series

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In the concluding part of this Africa Telecommunication opportunities series, it is important to understand that Africa still has major challenges to overcome before the Telecom sector matures to advanced standards as applicable in many developed economies. Political Instability Democratically elected leaders populate most African governments. The key challenge for foreign investors is the tendency of a policy shift at every election. For instance, an incumbent African government could formulate and implement effective policies for their country but once they lose political power, it becomes most likely that the new set of leaders will cancel the existing policies of their predecessors to start their own. This regrettable ‘my-turn’ and policy somersaulting approach to governance creates political uncertainties and confusion on the part of foreign investors.  The revolving door policy formulation and implementation does not reflect well on some African countries; it creates a political environment that is unstable for long-term investment projects. Low penetration in rural areas Due to limited economic activities in rural areas in most African countries, telecom service providers are reluctant to establish presence in the rural areas. This development has impeded the wider spread of telecom networks across the continent. The record subscription recorded across Africa today is mostly driven by metropolitan areas. To address this challenge, some African governments have drastically reduced the cost of GSM and rural telephony licenses for rural regions but investors still shy away due to a slower return of investment in comparison to metropolitan areas. Continental regulating standards Each African telecom-regulating body make their own rules and regulations. Every country has a different set of rules for licensing and equipment standards among others. The current situation makes it nearly impossible for a Telecom service provider to streamline their operations across regional borders without abiding to different sets of rules across neighbouring borders. However, there are new initiatives that are designed to make national regulators adopt an intercontinental approach to rules and licensing processes for ICT and Telecoms. Such initiatives include HIPSSA, a jointly funded project by the ITU and the European Commission to streamline ICT policies and regulatory frameworks across Sub-Saharan Africa. Infrastructure sharing Telecom service providers in Africa have not worked-out a clear and mutually beneficial mechanism to use each other’s assets in key areas. The lack of infrastructure sharing system has militated against rapid rollout of services because each operator has to build from scratch to delivery.  It is nearly impossible for small telecom operators to spread their services outside their niche market due to the high costs of infrastructure backbones needed to support their services. Pessimistic perception still lingers Africa has achieved unprecedented success in its telecommunication sector. Having said that, there are still many international investors that still harbour deep-rooted pessimism towards investing in Africa. Some investors in this category genuinely lack credible and updated information on Africa’s telecommunication sector, while other sceptical investors still live under the illusion that nothing good comes out of investment made in Africa. New direction As Africa marches on in telecommunication development, potential investors should re-position themselves to take advantage of niche markets such as SMS marketing technology, mobile content development and live streaming of sports on 3G mobile technology already established in some African countries. Another new direction is the mobile payment system developed by M-PESA Kenya. This system is still gaining momentum across Africa. There are huge telecom gaps that could be innovated to suit African consumer expectations. While you are here The inaugural Africa Australia Infrastructure Conference will take place on September 3rd and 4th 2012 at the Sydney Exhibition and Convention Centre. The conference will feature ICT and Telecom, oil and gas, transport and energy. Private sector decision-makers, government ministers, business community and experts from both Australia and Africa. You can register your interest now or get more information on the website.

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