Apps for Africa: Can SA tech up? | Fin24

Apps for Africa: Can SA tech up?

Aug 18 2016 12:37
Jana Jacobs

In Moxyland – a novel by Lauren Beukes – people live in a dystopian future set in Cape Town where a cellphone is everything. It is a means to confirm your identity and provides you access not only to money, work and travel, but also to your home. If you commit a crime, you are not sent to prison. You are “disconnected” – making you an outsider unable to function in society.

In 2008, when the novel was released, this future was fictional – distant at best. Only eight years later, and we can’t deny that smartphones (and our increased dependence on them) are changing the way we live our lives. While “disconnection” is not going to be a proxy for prison, it’s not such a stretch to associate a lack of connectivity with a hindrance in growth and functionality. 

Technology, and the apps it’s given rise to, is changing the way we engage with our world and function on a daily basis. Whether you are catching an Uber, banking, shopping, or playing a game phenomenon (read:Pokémon Go), you can do it all through an app.

The innovative tech start-ups developing and building these apps are reshaping industry globally to cater to the increased need for (often cashless) convenience, and to provide consumers with solutions that provide instant access and gratification.

But how does SA measure up on the tech scale?

According to Arthur Goldstuck, MD of World Wide Worx, six years ago less than 10% of the population had smartphones, where currently nearly half the population does. “This drives everything,” he says.

However, when it comes to using our smartphones optimally, we aren’t really because a gap remains between smartphone users and internet users. According to World Wide Worx estimates, 25% of smartphone users in SA are not internet users. This disconnect is due to the high cost of mobile data, users’ fears that mobile data will “eat up their airtime” and the reality that a smartphone that is already connected to the internet automatically uses airtime when completing background updates, according to Goldstuck.

Ultimately, most consumers are terrified of using their data, and 18m smartphone users primarily access their email, WhatsApp and Facebook on their devices. Few other apps are used, with a possible half a million using Uber. Although this is a great stat for Uber, Goldstuck points out that this represents a fraction of SA’s population – just under 1%.

In terms of smartphones, the optimistic forecast is that there will be about 29m in use in SA by the end of this year, with Goldstuck adding that we are reaching saturation of smartphones within the adult market in SA. “Eventually most cellphone users will be smartphone users…at around 2021 we will see saturation in the cellphone market at a total of around 45m.”

Vicki Myburgh, entertainment and media leader at PwC, believes that “smartphones have and will continue to prove that they are both market-making and market-changing… The smartphone is already the device through which most South Africans access the internet, and the growing take-up, we believe, drives a virtuous circle whereby, as more people get online, opportunities are created for advertising, local app development, content distribution and e-commerce, which in turn drives further demand for smartphones and mobile broadband.”

Connection, then, is key.

Country comparisons

So then, the problem is not so much with owning a smartphone but with connectivity and thus usage.

In terms of fixed-line broadband access, we are the leaders in Africa. Goldstuck explains that mobile internet is technically all broadband, but practically it’s not. “When your signal is weak, then it’s not a broadband experience, but it is a broadband service.”

Myburgh explains that South Africa is lagging behind more developed countries, but in comparison to African countries such as Nigeria (with mobile internet penetration of more than 25%) and Kenya (mobile internet penetration of more than 30%), South Africa is slightly ahead at around 36%.

“Mobile internet is popular in developing countries due to the affordability and the fact that it is available on pre-paid models in small packages,” she says.

According to Dobek Pater, managing director of Africa Analysis, “we will always be behind more developed markets in terms of new technology adoption on a large scale due to lower spending power of our average consumer”.

Can SA tech up?

What is important is for countries to realise the concept of the digital nation, according to Goldstuck.

And at present, Kenya and Rwanda seem to be the only African countries catching on to this, as can be seen with Kenya’s investment into its “Silicon Savannah” and Goldstuck’s belief that Rwanda is exhibiting the most exciting tech advancement on the continent. Of course, Rwanda brings with it concerns around its human rights and is not a media-friendly country – things that may negate this advancement somewhat.

So is SA’s government being short-sighted when it comes to the concept of a digital nation?

Pater doesn’t think so.

“I think [government] realises the importance of moving to digital platforms and the need for inclusion of all sectors of the society, business and government in the digital future. However, the way in which the government appears to be approaching it results in unnecessary delays in achieving these targets, which is ultimately counterproductive to the achievement of the self-defined goals.” (See sidebar below.)

Goldstuck, however, believes that the mentality towards digital advancement is virtually non-existent in SA. Couple this with what he deems a troubled telecommunications sector and it would seem that SA’s path to tech advancement is not looking particularly bright.

As can be seen in the tech environment, there is not a lack of innovative minds and potential for tech start-ups in the country, “but you have to be lucky or very determined and have strong backers to make innovation count in this country if you are a start-up,” says Goldstuck.

For an SA app to go global is not impossible, but it is unlikely. According to Goldstuck the bottom line is that the app would need a big audience as a starting point and needs to show traction. “It’s the old network effect: the bigger your network gets, the bigger it gets. The more momentum you have, the more you can build on that momentum.”

SA’s market is simply too small to facilitate this. Payment app SnapScan (see sidebar on pg. 30) is an example of an SA app that had the possibility of expanding globally. However, the app gained traction in SA through “an aggressive physical roll-out” whereby it spread via its presence at flea markets and in stores, which is a difficult base from which to scale, according to Goldstuck.

Myburgh reiterates that connectivity (or lack thereof) remains an issue: “Connectivity, especially for the man on the street, is a barrier to the local tech start-up scene as electronic products and services are not able to generate economies of scale as they would be if the entire population was connected.”

Where SA certainly has teched up is in the banking sector. With regard to innovation, Goldstuck believes that “banks have finally all gone beyond lip service”. This can be seen in FNB’s establishment of an innovator division, Standard Bank’s innovation environment in Rosebank, Nedbank’s use of big data, Absa’s integration of interesting payment methods in its credit card space, Capitec’s low-cost banking and Investec’s biometrics.

This innovation, however, is not seen in other sectors because they lack the same incentives. “They are not as obviously threatened as the banks are by start-ups. But this means that you could find massive disruption finally happening because they are not ready.”

Towards a connected continent

So what is the outlook for tech advancement across Africa?

Goldstuck believes that with more undersea cables landing in the future and the cost of wholesale internet costs falling, the cost of mobile data will drop dramatically and we will see a lot more terrestrial fibre spreading from the undersea landing points, especially in urban and metropolitan areas.

There will be a proliferation in urban fibre grids and “urban Africa will be highly connected”, says Goldstuck. However, rural Africa will still be facing a digital divide – not in terms of devices because most users will have the device necessary for accessing the internet, but in terms of affordability and quality.

“Everyone will have access, but it won’t be the same. And everyone won’t be able to afford the same access,” according to him.

So although Moxyland has not quite materialised, there is still a lot to be done if SA and other African countries are to avoid "disconnection".

This is a shortened version of the cover story that originally appeared in the 25 August edition of finweek. Buy and download the magazine here.



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