Incremental infrastructure

Ethan Zuckerman has a must-read post "Incremental infrastructure, or how mobile phones might wire Africa" on the economic growth of Africa as exemplified by the very fast growth of mobile telephony across the continent -- there are currently nearly 120 million subscribers to cell phones. That growth has been breathtaking, and is central to many discussions about the future of Africa -- including at the recent TEDGLOBAL conference in Tanzania. However, Ethan wonders, it’s hard to know whether that growth could be replicable in other sectors:

There’s a couple of circumstances that I think are critical to understand in the rise of mobile networks on the continent:

• You can build a mobile phone network one piece at a time. With a GSM license and a single tower, a company can begin earning revenue and start using this revenue to finance future expansion. An investment in the single-digit millions can turn into a multi-billion dollar business through reinvestment of revenues. That just isn’t true for creating container ports, major roads or large power generating facilities… or, at least, I’m not smart enough to figure out a model that allows me to build container ports a few million dollars at a time.
• Users financed a great deal of the infrastructure behind the mobile phone boom - specifically, they purchased the handsets (...)
• Sheer government incompetence helped the mobile industry by ensuring that most phone buyers weren’t replacing land lines with mobiles, but purchasing their first phones (...)

I’m trying to figure out whether these criteria lead to an infrastructure investment strategy for Africa based on incremental infrastructure development. (...) African mobile phone companies are being forced to become power companies. In urban areas, phone companies have to equip every tower with diesel generators because of frequent power cuts. In more rural areas, where companies can’t rely on grid power, providers need to put in two generators - one to power the station, the second as backup. The cost of delivering diesel fuel to these locations is substantial - Russell Southwood calculates that a grid and road-connected base station costs $2,500 a month to maintain, while a very rural station might cost $20,000. (...) If mobile phone companies - or a similarly entrepreneurial entity - could begin building larger, more efficient power generating facilities, they could service local communities with power as well as with telephony. If there were sufficient success for this model, it might start to resemble the “electranet” that some have suggested might alleviate African power problems.

Comments

[Andrew Mack]

Incremental or not, what Africa needs is Entrepreneurial Infrastructure

By Andrew Mack

In his piece last month about “incremental infrastructure”, Ethan Zuckerman makes a number of excellent points about the recent development of infrastructure in Africa. Using his example of the entrepreneur who put up cell towers in the Democratic Republic of the Congo, he rightly observes that there are opportunities to think beyond the traditional, top-down structures of infrastructural development.

He cites the logistical and budgetary problems of many nations as they seek to build out not just the famous “last mile”, but in cases like DRC, many of the basic earlier miles that need to be in place if a country wants to be connected – by road, by power grid, or by wireless. And, while he doesn’t dwell on one of the real reasons for this failure – Government disorganization or outright corruption – he hints at it as a driving force which creates both the space and the need for other approaches.

However, while the idea of incremental infrastructure is interesting, I would argue that at least to some extent, Ethan’s argument misses the larger point. It is not incremental infrastructure so much as “entrepreneurial infrastructure” that Africa needs and has shown it wants.

By focusing on the example of cell towers in DRC, Ethan may have chosen the one item best suited for incremental infrastructure. But consider roads... if a community – or a firm – decides to build an incremental piece of road, and who pays? Who maintains the road? Who sets the safety standards (as road accidents are an epidemic in many African countries today)? And what if the road doesn’t connect in to a larger grid? Clearly, while cellphones may not need coordination to function, most other pieces of infrastructure – roads, energy, etc. – do. And they need standards.

Moreover, there are issues of economy of scale and policy. Consider the case of neighboring Uganda. In Uganda, cellphone licenses were bid out, encouraging competition, and cellphone use has grown from some 5,000 lines in 1998 to more than 2.6 MILLION today. The major carriers have invested – and made – millions, and I would argue, have done more for Uganda’s development than most of the major donors over the last decade. A licensing regime that favored incremental providers might have brought service to a few villages, but today, CelTel is the largest taxpayer in the country, serving the entire nation and recently, offering no-roaming service across the sub-region – in Kenya, Tanzania, and recently also in DRC. An incremental approach would not have been able to provide this service, pure and simple.

What we need to do is re-orient our thinking, I believe. Rather than focusing on the challenges – and there are many – we need to step out of our past frame and see the markets as what they are: big and underserved. What we need is not so much small (incremental) infrastructure as infrastructure that is constructed by people with an entrepreneurial mindset. If the Government of Kenya is prepared to invest in wiring classrooms and has both the scale and technical savvy to pull it off, that’s great. If the private sector can do it better, then the Government should act as facilitator. In some instances, a public-private approach will be the best.

Without question, Ethan makes a good point about the effectiveness of many large projects in Africa, especially famous dam projects and the like. Still, this is not unique either to Africa, or to energy. Corruption and a lack of oversight will ruin a project, whether it’s managed by a poor African Government or Halliburton. Especially in infrastructure, the key is getting value for money. Everybody – Governments, the private sector, and consumers themselves – all need to think entrepreneurially.

In the end, while small may be beautiful in many things, I wouldn’t want my own water system in Washington, DC any more than my friends in Lamu would want their own. What they want is a water system that works. Based on my observations from more than 20 years work on the continent, I would argue that a focus on the incremental could – while providing solutions in some areas – actually hurt efforts to build a more complete and more robust African infrastructure with the policies and investments to make it sustainable.

While there will always be underserved areas where other options might not be possible, incremental infrastructure would be a poor substitute for the kind of top shelf, state of the art infrastructure Africans are looking for, the kind of infrastructure that could help them compete in the global economy.

Andrew Mack is the Founder and Principal of AMGlobal Consulting, and a former World Bank official. He can be reached at: contact@amglobal.com