The technology, media and telecommunications (TMT) sector in Africa is expected to show impressive growth in 2019, with transactions forecast to exceed earlier predictions of mergers & acquisition (M&A) investments worth $5.9 billion in 2019, according to Baker McKenzie’s Global Transaction Forecast.
Janet MacKenzie, partner in the Corporate/M&A Practice and head of the TMT Industry Group at Baker McKenzie in Johannesburg said that Africa is considered to be a region of significant investment potential in the tech space.
“Increasingly, M&A deals and IPOs in the TMT sector in Africa point to the growing reliance of African consumers on technology across multiple platforms. The unabated demand for technology has caused extensive cross-sector disruption in Africa, with, for example the financial, energy, transport, retail, health and agricultural sectors all seeking opportunities to expand their tech infrastructure in order to acquire the necessary skills and innovation needed to keep up with demand,” she said.
“In 2019, fintech will likely remain the most popular tech sector for investment in Africa, with health-tech, mobility and agritech also attracting investment. Tech companies in South Africa, Nigeria and Kenya are expected to secure the biggest funding deals of the year in 2019,” said MacKenzie.
MacKenzie, however, pointed out that the local TMT sector faced numerous challenges, which were affecting the sector’s ability to move forward and implement high end, fourth industrial revolution (4IR) technology.
In April this year president Cyril Ramaphosa announced the formation of a new commission on the fourth industrial revolution, with the aim of assisting the government to take advantage of the opportunities presented by the 4IR.
“This new commission is a welcome development. It has become critical for South Africa to have the correct policy and regulations in place to ensure we can effectively roll out the TMT infrastructure and services needed to implement 4IR technology. There is significant policy and regulatory work still to be done in this arena before South Africa will be on par with other countries who are much further along in the process than we are,” MacKenzie said.
“When it comes to policy, certainty is lacking, and needed,” MacKenzie said. The failure to properly implement the regulatory framework for the rapid deployment of infrastructure has resulted in uncertainty on the terms of access, the rights of landowners and the compensation to be paid to landowners for access.
A lack of uniformity in the approaches adopted by municipalities with regard to rights of way has led to costly delays in the rollout of infrastructure. All of this has culminated in an unprecedented number of access disputes being referred to our courts for resolution.
MacKenzie explained that prohibitive data costa are further delaying the implementation of affordable high end technology services, The Competition Commission in South Africa recently released a report on the cost of mobile data in South Africa in April and noted that data costs in South Africa are some of the highest in the world.
“The delay in the digital migration process and the consequent delay in the release of high demand spectrum has negatively impacted on the ability of the mobile operators’ to roll out data rich services and 5G, in particular. 5G is necessary for the implementation of 4IR technology such as blockchain, artificial intelligence, augmented reality and the Internet of Things. Insufficient spectrum and a lack of access to the lower band frequencies is the reason behind high data costs, the big mobile operators have said.
“If the challenges can be addressed via policy and regulatory certainty, it will provide a catalyst for further investment in TMT infrastructure and services in South Africa, which will enable the country to implement and reap the benefits of 4IR technology,” said MacKenzie.