In the 'West' or the 'North' we have come to expect at least one telephone line in our home (often attached to this are several telephone 'handsets', an answering machine and a fax machine), another telephone line reaches our office desk and we are increasingly looking to buy one or more mobile telephones or possibly a pager. The story in the South is very different. Table 1 shows figures for many African countries together with the Gross National Product (GNP) per capita. The contrast with the Northern countries is extreme. Some countries have been omitted because they refuse to return data to the International Telecommunications Union (ITU) or do so in incomplete form. Often this is because the data are treated as state secrets, fearing that such data could be used to evaluate the performance of their governments, something to be avoided at almost any cost.
The higher figures for Algeria and Libya are accounted for by the oil revenues which have allowed significant investments in telecommunications. Although South Africa also has a relatively high penetration rate for telephone lines, it is no surprise to discover that the distribution is badly skewed between black and white consumers. For example, in rural areas white farmers were well provided for at very modest line rental charges, achieved by cross-subsidy from other parts of the telephone service. In marked contrast are the black townships where there exists a population in relatively high density with a willingness to pay but who were not provided for. Telephones are high in the requirements of those living in the townships, after water, electricity and larger houses. With the demise of apartheid the imbalance can finally to be remedied, but the problem is how to do it. In many ways the situation in South Africa parallels that of Eastern Europe, where telephone penetration rates lag far behind GDP and consumer spending levels.
Country Population Area Telephone Intn'l GNP per capita (millions) (km2) lines call (US dollars) per 100 completion popn. rate % 1992 1992 1990 1992 1992 Sweden 8.7 450 68.08 63.6 27,010 USA 255.4 9,373 50.88 70.0 23,240 France 57.4 552 49.76 63.1 22,260 Japan 124.5 378 43.83 68.1 28,190 Belgium 10.0 31 39.15 61.6 20,880 Netherlands 15.2 37 46.24 - 20,480 UK 57.8 24.5 44.2 - 17,790 South Africa 39.8 1,221 9.74 53.7 2,670 Libya 5.31 17.2 5,026 * Tunisia 8.4 164 3.76 26.2 1,720 Egypt 54.7 1,001 3.25 34.7 640 Namibia 1.5 824 3.09 1,610 Algeria 26.3 2,382 3.09 25.5 1,790 Botswana 1.4 582 1.95 50.9 1,790 Swaziland 1.76 31.8 642 * Gabon 1.2 268 1.73 4,450 Morocco 26.2 447 1.60 31.5 1,030 Zimbabwe 10.4 391 1.34 34.3 570 Gambia 1.25 48.3 368 * Zambia 8.3 753 0.83 32.8 390 Congo 2.4 342 0.70 1,030 Kenya 25.7 580 0.70 33.3 310 Guinea-Bissau 1.0 36 0.62 220 Senegal 7.8 197 0.60 34.1 780 Cote d'Ivoire 12.9 322 0.59 37.2 670 Lesotho 1.9 30 0.56 38.2 590 Sierra Leone 4.4 72 0.39 16.5 160 Malawi 9.1 118 0.32 210 Benin 5.0 113 0.31 24.6 410 Mauritania 2.1 1,026 0.31 22.9 530 Ghana 15.8 239 0.30 29.8 450 Mozambique 16.5 802 0.30 36.6 60 Togo 3.9 57 0.30 27.4 390 Tanzania 0.30 17.5 83 Madagascar 12.4 587 0.28 - 230 Ethiopia 54.8 1,222 0.25 39.7 110 Sudan 26.5 2,506 0.25 8.8 - Nigeria 101.9 924 0.22 17.6 320 Burundi 5.8 28 0.19 210 Somalia 8.3 638 0.19 - Guinea 6.1 246 0.18 13.1 510 Central African Republic 3.2 623 0.17 410 Uganda 17.5 236 0.17 27.1 170 Burkina Faso 9.5 274 0.15 34.2 300 Rwanda 7.3 26 0.14 29.2 250 Mali 9.0 1,240 0.14 26.6 310 Niger 8.2 1,267 0.12 19.6 280 Zaire 0.08 5.5 260 Tchad 6.0 1,284 0.07 - 220Sources: ITU (1993), INTUG News July 1994, page 26, World Bank (1992) and World Bank (1994).
Notes: * = 1989, ° = 1983.
As Figure 1 shows, the growth in the penetration rate of telephone lines is weak-it would take decades to reach the levels of European countries. Often substantial network growth is offset by even more rapid population growth.
Source: ITU (1993).
In terms of reaching a mass market, the key will be public telephones, which can be:
Coin machines are going out of fashion, because of unreliability and problems of coin collection together with the need for frequent replacement of the coin detection mechanisms. Pre-paid cards are now seen as more reliable. In some countries, such as Benin, de-regulation has allowed the creation of telephone and facsimile bureaux, which are usually linked to other service businesses. Thus a single telephone line can be shared by many individuals and small businesses.
For most people in urban areas it is possible to use a public telephone, though these can be expensive and unreliable. For many in the rural areas there are no public telephones. Where private telephones do exist, they are a symbol and instrument of power, belonging to the ruling political elite, to the bureaucrats and factory managers.
In Africa there has been a tendency to restrict investment in telecommunications, partly because it has not been seen as fashionable and partly because of a failure to recognise the link between investment in telecommunications and economic growth. The latter was particularly the case in Marxist-Leninist states, even in Eastern Europe and the USSR very little was spent on their telephone networks. In particular, the cost of failing to make these investments was not recognised. Sensible investments in telecommunications can be shown to have a positive feedback into economic growth. The evidence for the benefits from investment in telecommunications usually involve a comparison of measures of macro-economic activity and telecommunications availability. The strong correlation between telephones per 100 inhabitants and GDP found in many countries can serve as a starting point from which to formulate telecommunications policy. Telecommunications investment can be both a stimulus and a consequence of economic growth. Thus economic growth provides revenue for investment in telephony, while investment in telephony leads to economic growth.
Some World Bank experience of investment suggests that as much as half of new construction funds can be generated locally, once initial 'pump-priming' finance has begun the process of reconstruction. However, profits from telecommunications are in danger of being transferred to other sectors as cross-subsidies (usually to the postal service or finance ministry), this is dangerous, given the large demands within the sector itself. Profits and foreign funds used for reconstruction of the network and for investment are in danger of being poorly allocated by the existing bureaucracies which consequently must either be replaced or retrained to acquire the technological, management and marketing skills and competences needed to operate a modern telecommunications network. In the area of marketing, a trained workforce can increase the profitability of the telephone network not only by servicing existing demand, but by creating new demand through greater consumer awareness of the advantages of a modern telephone network. Initial emphasis can be placed on business telephone networks that are likely to generate heavier traffic and so generate the more substantial profits needed for initial development of the public network.
In broader terms, a telecommunications network is important to create more open civic societies and to aid the functioning of democracy. The monopoly on information that raises transactions costs is still enjoyed by many in the ruling political elites. As energy and transportation costs increase, both fixed and variable transaction costs can only increase. A widespread telephone system can offset these costs, especially in rural areas.
Decisions to invest in telecommunications need to take into account:
The Telecommunication Foundation of Africa  offers the following view:
Technical improvement, liberalisation and privatisation of telecommunications operating companies feature high on the agenda of many countries in Africa. The time has arrived for the industrialised world to take a greater interest in the African telecommunications market.
Facilities in the sub-Saharan region lag far behind those in any other continent in terms of quality, quantity, and diversity. In the early 90s no large-scale schemes were in place to upgrade the facilities of the region. At the root of this stagnation lie insufficient absorption capacity of technology, lack of managerial skills, a relatively intransparent§ telecommunications market, and last but not least, more favourable conditions for investment in other regions.
Regulatory reform of the telecommunications sector is under way in the entire continent. Government committees are drafting new bodies of law in some countries, whilst in others, newly prepared texts are awaiting Governmental or Parliamentary approval. Time tables given for enacting new laws range from three months to two years. Corporatisation* and consequently future privatisation of national Operators is an irreversible and high priority trend in almost all African countries.
Whereas corporatisation if often on track, privatisation proves to be more difficult, for two reasons: political sensitivities and the absence or rudimentary state of stock exchanges in many countries. Some countries are considering floating a minority share of the national Operator on the capital market. This is the case in Nigeria. In some other countries a majority stake will be on offer, this is the case in Uganda. Rwanda is now effectively privatising; the first sub-Saharan country to date to do so.
The global telecommunications industry is undergoing great changes with:
Digitalisation means that new computer-based technologies are replacing the older electro-mechanical parts with switching of calls performed by software. This requires a replacement of the old machines and the development of a much higher level of skill in the workforce, though it is a much smaller workforce, since fault diagnosis is automated, maintenance is less frequent and repairs much simpler.
Globalisation affected the telecommunications manufacturing industry first, but is now affecting the service providers. In the past, the market in countries such as South Africa were large enough to justify manufacturers in establishing a factory. Today this is seldom the case, with the costs transferred from hardware to software and chip design and with manufacturing largely automated. A local factory can neither be justified nor does it significantly offset the costs of building the local telephone network.
One of the main changes in Europe and Japan is the privatisation of telephone companies, with, for example, the floatation of BT and Nippon Telephone and Telegraph (NTT) on the London and Tokyo stock exchanges. Few African PTTs* have a sufficient value to make privatisation attractive as an alternative source of revenue for governments. Privatisation has the attraction of getting rid of an organisation which has often been the source of complaints about services and, more importantly, reducing the need for governments to finance investments. It is possible to bring in foreign firms as partners in the PTT, by selling equity stakes, bringing in both money for the government and expertise for the PTT. For example, Deutsche Telekom (Germany) and Ameritech (USA) formed a joint venture to buy 30% of Matav, the Hungarian telecommunications operator, paying the Hungarian government US$ 875 million and committing themselves to massive investments over the following ten years.
For visiting Northern businessmen it is possible that their hotel will provide access to an international service and that their offices will have the necessary international private circuits to provide at least a semblance of a conventional service. An international service can be achieved by cutting out the local PTT, through the use of a VSAT (Very Small Aperture Terminal) which allows a consumer direct access to an international satellite. However, problems exist with licensing of VSAT by individual governments, whether licences are available and whether the prices charges are reasonable. Services such as INMARSAT-P and Iridium, global mobile telephone services, will clearly find a market in Africa for visitors and other wealthy customers.
While tariffs fall for international telecommunications amongst the Northern countries, this has not been the case in the South. Here the governments and PTTs have argued that they need high tariffs with the North in order to provide the revenue necessary to develop their networks. It not clear that the two issues need to be linked. Development of the telecommunications infrastructure requires substantial investment, the problem is how to raise such funds. Sources include the international funding bodies such as the World Bank, other governments (e.g., former colonial powers), investment by private companies such as the international telecommunication operators (e.g., AT&T) and the indigenous population (individual investors and large industrial enterprises). As the GNP figures suggest, the potential to squeeze money out of the population is extremely limited.
One threat to local revenues lies in a service known as 'dial-back', usually based in the USA or the UK. The relatively high tariffs for international calls apply only to outbound and not inbound traffic. In many cases the tariffs from international operators are much less, the difference being enough to allow a profit margin for resellers. Thus a subscriber in Africa calls a number in, say, New York and hangs up once it begins to ring. The computer in New York identifies the number of the inbound call and calls it back, providing access to a dial tone in the USA. Customers are then billed for the calls at much lower rates than if they were using their local telecommunications operator. The customer saves money, but in doing so deprives the local operator of profitable revenue.
The cost of installing a telephone line is around US$ 1,000-2,000, that is for the wiring of the local subscriber loop and a share of the telephone exchange. The variability is caused by differing labour costs, the higher figure being in the USA, the lower figure being in some of the poorer African countries. So that to bring, say, Egypt with a current population of around 55 million to a typical Western/Northern level of around 40 lines per 100 population from the current figure of 3.5 would require a massive investment:
lines per 100 population 40 - 3.25 = 36.75 total lines 55,000,000 * 36.75/100 = 2.021 million lines cost in US dollars 2.021 * 1,500 = US $3,031.5 million
Even assuming that the cost could be reduced to a figure closer to US$ 1,000 the investment would be massive. Moreover, the population of Egypt is growing rapidly.
ITU (1992) "Yearbook of Common Carrier Telecommunication Statistics" International Telecommunications Union, Geneva.
Maitland, Donald (1984) "The Missing Link" ITU, Geneva.
Telecommunications Foundation for Africa (1993). World Bank (1994) "World Development Report 1994; infrastructure for development" World Bank, Washington DC.
Discussions with Svetoslav Tintchev and Jim Cowie.