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ICT, the economic tonic for Africa?

By , IT in government editor
Africa , 05 Dec 2014

ICT, the economic tonic for Africa?

As many as three African countries have in recent months emphasised the role of ICT in driving economic growth in their respective nations.

Officials from Africa's most populous nation, Nigeria say the country's ICT sector could eclipse the petroleum sector as the highest revenue earner by the year 2020.

Communications technology minister, Omobola Johnson reportedly said Nigeria's ICT sector would soon displace the petroleum sector as the largest contributor to the national income.

Nigeria's oil rich reserves represent 14.4% of the country's revised Gross Domestic Product (GDP), according to the World Bank.

After a rebasing of the national accounts Nigeria's GDP increased to $509 billion, representing the 26th biggest economy in the world.

However, Johnson believes the country's ICT sector has the potential to drive the West African nation into the world's top 20 economies.

She expects the ICT sector to be the maximum share contributor to the national income and serve as a catalyst, according to reports.

Although the minister does not elaborate on which areas of the ICT sector could be the biggest drivers of growth, an expert says "the approach is a visionary one".

Ovum analyst Thecla Mbongue told ITWeb Africa that based on the re-evaluation of the country's GDP and the figures released on the contribution by sector, Johnson's forecasts are realistic if ICT usage keeps on growing.

After the rebasing of the economy, Nigeria's telecoms sector moved from contributing 0.9% of GDP to 8.7% of GDP.

Mobile communications is the largest contributor in the ICT sector in Nigeria, said Mbongue.

According to Ovum estimates the sector generated total revenues of around $2.8 billion just in the second quarter of 2014, she said.

"The growth in the ICT sector revenues is fuelled mostly by greater usage of telecoms networks for other services than just voice calls. Broadband usage is surging in Nigeria," she said.

According to the Nigerian Communications Commission Nigeria had more than 131 million active mobile subscribers for the period ended September 2014.

"We've seen connections on mobile broadband capable devices growing by nearly 60% year on year as at September 2014 in the country, she added.

Mbongue stated, in Nigeria, as all other markets in Africa, the strong deployment and usage of ICT is key to the country's economic development as it translates into easier and faster ways to communicate, to transact and to govern.

Rwanda

Moving towards East Africa the Rwandan government has been on a mission to drive the use of technology to develop the country.

The country's ICT sector has started contributing more to the economy than agriculture and mining exports combined.

Rwanda's GDP was calculated at $7.452 billion in 2013, according to the World Bank.

The ministry of youth and ICT says that ICT contributed 2% to the country's GDP over two quarters of 2104.

MYICT further revealed that in terms of foreign direct investments, Rwanda's ICT sector attracted 45% of total inflows: more than five sectors combined. And those sectors include trade, financial sector, mining and manufacturing.

Commenting on the contribution of ICT to the economy the ministry said, "Information and communication technology is a central engine to driving Rwanda's transformation to a knowledge based economy, a fact Rwanda has acknowledged by allocating a budget to ICT - as a percentage of its GDP - that is at par with OECD (Organisation for Economic Co-operation and Development) countries."

Kenya

Meanwhile, neighbouring country and East Africa's biggest economy, Kenya's ICT sector contributed 12.1% to the economy in 2013, says the International Data Corporation (IDC).

The country's GDP increased to $55.2 billion in 2013 after the Kenya also rebased its economy.

Kenya's ICT sector mainly driven by the telecoms space has assumed an increasingly strategic role in the economy in recent years, according to the IDC.

Leading telco Safaricom's mobile money service M-Pesa is used to channel some 43% of the country's GDP every year.

M-Pesa usage has soared in Kenya since its 2007 launch with over 19 million users today.

In 2014, more than $20 billion was transacted through the service, the telco says.

South Africa

When there is so much action and promise of growth in the ICT sector for these African nations, one wonders where South Africa stands in comparison.

A country heavily dependent on its manufacturing, agriculture and mining sectors, South Africa's GDP is calculated at 350.6 billion following the rebasing of Nigeria's economy, according to the World Bank.

South Africa is now the second biggest economy after the West African nation.

Although the southern African country is battling slow economic growth, high unemployment rates, a strained electricity supply system, which hurts the economy even further, it is still ahead of its African counterparts.

The International Telecommunications Union's (ITU) recent ICT Development Index revealed that South Africa dropped one place down to the 90th position among 166 countries globally, but the country is still ranked number two on the continent.

Naila Govan-Vassen, ICT industry analyst at Frost & Sullivan told ITWeb Africa over the past two decades, the South African ICT sector has developed and evolved to become one of the country's most attractive sectors.

According to Frost & Sullivan's forecast, South Africa's ICT sector contributed between 5 and 5.5% to the overall GDP in 2013.

"When compared to other nations, such as Nigeria, Kenya and Rwanda, South Africa has leapfrogged ahead of its peers in terms of ICT capabilities and ease of doing business," she told ITWeb Africa.

The country does, however, face a number of key challenges; namely, shortage of skilled resources and a lack of competition in the ICT sector despite strong growth in the telecoms sector, she stated.

Research firm BuddeComm describes South Africa's mobile market as vibrant and one that has seen rapid uptake since competition was introduced to the sector in the 1990s.

SIM card penetration is well above 100% of the population, driven by separate subscriptions for voice and mobile broadband services, says BuddeComm.

Involvement from government is also crucial for the development of ICT in South Africa, even though the country has state-of the-art ICT capabilities, Govan-Vassen added.

Whether we would see South Africa's ICT sector leading the country's economy in the near future, Govan-Vassen says that is unlikely.

"The intensifying convergence and consolidation among the telecoms operators and IT service providers in South Africa would potentially create a lot of room for cross-industry and horizontal opportunities that would grow..

"It is unlikely that it will become a major contributor to the country's economy in the next five to ten years," she concluded.

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