US Tech Giants Flock to Africa to Compete for Digital’s "Final Frontier" – Fortune

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Not so long ago, Big Business saw Africa as a charity case. Much of the investment by multinational corporations across the continent was geared more toward burnishing corporate sustainability programs—building schools, planting trees, offering occasional internships—than gearing up for future growth.

Today the picture has changed radically. In the past few years, U.S. technology companies have begun to invest heavily in Africa.

Why? They suddenly grasp the huge potential for customer acquisition. Africa has a combined population of over 1 billion people spread out over its more than 50 countries. And it boasts seven of the world’s 11 fastest-growing economies, with Ethiopia, the Democratic Republic of Congo, and Ivory Coast leading the charge. It’s also very much a mobile-first audience, as 99% of internet subscriptions on the continent are via handheld devices.

What’s more, as big tech companies grapple with market saturation in other markets, Africa is increasingly being seen as a “final frontier” for new customers. Alert to this, the likes of Alphabet


, Facebook




, and Microsoft


have been stepping up their business operations.

None more so than Microsoft. The company was one of the first U.S.-based tech giants to spot the continent’s potential when it launched its 4Afrika initiative three years ago. With a $75 million budget, the program was created to train tens of thousands of potential employees and place tens of millions of smart tech devices in the hands of African youth.

Africa currently accounts for less than 5% of Microsoft’s revenues, but is seeing high double-digit annual growth, according to Amrote Abdella, regional director of the 4Afrika Initiative. Yet there is still a way to go, Abdella says, as Microsoft plans further engagement in Africa from its 22 offices on the continent. “Three years down the road one of the things that we have learnt is that the need and the demand on Africa is about doubling down on investments we are making around connectivity and smart services,” she says.

Connectivity is key. Microsoft knows it has a part to play in establishing infrastructural building blocks before it can sizably build its African customer base. The 4Afrika initiative aims to get one million such businesses online, making them consumers of the technology the firm sells.

The company’s main focus in terms of connectivity is on TV white space technology, which utilizes unused radio spectrum to provide Wi-Fi connectivity at one-tenth of the cost of 4G. It is backing a number of projects across Africa, partnering with Spectra Wireless in Ghana to launch Africa’s first commercial service network utilizing TV white spaces, and rolling out similar projects in countries like South Africa and Kenya.

“In order to drive the knowledge economy, we need to drive connectivity so Africans can create and access content,” says Abdella. “The work that we are doing today is very much driving a market development for Microsoft on the continent. The SMEs of today will be the multinationals of tomorrow. More and more companies are looking at Africa. There is a business element and reasoning to invest in Africa today.”

In short, the assumption from the company is that if they “build” the connectivity, users of Microsoft’s software cloud services will come.

It is not only Microsoft that has awoken to this fact. A number of tech multinationals are increasingly active in Africa, most of them around the concept of connectivity. Alphabet, formerly Google, is experimenting with balloons to fill connectivity gaps. Project Loon—a network of balloons traveling on the edge of space—is set for testing this year, with the company stressing the need to get more people online.

Facebook, meanwhile, has rolled out its Free Basics service in a number of African countries, The aim of the service is to make the internet accessible to more people by providing access to a range of free basic services, such as news, maternal health, sports, local government information, and, of course, Facebook.

“Africa is important to Facebook. With more than a billion people there is strong business momentum and opportunity in many countries across the continent,” a spokesperson says. “Our commercial ambition for the next few years is to build a long lasting and trustful relationship with our key clients and their media and creative agencies and to listen and learn. We are currently seeing a historic shift in media consumption with mobile being the new, preferred screen of choice for consumer, in particular in Africa. This is a huge opportunity for marketers in the region and we want to help them to make use of it.”

Facebook had over 120 million users across Africa as of September last year, 20% growth from the year before, and recently opened its first office on the continent in Johannesburg.

It is not just software firms that see the opportunity, and how crucial connectivity is to the whole question of building businesses in Africa.

Charlene Munillal is general manager of the Huawei Consumer Business Group in South Africa, and says connectivity is the backbone of her company’s value proposition of the continent.

The company has deployed more than 50,000 km of optical fiber across the continent to provide better telecom connectivity, and recently joined the Southern Africa Telecommunications Association (SATA), with a key focus on implementing 4.5G and 5G technologies in Africa.

“Without connectivity there is no need for a phone. More than 60 per cent of our smartphone and tablet portfolio is LTE-enabled so we are definitely future proofing as a company,” says Munillal. “We want to grow our market share for both volume and value in the short term. We also aim to offer a complete solution to Africans; network, connectivity and devices.”

The potential gains are huge. This is the premise of each one of the multinational giants currently doing the groundwork on the continent. For Huawei, this is especially evident from the growth it has already seen. North Africa was its biggest growing region globally last year, at 164%, while between the second quarters of 2013 and 2015 its market share in the region quadrupled to 11% from 2.6%, and smartphone shipments grew 60%. The company expects this to continue.

“Africa is the ‘last frontier,’ so there is a lot of focus on Africa for growth,” Munillal says. “And we are confident.”

US Tech Giants Flock to Africa to Compete for Digital’s "Final Frontier" – Fortune