Mobile phones in Africa

There’s much talk about how mobile phones are a big business in Africa. Growth in that sector, and its economic impact within the continent, has been startling. In fact, a new GSM World report covering East Africa suggests that in 2006, the mobile industry alone accounted for an astonishing 5% of GDP in Kenya, 3.5% in Rwanda, 4.6% in Tanzania, and 3.6% in Uganda. In just those four countries, the industry employs about half a million people.

And the future potential remains strong. Already, mobile phones account for some 93% of all telecommunication connections in the East African region. But while 70% of the area’s population lives within range of a signal, only 12% are actually connected as yet, primarily due to its relatively high costs.

There have been many stories about the beneficial effects of mobile phones in developing markets. Some articles claim that as many as 80% of people in Egypt and South Africa rely on mobile phones to run their businesses, while across the continent, businesses have set up trading platforms that are specifically created for mobile phones to facilitate commerce.

But, as the GSM World report highlights, taxation is a significant (and unlike typical infrastructure problems in Africa, relatively easy to remove) barrier to growth in the industry. East Africans are taxed between 25% and 30% on mobile phone services, while Africa as a whole pays an average tax rate of 17%. Calculations by Deloitte for the report reckon that if East African governments implemented a modest tax cut on their mobile services, it would have a strong boost on both tax revenues and GDP growth in the region. Dare we hope?