Sub-Sahara Africa’s fast growing telecoms industry driven by private sector – World Bank

Telecoms

The telecommunications industry in the sub-Sahara African region is said to growing at a faster pace with significant investment from the private sector. These investments are primarily focused on network expansion and infrastructure.

A World Bank report, “Africa’s ICT Infrastructure: Building on the Mobile Revolution”, indicates that the rapid expansion of the telecommunications networks in Africa has required very high levels of investment.

The report, co-authored by Mark D. J. Williams, Rebecca Mayer, and Michael Minges, says “Between 1998 and 2008, an average of $5 billion a year was invested in sub-Saharan Africa’s telecommunications sector.”

These investments amount to about 1% of total gross domestic product (GDP) in the region during the period, it noted.

Private companies are a major factor for the investment as the World Bank says “The private sector accounted for most of this investment, which primarily targeted mobile infrastructure development following the liberalization of mobile markets.”
However, the report said, the investments has not been distributed evenly across the continent.

“Nigeria and South Africa together account for more than 60% of the total network investment in sub-Saharan Africa, with the remainder being distributed among the other countries in the region. The uneven distribution of investment corresponds to the size and relative wealth of these countries,” the report says.

It explains that “In the case of some countries— such as Nigeria—it also reflects policy decisions made by the governments over the past decade. Countries that have promoted competition within the sector by encouraging new operators to enter the market have received higher levels of investment than countries that have limited competition.”

Majority of the investment has been financed through debt, in the form of either bank loans or issuance of bonds on local securities markets with a little capital invested in the sector being in the form of equity from shareholders.

More than half of the financing originates in Europe and North America, and 20 percent originates in the Middle East and North Africa.

“…the telecommunications sector in Africa has also successfully tapped local financial markets (to the extent that they exist) to fund investments. In some cases, telecommunications operators constitute a significant part of the total value of securities—both equity and debt—on exchanges. Local telecommunications borrowing has also been a big factor in the growth of loan syndication in African markets,” the report adds.

Despite the dominance of the private sector in telecommunications investment, the report indicates that in many African countries the public sector continues to play a role through its ownership of one of the operators.