India Calling

One of my favorite memories from a visit to Rwanda involves hiking up a mountainside in Volcanoes National Park to see the mountain gorillas. As I was trudging up the trail, a Rwandan man in front of me was casually taking calls on his cellphone, completing various business transactions. Nice contrast: "wild" Africa meets modern Africa.

Cellphone use is skyrocketing in Africa (note the chart only tracks growth through 2008), so African consumers and entrepreneurs are likely to benefit from this news: the Indian company Bharti Airtel is buying the African assets of mid-East telecom firm Zain, and paying a bundle ($9 billion).

The story makes two interesting points: first, the process of accelerating urbanization is making sub-Saharan Africa a more attractive market for foreign investors. Why? These markets are filled with millions of potential consumers. This creates incentives for businesses to identify products and services that these consumers (bottom billion and otherwise) desire and provide them efficiently. Cellphones are just one example, but particularly important because they are being used in such innovative ways: to collect and disseminate medical information, to check crop and other market prices, to help the "unbanked" access financial services, etc.

Here's a nice quote from Aly-Kan Satchu, a market analyst in Kenya::

"The problem before is that Africa was very fragmented, with small towns spread out, and getting goods from Point A to B was very hard . . . now, young Africans are moving into urban centers in droves and companies are starting to look at the 1 billion Africans as potential customers. The switch has gone off."

The second point the story makes is that China and India are taking very different approaches to the economic opportunities in Africa. China is investing in resource development via state-owned enterprises; private-sector Indian firms are investing in different sectors. China's approach is to develop resources for its own use, not to sell to African consumers. Indian firms are trying to capture part of these expanding markets. Zenophobia and/or protectionist legislation could limit either approach. Personally, I'm excited about the growth of Indian-style investment and can't wait to see what cellphones offer the next time I'm in Africa.

- Karol