Into Africa

Which area of the world boasts seven of the top 10 fastest growing economies since 2011? Latin America - nope. Asia - so ten years ago! The place to be for real growth is Africa, where private equity investments have doubled in just two years, and the US, Chinese and European governments are tripping over each other to pave inroads for their own corporations. In fact, the World Bank says the collective economy of the entire continent grew by 5.6% last year.

The first US Africa Summit, held in Washington DC in August, was widely reported as a pivotal shift in perceptions of Africa as a place of war, corruption, and disease to a place of economic growth, investment, and grassroots innovation. Many suspect this shift in perceptions is due to a realization among American politicians and business leaders that China is far beyond the US in terms of market creation in Africa. Companies in a wide range of industries are now forging ahead in Africa despite persistent challenges to the business environment (e.g., infrastructure, socioeconomic inequality, corruption, and regulatory obstacles). Technology, pharma, media, and consumer goods companies reason that the burgeoning young, urban consumer class, though still a minority in all African countries, has more disposable income and the tools (i.e., phones and Internet) to buy what they want.

But where exactly are the greatest opportunities? Corporations are approaching the market from the top-of-pyramid down to the middle class, and the development community from the base-of-pyramid upwards. In such an environment, the most potent opportunities are at the intersection of corporate and development community interests. For MNCs, this means designing and delivering digital and mobile services with both a strong commercial value proposition and the potential for social impact. As the development community seeks to bring digital and mobile services to scale, there will be a real opportunity for enterprise-grade solutions and platforms that deliver key financial, health, agriculture, and public services. (At the US Africa Summit, Power Africa was frequently cited as a model initiative.) For their part, local governments are playing the tricky game of encouraging investment without creating dependency or hobbling local industry. Despite the increasing power of the consumer class, few companies will succeed without the collaboration and support of key government and local stakeholders. As Africa grows and flexes its economic muscle, multinational technology companies will do better to be seen as a partner than as a vendor. 

Microinsurance: Rising Star or Tough Sell in Emerging Markets?

A report released last month by the insurance company Swiss Re claims that there is a $40 billion market opportunity for targeting microinsurance to low-income people earning less than $4 a day in emerging markets. Microinsurance products can include life, health and weather insurance and feature lower premiums and coverage levels than traditional offerings. According to the report, the Asia-Pacific region is the largest and fastest-growing microinsurance market, though the segment is also growing in Africa and Latin America. Many companies are already in the process of extending insurance to low-income customers in both rural and urban areas. China Life Insurance Company has provided 4 million microinsurance policies covering approximately 8 million farmers, while Bradesco Seguros, the largest insurance provider in Latin America, hopes to add an additional 20 million new clients on the strength of its microinsurance products. Panama's Nacional de Seguros recently announced that it will be launching a number of microinsurance products in 2011, and Malayan Insurance is expanding its reach in microinsurance by partnering with other organizations to develop new insurance products for the poor in the Philippines. 

Microinsurance products can benefit low-income clients and insurers alike.  Poorer individuals targeted for microinsurance tend to by very risk averse. External shocks such as a death in the household or a drought can force them to sell off the few assets they have to stay afloat, stifle their future investments and ultimately cause them to fall even further into poverty. Microinsurance can help the poor guard against events that could otherwise wipe out their family's assets overnight. Meanwhile, microinsurance allows insurers to enter a new market and build a brand image, paving the way for microinsurance policyholders to become conventional insurance customers as their assets grow.

Despite these benefits, there are many challenges to making microinsurance profitable, including customer perception and price sensitivity. Low-income customers, who may not be aware of insurance or may perceive it as a luxury item, need to clearly understand the value added to their business or families before purchasing the insurance product. Conducting in-depth research can help insurance companies develop compelling products and messaging. Additionally, technology could be utilized to both educate customers and bring the products to market. Since the brick-and-mortar model is not always feasible for reaching poor, rural consumers, insurance providers would benefit from technology solutions that both market and sell policies, particularly as mobile payment systems develop.

Collaboration Shaping Demand for Health Technologies in the Developing World

A consortium of international health stakeholders just issued a call for collaboration to expand the use of technology in reducing maternal and newborn mortality. The call was issued by the Partnership for Maternal, Newborn and Child Health (PMNCH), an international alliance of 280 governments and development community members working to reduce maternal and infant mortality. This group has garnered the support of high-profile organizations such as the mHealth Alliance, a cross-sector organization launched in 2009 by the Rockefeller, UN and Vodafone Foundations. When organizations such as these collaborate, they are actually shaping how governments will use and demand technology in the future.

Maternal and child health has captured broad attention throughout the development community. Reducing maternal and child mortality is the stated goal of Millennium Development Goals (MDGs) 4 and 5, and they are the goals that have seen the least amount of progress. The recognition that insufficient progress has been made in these areas is illustrated by the emergence not only of the consortium, but of other organizations such as Advanced Development for Africa (ADA), a new foundation dedicated to scaling African health programs with a focus on maternal and child health as well as communicable diseases. And The Bill & Melinda Gates Foundation recently announced $1.5 billion in funding over the next five years for maternal and child health, family planning and nutrition.

Multinational companies seeking to expand the reach of their technology solutions in the developing world can advance their goals by getting involved with the development community early. By identifying and mobilizing resources towards key issues, the development community is influencing the health agenda and ultimately the technologies that governments procure. For instance, a new partnership between the Carlos Slim Institute for Health, the Gates Foundation, the Government of Spain and the Inter-American Development Bank promises $150 million to Mexican and Central American governments to support maternal health, nutrition, vaccination, anti-dengue and anti-malaria campaigns. Joining forces with leading organizations and emerging alliances in public-private partnerships can help multinationals get a seat at the table and shape the new demand for healthcare technologies.

Africa's homegrown companies come into their own

The start of the World Cup in South Africa this month promises to shine a new light on Africa's increasing economic dynamism, which is often overshadowed by the flashier growth of markets like China and India. It is not just the continent's consumer base that is expanding; homegrown African companies are also spreading their wings and challenging foreign multinationals in areas such as retailing, financial services and mobile communications. These firms are taking advantage of reduced barriers to intra-African trade and their knowledge of African consumer tastes to grow beyond their home countries and gain the scale they need to compete with companies from outside the region. The rapid growth of forty of the best

African firms have even led The Boston Consulting Group to christen them the "African Challengers". The growth of local "champions" signals a new maturity in African markets. In these countries, as well as other emerging markets, the emergence of competitive local companies usually follows a period in which foreign investors have taken advantage of political stability, low-cost labor and favorable incentives to produce goods and services for both local and export markets. Skills and knowledge transferred by these firms to local workers, as well as increased economic activity, then fuel the growth of native firms. An increasing number of African countries, in particular South Africa, Botswana and Kenya, now have the conditions in place to produce enterprises that can compete with multinational corporations (MNCs).

The growth of these companies poses a challenge to Western firms, but it also presents an opportunity to learn from the strategies and innovations of businesses that have their finger on the pulse of local customer segments. When entering new geographies, MNCs would do well to "go native" by understanding local, competitive dynamics. Thorough competitive intelligence and analysis of emerging-market competitors can be a critical part of MNC success on a global scale, especially when these new, local entrants threaten to upset the status quo.

mHealth for the masses...

by Karen Coppock
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MIT's Technology Review highlighted an ultra inexpensive microscope - just $3 - that can be attached to a mobile phone to conduct basic medical diagnostics such as generating blood counts and identifying disease cells and bacteria.

The key to its low price is the use of software, rather than an expensive lens for the medical diagnostics. Aydogan Ozcan, an academic and entrepreneur at UCLA, is the brain behind this solution and he is forming a venture, Holoscope, to continue to refine and then commercialize this solution.

I was very pleased to see that one target market for this low-cost microscope is educational institutions. While in Uganda a few months ago, the research organization where I was doing some volunteer work (Conservation Through Public Health) lent its microscope to the local hospital and schools as neither had access to a microscope (not even the hospital!). Even the most resource-constrained schools may be able to find a way to come up with $3 and most teachers that we met - even in very rural areas - owned mobile phones.

One critique of the $3 microscope was that the images were not clear enough and that doctors would be hesitant to use them. Many public high schools in remote areas in Africa (and likely Latin America and Asia) have no microscopes, so I imagine that low-quality images are a tad better than no images. Regardless as to if this particular solution succeeds or not, the most important take-away is that engineers are beginning to design very low-end, low-cost solutions so that the masses in emerging markets (and low-income segments in developed countries) will be able to benefit from the power of mHealth applications.

Microsoft Takes a Deep Breath, Releases 7

by Brendan Smith

The long-heralded release of Microsoft's new operating system, Windows 7, at last dropped yesterday, and that whooshing sound you hear is likely a gentle sigh of relief washing over Redmond. Reviews for the new OS have been largely positive, helping Microsoft put some of the negative atmosphere caused by the Vista OS aside. Microsoft also announced better-than-expected financial results today, despite revenue and profit declines.

Competitors are not sitting still for the hoopla though. Apple has launched advertising aimed at getting users to buy a Mac rather than going through the upgrade process, which is easy for Vista users and not-so-easy for XP users, who must do a clean install and copy and replace all files they wish to keep. And IBM is also using the opportunity to introduce its own software suite, which it launched specifically for the African market, to consumers in North America too. IBM claims that its suite could save customers 50% off the cost of migrating to Windows 7. It's part of a "Microsoft-free" alliance with Canonical, Red Hat and Novell. The initial package was aimed at African government and education users, while the North American push is targeted towards business users.

Google has also recently stepped up efforts attempting to get computer users to do more in the cloud, where it in turn is being more aggressively pushed by Microsoft. Windows 7 may signal just the parting shot of a whole new war for users' affections.

The mobile phone is the computer for Africa

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by Karen Coppock

During a break-out session in the MobileActive08 conference in Johannesburg last week, a participant from Uganda asserted that the mobile phone is the computer for Africa. This proposition was heavily debated amongst the group, with some voting in favor of the computer (argument: have you ever tried to work on a spreadsheet or edit a Word document on a mobile phone? The screen is simply too small to be one’s only computing device) and others voting in favor of the mobile phone (argument: affordability, ubiquity, ease of usage, etc.).

One concern with computers was the requirement for literacy. Yet someone in the group mentioned that literacy is also an issue for mobile phones as SMS messages are so much more affordable than voice calls and many of the MobileActive08 projects revolved around SMS text messages. A very sharp participant from Zambia mentioned that there is an old tradition of letter writers – people who used to write letters for people who were not literate. She said that there is evidence that this trend could be translated to the mobile phone environment with the emergence of SMS writers or people that will send/read a text message for someone if they are not literate (either reading/writing literate or technically literate).

Regardless of its shortcomings, the general agreement in the small group was that the mobile phone may very well be the only computing device that millions of Africans ever experience first-hand. There is an opportunity, therefore, to develop tools that enable the mobile phone to become easier to use as a computer (i.e., docking stations for mobile phones with connections to a monitor, keyboard, external speakers and/or a mouse) …thus far the CellC and Vodacom mobile phone booths across South Africa have not exploited this opportunity, but perhaps that is the next step in the technology’s evolution in Africa.

Pre-paid funeral plans....

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by Karen Coppock

From Soweto to Joburg to Limpopo, tombstone and funeral service signs dotted the landscape in all of the places we visited in South Africa last week. Billboards advertised tombstones, coffins, and even pre-paid funeral packages. Funerals are a big business in South Africa and unfortunately, with the spread of HIV/AIDS, it is a growth industry in Africa. The poor (and middle class) often experience the double trauma of both financial and emotional devastation when a loved one passes away. Our local researchers noted that in certain traditions, the family of the deceased is responsible for butchering a cow for their town every day from the person’s death until their burial. This cost is over and above the expenses of purchasing a coffin and a tombstone and has to be incurred even if the deceased person was the primary breadwinner.

Entrepreneurs have created business model innovations, such as pre-paid funeral packages and funeral insurance, to enable families to mitigate the financial losses associated with funerals yet still fully participate in traditional rituals. Both firms and families benefit from these innovations. Firms benefit as their clients’ lack of a constant income does not necessarily impact the firm’s bottom line. Families benefit by enabling a dignified end for the loved one and limited funeral-related debt for the surviving family members. Identifying this type of win-win situation is key to success in emerging markets…and in business in general.

Africa Says "Call Me Back"

Reporting in their “oddly enough” section recently, Reuters noted that one-third of all cell phone calls made in Africa are “missed.” While odd to Reuters, “missed” calls are a generally accepted method of communicating in Africa. The practice of “beeping,” which involves phoning someone and hanging up so the burden of the return call cost is on the receiver, was created by cost-conscious users. (In most markets outside the U.S., cell phones charges are billed only to the calling party.) Frustrated local phone operators, whose lines are tied up with non-income generating exchanges, are actively seeking methods to generate nominal revenue from this practice including offering a limited number of “call me back” text messages for free with accompanying fees for increased use.

“Beeping,” while unanticipated by wireless operators, is a smart adaptation of technology to better suit user needs and is currently under study by Microsoft Research. Cash-strapped users can continue to use their phones to communicate with friends and family as long as someone else foots the bill. This practice comes with a host of etiquette rules like not beeping a romantic interest and the one with more wealth pays. While such rules help to make “beeping” more socially acceptable, it is still considered nominally intrusive by receivers and demonstrates the degree to which users are willing to inconvenience or be inconvenienced in order to communicate with one another via cell phone.

Wireless operators have the opportunity to benefit from users' willingness to suffer minor inconveniences in return for service. With emerging advertising models, operators allow users to make a phone call for free or at subsidized rates in return for viewing (or listening to) a short ad. Operators can sell ad space to corporations interested in reaching the emerging mass markets of developing countries. Skeptics may question whether cash-strapped cell phone users are an interesting target market for advertisers. Vital Wave Consulting research demonstrates that cell phone users, even those earning less than subsistence-level income ($2 per day), have funds available for the purchase of goods and services. For instance, in Nigeria alone, individuals earning less than $2 per day represented a $40 billion market last year. Add this to other large markets and the African continent begins to represent a significant growth opportunity for consumer companies that face saturated or low-growth markets in developed countries. With advertising in exchange for free or lower-cost phone calls, former “beepers” could be the next billion pairs of eyes and ears to corporations seeking such growth opportunities in emerging markets.

Also in the news:

• India's broadband connectivity numbers are falling
• CDMA still kicking in Africa
• International remittances equal to a Fortune 500 company

Anecdotes on Mobile Trends in Africa

posted by Karen Coppock
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Had the opportunity to have coffee with Ken Banks of Kiwanja yesterday – always enlightening.

He mentioned some interesting anecdotes from the Mobile Advocacy Toolkit Working Meeting he participated in in Nairobi earlier this month.

Uganda - Training on SMS inbox cleaning. An entrepreneur created a business teaching mobile phone users how to clean their SMS inboxes. He charges $1 for a one hour class, a steep rate in a country in which many people earn less than $1 per day. Shows how we take for granted how “easy” mobile phones are to use.

Congo and Rural Uganda – Women prevented from using mobile phones. Appears that women are discouraged, or outright forbidden, to use mobile phones in some parts of the Congo and rural Uganda. Jealous husbands are not keen on their wives having access to communications devices even if they could be the gateway to financial, health and educational services.

Kenya – Mobile phones cobbled together with spare parts. In Kenya, some entrepreneurs apparently build mobile phones from a variety of spare parts and homemade materials. For some $15-20 a customer can pick a model and the entrepreneur will weld together a mobile phone for them…it may not be pretty, but it works – at least for a while.

Kenya – Mobile phones used to connect cyber cafes to the Internet. A leading carrier offered a flat rate (a few dollars per month) GRPS service in Kenya. Entrepreneurs seized the opportunity to create cyber cafes using mobile phones as modems for PC Internet connectivity. Pakistanis also tend to use mobile phones/GRPS to connect their computers to the Internet – a new twist on fixed mobile.

Thanks for the interesting stories, Ken.

Mobile Banking Lacks a Global High-Tech Leader

Using mobile phones for financial transactions, or m-banking, has seen rapid adoption in countries like the Philippines and Japan. Though the service remains fragmented and country-specific, this week’s CIO magazine points out the growing opportunity for m-banking in Africa.

CIO bases their assertion on survey results from South Africa, where local bank subsidiaries are already processing thousands of mobile transactions each month, and the biggest barrier to wider adoption seems to be a lack of consumer awareness.

Finding signs of m-banking success in South Africa is not surprising. Vital Wave Consulting research reveals that the mobile phone saturation rate among South Africans living at or above subsistence is comparable to the level in European markets. Saturation in South Africa (and Nigeria), together with rapidly increasing mobile penetration rates in other African countries, create a fertile user base. And mobile phone-based financial services are particularly attractive when poor roads and public transportation systems make a trip to the bank an expensive, all-day journey.

There are ample, quantifiable business opportunities in the m-banking value chain for multiple players, including banks, international credit companies, carriers, and software designers. While financial service providers are moving quickly to realize these opportunities, no global technology leader has stepped forward. A multinational high-technology company capable of providing such mobile solutions has much to gain by enabling comprehensive m-banking across emerging markets.

Also in the news:
• Microsoft is putting their money on smart phones as the next computer
• GSM and CDMA search for the best foothold in developing countries
• Vodafone unveils handsets designed for emerging markets