Global E-Commerce: Africa

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GLOBAL E-COMMERCE: AFRICA

While businesses coveted the relatively untapped African e-commerce market and saw tremendous opportunity there, Africa faced a number of troubling obstacles to the development of e-commerce at the start of the 21st century. These problems ranged from the technical to the social to the political. For instance, the continent was characterized by inadequate telecommunications and business infrastructure, structural inequality, a number of severe armed conflicts, political upheaval, massive public debt, and enormous health problems including the world's gravestAIDS epidemic. Lastly, in both Internet advancement and overall economic activity, Africa was marked by severe internal economic inequality both within and between nations. South Africa was the clear standout in terms of national economic performance and e-commerce, while a few Northern African nations were performing respectably. However, the bulk of sub-Saharan Africa languished in dire poverty, and it faced a number of severe obstacles on the path to prosperity.

Still, businesses, investors, and policy makers generally weren't sour on the prospects for African e-commerce. Rather, the debate centered on which issues needed to be addressed first so that African e-commerce could prove profitable and sustainable over the long term. Should the technical shortcomings be addressed so as to give later e-commerce programs a leg to stand on? Did the root lay in international financial tinkering so as to spur investment that would support e-commerce? Was it incumbent upon African and international leaders to first focus their attention on relieving some of the dire social maladies faced by the African people, or was the development of e-commerce a means toward that end? By the early 2000s, there were no definitive answers to these questions, but various interests were pushing forward in all these areas.

INTERNET PENETRATION

Despite the continent's lackluster performance in overall Internet connectivity, African countries vastly improved their levels of Internet access in the late 1990s. Only 11 African nations were even connected to the Internet at the close of 1996. However, by 2000 all 54 countries maintained a permanent connection. Still, for the most part reliable Internet connectivity was limited to the national capitals and other major cities. Rural areas, where about 75 percent of the continent's population resides, enjoyed little or no connectivity at all. By early 2000 there were some 450 public Internet service providers (ISPs) throughout Africa, excluding South Africa. According to Communications International, seven countries—Egypt, Kenya, Morocco, Nigeria, South Africa, Tanzania and Zimbabwe—boasted 10 or more ISPs, but 20 countries had only one.

Worldwide, an average of one out of every 35 individuals is an Internet user, but in Africa that ratio drops to about one in 250. Personal Internet accounts were a luxury beyond the reach of most Africans in the early 2000s. Communications International re-ported that there were roughly 1 million dial-up Internet accounts throughout Africa, with 650,000 of those in South Africa alone, although precise counts were hard to come by. Another 200,000 accounts were based in the North African Arabic-speaking nations. The end result of this count is a paltry 150,000 personal accounts spread among the remaining 50 countries. Internet connection through much of Africa, in fact, was only the tip of the iceberg, given that in many countries less than one person per 100 enjoyed access to a telephone. A few smaller countries with less geographical ground to cover, such as Cote d'Ivoire and Mauritius, could claim teledensities reaching 25 percent (or one telephone for every four persons). However, even well-developed South Africa maintained a teledensity of only 12 percent.

One strategy to combat the digital divide between the capital and major cities and rural areas and small towns was to provide special area codes for local areas that charge for service at local tariff levels. In this way, national telecommunications providers can significantly cut the cost of delivering service to such isolated areas. A handful of countries, including Ethiopia, Mali, Morocco, Senegal, Tunisia, and Zimbabwe, have adopted this strategy.

By 2001 the number of Internet hosts in all of Africa was roughly equivalent to that of the small, Eastern European country of Latvia, according to Communications International. In another comparison, there were as many ISPs in Tokyo as existed in all of Africa. The continent's largest commercial ISP, Nairobi, Kenya-based AfricaOnline, boasted 600,000 dial-up accounts in nine countries in 2001. Each of those accounts averaged seven individual users. South Africa, the largest Internet market, was dominated by two major ISPs that commanded 90 percent of the market between them, while more than 40 tiny companies specializing in local service shared the rest of that country's market. The market leader, Mweb, boasted 145,000 subscribers in early 2001, while its rival Yebo Net claimed some 100,000 subscribers.

TELECOMMUNICATIONS AND INFORMATION INFRASTRUCTURE

In telecommunications infrastructure, South Africa, Nigeria, Egypt, and Tunisia, were clear standouts on the continent, but Africa faced a massive degree of internal inequality in this area. Most sub-Saharan countries, which counted among them some of the poorest nations in the world, had little reliable telecommunications infrastructure to speak of, particularly in rural areas.

On the other hand, many analysts noted that Africa's infrastructure problems pose some key advantages as well. Most notably, the relative lack of telecommunications systems in Africa may allow developers to bypass the less efficient first-and second-generation networks and systems adopted by Europe and North America. This could potentially enable the implementation of more sophisticated setups under development in the early 2000s, featuring, for instance, widespread convergence between fixed-line and mobile networks. In fact, mobile technology was expected to be a primary means of escalating Internet penetration in Africa.

Some countries, such as South Africa and Botswana, already were successful in laying down sophisticated fiber-optic and mobile networks that reached substantial portions of their populations. In South Africa, the number of mobile Internet users surpassed that of fixed-line users in August 2000. Several other major investment schemes in the late 1990s and early 2000s aimed at placing fiber-optic networks in various African sub-regions, according to African Business. For example, AT&T launched Africa One, an initiative to line the entire continent with a fiber-optic backbone, while Telkom of South Africa implemented a project known as SAFE to set up fiber optics between South Africa and Malaysia. The United States government also has been directly involved in lending a hand to the development of the African Internet. In 1995, the U.S. Agency for International Development launched the Leland Initiative, which allocated $15 million to bring Internet access to the whole continent.

The late 1990s and early 2000s were characterized by the deregulation and privatization of telecommunications sectors in many African countries, in the hope that less stringent barriers would invite greater influxes of foreign investment. While most countries—Ethiopia and Mauritius are the exceptions—have abandoned government monopolies for ISPs as an element of official state policy, many governments still retained such control in practice.

In an effort to stimulate the Internet sector, open its telecommunications industry to outside investment, and reduce its public debt, in 2001 the South African government decided to take its telecommunications monopoly, Telkom, public. Beginning in 1997, Telkom Malaysia and SBC Communications owned 30 percent of the firm, while the remaining 70 percent belonged to the government. The government planned to sell up to 30 percent of its share. With a monopoly as the sole fixed-line operator in South Africa, and with a majority interest in the country's leading cellular phone operator, Telkom was highly coveted as an entry into this highly prized African e-commerce market.

African governments took the lead at the International Telecommunications Union's Telecom '98 conference in Johannesburg, South Africa, where they produced a policy document called African Connection. The thrust of the paper was to build a common agenda that the entire African business community could rally behind to establish an information-technology backbone for the whole continent. Before devising technical solutions, however, the African Connection working groups were first devoted to creating the institutional foundation that would be able to coordinate and provide for future development of Internet and e-commerce sectors. This work enjoyed support from major governments and institutions around the world, including the World Bank, the European Union, the United Nations Economic Commission on Africa, and the African Development Bank.

SOCIAL AND POLITICAL CONCERNS

The United Nations viewed the building of telecommunications infrastructure and tapping into the economic, educational, and communicative power of the Internet as key components for the economic development of poorer countries, including Africa. In fact, the UN saw the Internet as a tool for speeding development, skipping over many of the stages that characterized the development of countries in earlier years. UN Secretary-General Kofi Annan championed the building of what he called "digital bridges" to less developed countries. Especially in Africa, infrastructure problems are particularly pronounced—postal systems, roads, power supplies, and telephone systems are in extremely poor condition—and the effects on business are drastic. Without access to reliable information, the prices of ordinary consumer goods such as food go out of equilibrium. The UN and other concerned parties hoped that the Internet would provide the ability to access such information and result in tremendous incidental cost savings by, for instance, substituting e-mail for faxes and regular mail.

Meanwhile, business and government leaders generally agreed that failure to develop Internet capabilities and launch an e-business sector could push African development even further behind more developed regions. With international trade escalating and markets and economies integrating, to fail to get online is to risk cutting oneself off from the main avenue of economic and social development in the 21st century. Indeed, the international financial community positioned the Internet as a centerpiece of its development programs for the African continent. In 2000, the World Bank allocated $500 million to the International Finance Corp. for an initiative, in conjunction with the Japanese Internet group Softbank, to spur Internet technology and access in approximately 100 developing countries, including most of the African nations. The goal of the program, according to World Bank President James Wolfensohn, was to close the digital divide and "accelerate the inclusion of the developing countries in the information revolution. It will transfer technology from the rich countries to the developing world, fostering sustainable new local businesses which will promote prosperity and reduce poverty." African leaders remain cognizant of the gap between rich and poor countries in the world, and the general consensus holds that setting up a viable e-commerce infrastructure will at least assist in keeping that gap from widening at the expense of African nations. However, given the enormous structural difficulties facing African governments—in the form of severe international debt burdens, political instability, and other grave hardships—the bulk of the investment in Internet technology was expected to come from the private sector.

Delegates at the African Development Forum in 2000 debated the issue of technology, particularly Internet technology, in light of broader development schemes. While Internet development was a goal for all the continent's leaders, some were wary of placing too much emphasis on investment into information technology and telecommunications relative to other basic development needs, such as anti-poverty programs. Short-term realities, in other words, were a key caveat to the more ambitious schemes proposed by African and non-African developers. As Mali's president, Alpha Oumar Konare intoned, "[a]s an African, I am keeping a cool head—a computer can cost eight years' salary or send 20 children to school. If we don't have our own clear vision on information and communication technology, we will be disappointed."

The forum, however, spawned several major initiatives designed to utilize the Internet to tackle issues of specific concern to the African community. For instance, the Schoolnet Africa program, according to African Business, devised a working group devoted to wiring African schools for Internet access with the specific intention of communicating information centered on the prevention of HIV/AIDS, preserving cultural traditions, and fostering peace on the continent.

More basic consumer problems linger as well. Literacy, general education, and computer skill levels remain relatively low throughout Africa. Moreover, Africans on the whole are significantly less likely to use a credit card in transactions than are those in most developed regions. Since e-commerce basically eliminates cash transactions, the low credit card penetration is another inhibiting factor for African e-commerce, since it renders the building of a clientele that much more problematic. Thus, a major focus of foreign investment was on the wiring of medium and large businesses, as well as the more affluent sectors of consumer society, for Internet access. Not only would this create a foundation for new Internet-based business, it also would create a vibrant vehicle for international trade.

BRIGHT LIGHTS OF AFRICAN E-COMMERCE

By the turn of the 21st century African e-commerce already had registered some clear successes. According to African Business, one business sector in which e-commerce gained a foothold in Africa was tourism. With the ability to set up a Web site and distribute tour information for minimal cost anywhere in the world, African tourism companies were able to promote themselves on a par with tourist packages globally. Tourism firms, now able to accept reservations directly via e-mail, are decreasingly dependent on foreign travel agencies, thereby significantly lowering the cost of business by eliminating the agents' fees.

Some of the economic news bode well for Africa as it entered the Internet age. Through the mid-and late 1990s, even while much of Asia and Latin America found themselves in severe economic crisis, Africa enjoyed steady economic growth. Moreover, while Africa's share of global trade didn't change significantly in the mid-and late 1990s, the volume of African exports was generally keeping pace with the expansion in international trade. Building as it was on two decades of economic decline, however, these successes were particularly fragile. For instance, according to a 1999 article in Law and Policy in International Business, the growth levels achieved in the 1990s, while certainly a positive trend, weren't great enough to overcome the massive poverty levels that plague the continent.

Despite persistent problems, African countries made tremendous gains in the late 1990s and early 2000s in establishing their presence on the Internet. As late as 1997, e-mail itself was extremely rare on the continent, particularly outside South Africa, while general Internet access was almost unheard of. By the turn of the 21st century, however, Internet cafes had sprouted in most towns that had a vital business or cultural community.

ONGOING DEBATE

Everyone didn't agreed that e-commerce was the key to sustainable and democratic development in Africa. Some critics even insisted that the electronically driven globalization was akin to the patterns of colonialism that subjugated and exploited Africa throughout the late 19th and 20th centuries. According to such arguments, the nature of many African economies renders them largely dependent on raw export commodities, and the instant availability of rival commodity supplies from other parts of the world subjects the industries to excessively low prices—too low to meet the needs of the industries and the economies they support. In this way, critics claim, the prices of exports such as coffee, wheat, tea, timber, and other goods are removed from the process of negotiation based on quality and supply and into the hands of international financiers, who, treating these items as mere commodities, take no account of such factors.

In response, e-commerce proponents insist that trade and economic growth could flourish only if African governments gave up protectionist measures and point to successes like the tourism industry, where the opening of e-markets has produced positive results. For instance, many governments charge high international tariffs discouraging international ISPs from setting up efficient networks. There was growing international pressure on African governments to dis-mantle their telecommunications monopolies and open their doors to greater competition in the ISP sector.

Ultimately, of course, e-commerce is only part of the equation. African countries aren't likely to achieve sustainable, long-term democratic development only on the commercial possibilities of e-commerce. Rather, analysts insist that the adoption of Internet technologies must proceed in an integrated fashion, addressing the specific needs of the particular populations and utilizing the technology to further educational policies and open the channels of communication so opinions can flow freely within and between countries.