Zambia calling: The benefits of telecoms liberalisation in Africa

Few inventions have had as profound an impact as the mobile phone in Africa but governments have a nasty habit of standing in the way. That makes Zambia’s promise to free up international mobile calls andpartly privatise the state owned telecoms company Zamtel very tantalising: competition brings down prices and boosts the economy.

At the moment, Zambian mobile phone companies are forced to pay fees of around US$12 million--the highest in southern Africa--to state-owned Zamtel for foreign calls, causing prohibitively expensive rates. Users have to hope the Zambia Information and Communication Technology Authority (ZICTA) delivers quickly on last month's statement of intent but it included no date for action nor even a price.

Zambia has already seen the benefits of some telecoms liberalisation. Allowing competition between Zain Zambia and MTN Zambia made costs plunge:  in 2002, barely one per cent of Zambians could afford mobile phone calls but today more than a third can.

Thanks to private competition, much of Africa has seen a mobile phone revolution over the last decade--Botswana now boasts more mobile phone subscriptions per capita than China. Under Kenya's government monopoly Telkom Kenya less than one per cent of the population had access to a landline in 2002 and 3.7 per cent had mobiles. In 1999, the government auctioned mobile licences and private investors spent heavily on infrastructure: now 30 per cent of the population has a subscription and over 95 per cent has signal coverage.

Where countries dropped government control, mobile phones spread rapidly.

By contrast, Ethiopia is a case study in how governments stifle telecoms innovation. Under the state-owned Ethiopia Telecommunications Corporation, only 1.5 per cent of the population has a mobile subscription and even fewer have land-lines (all from the latest, 2007, figures). That is a scandal.

Modern telecoms matter: they boost the economy and improve lives. 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." But this exciting figure does not even include the profound impact that cheap communication has had on people's lives.

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: she arranges it all by cell phone for just KSh.4,000, including airtime, she told our colleague June Arunga for her 2007 report The Cell Phone Revolution in Kenya.

Today, almost 70 per cent of Africans live within network range and, thanks to competitive handset manufacturers and traders, many can get cheap phones.

Competition has transformed a luxury into a cheap and reliable necessity that improves and even saves lives across the continent every day. Mobile phones helped alleviate food shortages in Niger in 2005 because farmers could leapfrog corrupt government middlemen and communicate market prices, as much as 20 per cent cheaper in certain areas, directly to retailers and consumers.

A new scheme in six West African countries lets consumers verify by SMS whether the medicines they buy are authentic or potentially-fatal counterfeits--a big deal in a region where recent studies estimate 30 per cent of medicines are fake.

The rapid growth of mobile phones in Africa illustrates how businesses can provide an affordable service to the many, not the few--but only if governments allow them to.

Stable and open business conditions are essential. The World Bank's Ease of Doing Business Index puts 24 African countries in the bottom 30. A recent United Nations International Telecommunication Union (ITU) study demonstrates that when business conditions are improved there is significantly greater investment in telecoms, with all its benefits. Last year, investment in ICT in Africa totalled over US$8 billion--13 per cent of total foreign investment.

Yet overall mobile prices in Zambia are still eleven times those in Botswana. The right reforms can push those prices down: Zambia can become yet another example of how setting telecoms free allows business to flourish.