Potential for high ICT ROI in Africa

The ICT investment challenge that Africa faces can be turned into an opportunity for big rewards for investors. This was the central theme at the ForgeAhead Executive Business Forum in Bryanston yesterday.

George Finger, ICT specialist with the Development Bank of South Africa (DBSA), said on average in African countries, telecoms revenue is 3% of gross domestic product per capita. Teledensity has grown from a mere 2% to 20% due to GSM, he added.

Finger also compared Africa, which has nine cellular subscribers per 100 inhabitants, to Asian countries and the Americas, where there are 19/100 and 43/100 ratios respectively. This is indicative of opportunities for those who seek to make ICT investments in Africa, he noted.

The DBSA invested R2.64 billion in ICT in the year ending 2005, he said. "That is only 7% of total investments the DBSA made that year and it`s not enough."

He added that last year the bank decided to pay particular attention to ICT investment, although specific targets were not set.

Dr Gillian Marcelle, principal consultant at Technology for Development, said while it`s important for potential investors to evaluate the risk-reward proposition, those companies that have grasped opportunities in Africa have been rewarded.

Examples are mobile providers like Vodacom and MTN, which identified opportunities in Africa and acted accordingly, she said. Companies that were cautious are now playing catch-up, Marcelle added.

Willie Fourie, head of the techno industries strategic business unit within the Industrial Development Corporation (IDC), said the profitability and sustainability of projects that seek funding are not negotiable within the IDC.

The institution is not publicly funded and needs to raise funds, leading to a policy dichotomy, he commented. "While the law says we should invest in development projects, it must be recognised those who invest will go for more profitable sectors of the economy."

Marcelle noted that investors are not guaranteed to succeed, as choosing and executing investment decisions is more of an art than a science. Many investors learn from failure, she noted.

Marcelle said the regulatory environment in Africa protects incumbents. She noted that governments should shift focus from short-term goals and work to create an enabling environment that stimulates investment.

Deregulation is not enough, Finger added. Regulatory measures should address qualitative issues such as whether the investment will create jobs, offer connectivity to those who need it and attract other investors.

Finger said ICT investment initiatives are uncoordinated, with the result that impact is eroded and resources are wasted. He intends to present this issue to president Thabo Mbeki`s Presidential National Advisory Commission, he said.