Experts warn of regulatory tension in Africa's ICT sector in 2017

26 January 2017

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The decision by Zimbabwe to backtrack on plans to increase data costs last week following public outcry by consumers, as well as the budding challenge to OTT (Over the Top) platforms by mobile operators in several parts of the continent, is raising concern over the ability of Africa's regulators to manage the broader sector effectively in 2017.

Non-profit think tank Research ICT Africa issued a warning for the ICT sector to 'look out' as "we might be seeing a trend of price increase on data on the continent...," following the bungling by Zimbabwe's post and telecommunications regulator Potraz, which has since reverted to previous rates for data.

Professor Njuguna S. Ndung'u, Kenyan economist and former Governor of the Central Bank of Kenya is calling for Africa's regulators to exercise good judgment this year in a newly released report by the Brookings Africa Growth Initiative.

Ndung'u says the lessons are clear that a poor regulatory environment can be a major obstacle to innovations in the market and will constrain the speed of financial inclusion.

"A regulatory approach and a regulatory environment that will encourage innovation and entrepreneurship is what African economies should strive to achieve in 2017 but also work on the pitfalls that can disrupt the process that will kill innovativeness and broad-based growth across sectors."

Professor Ndung'u advises that regulatory reforms and leveraging successful cases to make the financial market more accessible, efficient, safe, and reliable to boost confidence, is required for progress. He adds that the approach adopted by regulators on MPesa ought to be sustained and replicated.

"In particular, Kenya's M-Pesa (as well as similar products in Kenya and Tanzania), pushed the frontier of innovation and financial inclusion without compromising financial stability. Kenya's combination of a supporting policy environment with a sound regulatory and supervisory framework allowed space for innovators and entrepreneurs to introduce financial innovations and a diversification of products into the market. Regulators agreed with the innovators on prudent risk management, and the policy environment ensured a stable macroeconomic environment. These combined factors ensured Kenya's success. These are major outcomes that form a strong base for lessons for 2017 in the African continent as well as for Kenya to sustain the frontier and move to the next level."

Professor Ndung'u believes M-Pesa's successes would not have been possible without the strong regulatory institutions as institutions play an important role.

"First, they define the rules of the game, generating a set of dynamic principles to guide the market of dynamic innovators and entrepreneurs. Second, they define the appropriate incentives (as well as penalties). A combination of rules, dynamic guidelines, and appropriate incentives will encourage prudent behavior in the market and will support market development. In this regard, innovators and entrepreneurs will find it easy and rewarding to operate and thrive in such a market and a regulatory environment."

Source: ITWeb Africa 20 January 2017