Alec van Gelder and Timothy Cox: Opening up markets to competition will improve Africans' access to life-changing communications technology (whereas Western aid propping up telecommunications monopolies will not)

Alec van Gelder is Project Director and Timothy Cox is Research Fellow at the International Policy Network, a development think-tank based in London.

Yesterday’s Man, Gordon Brown, was pitching Yesterday’s Idea at the African Union Summit in Uganda over the weekend. He thinks foreign aid will help telecommunications kick-start Africa’s lagging businesses.  It is an idea shared by Secretary of State for International Development, Andrew Mitchell, who has lauded the plan as “extremely sensible” in this week's New Statesman. Yet African economies have already demonstrated that building modern telecommunications infrastructure has less to do with government oversight and more to do with free enterprise.

Brown’s proposal is appealing but misguided. He thinks that because new technology has the power to revolutionise life for millions of Africans it needs government involvement — and our aid money.  This ignores the reality of African mobile telephony, which has boomed over the past decade.  When given the freedom to operate, Africa’s private sector has proven to be the best provider of life-changing communication technology to the poorest. A third of Africans now own mobile phones and almost 60 per cent of the population lives within range of a mobile signal.

Kenya provides one of the best examples of an open telephony market successfully serving millions of poor consumers.  At the beginning of the previous decade less than one per cent of Kenyans had access to a landline and just 3.7 per cent had mobiles. Yet the Kenyan government had had the foresight to increase competition with the former monopoly Telkom Kenya by auctioning new mobile licenses.  Local and foreign private investors were already investing in new infrastructure: now 42 per cent of the population has a subscription, and over 95 per cent has signal coverage. And access is even higher than the subscriber base suggests, because phones in rural areas are often for shared use.

However, access to technology varies greatly from country to country.  Botswana, with three competing providers, now boasts more mobile subscriptions per capita than China: 78 per cent of the population. By contrast the state-owned Ethiopian Telecommunications Corporation, continues to exploit a monopoly over service provision. Consequently, with no incentive to improve service or lower prices, only 3.7 per cent of Ethiopians have access to a mobile phone, and 1.1 per cent a landline.

Many African governments are starting to realise the benefits of competition, but the most significant obstacle to further development in telephony and internet remains the weight of domestic regulations.  Without changing these policies, more aid cannot help. Indeed, Brown’s aid proposals risk playing into the hands of governments whose cartelized operations prevent competition and deny cheap access to services.

Gordon Brown is right that new technology can make a huge difference.  A study by international consultancy Deloitte and the mobile operators' GSM Association said "a 10 per cent increase in mobile penetration leads to a 1.2 per cent increase in GDP."

Life without mobiles would be unthinkable for Kenyan market traders, farmers and transporters contacting suppliers, haggling over prices or doing their electronic banking. Mama Kim Atieno in Nairobi has halved the travel and transport costs of getting supplies for her small "food joint" called the Executive Canteen. She no longer spends KSh.3,000 a week on travelling to market and KSh.5,500 on transporting goods. Instead she simply arranges it all by cell phone for just KSh.4,000, including airtime.

Mobile phones are now used in West Africa to enable consumers to verify by SMS whether the medicines they buy are authentic - vital in a region where recent studies estimate 30 per cent of medicines are fake. And mobile Internet banking has the potential to provide access to previously unobtainable financial services, such as Safaricom and Vodafone’s joint Kenyan venture, M-PESA and others like it.

But in telecoms, as elsewhere, stable and open business conditions make the difference. A recent United Nations International Telecommunication Union (ITU) study demonstrates that when business conditions are improved there is significantly greater investment in telecoms. On the other hand, despite Gordon Brown’s enthusiasm, aid does not result in more free and open business environment. If anything, it does the opposite. The World Bank's Ease of Doing Business Index puts 24 African countries — all aid recipients  —in the bottom 30. In real terms, it is a hundred times more expensive to open a business in sub-Saharan Africa than in the UK.

Mobile phones can be good for development, but this certainly isn’t helped by propping up governments that hang onto their telecommunications monopolies.  Africa doesn’t need to return Gordon Brown’s call.