Who will be the winners of Africa’s telecommunications race?

Digitalisation is increasingly seen as a vital component for growth, with countries around the world investing significantly in pursuit of this aim. Although Africa remains behind the rest of the world in this regard, the continent is nonetheless slowly developing the necessary infrastructure required, and increasingly shifting towards digital investment as a means of driving productivity and development.

The potential for growth across Africa is almost unmeasurable, though this will, however, depend on the scale to which digitalisation is made affordable and accessible. For widespread adoption to be accomplished, significant capital is required from investors and financiers — who also stand to benefit from such a venture.

Stay with us as we delve deeper into Africa’s potential for growth, and the challenges it faces in the race for digital solutions.

Investment Trends and Digitalisation Opportunities

According to a report by Google and the IFC, there remains an untapped market for digital investment in Africa, with a projected $180 million to be added to its annual GDP by 2025.

However, the digital divide in Africa is pronounced; out of the twenty-five least connected countries in the world, twenty-one are located in Africa. Compared to the global average of 62.5%, Africa’s internet penetration of 36% compares poorly worldwide, with lack of investment remaining one of the main obstacles to bridging this gap. The World Bank has estimated that $100 billion is needed for African countries to have access to high-quality internet. 

To understand what form of investment this may take, let us examine three main possibilities for revolutionising Africa’s digital infrastructure: 

Data centres

Latency issues and data sovereignty have been at the forefront of the argument for localisation in Africa. Due to these factors, around two-thirds of data centres are now located in South Africa. However, to expand this capacity to the rest of the continent would require a bold investment of over 700 new centres. 

With data centres expected to grow by $3 billion by 2025, firms like Equinix, West Indian Ocean Cable Company, Digital Reality and Liquid Intelligent Technologies are just a few of the investors that have already acted to capitalise on this field of opportunity.

Mobile networks

With existing network coverage expanding and older networks being upgraded, 4G connections are set to grow to 28% by 2025, though 5G networks currently remain in their infancy. 

Average download speeds have doubled and data costs halved, with African mobile traffic projected to quadruple by 2025 and 5G connections potentially being utilised by 30 million African users.

As mobile devices look set to remain the primary method of communication in Africa, improved 4G and 5G networks stand to provide a wide range of benefits for users on the continent and, in turn, offer opportunities for growth.

Fibre-optic cables

The 2024 African cable system is expected to ring the entire continent with a network of high-speed subsea cables, providing access for up to sixteen nations and effectively doubling the total internet capacity of the continent. At the time of writing, only three African countries lack fibre optic connection on the continent. 

As a fully optimal fibre optic network is yet to be fully implemented in Africa, widespread broadband internet for homes and offices remains largely concentrated in a few capital cities. Though challenging, this represents an interesting opportunity for potential investment in countries such as Eritrea and South Sudan.

Financing and energy cost

To date, most investments in Africa have been funded through equity investments, as opposed to debt financing, a trend that looks set to continue. With energy also an important investment factor, the expansion of data centres — and the related necessary price increases for maintaining services — will likely be challenging if cheap and reliable power cannot be ensured. Additional power shortages and load-shedding, characteristic of southern Africa, currently enforce the need for and reliance on expensive diesel and battery-powered solutions.

Final words

With one of the youngest and fastest-growing workforces on the planet, Africa is rapidly expanding to becoming a growing consumer of online goods and services — from basic needs to entertainment websites such as Paridirect, Africa’s most prominent online sportsbook.

With the potential for significant investment on the continent, these increases in connectivity and the adoption of the latest technologies are also likely to create more entrepreneurship opportunities.

Still, this desired transformation can only be achieved by the implementation of two key factors in this high-stakes investment strategy: high-quality access to communication networks and affordable pricing of required services. Thus, accelerating investment in the digitalisation of African infrastructure will prove critical to ensuring economic growth and, in turn, for improving the quality of life for its inhabitants into the future. 

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