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India’s Information, Communications and Technology (ICT) Companies Lead the Way to Further Indian Investment in Africa

This week, numerous companies from emerging economies will gather in New Delhi, India to participate in the third annual Growth Net conference, a unique platform focused on promoting business, trade and financial partnerships amongst the countries represented.  South-South cooperation will be the focus of much of Growth Net’s agenda, and a principal topic of interest will be the opportunities that exist for Indian companies in some of Africa’s most promising industries.  These discussions will almost inevitably involve significant attention to Africa’s Information, Communications and Technology (ICT) sector.  The African ICT sector is expected to triple by 2025, growing in value to $80-95 billion, and Indian companies’ engineering capabilities, experience with frugal innovation, and ability to train employees at scale makes them uniquely well-positioned to prosper in this booming African industry.

India-Africa Synergies

Indian companies have a first-mover advantage within Africa’s ICT sector, and their comparatively long history in Africa has resulted in an expansive Indian ICT footprint throughout the continent.  Indian ICT companies like Bharti Airtel, Essar, Tata and Wipro have a significant presence in Africa, yet much room exists for mid-sized enterprises to enter the industry, normally by partnering with local service providers.  Recently, Indian software companies Tata Consultancy Services, Infosys and Wipro all expanded their operations and delivery centers in Africa, implementing low-cost models in strategically situated delivery centers to serve outsourcing customers in Europe and West Asia.  While the bulk of Africa’s ICT spending emanates from South Africa, Nigeria, Egypt, Kenya, and Ghana, many Indian ICT companies are expanding  to countries like Ethiopia, Uganda, and Malawi.  These investments are prompted by Africa’s accelerated ICT needs, the continent’s growing urban middle class, and the increase of Western and Asian multinational corporations into sectors like manufacturing, telecom and natural resources, which demand IT support systems and infrastructure.  Overall, Indian companies low-cost, innovative business models have been particularly successful in attaining business from enterprises focused on mobile technologies, e-governance, skill development and social media.

An increase in ICT infrastructure stimulates growth in all African industries and facilitates enterprise innovation, efficiency, and job creation.  Indeed, Kenya’s Communications Authority estimates that since 2013, the country’s increase in internet access–which is substantially driven by public-private partnerships–is estimated to have created at least 1,000 jobs a month in the business process outsourcing subsector.  One of the main challenges posed by Africa’s ICT sector is the retention and training of skilled workers, yet Indian companies including Tech Mahindra, Infosys, and Wipro have addressed this obstacle by collaborating with universities and offering internship programs that expand their talent base.  If Indian companies can leverage their engineering talent and experience to train African employees at scale, these companies may possess a substantial long-term advantage over Chinese companies that oftentimes rely on skilled labor originating from outside of Africa.

Mobile Phones and Mobile Banking 

As urban centers experience further connectivity with 3G and 4G networks, the demand for newer forms of ICT services and consumer technology will rise alongside Africa’s fast-growing middle class.  However, opportunities within the ICT sector are not exclusively driven by this subset of the population.  Africa is unique in that a larger percentage of its population executes activities on relatively inexpensive mobile phones that people in other nations typically perform on computers.  Indian companies like Bharti Airtel–which acquired Zain Telecommunications’ Africa operations in 2010 and currently boasts 70 million subscribers in 17 African countries–have capitalized on Africa’s mobile phone industry, recognizing this subsector as the backbone of Africa’s ICT landscape.

Africa’s mobile phone sector encompasses Africans of all economic strata, and the continent’s mobile internet usage is predicted to increase twenty-fold in the next five years, at a growth rate that is twice as fast as that of the rest of the world.  Approximately 700 million of Africa’s 1 billion people are unbanked, and many people rely on their mobile phones’ ability to conduct low value, real-time person-to-person payments as their sole means of transferring funds, paying bills, and making everyday purchases.  While telecom companies currently dominate Africa’s mobile banking subsector, the recent increase in Indian banks operating in Africa such as the Export Import Bank of India (EXIM Bank), State Bank of India, Bank of Barod and ICICI Bank creates opportunities for cooperation between Indian ICT enterprises and Indian financial entities within Africa’s mobile banking space.

Indian ICT companies were amongst the first Indian companies to invest in Africa’s emerging markets, and their investments are beginning to reap significant returns.  Today, Indian ICT companies in Africa are well-poised to continue their trail blazing innovations, expanding into new African markets and exploring innovative means of meeting Africa’s dynamic ICT needs.

© 2020 Covington & Burling LLPNational Law Review, Volume V, Number 83

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Repeatedly ranked as having one of the best privacy practices in the world, Covington combines exceptional substantive expertise with an unrivaled understanding of the IT industry, and of e-commerce and digital media business models in particular.  Our practice provides exceptional coverage of all of the substantive areas of privacy, including IT/technology, data security, financial privacy, health privacy, employment privacy, litigation and transactions.  One of our core strengths is the ability to advise clients on relevant privacy and data security rules worldwide,...

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