Investing in Africa’s Digital Future: A Conversation with Africell
Africa's investment landscape presents a nuanced picture in 2023. Despite disruptions to post-COVID-19 economic recovery from a range of internal and external shocks, the continent is on track to be the second-fastest growing region globally – trailing only Asia – with generally stable macroeconomic fundamentals. However, challenges persist due to currency depreciation, high debt levels, and a funding squeeze amplified by tighter monetary policies. Nevertheless, the continent is perhaps more resilient to economic headwinds than ever before, with African countries aligning trade and investment policies behind the African Continental Free Trade Area and implementing prudent macroeconomic policies to navigate uncertainty.
In particular, Africa's rapid digital transformation presents promising investment prospects in fintech, e-commerce, and telecommunication infrastructure development. With a young and tech-savvy population, the continent is projected to have 615 million unique mobile subscribers by 2025 (up from just 300 million in 2020) – providing fertile ground for digital innovations and investment.
To shed light on some of these opportunities, Invest Africa spoke to Ziad Dalloul, CEO, President, and Founder of Africell – a fast-growing mobile network operator serving almost twenty million subscribers across Africa. Africell offers fast, low-cost, and reliable mobile network coverage and related services. The following interview provides valuable insights into investment trends in digital infrastructure across Africa.
From your standpoint, what factors make investing in Africa worthwhile despite the presence of genuine investment risks and the perception of even greater risks?
Ziad Dalloul: Africa’s young and growing population means that it offers virtually unparalleled investment opportunities. Whereas many other regions are demographically flatlining, Africa will for the foreseeable future remain highly dynamic, with new generations piling into the labour market and becoming active consumers. Managing a degree of political and regulatory risk is the price to pay for being part of this story.
Africell’s sector, telecommunications, is gaining traction in Africa, but penetration is still low compared to other parts of the world. Mobile phones may seem ubiquitous in Africa’s cities, but they are still relatively scarce in rural areas. Even in cities, people in lower-income communities are much less likely to use mobiles than those who are better off.
The economic case for investment in Africa is therefore strong. But there are equally powerful social and cultural arguments. Focusing again on our sector, it has been proven repeatedly that cheaper and better telecommunications has a positive social impact by narrowing gaps between men and women, increasing financial inclusion, and facilitating education. At the same time, African cultural traditions of music and storytelling are well-suited to digital media. Investing in telecommunications in Africa is attractive because it is a sector that stands to deepen its role in African social life and, over time, to take on an increasingly authentic African character.
Ziad Dalloul, CEO, President & Founder, Africell
“It is essential to maintain open, trusting and – as far as possible – neutral relations with host governments.”
What resources and support systems are available to assist investors like Africell in accessing opportunities and navigating risks in African markets?
Ziad Dalloul: For businesses exploring investment opportunities in Africa, there is no shortage of help and resources. But a successful investor will be smart about how they assess and capitalise on the opportunities.
Take Africell as an example. We are the only US-owned mobile network operator in Africa. We count the United States government (through the United States International Development Financial Corporation, or DFC) as our biggest external investor. At a time when the United States is seeking to expand its commercial engagement with Africa, and many African governments are starting to worry about their dependence on Chinese funding and technology, this is a useful status for us to have. Africell works closely with various arms of the United States government – in addition to other international bodies – to navigate issues arising in our operating markets, including responding to political instability and understanding regulatory changes.
It is essential to maintain open, trusting and – as far as possible – neutral relations with host governments. The last thing any company investing in a new market wants is to be too tightly enmeshed in a specific regime. If a political leader is replaced, you don’t want your access to that market to be suddenly closed off. Keeping party politics at arm’s length and being transparent about your economic and social contributions (including jobs created and taxes paid) earns social legitimacy and makes it more likely that you will be able to work productively with, rather than struggle against, the government of the day.
Sharing tips with other businesses investing in Africa is also helpful. In frontier markets, it pays to build a collective body of best practice, because doing so lifts everyone. Perhaps more than anyone or anything else, current investors can offer realistic judgements on the investment climate, the operational challenges, and the opportunities. The flip side is that companies currently investing in specific countries can warn others. That is one reason that governments should avoid alienating the private sector. If attracting more international investment is a goal, the best potential evangelists are existing investors who are treated fairly and respectfully.
Africell is a disruptor in the African telecoms market, working to expand connectivity and bridge the digital divide. How is the rapid digitalization of African markets affecting the investment landscape? What opportunities have emerged as a result?
Ziad Dalloul: The compelling thing about telecommunications, particularly in an under-penetrated market, is that investment begets investment. In other words, as digitisation spreads, it accelerates, creating demand for further investment.
One reason is that there are numerous “tiers” of services, from basic 2G and 3G services (voice and SMS only), to 4G (data), and most recently to 5G (ultra-fast data). As customers gain access to one tier and become more reliant on it, operators can help them graduate to the next level through various pricing, marketing, and distribution strategies. Customers aren’t static. One who starts with a 3G connection, for example, won’t necessarily stay there forever, but the investment is required to propel her towards new products and services.
Another reason is that as consumer mobile technology advances and customers develop more cases for mobile phones in their daily lives, it is necessary to keep up with their evolving needs and tastes. The phones and bundles we are selling now are different to those we sold five or ten years ago. When you invest in telecommunications, you must be prepared to continue to invest to remain relevant and maintain (or ideally grow) your market share in the context of changing technology.
Finally, as digital communications in Africa becomes more demotic, the opportunities for corporate and institutional services also expands. In the past two decades, a whole generation of businesses has sprung into existence on a platform of telecommunications, in sectors from agriculture to entertainment to finance to energy. These companies have business models that rely fundamentally on ordinary people having and using mobile phones. As an operator, we of course want to invest in serving these businesses; and the very fact that we have an opportunity to do so is proof of the “multiplier effect” of earlier investments in network infrastructure and customer acquisition.
Africell recently launched its “Afrimoney” mobile money service in Angola. What does the platform offer and how is it helping to drive financial inclusion in Angola?
Ziad Dalloul: Angola’s mobile money industry has more scope for growth than most countries in sub-Saharan Africa. According to the GSMA, Angola has a “very low” mobile money prevalence. This means that mobile money adoption, activity and accessibility in Angola is limited, despite the country’s relatively strong economy. Elsewhere in Africa, mobile money has received enthusiastic attention and investment, with over 150 services processing over $800bn worth of transactions in 2022. But in Angola, it hasn’t, and Angola’s large unbanked population remains effectively shut out of the formal economy.
Afrimoney launched in April this year and is already changing this by extending essential financial tools to many of the approximately 50% of Angolans who don’t have bank accounts. These are often people in marginalised or low-income communities who rely on cash. Afrimoney is harnessing growing mobile penetration at all levels of Angolan society to offer users a simple, safe and accessible alternative, accessed through their mobile phones, for executing rapid digital financial transactions including saving, transferring, spending and earning.
Currently, we’re offering all the core mobile money use-cases: airtime, cash-in, cash-out, P2P transfers, as well as bill, bulk and merchant payments.
In your view, what sectors are primed for investment across Africa? Where does Africell see some of the greatest opportunities?
Ziad Dalloul: Exciting opportunities exist almost wherever you look in Africa. We are working with ambitious and innovative partners in a variety of sectors to accelerate the integration of mobile technology and explore creative new use-cases both for our core GSM services and for mobile money. Africa’s content, entertainment and streaming industry has obvious scope to benefit from digitisation, while clean energy, education and healthcare are other areas we are looking at with interest.