Both the countries rely on agricultural output for its economic growth. 80% of the population in Ethiopia depends on agriculture for living and Tanzania produces good quality of cashew and 90% of the harvest is exported for processing in India and re-exported to other parts of the world as final product. There is lack of transparency, mostly in prices, people at the base of pyramid (farmers) suffers.
We interviewed government officials in both the countries and they would welcome private investors to invest in agriculture sector. There are many opportunities around value-added services – domestic and international prices, weather updates (especially for Tanzania given that its along the equator), amount of fertilizers required and learning best practices from around the world. Kifiya, in Ethiopia, provides insurance and similar idea can be replicated in Tanzania.
Key Things for Implementation
Knowing that government is welcoming private investors in this space, inventors focusing on this industry should not miss this opportunity. For e-agriculture to be successful and knowing that smart phone penetration is low especially in rural areas in both the countries – investors should tie up with the government to educate farmers about the benefits of using VAS and this will further increase the smart phone penetration as well use of e-agriculture solutions. At first, companies can work with government or any other world organizations/funds to subsidize the service for farmers and once the business picks, they can start charging farmers for the services. Also, investors should do a pilot project in one region and then advertise the benefits across the country, further gaining confidence in the services provided. At the same time, companies need to develop USSD capabilities in parallel to penetrate further.
In both the countries we noticed that people start learning English starting eight grade and in Ethiopia literacy rate is only 40%. Many young generations start using mobile phones, including smart phones, at much younger age and there are opportunities to educate people via VAS in education sector.
Opportunities & Key Things for Implementation
In Ethiopia, which is increasing its focus on manufacturing and industrial sector, there is high demand for people with technical knowledge and also high demand for Chinese speaking people. In this context, private companies can roll out courses for English and Chinese languages. Private companies investing in teaching language courses need to account for local language translation which will gain further traction. Private companies need to partner with schools (either private or government) and introducing the idea of e-learning for the students. Although there is no need for learning Chinese in Tanzania, there is huge demand for learning English.
In Ethiopia, companies can partner with other companies that focus on manufacturing/industrial goods and can introduce e-learning of technical subjects required. Think of outsourcing technical training to other private companies (new investors). Apart from collaborating with companies, private investors/companies can also partner with technical schools and government to introduce e-learning of science and technological subject. Private companies should highlight huge benefits of e-learning – you don’t need teachers with deep expertise in these subjects as you can find more explanation via e-learning, one can learn different applications via internet and how the same concept can be used in different ways and many more benefits.
- Last Mile/Service Operators
In Ethiopia, the infrastructure is exclusively owned and operated by Ethio telecom. Their primary purpose is to broaden the coverage so that more people can afford to use mobile phones at reasonable price. Given that the current penetration rate of mobile phones is around 50%, there are few possibilities for Ethio telecom to open the market in the next couple of years.
On the other hand, the government and Ethio telecom welcome the opportunities to work with private sector in network & Internet service space. In this context, an opportunity is that private enterprises purchase bandwidth & telephone packages from Ethio telecom in bulk. Enterprises would be responsible for the delivery, maintenance, and servicing of the final leg (last mile) of Ethio telecom’s network that physically reaches the user’s premises. Last mile providers can hasten Ethiopia’s telecom coverage expansion and outsource customer service constraints. This business model will allow for competition in the Ethiopian telecommunication market, mostly in customer service. In the long-term, last mile providers will be uniquely positioned once the telecom industry is privatized.
Key Things for Implementation
Given that the Ethiopia government keeps control the telecom industry, their approval and corporation are the key for success. The private enterprises should show that the new business model will benefit customers throughout Ethiopia, and that Ethio telecom will not lose any potential benefits with the idea. In that sense, education for the government officials (i.e. lobbying) is one of the most important factors.
- B2B Market place
Manufacturing and Industrialization is growing at faster pace in Ethiopia and very soon there will be demand for industrial products by the companies producing bigger industrial/manufacturing products. Once the economy grows, private investors can introduce two sided market place – like Alibaba – and act as intermediator for buying and selling manufactured/industrial good. Although its very early to setup two sided market place, investors and private companies interested in two sided market place should constantly watch out for opportunities as the economy grows. They need to work with individual companies and showcase the benefits of two-sided market place – especially better pricing and better quality as competition will drive both of these aspects.
- Cyber Security & C2B Payment gateway
In Tanzania, there is huge mobile money business – 62% of Tanzanians use mobile money and mobile transactions value is almost 60% of GDP. At the same time there are two challenges – first, customers cannot pay directly to businesses into merchant’s account – customers have to pay to an individual and that individual “represents” as a business. There is huge probability of theft with this approach. Think of credit/debit card swipe machine – once anyone swipes the card, money directly goes into the merchant’s account – much secured gateway. Similar solution is not available for mobile money yet. Second, Tanzania lost TSH 187billion in 2016 to cyber criminals mostly through mobile money transfers.
Cyber Security – secured payment gate as well cyber protection in general – is a huge area of opportunity for private investors. Solutions to many fraud things happening in Tanzania are available in the world but hardly any companies have invested in Tanzania. Based on our interviews, its not only payments where cyber security is required but government and banking sectors also requires cyber security and is untapped market.
Key things for implementation
Mobile companies are looking for solutions for secured payment gateway. Private companies should work with the mobile companies to build local solutions. Private companies need to prove solutions are highly secured and they can do a pilot project with few merchants before rolling out to big scale. For technological advanced solutions in cyber security, private investors must encourage professional companies who have expertise in cyber security to find/roll solutions for Tanzania. It can be difficult to work with government (knowing that there is corruption) but government is very receptive for cyber security solutions.
- Local Content
In Tanzania, there is large amount of unmet demand for local Swahili content (both original and translated media), while rising incomes will further increase the desire for leisure spending. Tanzanian telecom companies have already made significant investment in high speed broadband networks that need to be fully utilized. Also, previous partnerships between telecom companies and companies like Facebook, YouTube, and Google have proven successful for both parties, as well as consumers.
In this context, a profit sharing model between the telecom companies and the content creators can be the bridge to entice the content creators to invest in the region. For example, customer can watch Swahili contents provided by content creators for free for the first couple of months to help customers get accustomed to online streaming. After the free period, telecom companies can generate additional revenue by data usage, and share revenue with content providers.
Key Things for Implementation
In order to watch content, customers need smartphones, but the current penetration rate of smartphones is still not high enough (estimated as 10-20% based on the interviews). An option is that telecom companies can work together with hardware companies to launch simpler and cheaper smartphones. Also, Telecom companies can allow customers to pay hardware costs by installment, though it requires a reliable postpaid system.
- Credit Score
In Tanzania, most people prefer pre-paid to post-paid, as post-paid system is not well understood (perceived as expensive); credit card usage is less than 5%. Also, the number of bank account holders is limited, because KYC process hasn’t yet been developed as well as because many people live far away from their nearest bank branches in rural area (account holders at financial institutions is less than 20%4). As a result, the loan market, like mortgage loan or loan for expensive agricultural machines, is limited. In addition, global e-commerce companies, such as Amazon and eBay, have faced difficulties to expand their business due to different payment system.
In Tanzania, the telecom companies have huge opportunities to tackle this issue, as they can utilize the database in mobile payment. The mobile payment services, such as M-Pesa, Tigo Pesa, or Airtel Money, has widespread all over the country with 65% of penetration rate in urban area and about 25% in rural area. In aggregate, transaction value of mobile payment is estimated as 60% of GDP2.
There is huge data on who paid how much to whom. The mobile payment companies can use these data to create quasi credit score as a starting point, granting virtual credit card to their customers without bank account. Once customers understand how it works and the telecom companies obtain the data on sufficient credit history, the amount of credit can increase. With this system, customer can afford to buy smart phones by installment payment, which will benefit telecom companies as more revenue will come from additional data usage. In the long term, loan lenders or e-commerce companies can use these data as credit history for bigger amount of purchase.
Key Things for Implementation
First, telecom companies need to educate customers on how credit system works. The current agent network of mobile payment service can serve as evangelists to educate customers. For example, M-pesa has more than 90,000 agents in Tanzania as of January 2017 (based on the interview). Telecom companies don’t need additional infrastructure. Second, telecom companies need to identify their customers with more rigorous process. To prevent fraud, telecom companies can establish a JV to control credit history as an industry. Also, national ID cards, expected to be distributed in the near future, will help them identify who is who.
There are opportunities in health care business also such as collecting data of various blood types (that can help for smooth blood transfer especially during accidents), common diseases and online medical services (such as helloDoctor).
 Financial Inclusion – http://finclusion.org/uploads/file/2016%20InterMedia%20FII%20TANZANIA%20poster.pdf