NAIROBI, Kenya, Sep 27 – In the often stated world order, innovation is ‘ordained’ to flow from Western nations to their Southern counterparts.
However, the mobile phone industry has provided the South, particularly Sub-Saharan Africa, the rare opportunity to impart on their illustrious Western counterparts pioneering advancements in Information and Communication Technology (ICT) that if replicated worldwide, would make an astronomical social impact.
On Monday night, a report released by GSMA, the umbrella body of all mobile phone operators worldwide in Nairobi spelt out the staggering scale of what government initiatives aimed at promoting mobile phone use can have on their populations.
The GSMA conducted two studies, titled ‘Mobile Telephony and Taxation in Kenya’ and ‘Mobile Taxation: Surtaxes on International Incoming Traffic’ where the positive and inhibitive impact that government policy can have on the advancements of the industry were spelt out.
In the first report, the decision by the Kenyan government in June 2009 to exempt mobile handsets from Value Added Tax (VAT, pegged at 16 percent in the country) spurred unprecedented growth in the industry that in turn accelerated economic growth.
That pronouncement was made by the country’s Minister for Finance, Uhuru Kenyatta, tucked in his long annual budget speech and its importance was lost at the moment.
“The social impact has been astounding. Economic growth has been boosted by eight percent in Kenya as an example with services such as M-Pesa and Airtel Money making such a huge difference in people’s lives,” Gabriel Solomon, the Head of Public Policy at GSMA said.
He was alluding to the mobile money transfer services pioneered by Kenya’s leading communication service provider, Safaricom (M-Pesa) and rival Airtel (Airtel Money) who followed suit with the concept catching on worldwide.
“It has improved production efficiency and social cohesion tremendously and such an impact can be replicated worldwide if mobile phone and mobile broadband technology is adopted worldwide,” Solomon added.
According to the report, the economic impact of the growth in mobile telephony in Kenya has seen contribution to the Gross Domestic Product (GDP) shoot up by a whopping 250 percent since 2006 with the industry expected to churn some $3b (Sh300 billion) or 5.6 percent of the entire GDP to the nation’s breadbasket in 2011.
The decision to slash VAT on mobile handsets has led to a 200 percent growth in sales in the past two years. It also saw the market expand to include two other Mobile Network Operators (MNOs) namely Orange and Essar (yu mobile) added to the Safaricom and Airtel duopoly.
The corresponding price drop on the handset pegged at 70 percent has seen mobile coverage increase to cover 96 percent of the population, one of the highest penetration rates worldwide.
“Kenya and sub-Saharan Africa have shown to be leaders in innovation in the developed world and we are seeing a shift of innovation from the South to the West and this levels the playing field if ultimately replicated worldwide with the world doing business,” Solomon remarked.
Subsequently, MNOs in the country have played their part in motivating the growth in productivity of the country’s economy as a whole by contributing such increases by providing services such as mobile banking, M-Agriculture and M-Education in addition to initiating a number of social projects in Kenya’s rural areas.
Events such as the annual Safaricom Lewa Marathon held at the Lewa Downs Wildlife Conservancy where besides promotion of the rare black Rhino at the 5,000 acre lush of Savannah in Northern Kenya, the race also raises money for eradication of eye disease trachoma among the nomadic Samburu community.
“The experience of the Kenyan government’s removal on taxation on handsets indicates there could be significant benefits for consumers from removal of mobile specific taxes,” the report features.
On the other side of the spectrum, the second study on Surtaxes on International Incoming Traffic (SIIT) illustrated the adverse effects state levies on mobile telephony were having on particularly rural African society that continues to be left behind by the digital boom.
Gabon and Congo Brazzaville have borne the brunt of the introduction of SIIT by their governments with the price of inbound mobile call traffic rising by 111 and 82 percent in that order.
“MNO in Senegal noted that the number of international call minutes terminated on its network decreased each month the taxation is in place when the prices rose by 50 percent,” the report cited.
Similar reversals were witnessed in Ghana where prices rose by 58 percent when SIIT was introduced where in addition to the reduction of incoming calls, operators in African countries are reciprocating by higher termination prices.
Of more worrying concerns, the findings state: “Operators have reported significant cases of illegal traffic since the introduction of SIIT. This takes away the revenue from operators and governments since illegal SIM boxes work in a way that congests a disproportionate amount of spectrum and reduces the average quality of service for illegal calls.”
“Governments should liberate the mobile phone industry to allow private sector investment for the benefit of the consumer as Kenya demonstrated by dropping the tax on mobile phone handsets,” Solomon asserts.
During the launch of the report where Kenya was cited as a model example of government’s active involvement in advancing mobile telephony, the country’s Information and Communication Minister, Samuel Poghisio, said: “The world should think of mobile technology as an agent of social development and there is need to worry about cyber security and such steps are for the sake of mankind.”
While proclaiming the country was in the process of rolling out an ambitious M-Education and M-Health programme, he added: “We should think of the mobile phone as an agent of rural development.”
While the figures stated above are beyond the comprehension of the commoner, Jane Mwai, who owns a small stall for mobile phone handsets and accessories in Kinoo, a settlement 15km from Nairobi’s Central District perhaps best sums the impact of devices whose stated average weight are given between 200 to 800 grams.
“Before I ventured into mobile phone business three years ago, I used to operate a shop on this very premises that was not bringing much and I had to rely more on my husband,” she narrates.
“However, since I changed to phones, I’m making enough to keep me going and with my savings, I’m looking forward to opening another stall in Kikuyu (some 5km away). Every day, there is a new mobile product in the market and customers are always there so I made the right choice,” she added.