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Moving forward in Zimbabwe Reducing poverty and promoting growth impact of mobiles on economic development comes to eight per cent of GDP (McKinsey, 2006; Waverman, Meschi and Fuss, 2005). Empirical evidence from the East African countries of Kenya, Tanzania and Uganda shows that in 2006, a ten per cent increase in mobile penetration was estimated to have contributed as much as 1.25 per cent to GDP (Deloitte, 2007). A recent study by Deloitte and Touche (2007) covering Serbia, Bangladesh, Ukraine, Malaysia, Thailand and Pakistan found that the contribution of mobile phone technology to GNP amounted to between 4.5 and six per cent, and had contributed to the creation of 36,000 jobs (in Serbia) and 244,000 (in Pakistan) (Focus, 2008). Mobiles contributed as much as 24 per cent of the tax revenue of the countries studied. In a GSM Association report (2008), it is estimated that for every dollar invested in the mobile industry in Africa between 2000 and 2012, US$0.80 will be earned as tax revenues by governments, with more accruing indirectly. The report argues that lower tax will increase usage and in turn increase revenues, as more people can afford to be connected. It is further argued (Hausman, 1997) that the ‘dead weight’ loss caused by mobile taxation is likely to be more significant when demand is relatively elastic, and when industry has relatively high fixed costs and relatively low marginal costs. Quite clearly, a case can be made for the growth-enhancing potential of telephony and ICTs in general. A key question, however, is whether this growth generated by ICTs and telephony can be linked to poverty reduction efforts in post-crisis Zimbabwe. Telecommunications and poverty alleviation There have been studies done to find out if an increase in teledensity (i.e. more access to telecommunications per 100 people) is pro-poor in terms of its growth impacts (Forestier et al, 2002). Cross-country evidence suggests that, prior to the internet (and to mobiles) increased teledensity in fact led to greater inequality. However, emerging evidence indicates that newer technologies such as the internet and mobile phones can be a source of growth that diminishes income inequality, if appropriate policies are put in place for harnessing these technologies for the common good. This finding reinforces the important role of policy frameworks and regulatory regimes that focus on the big picture and place the sector’s development within the macro-economic and social development sphere. A Socio-Economic Impact of Mobiles (SIM) project launched by Vodafone in 2004 tracked these benefits through research conducted in Kenya, Tanzania, South Africa and Egypt. The project found three broad categories of benefits the poor may receive. Firstly, mobiles offer incremental benefits, through enabling people to be more efficient in whatever they have already been doing. Fishermen in Kerala in India were able to coordinate supply and demand for their catch and respond more efficiently to market demand, thus reducing waste and minimising the risk and uncertainty of the market (Abraham, 2007). Fishermen’s profits went up by eight per cent and consumer prices went down by four per cent, thus benefiting both the producer and the consumer (Jensen, 2007). In Kenya, the Kenya Agricultural Commodity Exchange (KACE) provides prices to farmers through text messages, enabling them to decide whether or not to deliver, where and when to do so, and often avoiding costly trips. Mobiles have enabled traders to overcome the challenges associated with physical distances, and lack of information. Studies in Tanzania found mobiles obviate the need to travel long distances to look for employment, enabled friends and relatives to keep in touch and enabled access to health and emergency services (Vodafone, 2004). Secondly, there are transformational benefits, through new and innovative offerings that unlock opportunities that were not previously available. The most celebrated of such benefits is mobile banking (m-banking), which has enabled many rural people who have never had a bank account to access micro-financing, receive money remitted from their relatives in the cities, and to pay for goods and services without the need to travel or carry cash. Successful mobile banking projects in Africa have been undertaken in South Africa (WIZZIT) and Kenya (M-Pesa). There is now a stampede by operators to join this growing market. The third cluster of benefits is production benefits, resulting from the creation of new livelihoods. The selling of phone cards and airtime is a common sight in Africa, and many small businesses sell second-hand mobile phones. These activities generate thousands of jobs (ID21, 2007; ODI, 2009). Mobiles have also created business opportunities, and increased profits for small traders in Egypt and South Africa. A review of the social and economic development impact of the Grameen Village Phone Program in Bangladesh established that incomes for phones operators averaged between 24 and 40 per cent of household incomes, and left the owners socially and economically empowered (Richardson et al, 2000). Up to a quarter of a million people in Bangladesh depend on the mobile industry for a living, either directly or indirectly. The success of any technology or innovation is judged by its rate of adoption (Agarwal and Prasad, 1998). If we use this measure to assess the benefits of mobile technology, it can be said to have passed the test of acceptance in the developing world, particularly in Africa. Mobiles and financial services: mobile banking and remittances One transformational and developmental feature of mobile phones has been giving the poor access to financial services to which they would not have otherwise had access. Access to financial services can be seen as a public good and is important in enabling people to participate in the modern, market-based economy (Arun and Hulme, 2008). It is therefore a tool for social and economic inclusion and an important component of poverty alleviation. Demand for financial services in Africa is high, despite the low levels of income (UNCTAD, 2007b: 19), and research has shown that both the poor and rural people have the desire to save and will do so, given the opportunity (de Soto, 2000). The main reasons for the poor not having bank accounts is the unavailability of banking networks (due to the prohibitive costs for banks to open outlets in far-flung places) and the fragmented and segmented structure of the financial sector in Africa. Other reasons include high transaction costs and stringent formalities for opening an account (Ivatury and Pickens 2006). Mobile banking brings all the benefits of a formal bank, minus the hassles and the costs, plus the advantage of mobility. Globally there is a huge potential market for mobile banking. Only one billion of the world’s 6.5 billion people have bank accounts, yet there are now more than four billion mobile phones. The World Bank estimates that in many developing countries, over half the population has never had a bank account. The Consultative Group to Assist the Poor estimates that 80 per cent of the population in UN-designated least developed countries have no access to banking (CGAP, 2009). It is also estimated that only 108
Moving forward in Zimbabwe Reducing poverty and promoting growth ten per cent of the recipients of remittances in Latin America have bank accounts (Smith, 2005), yet remittances are a growing global business, worth an estimated $433 billion in 2008, that m-banking is in a position to service (World Bank 2009). From a business point of view, figures from McKinsey and Company indicate that mobile money has the potential to deliver up to US$5 billion in direct revenues for mobile operators, and US$2.5 billion in indirect revenues per year by 2012 (GSMA, 2009). This is on the basis of the service being adopted by an additional 364 million unbanked customers. The market size growth projection is put at 1.7 billion people in developing countries with mobile phones but no access to financial services by 2012, up from the current one billion (CGAP, GSMA 2009). Africa is an interesting proposition for mobile banking, because of the combined impact of rapidly increasing mobile penetration and very low access to financial services, as well as the existence of large populations of people living abroad and supporting their families and relatives back home through remittances. With mobile penetration expected to grow, so will access to financial services that are mobile enabled. The weighted average percentage of population with access to financial services is approximately 23 per cent, which makes it comparatively lower than in other regions (GSMA, 2009). Mobile penetration levels and access to financial services for selected countries are shown in Table 9.5. Table 9.5: Selected regional countries’ access to financial services and mobile penetration, 2008 and 2012. Country Access to financial services (%) Mobile penetration (%) 2008 2012* Tanzania 5 33 61 Kenya 10 49 101 Liberia 11 29 49 Mozambique 12 26 42 Sierra Leone 13 26 55 Zambia 15 31 63 Sudan 15 29 73 Nigeria 15 46 97 * Projected. Sources: Wireless Intelligence (www.wirelessintelligence.com), World Bank (2007). Globally remittances continue to grow in size and significance to national economies. They are the second largest financial flow into developing country economies after foreign direct investment (Scott et al, 2004). Remittances are popular in Africa, with estimates of over US$ 90 billion sent back home by migrant workers every year (Ericsson, 2007). Remittances through mobiles are up to ten times cheaper than other forms of remittances. This reason alone makes mobile banking an attractive alternative in Africa. Mobile banking was popularised in the Philippines (Porteous, 2006). In Africa, South Africa’s WIZZIT, started in December 2004, is an example of this (Ivatury and Pickens, 2006). M-Pesa – a mobile banking service introduced by Kenya’s leading mobile operator, Safaricom, in March 2007 – is another example offering money transfers, airtime top-up and transfers, and payments for utilities such as electricity bills. It competes very favourably in the money transfer market. Other money transfer platforms have lost market share and now control only three per cent of total transfers, from close to a tenth of the total transfers two years ago. A major selling point for the mobile operators is their relatively low transaction costs. Official data on cash movement in the Kenyan economy shows that nowadays 47 per cent of all money transfers take place through the mobile phone (Business Daily, 14 Sept 2009). A survey in Kenya done by Financial Sector Deepening on behalf of the Central Bank of Kenya, found out that nine out of ten users of mobile cash transfers say they are mainly attracted by convenience, almost instantaneous speeds, safety and relatively lower transaction costs. Lessons for Zimbabwe’s recovery programme Based on this analysis, it is clear that recovery for the ICT sector will mean four key priorities. Firstly, there will be a need to implement a sound ICT policy that recognises the central role of ICTs in national development. This should be based on a robust and coherent framework that responds to the cross-sectoral nature of ICTs. This is one way to avoid contradictions and suboptimal resource utilisation. The establishment of a Ministry for ICT creates an institutional base, from which to direct a sound policy environment for the sector. We emphasise here that policy should be evidencebased. This necessarily means looking at how the comparative experience can be adapted to suit the Zimbabwe setting. One advantage of the time warp created by the crisis in Zimbabwe is that we can avoid mistakes made by the trailblazers if we are careful enough in formulating a sound policy environment that embraces and promotes rather than hinders ICT development. Secondly, promoting competition and public-private partnerships will be key. A recent ICT survey in Zimbabwe identified as priorities infrastructure development, finance mobilisation, and human resource development and capacity building. On infrastructure and financial resource mobilisation, the critical issue is to open the market to competition and create a policy and regulatory environment that is investor friendly. The growth of ICTs in African countries such as Nigeria is directly linked to creating a competitive environment, lowering barriers to entry, and allowing market forces to determine the pace of growth. Competition encourages investment and reduces access costs for consumers. The telecommunications market in Zimbabwe cannot be said to be competitive with only one dominant player. The third priority is capacity building. Countries that use the ICT industry as an export market have invested in human capital development. Simply implementing the right policies and regulatory environment will not produce the skills to run the sector, or attract back lost talent. In the long term, there is a need to create an e- culture that extends to primary education, and promotes ICT use at an early age. At tertiary level it is essential to establish centres of excellence in ICT. The state can lead this, but private sector involvement is also needed. The last priority is sector regulation. A perception that regulation and regulators have been subjected to political interference and serve the state rather than citizens diminishes confidence and the ability to fully embrace the opportunities that ICTs offer. It is in the interest of ICT sector growth, and the long-term interest of the inclusive government, to promote regulatory environments 109
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