Changing lives in Africa, continent of potential

By Alan Knott-Craig, CEO, Vodacom Group

Alan Knott-Craig is recognised as a visionary who has been a driving force in the democratisation of telephones in South Africa.

He graduated cum laude with a BSc honours degree in electrical engineering at the University of Cape Town in 1974 and completed a four-year Master of Business Leadership (MBL) degree at Unisa Graduate School of Business Leadership (SBL) in 1988.

He joined the SA Posts and Telecommunications Corporation, later known as Telkom, in 1971 and in 1992 became senior general manager of mobile communications before joining Vodacom as founding managing director in 1993, later becoming Group CEO.

He received the Data Communications Personality of the Year award from the Computer Society of South Africa in 1988 "for his leading role in planning and implementing the National Data Network".

In 1991 he received the Telkom Managing Director's Award in Recognition of Exceptional Achievement. In 1993 he was jointly awarded the Computer Society of South Africa's Computer Personality of the Year award.

In 2001 Knott-Craig was inducted as one of only eight Gold members worldwide of the GSM Association's 2001 inaugural Roll of Honour for the role he played in making mobile communications accessible to Africans.

In 2006 he received an honorary doctorate from the University of South Africa.

He serves as a commissioner on the Presidential National Commission on Information Society & Development for the Information and Communications Technology (ICT) industry.

A few years ago, when we celebrated the 10th anniversary of the mobile telephone industry in South Africa, our former president, Nelson Mandela, made some comments that have in many ways been the guiding light of the industry in Africa.

Madiba, the clan name that we fondly use for Mandela, spoke about the human cost of inadequate telephones. "In 1993 there were three million telephones in South Africa, of which only 1% were owned by black people. Behind that statistic are the thousands of stories of people who died when a telephone call to a doctor could have saved them, husbands in distant cities who couldn't phone home or schools in far-flung rural areas crippled by lack of communication."

This is the human face of low telephone density in Africa, although the situation in South African was unique, with telephones, water, electricity and roads deliberately withheld under apartheid.

Madiba said: "The social fabric of our people was torn apart," but then added happily: "Today, wherever I go, I see people talking. I hear phones ringing in the streets of Soweto. I even see people talking on their mobile phones in my hometown of Qunu, a rural village that in the past only had a few public telephones. There are millions of South Africans in every corner of the country talking on mobile phones. They are ordinary people calling their loved ones, helping people in emergencies and doing business. "And that is how it should be."

Indeed. It is after all a basic right for all people to have access to communications.

Continent of potential

Africa still falls woefully short. By the end of January 2005 there were 82 million GSM mobile phone users in Africa, a penetration of only 9.25% of the population. In 2005 Africa - with 12% of the world's population - had only 2% of global telephones and less than 1% of the population had Internet access.

Yet within this inadequacy, we can highlight a positive story of dynamic change, ingenuity and one of the last markets in the world with the potential for massive organic growth.

Vodacom has used our hugely successful operation in South Africa - more than 25 million customers - as a springboard for expansion into Africa, where we have encountered an incredible craving for telecommunications and technology.

Increasingly, GSM cellular networks are not a luxury Africa cannot afford, but a commodity that it cannot do without. Most African fixed-line networks have deteriorated beyond repair and if the continent is to catch up to the rest of the world, it has to place its faith in wireless communication. There is no doubt that GSM mobile telephone networks have made the biggest strides towards helping to democratise telephones in Africa.

Outside South Africa, Vodacom has built GSM mobile phone networks in Tanzania, the Democratic Republic of Congo (DRC), Lesotho and Mozambique, now serving well over 7 million customers. With the exception of South Africa, the unreliability and sometimes near absent fixed-line infrastructure mean that for at least a decade to come the network will make extensive use of satellite communications as the quickest and cheapest way of building its backbone in Africa.

The power to change society

GSM technology has had a dramatic effect on the way society operates in Africa. The DRC is an area that most would shy away from. War, disease and death have gripped the country for decades and access to even the barest necessities has remained elusive for millions. Before our network rollout started, there were only 7000 landlines for 60 million Congolese.

Investing in a country gripped by civil war would be considered high risk by most, yet it is a strategy that has paid off. By the end of the 2007 financial year we had provided coverage in 238 towns, giving millions of people meaningful access to telephones for the first time in their lives.

In Tanzania Vodacom's network offers the country's first reliable telephone service, something the country's older fixed-line operator has long battled to do and now has a 55% share of the mobile phone market.

All over Africa selling airtime has produced a thriving industry, with everyone wanting a share of the booming sales. Selling airtime vouchers has become a lucrative extra income for bars, shops and even hair salons doubling as mobile phone voucher outlets.

In Mozambique Vodacom's mobile phone network has created the first reliable communications link between rural and urban areas, which has had a big positive impact on society. Communication has boosted the fight against diseases like HIV/Aids and Malaria and has helped to develop communities.

Internet and email: the next wave

GSM network operators in Africa are now in the ideal position to democratise Internet and email access in the same way as telephones. All over the continent Vodacom is meeting a growing demand to become more than a provider of telecommunications.

In addition to providing voice services, we are increasingly becoming a provider of technology: data transfer, Internet and email access, entertainment and information platforms and video communication.

South Africa, more than 98% of the population lives and works within our network footprint and our more than 25 million customers represent a market share of well over 58%.

The demand for 3G in South Africa has surged as fast as we can supply the service and by March 2007 we had more than 139 000 users. In December 2005 we launched mobile TV and video SMS on our 3G network.

We have marketed 3G with a free data card and a free laptop if customers sign up for a threeyear contract. This kind of incentive marketing points the way to growing the Internet and e-mail market for millions of people in Africa.

At the same time, Vodacom has made substantial investments in building the infrastructure to make this possible. Our total cumulative capex expenditure in non-South Africa operations is just short of a billion US dollars (R6.5 billion) and in the last financial year alone our capital expenditure additions in these operations totalled U$225 million (R1.6 billion). This investment includes building high-speed data networks in most of these countries.

More people in Africa have mobile phones than computers and this is accelerated by mobile devices getting more and more computer-like. You can get your email, get to the Internet; for many people there's no need to get a computer.

In the Democratic Republic of Congo (DRC) we acquired an Internet Service Provider to compliment the telecommunications offering to the corporate business market. Vodacom rolled out a GPRS network in the DRC and Mozambique and in Tanzania we established a core data network for 3G/HSDPA, as well as GPRS/EDGE and WiMax product offerings. Vodacom Mozambique launched VodaMail, a free email service for contract customers.

A taxing obstacle

However, one of the biggest obstacles to higher teledensity in Africa is a short-sighted approach to taxation. Although most African countries have liberalised the telecommunications industry, allowing private players to partner governments in developing their telecommunications capacity, cellular telephony is one of the most taxed industries on the continent.

The challenge is to persuade governments to shift their focus from the short-term benefits of taxation to the long-term and more lucrative benefits of boosting economic growth through telephone penetration.

High taxes reduce return on investment, limiting investors' interest in capital-intensive network expansion. And when there's no network growth, telephone penetration doesn't increase and prices remain high.

Government policies in Africa have often been haphazard. In one country our network investment was encouraged by removing import duties on equipment, but then a 25% duty was slapped on the import of handsets.

A climate that nurtures economic growth encourages the healthy cycle of investment, network expansion, higher telephone penetration and an affordable service. This is the cycle that can help Africa to bridge the digital divide and achieve sustainable economic growth.

The ingenious continent

Finally, Africa's most powerful advantage has nothing to do with investment, policy or technology. It is the ingeniousness of Africans themselves that will eventually allow the continent to hurtle over the digital divide.

Wherever we do business and the more challenging and difficult the environment is, the more I have been awed and impressed by the ingenuity of people. A picture taken in the Democratic Republic of Congo tells this story.

The picture shows a tall tree in an open patch of forest surrounded by a wall of green trees. High up in the tree, probably about eight metres up, a man had made a ramshackle tree house consisting of nothing more than a platform built from pieces of wood of varying lengths. A rather frail looking ladder is secured to the tree with horizontal lengths of wood.

At the top of this tree the man receives a clear cellular signal well above the impenetrable forest jungle, beamed down to his tree house via a link from a satellite revolving somewhere in space. In his tree house he runs a flourishing business allowing his customers to make phone calls on the Vodacom network. And at the base of this tree in the middle of nowhere he sells airtime to his customers who have mobile phones.

Enabled by the cellular infrastructure, this man has used his incredible ingenuity to singlehandedly leapfrog the digital divide. In an instant, he became a participant in the formal economy.

Now combine this ingenuity with cutting-edge technology and the world's best advances in quick, easy and cheaper communications and you have a winning formula to connect millions of Africans via mobile telephones, Internet and email.

To paraphrase Nelson Mandela: "And that is how it should be."

For more information visit:
Vodacom website at www.vodacom.com
Or email us on corporate.affairs@vodacom.co.za