Tag Archives: Africa

Kenya’s Safaricom takes a pasting. Has economic contagion finally reached the booming markets of Africa?

Below I am reprinting a news report by Martyn Warwick , published at TelecomTV | News on 22 May 2009. The report covers thereduction of profits by 23%, announced by Kenya’s and Africa’s biggest mobile operator Safaricom. Alongside with the reduction in profits, the story mentions the significant annual growth in the number of registered users for Safaricom’s M-Pesa mobile money transfer service. The number of registered users for M-Pesa increased from 2.1 million to 6.1 million. Both of these news from Safaricom in Kenya indicate the relevance and timeliness of the revenue opportunities offered to African mobile operators by mobile market services.

safaricomlogoMore evidence today that the recession is a truly global phenomenon. While in the developed economies of North America, Europe, Japan and Australasia ARPU has been falling and sales of handsets are in decline, over in the burgeoning markets of Africa, (Egypt, Nigeria, South Africa and Kenya, for example) the mobile industry has continued to roar ahead -until today. Martyn Warwick reports.

But today comes news that, for one carrier at least, the economic downturn has now hit home and profitability is on the wane at Safaricom of Kenya, Africa’s biggest mobile carrier.

Mobile penetration in Africa has roared ahead in recent ayears and some industry observers had opined that companies like Safaricom might continue to grow despite the recession. It seems now that this has more to do with wishful thinking than dispassionate analysis.

Figures released this morning show that Safaricom’s full-year profits slid by 23 per cent – mainly because of the prevailing economic conditions but increased competition and increased costs of servicing debt have also played their part.

For the financial year ended 31 March Safaricom made a profit of 15.3 billion Kenyan Shillings – that’s about £126 million Sterling. For the previous year ended march 31, 2008, the company made 19.9 billion Shillings in profit.

Perhaps more worrying is that although the operator’s total revenues were up 15 per cent year on year, ARPU (globally accepted as being a major indicator of performance) is in serious decline have fallen by a massive 23 per cent to 475 Shillings a month.

Over the past 12 months Kenya has suffered remarkably high inflation as the national currency has weakened and the costs of basic foodstuffs, fuel and transport have rocketed. Kenyan consumers, the vast majority of whom are far from wealthy, have less disposable discretionary income than they did 12 months ago and they are using their phones less.

Confidence was also severely dented by the ethnic violence that followed the results of the disputed 2008 general election and that has had a long-term effect on the economy.

Safaricom has been one of Africa’s great success stories. It is the biggest company in East Africa, is valued at in excess of £1 billion, has 2,300 employees and 13 million subscribers. The company is 40 per cent owned by Vodafone, 25 per cent by both private and institutional investors and 35 per cent owned by the Kenyan state.

It has a market share of 79 per cent and has increased its customer base by 31 per cent over the course of 18 months.

However, the market is changing and Safaricom faces increased competition from a raft of rivals including Essar telecom’s “Yu”, Zain of Kuwait and the Orange network of the incumbent, Telkom Kenya. As a result of this intense competition mobile tariffs have fallen by 40 per cent in just a year.

mpesaCommenting on the results, Safaricom’s CEO, the amiable and approachable Michael Joseph said, “It was probably our most challenging year in terms of operating environment. But it’s not all gloom, we have delivered strong results despite the difficult economic conditions and there has been strong growth in the popular M-Pesa money transfer services, with 6.2 million registered users now compared to the 2.1 million of the previous year.”

The CEO added that Safaricom will continue to invest in its network and will also look to acquisitions to maintain its strategy for consistent growth. Mr. Joseph said, “Our capital expenditure is expected to remain high over the next few years as we continue the roll out of our data infrastructure and continue to invest in the capacity, coverage and quality of our network.”

Meanwhile, Richard Hurst, a senior telecoms analyst at research house IDC commented, “In the past, Safaricom has been quite a solid operator, usually coming up with some decent numbers, so it is a bit of a surprise,” and added that Safaricom will have to spend big money on enhancing and expanding its infrastructure if it is to fend off competition and maintain its Number One position.

Hurst believes though that the overall African telecoms will continue to grow at rates higher than in other markets. He says, “We’ve still got some quite substantial growth to go, it’s [the African market] not as saturated as the European, North American or even Asian markets. I think this is just a blip.”

Let’s hope so. New figures from Nigeria expected to be published in the coming weeks may show whether this is indeed a “blip” confined to one company in one country or if the malaise is spreading across Africa.

Market Information System for Ethiopia

News regarding current work on the implementation of a market information systems in Ethiopia, released by Wageningen University and Research Centre (Wagenigen UR – LEI) on 24 Feb 2009.

From 24 to 31 January, Olga van der Valk and Monika Sopov (Wageningen International) visited Ziway and Meki, two villages in the Rift Valley south of Addis Ababa, Ethiopia. Their goal was to develop a Market Information System (MIS) for small-scale outgrowers of green beans, whose production is contracted by an exporter to Europe. The design of an MIS was requested by a project with CFC funding aiming at promoting small-scale growers’ participation in exports. In a workshop with local stakeholders, the findings of an earlier assessment on market information sources and communication lines were discussed.

An MIS is an instrument to reduce market insecurity by providing more transparency in the market. Other instruments are the implementation of (innovative) technology and horizontal and vertical market coordination to strengthen market position and to combat seasonality. To further define the MIS, stakeholders were asked to prioritise their demand for information: whether related to export or domestic markets; whether on daily-changing information such as prices and supply or on market-technical data for the development of marketing strategies.

Neither stakeholders nor farmers currently work with or have a view on long-term marketing strategies to develop the small-scale horticulture sector. This makes it difficult to prioritise the marketing information needed to design and operate an MIS. The proposal by the workshop stakeholders was to enter into dialogue with the Ethiopian government to improve its centralised MIS used for statistical purposes, and to make it more accessible to farmers. The recommendation by the Dutch experts was to set up a business service centre to collect available historical data, including surveys and statistical information, and use this information in the development of marketing planning skills among small-scale farmers and governmental officers. This will enable farmers to efficiently use and sustain the technology currently in development.

Mobile Use Behaviour in Liberia

During my work with ITC on Liberia, I was in touch with field contacts and I had the opportunity to discuss the state of the mobile telephony sector there, the available services and their prices. One of my reliable contacts there shared with me the following information. She said, that the average amount spent on pre-paid mobile phone cards (aka scratch cards) in Liberia is $5 per month. Apparently, most of the $5 of airtime credit  is used up within a few days of scratching the card. How could we possibly account for such behaviour? I’ve been thinking up hypotheses about it:

  1. One obvious suggestion would be that people go into the trouble and expense of getting the scratch card because they have some particular significant information need, or emergency which requires conversations at considerable length. Then the question becomes, how is it that these events re-occcur with considerable regularity, approximately every month?
  2. A variant of the same scenario would be the use of the airtime for a short but expensive conversation. For example, parents in Liberia calling their children overseas.
  3. A completely differnet way of looking at it, would relate to the nature of the social networks people are part of. Say, for example, if someone has enough money to buy credit then he/she is expected to get in touch with many people in order to re-affirm their identity as part of a group.
  4. Yet another scenario would be that once someone had airtime credit on their phone, the airtime credit is considered communal. So the people in their immediate surrounding feel entitled to use the phone.

What do you think? Any suggestions on the matter?

Collaboration@Rural in South Africa

Collaboration and Rural (C@R) is an EU project aimed at enabling the participation of European rural dwellers in the knowledge society. The methodology of the project involves the testing new technologies developed by the C@R consotium within 7 Living Labs, including the Sekhukhune Living Lab in South Africa.

Below is a video material presenting the technology developed by SAP to the benefit of SMEs and micro enterprises, within the C@R project. The featured procurement technology is focused on realising benefits through the aggregation of rural demand for manufactured goods andprocessed foodstuffs. The savings are realised due to the lower prices, achieved by a coallition of buyers who manage to order together greater quantities via mobile communication.

The main beneficiaries of the system are Spaza shops which are scattered all over the area and ensure the supply to the rural community of bread and other items such as soap, detergent, clothes etc. Stock replendishment is a challenge to Spaza shop owners because goods need to be sourced from the nearest town, which involves a transportation cost and the opportunity cost of day’s work. Ms. Sesina Mabuza, a Spaza shop owner recounts the financial constraints she faces in re-stocking her shop. Ms. Christina Zikhali, a Spaza shop owner in a very remote village explains the variability of the transportation costs incurred by using shared taxi services.

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Consistent with New Institutional Economics, C@R seeks to reduce transaction costs through vertical integration. The system implemented by SAP facilitates the establishment of virtual buying cooperatives, consisting of a number of Spaza shops and coordinated by local information service providers, known as “nfopreneurs”. The video presents the example of bread supply. Retail shop owners are enabled to order the bread they need via SMS. The messages retailers send to the “infopreneurs” consist of the name of their shop, a PIN number verifying their identity, the amount they are ordering and the code of the product. The SMS messages are aggregated by the “infopreneurs”, they are bundled and transmitted to the suppliers of the product. The system is of benefit to the suppliers by allowing them higher visibility of the market for their product. Mr. Hansie du Plessis, Manager of Tubatse Bakery in Sasko testifies to the benefit to suppliers. The savings realised are used for the delivery of the products to the Spaza shops.

The video suggests that in the future the entire basket of items carried by Spaza shops might be available through the C@R procurement system implemented by SAP in the Sekhukhune Living Lab. I think that this is a truely exciting prospect.

Warehouse Receipt Systems

Here is a very informative educational documentary on Warehouse Receipt Systems produced by the Technical Centre for Agricultural and Rural Cooperation ACO-EU (CTA), Agence Français de Développementé (AFD) and the Natural Resources Institute (NRI).

The film documents a study visit to Tanzania and South Africa. Even though the film provides plenty of useful information, its authors make sure to note:

“The examples presented in these two countries are typified by particular experiments and contexts and cannot simply be transposed to other cases. Nonetheless there are a great number of lessons to be learnt and which could provide guidancefor certain aspects of orientation and initiatives in your respective countries.”

I personally think that the documentary illustrates theoretical issues which are encountered the world over, and are not specific to any particular context. The film raises questions regarding trust, confidence, contractual completeness, regulation, product quality and standardisation. Even though in this documentary the issues emerge with regards to warehouse receipt systems, they are intrinsic characteristics of any market negotiations (and eventual transactions) taking place without the double coincidence of time and place. The film focuses on futures markets i.e. transactions without coinsidence in time. Conversely, market negotiations carried out via mobile phones, or other ICTs exemplify transactions without coinsidene in place.


Warehouse receipt systems were developed in the 1990s as a response to farmers’ income instability due to price fluctuations resulting from liberalisation. Since prices tend to be low during harvest periods and to subsequently rise, warehouse reeipt systems provide a solution by storing commodities for the suration of the low price season. Price volatility and lack of quality standards are attributed to market liberalisation in the agricultural sector.

Warehouse receipt systems operationalise the food supply chain and involve the following stakehoders:

  • farmers (individuals or cooperatives)
  • warehouse operators
  • financial institutions
  • exporters, traders

Tanzania

The warehouse receipt system was introduced in Tanzania in 2005 with the pilot crops of coffee and cotton. It enables farmers to receive loans and assure the quality of their produce. The system allows coffee producers (individuals or cooperatives) to store their coffee in a silo. Upon the receipt of the coffee the producers are issued with 2 certificates: certificate of title for them to keep and certificate of pledge to provide to third parties. These are normally cooperative or commercial banks participating in the system. The certificates of deposit allow farmers to induce confidence in the financial institutions. They also enable the banks to reach a new set of customers for financial services.

The warehouses also ensure the transparency of the commodity marketing system. Commodities are classified according to quality and offered for sale at regional and sub-regional markets. For example, coffee is graded and offered for sale at auctions administered by a public organisation.

Producers in other sectors, such as the Chawampu rice growers cooperative, have followed suit. Representatives of the cooperative introduce a model whereby they are able to offer 70% of market value of deposited quantities of rice. Subsequently, after selling the crop and substracting the administrative costs the cooperative, they provide a second payment to the members of the cooperative. Farmers use any additional income in order to buy seeds, fertilizer and to develop off-season activities.

The warehouse receipt systems functions well due to the high price differentials between the post-harvest season and the hungry season. The main challenges to the warehouse receipt system remain:

  • providing adequate infrastructure
  • ensuring warehouse security
  • reinforcing producers’ organisations
  • increasing the number of quality control specialists
  • reducing operating costs

South Africa

South Africa presents an advanced example based on the warehouse weceipt system because it has a functioning futures market in agricultural commodities. The SAFEX was established in the 1990s during an intense period of market liberalisation.

The advantages of South Africa include its good financial infrastructure for the settlement of deals and the quality of  its physical infrastructure enabling the trading, warehousing and transportation of the commodities. Critical is the legal enforcability of contractual rights and of legal receipt rights. Thereby, people are able to take the necessary steps and to manage their post-harvest risk well in advance.

SAGIS acts as an information intermediary for the South African commodity markets. It collects and distributes local consumption and up-to-date market information. The agricultural marketing giant SENWES provides mobile phone access to hourly prices of grain via SMS. Even though it is not typical of Africa in favouring large scale farmers, the South African warehouse receipt experience provides a useful benchmark for implementations elsewhere.

Evaluating the Use of Mobile Phones for Access to Price Information in Ghana

Here is an interview with Mohammed Mounouni of SAND, Ghana recoreded on 19 March 2009. He reflects on the monitoring and impact evaluation of the use of mobile market information services such as the services TradeNet and Esoko implemented via the MISTOWA project. Mr. Mounouni hopes new developments in the Esoko platform will make farmer’s feedback easier and suggests they should not pay credit time when they do so. Mr. Mounouni emphasises the importance of fieldwork with African farmers, investigating their use of market information.

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Having researched invormation behaviour, I agree particularly strongly with this point. With the current surge in the development of mobile Intenet services I think it is essential that forthcoming ICT4D projects are needs-based and take into account information use. Otherwise, the development community is in danger of proliferating technology for its own sake.

In another interview available through the Forum for Agricultural Research in Africa (FARA) blog the software developer David McCann of Busylab, Ghana introduces the new Esoko platform which builds on the efforts dedicated to the implementation of the TradeNet Web based platform. The Esoko technology includes an SMS gateway with a centralised computing power in combination with an extendable mobile application.

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Cultural Exchange and Export of Digital Content

The increased availability of ICTs in Africa provides opportuities for their adoption in the process of art creation and in the marketing of unique handcrafted products to large audiences. The increased opportunities for cultural exchange and for export of digital content raise questions regarding the licensing of art products and their copyright.

At the Africa Gathering which took place in London on April, 25th 2009, Martin Konzett from ICT4D.at (Austria) presented the trailer for the upcoming film release “Hello Africa”. The movie is a documentary which sets out to illustrate the ongoing phenomenon of constantly increasing mobile phone use in Africa in general, and Zanzibar in particular. The film documents how the mobile boom is changing traditional attitudes, cultural values and social patterns.

The documentary captures contemporary, everyday life in Africa. It presents the lifestyles of African people, the concepts used in their popular culture, their habits, opinions and activities in the context of mobile technology use. “Hello Africa” portraits individuals from various social groups: students, rappers, teachers, athletes, vendors, watchmen and many more. The forthcoming release date for the documentary is May, 8th 2009. The interest in “Hello Africa” even prior to its release is an example of the opportunities offered by ICTs for cultural exchange between Africa and the rest of the world. The film will be licensed under a Creative Commons license BY-SA. This means that all of the raw material as well as the final edit of the film will be available for anyone to copy, share, remix and sample under the license condition.

itc-tech-paper-trade-in-soundsThe increased opportunities for cultural exchange and for export of digital content prompted the International Trade Centre (ITC) to published in February 2009 the technical report “Trade in Sounds”. The report considers the potential of digital content, particularly music, to generate export revenues for developing countries and to encourage the online distribution of music from developing countries. The report uses the OECD definition of digital content as the “digital delivery of content, specifically, scientific publishing, music, on-line computer games, mobile content, user-created content and public sector information and content”.

“Trade in Sounds” presents ITC’s findings on the topic of international trade in digital music. The subject matter is introduced by a chapter on market trends and challenges. The report continues by overviewing methods and techniques which can be used successfully for the distribution of digital content via the electronic channel. Because of its commercial character and its impact on music trade, traditional copyright, rather than Creative Commons licensing, is enphasised in the report. “Trade in Sounds” includes detailed case studies of the existing opportunities for export of digital music content by the music industries in Brazil, India, Kyrgyzstan, Mali, Senegal, Serbia and Tajikistan.

kachile481Another recent initiative aimed at an increase in the exchange of visual art products between West Africa and the rest of the world is the project Kachile led by Ulf Richter in the Ivory Coast. Kachile seeks to create digital opportunities for artists in West Africa by enabling them to sell products in the following categories: accessoires, african art, ceramics, fashion, furniture, jewlery, music, textiles, toys, etc. The categories in the Kachile marketplace are still in the process of being populated. Nonetheless, the project carries the promise of creating an electronic marketplace for African products of visual art and music.

Impact of ICTs on Welfare: Evidence from Uganda

Recently I have come across some resources about the broad-based impact of access to ICTs on the welfare of people in Uganda. The materials below demonstrate not so much the use and development of mobile (or electronic) market services, but they demonstrate the general point about the impact of communication on businesses and individual livelihoods in Uganda. So, do have a look at the video! It shows the users of the telecentres in Nakaseke and Kasambya. Nakaseke is a larger and economically more active community with a busy marketplace, while Kasambya is a rural location. The video shows Margaret Nawoga, a farmer who grows plantain, coffee and vegetables and uses the telecentre for access to cultivation literature. The video also shows the proprietor of a small harware and bicycle repair business who uses the fax, photocopying and telephone facilities in the Nakaseke telecentre in order to arrange the purchase and delivery of spare bicycle parts. The video has been available since Feb 2007 so the information is hardly up-to-date. Do you have information about Uganda along similar lines? Please, do share it. muto-2008

Demonstrating the same general point in a much more rigorous way is an article by Megumi Muto. It analyses the effect of the expansion of mobile phone networks in Uganda on market participation.  The work uses survey data collected in 2003 and 2005 from 856 households in 94 communities. The study compares the effects of the increased access to mobile networks on the marketing of maize and of bananas.  Megumi Muto establishes that the proportion of banana farmers who sell their produce, rather than consume it themselves, raised from 50% in 2003 to 69% in 2005. By contrast, the marketing of maize as opposed to its subsistance use did not change over the same period. The difference in the impact of mobile phone network expansion on the marketing of maize and banana is explained by the perishable nature of the banana products. As mobile phone coverage increased from 2003 to 2005, the sensitivity of the price of bananas to information was reduced, thereby reducing the price differential between farm-gate and market prices for bananas. Below is a map showing the progress of mobile phone coverage in Uganda between 2003 and 2005.

muto-mob-map

KACE (Kenya) and the Kerala Fish Trade (India) on TelecomTV

Under the title “Market Intelligence: How Mobiles are Helping Farmers and Fishermen” Telecom TV recently covered the work of the Kenya Agricultural Commodity Exchange (KACE) , as well as the use of mobile phones for price discovery by fishermen in Kerala, India. Trades of various other goods and services in India were also covered. Both, the work of KACE and the changes in the information behaviour of fishermen in Kerala are phenomona well familiar to people interested in the application of mobile technology to agricultural trade in developing countries. Still, the video material allows us the opportunity to visualise the daily routines and work conditions of Kenyan market traders and of Kerala fishermen.

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Name: TV Ramachandran, Mutahi Kagwe, Godfrey Fwamba
Recorded: 13/03/2009 – Nairobi, Kenya and Kerala, India

jensen-2007The background behind KACE is that it is a commercial enterprise seeking to facilitate the process of price discovery occurring the market exchange of agricultural products. The video footage covers the work of Godrey Fwamba who appears to work as an enumerator and his duties seem to involve daily visits to the Nairobi market. During those visits he collects prices from the local traders, then sends them back to his office via SMS, where they are made available to farmers. The role of enumerators is crucial for the successful implementation of mobile market information services. A dedicated network of extension workers is capable of collecting comprehensive price and avalability information from local markets, thereby enabling ICT solutions to deliver relevant information with potential for changing the behaviour and choices of market suppliers.

The video further shows the work of Pradeep Kumar, skipper of the Sreevaltsom, a trawler fishing in the seas of Kerala, India. Pradeep Kumar is shown using his mobile to check fish prices, thereby ensuring he lands his catch at the most profitable quayside market. The story about the impact of increased mobile network coverage in the coastal waters of Kerala on the market prices for fish in the region is familiar from the work of Robert Jensen. In Issue 3, 2007 of the Quarterly Journal of Economics Robert Jensen published the results from a study carried out between 1997 and 2001 in theh Kerala region. The empirical worked showed that the increased availability of mobile phone communication, encouraged fishermen to make informed decisions about which port to land at and reduced the price dispersion among fish markets in different ports. It is worthwhile to point out that the behavioural changes and the welfare gains in Kerala were not the result of any subsidised mobile market information initiative. By contrast, the changes in Kerala were self-sustaining because they resulted from individual bhavioural adaptations to information availability.