Harare, 25 August 2009

Mike Nxele

� Background and Overview

� ICT’s Growth and Development: Focus on Mobile

� Mobile Banking and The M-Pesa Success Story

� The Zimbabwe Economy and Impact on the Telecommunications

Sector

� Policy Options and The Way Forward

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� There is no facet of life that ICT’s do not touch.

� ICT’s are acknowledged as enablers of social and economic

development (G8, 2000).

� ICT’s are central to the promotion of the goals of the

Millennium Declaration.

� ICT’s have the potential for poverty alleviation and

improvements in the quality of the lives of people (WSIS 2003).

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� International interest in ICT’s and Information Society issues

has increased markedly in recent years: two World Summits

on Information Society (WSIS) in Geneva in 2003 and Tunis in

2005.

� What was significant was the recognition that ICT’s are not only

drivers for economic growth, but a key component in addressing

the development challenges (OECD 2009).

� Global initiatives to promote ICT’s for development are: the

Digital Opportunities Task Force (DOTFORCE 2000), the UN

ICT Task Force (2001), the Global Alliance for ICT Development

(GAID 2006).

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� Therefore, promotion of ICT’s should be part of any Nation’s

Development Agenda.

� This must be reflected in how ICT’s are placed within the Vision

and National Development Strategies and Plans.

� Resource Allocation for ICT’s; ICT’s Infrastructure Development.

� Ultimately ICT’s must be accessible to everybody at affordable

prices.

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� Fixed Telephony

� Mobile

� Internet

� Broadband

� These technologies are not mutually exclusive but can be

treated as separate technologies as each has its own profound

and transformative impact.

� Impact is different for the different telecommunications

technologies: Fixed, Mobile and Internet, Broadband.

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� This paper will focus on mobile technology because of its great

appeal to the majority of people in the developing world and

has the greatest impact in their lives and a direct livelihood

effect.

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� During the past 10 years (1998 – 2008) of economic decline in

Zimbabwe, ICT sector did not play its rightful role as an engine

of growth.

� Mobile growth fast and remarkable elsewhere in Africa, except

in Zimbabwe.

� Emphasized linkages between telecommunications and

economic growth.

� Zimbabwe was metaphorically disconnected.

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� Recovery of ICT sector needs to be central to Zimbabwe’s

Economic Reconstruction Program.

� Basis of this argument is the Conceptual and Empirical Evidence

of how ICT’s in general and mobile telecommunications in

particular have contributed to Economic Growth, Development

and Poverty Alleviation.

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� ICT’s within the context of Capabilities and Freedoms

� ICT’s and Empowerment (Gender Dimensions)

� Contexts of the broader views of Wellbeing and Livelihoods

� Poverty Alleviation, the BoP, the MDG’s

� Knowledge Economy , Social Perspectives

� Governance

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� Paper highlights growing importance of Mobile Banking as a

means of extending Banking and Financial Services to the poor

and the unbanked, citing the success of M-Pesa in Kenya as a

Case Study to demonstrate the extent to which Mobiles can play

a transformative role in the lives of people.

� Paper concludes by arguing for greater engagement in

promoting the growth and development of this sector within the

policies and actions of the State and any of its Agencies

concerned with the sector.

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� It appreciates the efforts made in turning the economy as this is

the only context within which the promotion of ICT’s can be

accommodated, and the pro ICT measures taken in the Mid

Term Review July 2009.

� It urges greater efforts to open up the market to greater

competition, and proposes a more ex poste type of Regulation

rather than the current ex ante.

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How important is Good Communications System for EconomicHow important is Good Communications System for EconomicHow important is Good Communications System for EconomicHow important is Good Communications System for Economic

Growth?Growth?Growth?Growth?

� Social Overhead Capital (SOC) is critical for economic growth

(electricity, communications, road network);

� Communications is a key component of SOC;

� Investment in telecommunications infrastructure, especially

Backbone Infrastructure is part of productive spending; has an

impact on Aggregate Supply.

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� Communications Systems Impact:

� Organisation of business life

� Productivity of firm and workers

� Organisation of household and community life

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� Communications and Growth in Developing Countries:

� Good communications networks widens markets

� Widens buyer and supplier networks

� Creates better information flow

� Lowers transaction costs

� Substitutes for costly physical transport

(quite significant in rural Africa)

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� Communications and Growth: a Macro AnalysisCommunications and Growth: a Macro AnalysisCommunications and Growth: a Macro AnalysisCommunications and Growth: a Macro Analysis

� Dual causality of Telecommunications and Economic Growth

� Better Communications – Higher Economic Growth

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� Telecommunications and Investment

� A 1% increase in GDP corresponds to an 8% increase in

Investment in Telecommunications (OECD).

� A 1% increase in fixed and mobile penetration leads to an

increase in net foreign investment of 1.2% and 0.5%

respectively (Furthers Economics).

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0

0.2

0.4

0.6

0.8

1

1.2

Growth Effects of ICT

Source: Qiang 2009 , World Bank 2009

Note: The y axis represents the percentage-point increase in economic growth per 10-percentage-point increase in telecommunications penetration. All results are statistically significant at the 1 percent level except for that of broadband in developing countries, which is at the 10 percent level.

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� Impact of ICT’s on Economic Growth:

� Of the 4 communications technologies i.e. Fixed, Mobile,

Internet and Broadband, Fixed Networks have the lowest

impact on economic growth and Broadband has the highest.

� Impacts are invariably larger for developing countries than

for developed countries, in each of the technology categories.

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Broadband

10% increase in high speed internet leads to 1.38% increase in

Economic Growth low and middle income economies (Quiang,

Rossoto), World Bank 2009

� For high income economies impact is lower;

� European Commission wants to make broadband a USO by 2010;

� 36% of households in Europe have Broadband, with an Annual

Broadband growth rate of 20%. Broadband Internet access tripled

since 2003.

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Mobile Impact

� 10% penetration of mobile – 0.6% economic growth rate.

� In developing countries 10% penetration – 1.2% growth i.e.

double the impact.

� Impact underestimated by as much as 75% because it ignores

indirect impact on downstream industries and consumer welfare

(McKinsey). Combined impact estimated 8%.

� In the East Africa countries of Kenya, Uganda and Tanzania, 1%

penetration resulted in 1.25% increase in GDP in 2006 (GSMA).

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Images courtesy of Jon Stern

“People in the developing world are getting more access at an incredible rate- far faster than they got access to new technologies in the past . . . The Digital Divide is rapidly closing.”(World Bank, February 2005).

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� An entire range of economic services enabled by mobile have

emerged.

� Beyond economic impacts are other improvements and

freedoms being made and enjoyed by almost everybody

including the BoP’s.

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� Communications and Growth: a Micro AnalysisCommunications and Growth: a Micro AnalysisCommunications and Growth: a Micro AnalysisCommunications and Growth: a Micro Analysis

� SIM project (Vodafone) 2004

� Mobiles have transformational benefits (enabling people to

do new and innovative things that unlock opportunities that

never existed before (M. Barling).

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� Incremental Benefits

� Efficiency Benefits: doing more with less; saving money and

time; access to information enabling better decision making.

� Transformational Benefits

� New innovative offerings, unlocking new opportunities e.g. M-Banking

� Production Benefits

� Creation of new livelihoods

� Selling of phone cards, airtime, downstream industries creates

thousands of job

� Social and Economic Empowerment

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InnovationInnovation Incremental benefits: Bringing people and

markets together in agriculture

Source: Does Digital Divide or Provide? The Impact of Cell Phones on Grain Markets in Niger, Jenny Aker, 2008, African Economic Outlook 2009, OECD Development Center, 2009

phoner~1.gif

Bakin Birgi

(Monday)

Zinder

(Thursday)

Tanout

(Friday)

Niamey

(Sunday)

65 km ~ 3 hours

20 km ~ 1 hour

750 km ~

not accessible

Home market

Farmer in Niger

• Esoko collects price information on crops in local markets and distributes it using SMS and

internet to farmers and buyers in 10 West and Central African countries

�2 mins

�2 mins

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Innovation Reaching the poor through new business modelsReaching the poor through new business models

Trickling down the Global Income Pyramid

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aid

1.3 billion people with US$1/day

1.4 billion people with US$2/day

1.5 billion people with US$4-40/day

0.8 billion

>US$40/day

2 billion mobile users in 2005

3 billion mobile users in 2007

4 billion mobile users in 2008

1.3 billion people with US$4/day

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By 2012, there will be 6,1 billion mobile subscribers reaching ever lower income populations

Source: New Growth Markets, Nokia Siemens Networks, 2008, Wireless Intelligence, 2009

6.1 billion mobile users in 2012

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Why is Mobile Banking important?

� It is an opportunity to bank and the unbanked and extend financial services to the power (transformational).transformational).transformational).transformational).

� A form of empowerment as it links the informal and semi-formal financial services market: (Social Economic InclusionSocial Economic InclusionSocial Economic InclusionSocial Economic Inclusion).

� Encourages flow of remittances, now 2nd most important source of resource flows to the developing world after FDI.

� Remittances a USD5 billion market in direct revenues and 2.5 billion in indirect revenues by 2012. There is a business case.

� There is a big market in Africa (high and increasing mobile penetration with low access to financial services).

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Regional Economies, Access to Financial Servicesand Mobile Penetration, 2008 and 2012

Sources: Mobile Penetration – Wireless IntelligenceAccess to Financial Services - The World Bank, Finance for All?

*) projected

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Mobile Remittances are cheaper

Transaction costs Transaction costs Transaction costs Transaction costs for domestic transfers have been cut by have been cut by have been cut by have been cut by

10 times 10 times 10 times 10 times in Kenya with mobile-payments

To send 9 €, Western Union asks a commission of 50 %,

M-Pesa mobile service requests 5 %

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The MThe MThe MThe M----Pesa StoryPesa StoryPesa StoryPesa Story

� A form of Money Transfer Service transacted through the

mobile phone in Kenya. It handles money transfers airtime;

top-ups and transfers; payment for utility bills.

� Introduced in March 2008 by Safaricom,

the leading mobile operator.

The M-Pesa Run-Away Success Story

Mobile Banking and the MMobile Banking and the MMobile Banking and the MMobile Banking and the MMobile Banking and the MMobile Banking and the MMobile Banking and the MMobile Banking and the M--------Pesa StoryPesa StoryPesa StoryPesa StoryPesa StoryPesa StoryPesa StoryPesa Story

� Awarded Kenya Banking Award for Product innovation

� UN World Business and Development Award

� Passed the Central Bank of Kenya Audit for Openness and Safety

� Audit also stated that M-Pesa has helped reduce financial

exclusion in the country

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Mobile Banking and the MMobile Banking and the MMobile Banking and the MMobile Banking and the MMobile Banking and the MMobile Banking and the MMobile Banking and the MMobile Banking and the M--------Pesa StoryPesa StoryPesa StoryPesa StoryPesa StoryPesa StoryPesa StoryPesa Story

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� From 1998 to 2008, the economy was characterized by:

negative growth rates, high inflation, massive de-

industrialisation and informalisation, and high levels of

unemployment.

� There was an attendant collapse of social services, and a marked

decline in people’s standards of living as many people were

stripped of their sources of livelihoods.

� The country joined the ranks of 27 other countries in Sub

Saharan Africa classified as Chronically Deprived Countries (CDC).

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Cartogram of USD 1/day poverty by country

Source: Chronic Poverty Report 2008-09

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Economic Performance 1997-2008: Selected Indicators

Sources: AFDB Selected Statistics on African Countries 2008 Volume XXVII, and IMF Regional Economic Outlook, Sub-Saharan Africa, May 2005 and April 2009; sub sources: IMF African Department database, February 24, 2005/April 14, 2009; and WEO database, February 24, 2005/April 14, 2009

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Zimbabwe Real GDP Growth Rates, 1997-2008, annual percentage

Source: AFDB Selected Statistics on African Countries 2008 and CIA, The World Factbook

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SADC Countries Real GDP, 2000 – 2007, average change, percentage

Sources: IMF, World Economic Outlook, Financial Stress, Downturns, and Recoveries, October 2008 and Crisis and Recovery, April 2009

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Zimbabwe Inflation Consumer Price, 1997 – 2007, annual percentage

Sources: AFDB Selected Statistics on African Countries 2008 Volume XXVII

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Zimbabwe Total Investment and Domestic Saving, 1997 – 2007

Resources: IMF Regional Economic Outlook, Sub-Saharan Africa, May 2005 and April 2009

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� Conceptually significant for Resource Mobilisation and

Economic development (Harrod Domar and Successor Models,

Keynesian Theory)

� Growth of Asia’s NIC anchored on high Savings Ratios

� Established Links between Investments in Telecoms and

Economic Growth

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Regional Economies, Gross National Savings as % of GDP, 2000 – 2006

Source: UNDP Zimbabwe, Comprehensive Economic Recovery in Zimbabwe, A Discussion Document, 2008

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Regional Economies, FDI Stock Inward, millions of USD

Source: POTRAZ 2009

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Source: POTRAZ 2009

Zimbabwe Subscriber Growth since 2000

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Zimbabwe Subscriber Growth, 2000 - 2008

Source: POTRAZ 2009

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Zimbabwe Operator Subscriber Growth, 2000 - 2008

Source: POTRAZ 2009

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Regional Economies, Mobile Cellular Subscriptions, 2003 and 2008

Source: ITU Information Society Statistical Profiles 2009 Africa

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Regional Economies, Mobile Cellular Subscribers, per 1000 inhabitants

Source: AFDB African Statistical Yearbook 2009

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� The Internet and Broadband:The Internet and Broadband:The Internet and Broadband:The Internet and Broadband:

� Penetration Levels

� Can we afford it?

� How does Zimbabwe compare with others in the Region?

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Regional Economies, Internet and Broadband Users and Penetration

Sources: extracted from Internet World Stats for 31 March 2009; ITU African Telecom Indicators 2008 (fig. 2007)

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Difference between Prices between Developing/Developed Countries, 2008

Source: ITU, Measuring the Information Society, The ICT Development Index 2009

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Africa has the highest price for Africa has the highest price for Africa has the highest price for Africa has the highest price for Africa has the highest price for Africa has the highest price for Africa has the highest price for Africa has the highest price for InternetInternetInternetInternetInternetInternetInternetInternet

Zimbabwe is competitively lower Zimbabwe is competitively lower Zimbabwe is competitively lower Zimbabwe is competitively lower Zimbabwe is competitively lower Zimbabwe is competitively lower Zimbabwe is competitively lower Zimbabwe is competitively lower than the Regional average. Or is it?than the Regional average. Or is it?than the Regional average. Or is it?than the Regional average. Or is it?than the Regional average. Or is it?than the Regional average. Or is it?than the Regional average. Or is it?than the Regional average. Or is it?

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Zimbabwe, Internet and Broadband, 2000 - 2008

Source: ITU, ICT Eye (online)

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� What does this mean for Zimbabwe?

� Telecom Sector suffered a lack of investment that affected all

the other sectors.

� Recovery of the sector hinges on recovery of the economy.

� But Sector recovery can also assist economic recovery. Sector

has demonstrated its capacity to survive economic turbulences,

especially in Africa (recall the dotcom crisis in 2000?).

� But it needs a set of measures that assuages the fears of

investors.

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� What does this also mean for Zimbabwe?

� A great Mobile Banking market awaits in Zimbabwe.

� Remittance can bring transformational production to

incremental benefits to improve the livelihoods of people.

� Remittance can promote socio-economic inclusion through

provision of access to financing.

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� Remittances a Business Opportunity for the Mobile Players in

Zimbabwe:

� An estimated ¼ of population leaves abroad.

� Many harbor wishes of coming back.

� Many household in Zimbabwe are supported by someone

leaving abroad.

� Most of the money is transmitted through unofficial channels.

Official channels accounted for 1% of remittances from South

Africa – 2007.

� Growing the Mobile Market and introducing services such as

Mobile Banking can benefit many people in Zimbabwe.

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� Lessons for Recovery Program

� The mobile sector failed to exploit the barriers to entry placed by the Reserve Bank of Zimbabwe (RBZ) in 2004 restricting the formal channels for remittances.

� Money Transfer Agencies were restricted to only four, and subjected to some stringent reporting conditionalities.

� Further, in 2005, the RBZ further decided that recipients receive their money in local currency at official exchange rates.

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� A recent ICT survey came up with three major issues dogging

ICT’s in Zimbabwe:

1. Infrastructure Development and Employment i.e. availability,

affordability and accessibility;

2. Finance Resources Mobilisation drive in support of ICT4D

activities;

3. Human Resource Development and Capacity Building.

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� Infrastructure Development

� Promoting Competition & Private Partnerships

� Lowering Entry Barriers

� Cost of acquiring a License in Zimbabwe is on the high side. This will impact the pricing structure as providers seek to recover their investment. In turn it affect service uptake. GSM established that in long run lower entry barriers will benefit the country and the people.

� Process for obtaining license needs to be streamlined.

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� Promoting Infrastructure Sharing

� This is as much a regulatory issue as it is a commercial one

(part of the 2nd wave of Regulatory Reforms). Pro-active

regulation that is developmentally oriented are pursuing this

model.

� In a way this is part of the Market Efficiency Gap Analysis.

New players may want to reach underserved areas but through

the use of infrastructure aimed by other.

� In the case of Zimbabwe, promoting (as opposed to merely

authorizing) sharing is needed.

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� Promoting Infrastructure Sharing

� This could be for both passive sharing (operators sharing the

non-electrical civil engineering elements of the network –

towers, masks, pylons, ducts) or Acting Sharing (the

active/intelligence part of the networks part of the 2nd wave

of Regulatory Reforms)

� Sharing reduces network development costs, makes roll out

faster and more affordable.

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� Infrastructure Development

� Building Confidence of the Investing Community

� Promoting Competition.

Zimbabwe is a Suppliers market at the moment

� Participating in Regional BB projects

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� Improving the Credibility of ICT Regulatory Bodies

� EKOWISA Survey for 2009 found low perception in the market.

� Balancing the Interest of many Parties:

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Three key requirements for a robust ICT sector are relevant in

the Zimbabwe scenario and need repeating here:

1. Timely policy and regulatory responses;

2. Cross sectoral leadership and institutional arrangements;

3. Public private partnerships that can harness the capabilities

of private sector to meet public policy objectives (World

Bank 2009).

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� Given the link between ICT development and economic growth

and development the hope for the future of ICT’s in Zimbabwe

rest on the revival of the economy.

� Promoting the ICT sector is not a matter of choice for a nation

eager to grow rapidly and improve the living standards of its

people. In the case of Zimbabwe, it is a necessity for

Zimbabwe to be reconnected to the ICT world.

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� Developing a National ICT Policy

� Ministry for ICT established by the new Coalition government

� ICT Bill is due for tabling in Parliament

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� ICT Industry:

� The Pro ICT Mid-Year Fiscal Policy Review (July 2009) is

cause for cautious optimism.

� It needs to be buttressed by other actions such as the

passing of the ICT Bill into an Act, the establishment of the

envisaged ICT Authority.

� Further liberalisation of the market and allowing more

players.

� Adoption of innovative Pricing strategies (Low Margin, High

Volume Business Models that encourage access and use by

the poor.

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�The Future is Bright.

�But it starts with what we do Today.

�Its all about balancing the interests of various Stakeholders (Investors, Consumers, Employees, Operators).

�The comfort to be drawn is that the Mobile Sector has so far not let anybody down anywhere in Africa, or the world for that matter.

�With the right Policies, Environment, Vision and Commitment, it will not let us down in Zimbabwe.

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