How Africa invented mobile money and created the digital society

Niki Bhan


is a blogger, and a graduate student at Aalto University School of Engineering


What can we learn about the digital society emerging in Africa without the advantage of conventional infrastructure and institutions?

Three seemingly unrelated events in different parts of the world from the early to mid-1990 converged, to culminate in the perfect storm: what we now call Africa’s Rising digital economy.

The first event occured in the mid-1990s in a small city in northern Finland, where engineers and designers began work on the product development of a mobile phone that would eventually become one of the best-selling Nokia models ever, the 3310, released in Europe and the Far East in the year 2000. The continent of Africa was not yet on their radar as a target market. Nokia’s impact on sub Saharan Africa as well as its celebrated success for the durability of its product was still some years in the future.

The second event occurred about the same time 1994-1995. Portugal Telecom’s mobile telephony division, TMN, invented the prepaid business model whilst researching ways to lower barriers to credit services, and thus reach a wider audience. They too, were not thinking about the farmers, traders, or the veranda traders in Africa, for whom the prepaid plan would turn out, a godsend, matching their needs for flexibility, control over timing, and amount spent on cellular services. This, too, was still a few years in the future.

The third event is the liberalization of African state-owned monopolies such as in telecommunications in the mid-1990s, which opened the doors to private sector operators in cellular telephony, and thus, to competition.

These 3 events would prove to be the perfect ingredients for a firm foundation on which today’s African digital economy thrives.

It was Prepaid that made our Fortunes

Africa in the 1990s was a bleak place of rising prices, falling employment rates, and meager economic growth.

African countries were still adjusting to the impact of the Structural Adjustment Programs (SAPs) imposed on them by the IMF and the World Bank. Hundreds of thousands of civil servants had been laid off as Africa strove to meet the demands of liberalization and globalization. Young graduates left universities with little or no prospects for employment. Uncertainty was rife, as Cameroonian scholar Walter Gam Nkwi observed.

Around the late 1990s, Telecommunication companies used an approach to sales and revenue forcasts and projection that was reliant on 

  1. number crunching of growth figures of adoption rates from a hundred different markets where mobile telephony had been introduced 
  2. and then, comparing them against selected countries with similar economic and demographic attributes to the target country.

This approach provided metrics that, within the short span of a decade, proved to be laughable.

For instance, in 1999, Kenya’s Safaricom forecasted reaching 3 million subscribers by the year 2020.  In reality, Kenya had crossed 41 million subscriptions by the end of 2018.

These modest forecasts led to Telcos assuming a High Margin; Low Volume business model targeting the wealthy who would be eligible for credit required for a monthly subscription. In addition, they expected businesses, government departments, and non-governmental organizations of all stripes to sign up for reliable communication services given the inadequate fixed line infrastructure and the moodiness of its service quality.

Nobody really expected much from these markets, and investments in cellular infrastructure was limited to capital cities, major trunk roads, and a handful of other urban clusters. After all, Africa’s declining growth in the 1980s and 1990s, together with the SAPs, had decimated the economy and poverty was endemic. 

It took two African visionaries, who in 1998 independently came to the conclusion that the prepaid business model was the key to the future.

Strive Masiyiwa, had been on a long hard fight to crack the telecommunications monopoly in Zimbabwe, tightly held by Mugabe’s government. It would take him 5 years before he was able to launch Econet Wireless with its prepaid plan, ultimately transforming the Zimbabwean market.

In London, Mo Ibrahim, a Sudanese telecom engineering consultant, saw the fortune at the bottom of the pyramid that an African mobile service operator could reap, if only he could make it happen. For him too, prepaid was the wedge that would drive demand among the African populace navigating economic uncertainty on irregular incomes. Celtel would go on to pioneer per second billing in lower income developing countries (LDCs) like Malawi in 1999, and capture the lion’s share of the market as price and service became affordable in prepaid micro-sized bundles that began to flexibly match local cash flows.

Both men would later be quoted as saying it was prepaid that made their fortunes.


Hockey Stick Growth

By 2003, airtime vouchers for voice and text messaging on mobile phones across Africa could be purchased for as little as 50 cents, if not less. This ability to purchase bite size pieces of communication triggered the hockey stick curve of adoption of mobile telephony seen in the chart below

Hockey stick growth Mobile telephony adoption in sub Saharan Africa (Source: IFC)

Led by the Finns in their northern stronghold, rapid improvements in the prepaid billing model made by advances in software and switching technology, as well as GSM standards for telecommunications, over the next few years made all the difference as they permitted greater fractionalization of purchasing power thus lowering the barriers to adoption for the vast majority of the population.

By this time, the robust well engineered Nokia models of the late 1990s were entering the second hand markets, both locally in Africa, as well as shipped in bulk from the wealthier markets of Europe, as people upgraded their devices to keep up with the times.

For as little as $10 or $20, Nokia phones were suddenly made affordable for the masses, who did not hesitate to put down their hard-earned shillings or kwacha or rand for the chance to become connected, at last. Hand me downs by wealthier relatives and devices sent home by migrant workers also played their part in this heady period of adoption and growth.

It would take the visible impact of the hockey stick curve of growth for Nokia to turn their focus on the African consumer and her needs, before phones could be designed and built for this market.


The Perfect Storm

This was the perfect storm of design, engineering, and business that came together on a fertile field to create exponential growth in mobile handset sales and mobile prepaid service subscribers in Africa (among the informal economy) that would lead to the next 15 years of annual growth rates of more than 30%, until slowing down in 2018.

Commerce and finance have been disrupted by the mobile phone in the past ten years, and daily life including rural/urban linkages and relationships impacted for the past 15 years.

There was a flurry of research on understanding the impact of mobile telephony in the informal economy and among the low-income demographic also known as the bottom of the pyramid in the early years of mass market penetration circa 2007 to 2010. 

However, there has been little or no study taking the long view of the changes that the sudden intervention of modern telecommunications and ICT have made on society, particularly among small businesses, traders, and manufacturers in the informal sector.

What can we learn about this digital society emerging without the trappings of legacy infrastructure and institutions? 

Early signals of a decentralized digital economy are emerging, and in today’s context, what can these emergent and novel models of supply chains, distribution, marketing, and commerce show us for future ways of organization for inclusion and impact in our increasingly smaller and more connected world?

I, Niti Bhan, is a blogger, and a graduate student at Aalto University School of Engineering