A recent Ewing Marion Kauffman Foundationstudy revived the term “gazelle companies” to describe the young, rapidly-growing U.S. firms that are producing the majority of new jobs in the U.S. The report recommends that policy-makers nurture Gazelles to stimulate job growth at a time when unemployment is high.
I’m interested in another class of companies—young, well-run firms in emerging regions like the sub-Sahara. Like their Western counterparts, they’re creating a disproportionate number of jobs. But these young African companies are playing a more crucial role than gazelles do in driving market growth.
To belabor the metaphor, I call them Impalas, after the lean, swift gazelles indigenous to Africa. Impalas provide technology-enabled and outsourcing services to a growing number of multinational (MNC) service providers – mobiles, airlines and banks – in Johannesburg, Accra, and Nairobi, etc. They share many of the characteristics of gazelles, but there are some notable differences.
I spent the last couple weeks on assignment in Accra, Ghana. On this trip, I’ve seen more growth than any time since my company started working there in ‘07. This is a period of unprecedented business activity and promising new projects within and beyond the mobile sector. Meanwhile, new competitors from around the world are streaming in. This corner of Africa’s business scene is pulsating.
Astute businesses here are taking steps to preserve their client base and deepen relationships with their customers. We’re privileged to work with a new generation of African business leaders with the courage and determination to transform their offerings to meet the needs of an emerging class of consumers.
While the business world is preoccupied with the global economic recovery, a mobile revolution is quietly reshaping the marketplace in the developing world. In Africa, mobile phones are providing access to communications for millions of people who’ve never had fixed communications let alone cell phones. I’ve written before about the impact that such ‘leapfrogging’ is having on African business. Now, we’re beginning to see exciting and substantial commercial projects taking shape, particularly in the service sector.
It’s been a week since the Port-au-Prince earthquake and images streaming in are helping us to grasp the region’s boundless misery and desperation. Hundreds of thousands have perished, and despite our best efforts, more will die and suffer for myriad reasons including the inability to deliver relief where it’s needed.
Despite the gut-wrenching news, it’s heartening to learn that determined, inventive people are finding ways to alleviate the suffering and, in some cases, save lives.
One of the more interesting stories is about an open-source project called Ushahidi which takes its name from the Swahili word for “testimony”. The software, developed during the post-election violence in Kenya in 2008, enables text messages to be mapped by time and location. Anyone with an internet connection, regardless of the device they use to access it, can send a text message, an image or an email. Ushahidi can also store data offline for later synchronization.
Today, there are more than 3.3 billion mobile-phone subscriptions worldwide, which means that there are at least three billion people who don’t own cell phones, the bulk… found in Africa and Asia. --Sara Corbett, author “Can the Cell Phone Help End Global Poverty?” (NYT)
I’ve been optimistic about the continued growth of mobile services in emerging regions, even through this downturn. If that happens, it’s good news for those who appreciate what connectivity is doing for new subscribers in the developing world. The nascent mobile sector is an enabling engine for other industries in the developing world notably health care, agriculture, banking, and goverment services.
We see continued growth in emerging markets where there are few fixed line communications, low mobile penetration rates, and the arrival of new, highly motivated operators. Look for continued double digit growth (CAGR). Revenue growth (ARPU) will likely lag subscriber growth as companies add more lower-income users. Despite a crowding market, prospects for for growth by incumbent and new operators remains strong so long as they manage their growth with an eye to the future.
Ex Africa semper aliquid novi — Out of Africa always something new. ~Pliny the Elder
This week marks my company’s 3rd anniversary of working in Africa within our emerging markets service practice. Helping companies in the region to understand and serve the needs of their customers has been enriching on a personal level. I’ve had the privilege of witnessing the growth of the sub-Sahara’s nascent service industry and I marvel at its favorable impact on a growing number of people in the region.
The ascendant mobile industry illustrates the point. On a continent where few people have landlines due to the high cost of installing cabling, cell phones are bridging the communications gap. In many sub-Saharan markets, like Ghana where we work, mobile growth rates have been approaching 50% annually. While less than 20% have mobile phones now, hundreds of millions of Africans are expected to get handsets in the next few years. Keep in mind that this is a continent of almost a billion people. That’s a lot of potential new subscribers.
The satellite company, O3b Networks, has attracted investors at Google, HSBC Principle Investments and Liberty Global for its project to deliver cheaper, high-speed wireless Internet access to underserved regions of the world. The term, ‘O3b’, refers to the “other 3 billion,” or the large segment of the world’s population that can’t access the Internet because there is no fiber cable in their regions.
03b, a Jersey Island (UK)-based company, announced that it is building 16 satellites that will enable lower-cost Internet accessibility over 3G and WiMax networks. These satellites will provide “trunking” or backhaul coverage zone between +/- 40 degrees of latitude which blankets much of the world’s underserved regions including Latin America, the Middle East, Africa and South Asia.
Fiber cable and the labor for digging fiber trenches in underdeveloped countries is costly by any measure. Mobile operators face prohibitive costs in building transmission capacity between their networks and towers. Using satellites had been long been considered problematic due to their latency or the time it takes for a signal to travel between earth and satellites.
Today’s geosatellites orbit the earth at an altitude of 22,500 and their latency can exceed 600 milliseconds. By contrast, O3b plans to use MEO satellites which orbit the earth at 5,000 miles and can reduce latency to only 120 milliseconds—not that much more than a fiber network.
O3b which expects to activate service by late 2010 intends to provide speeds of up to 10G bps (bits per second) to regions. The companies collectively invested about $65 million with the total cost estimated at $650 million.
This is good news for “3b” consumers, and probably a smart investment for Google which recognizes that the majority of the world isn’t currently using its services do to lack of access. With their $10M investment, Google is getting in on the ground floor, so to speak. Consider this another milestone in moving forward their Android initiative.
Having just returned from Ghana, I was keenly interested Roger Cohen’s NYT piece today. He says,
In my lifetime, conditions have grown immeasurably better, freer and more prosperous for a majority of humanity, yet hand-wringing about the miserable remains the reflex mode for most coverage of planet earth.
Nowhere more so than in Africa, from which I’d just returned when the e-mail landed. During a short stay in Ghana, which will hold free elections in December, Vodafone had bought a majority stake in Ghana Telecom for $900 million (entering a fiercely competitive mobile-phone market) and I’d heard much about 6 percent annual growth, spreading broadband and new high-end cacao ventures.
Accra, the capital, is buzzing. Russian hedge funds are investing. New construction abounds. Technology enables people in the capital to text money transfers via mobile phone to poor relatives in the bush.
I think most of Cohen’s points are well taken. He doesn’t mention the discovery of oil off Ghana’s coast and the country’s fiber projects or the investments being made by multinationals in the country’s business infrastructure. The business climate in the region is improving, albeit in successive approximations. The country’s services sector — chiefly teleco and financial services — are contributing to Ghana’s high annual growth rate. Inflation is a growing concern, but so far it’s been manageable. The process leading up to this December’s election should be interesting. So far so good.
It’s also true that Africa’s success stories aren’t newsworthy to many news consumers. We mostly hear about war, corruption, disease and rampant poverty. On this point, I recommend Charlayne Hunter Gault’s “New News Out of Africa: Uncovering Africa’s Renaissance,” — it’s chiefly about South Africa, but pertinent to the problem of media coverage across the continent.
If Ghana’s political environment remains stable and forward-looking, the country will be in a position to contribute even more of its stalwart intellectual capital to a “globalized” resource (R=G) community in the coming years. So, even if the global media is fixated on the region’s challenges, the numbers will support a different story. So look for Ghana and other gazelle nations of the sub-Sahara to lead the way.
A recent Ewing Marion Kauffman Foundation study revived the term “gazelle companies” to describe the young, rapidly-growing U.S. firms that are producing the majority of new jobs in the U.S. The report recommends that policy-makers nurture Gazelles to stimulate job growth at a time when unemployment is high.
Subscribe to this blog's feed
Follow Me on Twitter
