Doing business in Africa: the case of ITC

Éric Waku is an ITC expert and former vice-president of Alcatel-Lucent (Africa & Mediterranean).

Doing business in Africa: the case of ITC

You are a telecommunications expert in Africa. How is this sector particularly promising and innovative?

In an Africa that is generally under-equipped, with a low infrastructure development index, the development of telecoms from the 1990s onwards (mobile networks, national fibre optic backbone, regional submarine cables such as SAT3, EASSy, WACS) can be considered as the first stage of a new continental economic dynamic. Indeed, telecoms are becoming vital as they condition the proper functioning of other economic operators, and in so doing, they create many business opportunities that have a positive impact on the national economy of each country.

Paradoxically, the absence of a legacy in telecoms infrastructure makes Africa an early adopter of new technologies that will surf the wave of disruptive innovation to create, as of 2005, the first mobile banking in the world (M-Pesa, by Safaricom). This technology then spread to Asia, Latin America and now arrives in France via Orange Money, which in 2017 carried out 23 billion transactions in 17 African countries! This innovation is so promising that it brings phone operators (MTN, Airtel) into the banking sector, thus provoking a new disruption: it responds to the problems of sub-banking in Africa, it revolutionizes payment instruments, enables the payment of salaries, invoices, utilities, etc. It is also a major innovation in the banking sector.

Among the innovations, we can mention the very ecological solar kit with credit via M-POKA, which targets populations in rural and peri-urban areas (70% of Kenya's population). This kit is a device that includes an eight-watt solar panel, two bulbs and an LED torch, a USB phone charger that supports five terminals and a radio. It also carries a SIM card that operates as an automated collection agent, all for a price of 200 euros.

After a down payment of 30 euros, the balance of 170 euros is paid 50 cents per day through a mobile payment application deployed via secure text messages. In the event of a user's failure to pay, and after a certain period of time, the SIM card is deactivated and blocks their solar power supply, and the system starts up again as soon as the unpaid amount is paid. The user becomes a full owner after 12 months of subscription, and even benefits from a 12-month guarantee.

Since the launch of M-POKA in 2012, 500,000 families in Kenya, Tanzania and Uganda have had access to electricity and 700 households are equipped every day. Building on this success, M-POKA is planning improvements to the kit as part of its roadmap, since the solar panels will have a capacity of up to 20 watts and will now feature a 16-inch digital TV. The impact of M-KOPA's success has been emulated by the fact that several American and African start-ups have replicated the same business model. This is the case of d. light, which raised $22.5 million in 2016 and invented a financial administration software for solar kits based on the "pay as you go" principle. The Kenyan start-up Bboxx raised more than $20 million in 2016 to cover the Nigerian, Ivorian and Cameroonian markets through franchises.

OffGrid Electric, another Tanzanian start-up, raised $45 million in 2015, while PEG, with several tens of thousands of customers in Ghana, raised $7.5 million in 2016 to expand its operations in Ivory Coast. Finally, the famous Senegalese Hip Hop artist Akon co-founded Solektra International, which raised $1 billion from Chinese banks and has already installed more than 100,000 solar kits in West Africa through mobile phones.

These are just some of the examples that prove that Africa is a vast market of more than a billion consumers, whose country risk ratings is constantly improving, making it easier to raise funds. It is a market that must be approached with the idea of technological leapfrogging and à disruptive approach that suits young people, since more than 60% of the African population is under 18 years old.


How is this sector essential to the development of sub-Saharan Africa?

Like electricity, transport, water and banking, ICTs are essential for the development of sub-Saharan Africa because, even in the short term, they provide benefits that I have personally  seen in countries such as Nigeria, DRC, Angola, Mozambique or Ghana, and which are: the creation of hundreds of thousands of jobs, distribution of purchasing power, tax revenues for the State, opening up rural areas and bringing cities and rural areas closer together, etc.

In the medium and long term, the ITU (International Telecommunication Union) has identified ICTs as a catalyst for socio-economic development because of their three characteristics:

  1. omnipresence in most parts of the economy,
  2. continuous improvement leading to reduced costs for users, and
  3. source of innovation, i. e. their ability to evolve for themselves and for other sectors.


In sub-Saharan Africa, many technologies are still in the germination phase. How can we give them a boost? Do we need more political will?

One powerful way to drive or push germinating innovations to the next level is through the implementation of acceleration programmes or start-up incubators through public-private partnerships. State voluntarism can also take the form of a policy of tax exemption or direct cash injections via ad hoc structures, such as France and the BPI.

In addition, African countries must become strategic states and mobilize both domestic and foreign resources to promote the creation of innovation ecosystems, such as Orange's Technocentres in Abidjan or Vodacom (Vodafone Group) in Cape Town.


As a business leader in DR Congo, what were the main challenges you faced?

As a Country Senior Officer, the DRC undoubtedly remains the most difficult challenge I have had to face because, together with my team, I put a lot of energy, for four years, into convincing my superiors to continue giving me carte blanche over this country despite the war in the East.

Then we had to convince several operators like Orange, Mauritius Telecom or Namibia Telecom to go there, and it was only after three years that we managed to persuade Vodacom to "marry" a local investor who held the licence. The installation of the network posed enormous logistical and security problems in areas considered too dangerous by the Congolese State and the Quai d'Orsay (French Ministry of Foreign Affairs), which required lengthy negotiations before the teams could be dispatched to the site. The other challenge was to train local staff to be able to independently expand the network. The success was such that this team subsequently operated in other African countries!

Finally, I was confronted with the paper burden of a tax administration that does not always act in good faith, and with insecurity in times of political unrest in Kinshasa and the provinces.


What advice would you give to a company wishing to establish itself in Central Africa or, more generally, in sub-Saharan Africa?

I would advise a French company wishing to establish itself in Africa to collect as much information as possible on the political and economic situation, the regulatory framework (investment code, customs law, taxation, etc.), the business culture and of course on the targeted market (competition, consumption habits, positioning of the product or service, etc.).

In addition, I always recommend that you be accompanied by specialised organisations such as Business France, economic missions, or Coface, which can cover the risk or facilitate prospecting, without forgetting French economic advisors based in these countries or independent consultants, including yours truly!

Normally, a clearly defined strategy and objectives should help to choose an appropriate legal structure (stable establishment, subsidiary, etc.) with significant tax consequences. However, I always advise you to be assisted on the spot by legal and tax firms that are better acquainted with local legislation.

Human resource management must never avoid the acquisition of intercultural competence. Africa is changing, it is not a monolithic cultural bloc, it is important to understand cultural paradigms, people are not just consumers!

Finally, in addition to the security arrangements provided by the French Embassy in the country, it is vital to provide a personal security system that will further secure expatriates and premises.