Internet Speed and Economic Development in Africa

September 20 2017 Sahar ElDeeb

Technology,Africa

Internet Speed and Economic Development in Africa

“Broadband can radically change the socio-economic prospects for the region and contribute to higher growth and shared prosperity.” – Carlo Maria Rossotto, World Bank ICT Regional Coordinator in the MENA region[1].

The majority of African countries have certainly been lagging behind in the economic development path. Public opinion usually agrees that this underdevelopment is due to reasons such as bureaucracy, illiteracy, and others. However, in the 21^st century, a new variable was added to the development formula and it is often overlooked.

Research about the relationship between economic development and internet speeds started to be noted in the beginning of the 2000s. A research conducted in 2011 by Ericsson and others concluded that “doubling the broadband speed for an economy increases GDP by 0.3%”[2]. Not only that, but it also claimed that additional growth can be yielded by additional doublings of speeds. Moreover, a report released by the World Bank and IFC claimed that there is a GDP increase of 1.3% for every 10% increase in high-speed internet connections[3].

“Broadband has the power to spur economic growth by creating efficiency for society, businesses and consumers. It opens up possibilities for more advanced online services, smarter utility services, telecommuting and telepresence.” – Johan Wibergh, Head of Business Unit Networks, Ericsson.

Researchers have many explanations as to link economic growth to higher internet speeds. For example, it was proved that the shift from slow dial-up connections to broadband had a positive effect on productivity and efficiency[4]. It can lead to expand businesses and services, empower local economies, and social inclusion. All these factors contribute to boosting the competitiveness of the economy.

Internet speeds in Africa are very poor compared to the rest of the world. Data shows that 17 of the 30 countries with the slowest internet connections are located in Africa, 7 are in Asia, 6 in South America and 1 in Oceania. None of the top 30 countries are in Africa. To further identify the depth of this issue, a research conducted by Cable.co.uk showed that it takes about 18.5 hours to download a 7.5 GB file in Malawi, 14 hours in Egypt, and 18 minutes in Singapore (fastest internet in the world)[5].

The most promising African country when it comes to internet speed is Kenya. It has the fastest internet connections compared to its African neighbors with an average connection speed of 12.2 Mbps, having an impressive YoY change of 67% in 2017[6]. Not only that, but Kenya’s total available bandwidth jumped from 2028 Gbps end of 2016 to 2906 beginning of 2017, with a % change of 43.28%[7].

These impressive developments come as a result of implementing the National Broadband Strategy for Kenya (NBS) as part of Kenya’s Vision 2030 program, contributing to Kenya’s goal of becoming a knowledge-based economy by the year 2030. NBS aims to reach “broadband connectivity that is always on, and that delivers a minimum of 5 mbps to homes and businesses for high speed access to voice, data, video and application”[8]. It has 5 focus areas which are [9]:

Infrastructure, Connectivity and Devices
Content, Applications and Innovations
Capacity Building and Awareness
Policy, Legal and Regulatory Environment
Financing and Investment

“The strategy has enabled the government to roll out the National Optic Fibre Broadband Infrastructure that has linked all the counties to the Internet by fibre cable. Fibre cable ground installation and provision of 4G network coverage has contributed to the high speeds and efficiency in connectivity,” – Joseph Mucheru, the Kenya’s Cabinet Secretary in the Ministry of Information[10]

This strategy has proved successful with extinguished growth in both start-up and e-commerce segments in Kenya[11], spurring massive economic and social benefits. Currently, Nairobi is considered as East Africa’s most vibrant technology hub and Kenya is internationally recognized as a pioneer in the mobile banking field (M-Pesa), boosting access to finance and financial inclusion for Kenyan citizens[12]. All in all, the Kenyan experience demonstrated that investment in internet speeds and penetration has many positive spillover effects on various aspects of the economy.

Sahar ElDeeb, Analyst at Infomineo