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Africa’s booming mobile internet market a draw for big names

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Only about 27 per cent of Africans regularly use the internet but this is growing fast, according to US-based Alphabet, the holding company for brands such as Google and YouTube.

Mobile internet penetration accounts for about a quarter of all internet activity, but will continue to grow to 41 per cent in 2020 with 720 million people, says the global mobile communications body GSMA. Many of these new users will be connecting to the Web via smartphones.

Almost half of all Africans now subscribe to a mobile service with Egypt, Nigeria and South Africa making up the bulk of the users, GSMA says.

So big has mobile become that it now contributes about 7 per cent of the continent’s GDP, and will exceed US$200 billion by the end of this decade.

A study by the mobile technology firm Ericsson is even more optimistic – it says more than 1 billion Africans will be connected within five years, mostly using smart devices. Personal computers will play an almost negligible role in Web access, it says.

Social media is one of the biggest drivers of internet use. Platforms such as Facebook, Twitter and WhatsApp are commonly used. So much so, in fact, that some governments restrict their use for fear they will be used for political activism. Last year, the BBC reported that Ethiopia blocked social media services during a state of emergency to contain protests.

Political activists of all stripes have taken to social media with alacrity. In South Africa critics of the president Jacob Zuma have used these platforms to organise protests and attack his supporters. Mr Zuma’s backers, meanwhile, have carried out their own campaign in his defence.

Internet companies have had to adapt to the often poor bandwidth in many African countries. The South African provider Telkom has still to live down a 2009 test during which a carrier pigeon with a flashdrive with four gigabytes of data delivered the information to a destination 60 kilometres away, faster than the same amount of data could be downloaded.

In 2015 Facebook unboxed Facebook Lite, an app for parts of the world where internet speeds are slow. The Lite is less than one megabyte compared with standard apps in excess of 100 megabytes.

Still, getting unconnected Africans online has some way to go. One of the issues yet to be overcome is that 15 countries out of 54 are landlocked. Coastal countries are increasingly being connected via undersea cables, but for those surrounded by neighbours this option does not exist.

The World Bank says landlocked countries pay an average $232 more per internet user a month for fixed broadband access than those living in coastal areas. The disparity is so great that Somalia has better connectivity than Zambia and Lesotho, in spite of being a failed state.

While the citizens of Ghana on the west coast pay as little as $7 a month for internet, those of Chad in the north and which is surrounded by its neighbours, must pay $3,000, the World Bank says. One attempt to overcome this was made by Facebook when it decided to place a satellite in orbit to provide connectivity. Unfortunately, the SpaceX rocket that was supposed to deliver it blew up shortly after launch late last year. It is unclear when a replacement will be available.

In the meantime, Facebook and Google are also working on other methods, including drones and balloons. Given the potential size of the market for advertising these efforts are likely to gather momentum in the coming years.

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How to Turn $200,000 Into a $670 Million Business

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Seven years ago, Ismail Ahmed set out to build a startup that could send cash electronically from the U.K. to Africa. He had $200,000 and a lot of experience in the money transfer business in his native Somalia.

Today, London-based WorldRemit Ltd. sends money to 148 nations and has just raised $40 million in a deal led by LeapFrog Investments, an investment firm in London, the company said in a statement on Thursday.

The Series C funding round values the fintech firm at more than $670 million, according to a person familiar with the transaction, who asked not to be identified because the matter is private. WorldRemit’s longtime backers, Accel Partners and Technology Crossover Ventures, invested in the deal.

WorldRemit, which specializes in sending money via mobile phones, will use the cash to try to grow its customer accounts globally to 10 million from 2 million by 2020. The company is making a big push in transfers between the U.S., Asia, and Latin America.
“The U.S. will grow our revenues as much as 40 percent over the next few years,” Ahmed, WorldRemit’s chief executive officer, said in an interview.

But the company faces stiff competition from The Western Union Co., the longtime powerhouse in the $444 billion global remittance business, as well as other fintech firms such as Remitly Inc., a Seattle-based company that raised $115 million in a private fundraising deal in October.

WorldRemit is on course to record 60 million pounds ($81 million) in net revenue this year, a 46 percent jump from 2016, according to Ahmed. The company is looking at a potential initial public offering in two to three years, he said.

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New market means increased economic opportunities for one Somali town

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In Somalia’s Puntland region, Bossaso’s local market provides a source of income for local traders. For women, however, the market is especially important.

After years of conflict, many households are reliant on money generated by women to survive. In some households, women contribute more than 70 percent to their families’ income.

And the majority of women in Somalia earn money from informal sectors – including working in local markets.

Unfortunately for traders in Bossaso, selling their goods in the city’s main market was no longer an option. In 2012, a fire severely damaged Bossaso Market – a place many women traders depended on for their livelihoods.

With funding from the Government of Japan, UNOPS oversaw the construction of a new market with improved facilities to support women entrepreneurs in Bossaso.

“We’re grateful for the support of the Government of Japan and UNOPS, who worked closely with us to implement the project,” said Engineer Yazin Mire, Bossaso’s mayor. “Many businesses will benefit from this market, which will help several different communities, including Yemeni refugees and returnees who fled from the conflict in Yemen.”

Giving women a say in their future

Before the construction of the new Bossaso Market began, information was collected from female traders during an extensive consultation process. This allowed them to be actively involved in the design and planning of the new site, ensuring their needs were taken into account from the beginning. In all, nearly 2,000 market traders, both male and female, participated in the data collection process. That data was used to define the scope of the construction of the new market.

An extensive community needs assessment was also conducted to encourage a sense of community ownership of the project, as well as to contribute to the long-term sustainability of the new market.

Training for the future

The new Bossaso Market will enable traders, particularly women, to become economically self-sufficient. In addition to the new market, local entrepreneurs also received training – carried out by the Japan Center for Conflict Prevention – aimed at teaching them new skills to help their businesses thrive. More than 200 traders – nearly 90 percent of them women – either received business skills training or business start-up kits.

“The Government of Japan is delighted with the success of this project, which contributed to stabilization of the region through the empowerment of women, in collaboration with the Japan Center for Conflict Prevention,” said the Embassy of Japan. “The Government of Japan is confident that those who got vocational training will play an important role in leading the local economy and society.”

Asiya Ali Farah owns a kiosk in Bossaso. She participated in a training session on microfinancing. “One day, I hope I will become a lender,” Asiya said. “So that I can give loans to Somali women who need help starting up small businesses to feed their families.”

“Microfinancing is not new in Somalia, but there are not many female traders with access to it yet,” explained Japan Center for Conflict Prevention Secretary General Yukiko Ishii. “The training was intended to help participants access emerging, locally available microfinancing schemes to boost their small business.”

The new skills learned as part of the training sessions will help market traders generate a higher income. This in turn can help increase economic development in the region – and encourage stability.

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Somalia’s Premier Bank becomes the first to offer letters of credit

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In Somalia, the government is trying to improve its financial capacity and capabilities. It wants to convince other countries that it’s a safe place to invest. One lender has taken a major step forward in this process. Premier Bank has become the first to offer its clients access to a letter of credit. The crucial document will go a long way to boosting trust between traders and suppliers.

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