Africa needs $15.5bn to enhance GSM services- says World Bank

Mergers, Acquisitions and Financial Results

The World bank has said that all players in African Global System for Mobile Communications networks, GSM, Nigeria inclusive would need about $15.5bn to enhance GSM coverage across the continent.

In a recent report released by the bank, the African GSM market is capable of expanding beyond its present status, if the needed funding is injected into the industry.

The World Bank report by Mark Williams, Rebecca Mayer and Michael Minges, posited that Africa will require a total expenditure of $15.5bn between 2007 and 2015, for Africa to expand its coverage of the GSM network across the continent.

The report rated Nigeria as one of the countries that attracted the highest investment between the periods of 1998 to 2008, with an estimate figure of $12.7bn behind South Africa, that had $18bn.

Other African countries rated in the report include: Kenya ($2.9bn); Sudan ($1.8bn)); Uganda ($1.6bn); Senegal ($1.5bn); Tanzania ($1.4bn); Democratic Republic of the Congo ($1.2bn); Ghana ($1.1bn); Angola ($1bn).

Of this, $6.9bn is for areas that are potentially commercially viable, with the total cost of expanding networks to cover the eight percent of the population that lies outside these areas amounting to $8.7bn, or about $1bn per year.

Access to finance, according to the World Bank, is often seen as a constraint on economic development in Africa, but the telecommunications sector appears to have overcome this constraint by accessing a wide range of financing sources to fund the rapid expansion of networks.

Besides, the report, the latest of the World Bank, noted that operators and governments in Sub-Saharan Africa are investing heavily in the region’s ICT sector, stressing that, about $5bn a year or one percent of Gross Domestic Product is been invested.

The report informed that, private sources accounted for the majority of capital investment in the sector, but that, a significant amount of money is invested by operators that remain under state ownership.

According to the World Bank, Official Development Assistance from outside the region is still marginal, overall.

The World Bank, which said it was cheapest to call the United States from Ghana at $0.31 per minute, compared to $0.88 a minute in 2008 from other parts of Africa, noted that Ghana, for instance, still has a long way to go in order to provide the best network in the continent.

“Kenya and Ghana, for example, are of similar size, but Kenya’s networks are growing much more faster – with 6,445 km versus Ghana’s 919 km of backbone network currently under construction”, it stated.

The World Bank adduced to the fact that, African capital markets, corporate bond markets, and commercial bank loans all have played key roles in financing investment in the telecommunications sector in the Continent, but stressed that, securities exchanges in Sub-Saharan Africa are generally underdeveloped, reason why telecommunications businesses were relatively well represented in them and have successfully used exchanges to raise investment finance.

It further added that despite the wave of privatization and liberalization of the telecommunications market in Africa, the public sector—both domestic and foreign, continues to play a significant role in financing ICT development.

The World Bank informed that, private sector has invested heavily in ICTs since the end of the 1990s, when the expansion of telecommunications networks in Africa began, adding that, this investment has fluctuated from year to year, however, and the amount of investment received by each country has varied enormously.

The report explained that bank loans were used to finance investment in all types of infrastructure in Africa, and telecommunications infrastructure was no exception. According to it, at the end of 2006, outstanding commercial bank loans used to finance infrastructure in Sub-Saharan Africa totaled $11.8 billion. It however, stressed that, though it is difficult to determine the exact allocation of these loans among sectors, but that, at least $8.3 billion went to projects in the transport and communication sectors.

The report further revealed that other development institutions are also involved in providing financing for telecommunications infrastructure in Africa.

“The World Bank, for example, provided $338m in financing for investment in the ICT sector in Africa between 1998 and 2008. Not all of this, however, was invested in physical infrastructure: It covered a wide range of activities, from policy and regulatory reform to e-government and information technology ndustry development.”