AfCFTA: Towards one big African telecoms market

By Omobayo Azeez

The Nigerian telecoms industry is about to scale up and expand the scope of its products and services beyond the local market to 53 other countries whose governments have endorsed the African Continental Free Trade Area (AfCFTA) agreement. In this report, OMOBAYO AZEEZ appraises the AfCFTA deal vis-à-vis the African telecoms market.

The African Continental Free Trade Area (AfCFTA) is an initiative of the African Union with the main objective of creating a single continental market for goods and services, in addition to facilitating free movement of investment and people across the entire continent.

Eritrea became the only member state of the African Union yet to sign the agreement and thereby left out of the trade bloc after President Muhammadu Buhari appended his signature to join 53 other signatories to the trade pact on July 7, 2019 at the AU Summit held in Niamey, Niger.

Already, the AU has maintained that the AfCFTA will create the world’s largest free trade area. It is also estimated that implementing AfCFTA will lead to about 60 per cent boost in intra-African trade by 2022.

This is instructive considering the fact that only 16 per cent of international trade by African countries takes place between African countries, according a 2014 study by the African Development Bank.

Having attained the milestone of ratification of the AfCFTA Agreement by 22 member states, the agreement has become implementable, thereby putting the countries in a race to jostle for gains derivable from its execution.

This is particularly true for operators in the Nigerian economy, of which those in the telecommunications sector have swiftly started looking at ways to strategically position the sector to pull huge resources for expansion of telecoms services to over 1.2 billion consumers on the continent.

The state of telecommunications in Africa   

Africa remains the only region with the least developed telecommunications infrastructure in the world today, albeit with the fastest growing penetration of mobile telephony in the world, according to a recent Global System for Mobile Communications Association’s (GSMA’s) report

The report states that by 2025, mobile broadband will account for 87 per cent of mobile connections in Africa from the current figure of mobile broadband penetration estimated at 38 per cent.

During the year 2019, 3G will overtake 2G to become the leading mobile technology in the region, with just over 45 per cent of total connections by the end of the year.

Reports have also showed that 3G adoption has doubled over the last two years as a result of network coverage expansion and availability of affordable devices, particularly smartphones.

Across sub-Saharan Africa, mobile-enabled platforms are increasingly becoming the modem for conducting e-commerce, and these platforms extend the reach of services and provide greater choice to customers.

The GSMA estimates that in 2018, mobile technologies and services generated 8.6 per cent of GDP in sub-Saharan Africa, a contribution that amounted to over $144 billion of economic value added.

In addition, the mobile ecosystem also supported almost 3.5 million direct and indirect jobs and made a substantial contribution to the funding of the public sector, with almost $15.6 billion raised through taxation.

It is however estimated that an efficient telecommunications infrastructure is the backbone of a country’s industrial development, as it contributes to the efficiency of the economy of a country.

Liberalisation of telecommunications in Africa

The continental free trade pact promises a liberalised telecommunications regime in the continent and in the same way that deregulation of the industry at the national level spurred rapid development in Nigeria, particularly in terms of investment and quality of service delivery, the continental liberalization of telecommunications is expected to have similar effect at the continental level.

According to the acting director general of the Nigerian Office for Trade Negotiation (NOTN), Liman Liman, a liberalised telecommunications sector presents opportunities for competition in the market, thereby reducing the cost to the consumer.

As the keynote speaker at two stakeholder sensitization workshop on the implications of the AfCFTA initiative for the communications industry held separately in Kano and Lagos recently, Liman said the liberalization also presents an opportunity for the government to impose universal service obligations to telecommunications service providers to ensure that even poorer areas are provided with telecommunications services, adding that this can be imposed as part of the licensing conditions.

To underpin liberalisation and avoid unintended consequences for Africa to benefit from the opportunities of the proposed liberalistion telecoms market, Liman said the process must meet three conditions.

These conditions are eradication of monopoly arrangements that exclusively benefit incumbents; establishment of conditions that attract private investment in the telecommunications sector; and establishment of regulatory institutions to protect consumers, prevent and correct market failures where they occur, he said.

Regulatory and liberalisation framework under AfCFTA

The Assembly of Heads of States of the African Union has resolved that the liberalisation of trade in services in the AfCFTA shall be negotiated in two phases.

According to the Assembly, phase one shall involve liberalisation of what it referred to as priority sectors, telecommunications being one of them.

As at the time of filling this report, the negotiations on the liberalisation of telecommunications have not yet begun.

However, Business a.m. can reliably report that the framework of the telecommunications sector in the AfCFTA will include regulatory disciplines, data transmission, cellular telephone, fixed telephone, mobile satellite, value added data services and other services to be determined by the negotiating parties.

Experts expatiated that the trade pact does not intend to harmonise telecommunications regulations, nor usurp the function of the national regulators in each country, such as that of the NCC in Nigeria.

They said AfCFTA will rather ensure that amongst others, there is a minimum standard of treatment or regulatory principles such as competition to avoid abuse of dominance,   interconnection to guarantee fairness and independence of operators.

Other high points in the liberalization and regulatory framework for the planned one big African telecoms landscape will include universal service requirements, transparency provisions, technical standards, licensing criteria and procedures and qualification criteria and procedures.

In addition, the telecommunications section of the AfCFTA will include a schedule of telecommunications services commitments, which sets out the scope and depth of market access, national treatment obligations and any additional commitments to be offered. Meanwhile, it is expected that on the list of its don’ts, the AfCFTA telecommunications regime shall prohibit a country from setting limits on the number of suppliers, the value of transactions or assets, quantity of output, number of employee in a sector and the participation of foreign capital.

Although the process of granting a licence to operate shall be determined at national level, the AfCFTA telecommunications regime will set minimum standards or criteria for granting of licences.

According to experts, this is important for the purpose of ensuring predictability and certainty of the 1.2 billion people market.

They envisage that such criteria may include financial capability and willingness to invest sufficient capital to provide a satisfactory public service; providing technically sound service, proven managerial and technical expertise, and a workable and defined corporate structure.

Economic gains for Africa

Until recently, the telecommunications sector in most countries in Africa operated under a legal monopoly regime whereby one or a few operators held the exclusive right to provide telecommunications services, whereas liberalisation of telecommunications is a critical component of financial inclusion.

According to reports, the total value of mobile money transactions in sub-Saharan Africa last year was worth $19.9 billion, as individual transactions grew by 17.9 per cent to 1.2 billion year-on-year, a landmark growth grossly occasioned by a liberalised telecommunications sector.

Similarly, e-commerce and digital trade are on the rise in Africa, giving that e-commerce sales in the sub-Saharan region reached $16.5 billion in 2017 and are expected to reach $29 billion by 2022.

This trend is primarily driven by increasing purchasing power of the middle class, increasing internet and smartphone adoption, and the growth of digital payment solutions.

With a liberalized telecoms landscape in the African region, experts believe that digital divide that has left a sizeable millions of people, particularly in the rural areas, out of digital revolution would be bridged and this in return will spur economic growth and improved standard of living.

Challenges

According Liman of NOTN, the process of liberalisation may force smaller mobile network operators to be crowded out of the market because of their inability to compete successfully with few big operators.

Liman said these few operators will increase their market share and have the power to influence prices.

“Based on the point made above, it is of critical importance that a strong regulatory institution is established, in order to prevent unfair competition in the market, although the AfCFTA will establish a minimum set of standards in this regard, the role of national regulators will remain critical.

“In order to be globally competitive, telecommunications infrastructure will require significant amount of investment both by domestic and foreign investors,” he said.

In the same vein, President of Association of Telecommunications Companies of Nigeria (ATCON), Olusola Teniola, said since each country under the agreement is at various stages of development, the pact is better seen as a long term goal.

While he identified funding as another challenge that may confront the initiative, he submitted that “private funds and private involvement is the most viable means of achieving this.”

Nigeria’s readiness to explore, exploit gains

Immediately President Buhari appended his signature to the AfCFTA agreement on July 7 this year in Niger Republic, Nigeria automatically became a beneficiary of the many benefits promised by the agreement.

However, these benefits would not come automatically except with concrete plan and strategic blueprint that will deliver the promises entrenched in the liberalized African telecoms regime.

This realization must have informed the collaboration between the Nigerian Communications Commission (NCC) and the National Office for Trade Negotiations (NOTN) to organise a two-day sensitization workshop on the AfCFTA initiative separately in Lagos and Kano.

At the events, organisers assembled captains of industry, national legislators, regulators, consultants, telecoms operators, among others, to brainstorm on ways to drive home telecommunications gains on the new pact.

Speaking at the event, Olabiyi Durojaiye, chairman of the Nigerian Communications Commission, said that the agreement is akin to freedom to extend telecommunication services from Nigeria to 1.2 billion people across the African continent.

He said with a larger proportion of this population made up of young people, whose hunger for data and mobile services continues to grow; there is no limit to achievement by innovative operators and investors in terms of business opportunities.

He said, “Just the way we recognize the opportunities for investors in the African market, we also know that there are challenges not to say threats.

“Operators and investors within the communications ecosystem must fully appreciate these dynamics, in order to ensure that they prepare adequately for them.”

Also speaking at the event, Umar Danbatta, a professor and executive vice chairman of NCC, stressed the commission’s commitment in ensuring synergy through strategic collaboration with relevant stakeholders such as NOTN in sensitizing industry stakeholders on the implications of the AfCFTA.

He said, “We want to ensure that we leverage on the relevant provisions of AfCFTA Agreement, to the advantage of the Nigeria’s Communication industry, which is the sector expected to facilitate and drive the digital economic revolution in the country.”

Danbatta, represented by Mohammed Babajika, NCC’s director of licensing and authorization, further stated that the workshop was designed to initiate and lead discussions on areas of comparative advantage for the Nigerian telecoms stakeholders, in addition to developing implementable strategies for market entry and market exploitation for the Nigeria-based communications businesses and investors.

Last Line

As African countries unite under the AfCFTA agreement to remove trade barriers and record more business deals amongst themselves, players in Nigeria’s communication sector are busy looking for ways to cash in big from the process which will soon make the whole of Africa a single telecoms market.