Lions go digital: The Internet’s transformative potential in...
-
Upload
duongtuong -
Category
Documents
-
view
219 -
download
0
Transcript of Lions go digital: The Internet’s transformative potential in...
McKinsey Global Institute
April2014 Discussion document
CONFIDENTIAL AND PROPRIETARY Any use of this material without specific permission of McKinsey & Company is strictly prohibited
Lions go digital: The Internet’s transformative potential in Africa
McKinsey & Company | 1
This is Africa …
McKinsey & Company | 2
This is also Africa …
McKinsey & Company | 3 3
Some surprising facts about Africa
Consumption grew more in Africa than in India or Brazil over the last decade
Africa has as many cities with 1 million people or more as Europe
Africa today is more urbanised than India, and just below China
More than 75 companies earn over $3b each, in revenue from Africa
McKinsey & Company | 4
Africa’s major cities are embracing the Internet
SOURCE: McKinsey Africa Consumer Insights Center Survey, 2012; McKinsey Global Institute analysis
51% have accessed the Internet in the last month
25% are online daily
21% spend more than 10 hours per week online
54% own Internet-capable devices
57% of Internet users use social networking sites often
Johannesburg
Cape Town
Lagos
Abuja
Nairobi
Dakar
Algiers
Casablanca Alexandria
Cairo
Addis Ababa
Among urban residents …
McKinsey & Company | 5
All indications are that this will continue … transforming the continent, even more than the mobile phone
There is a massive demographic shift to an Africa that is urban, young and middle class;
Ambitious ICT infrastructure planned by telecoms industry and governments that will drive access
Smart devices fall below the “tipping point” of sub $50 smart devices
Almost every government on the continent has developed a national ICT strategy to harness the impact of the Internet
A large cadre of digital entrepreneurs (some well-funded) are racing to meet this demand with new business models that look to innovate around the unique challenges to Africa – investors are taking notice
McKinsey & Company | 6
Exciting examples of entrepreneurship
iROKOtv
McKinsey & Company | 7
iGDP composition varies by country
SOURCE: McKinsey Global Institute analysis
NOTE: Numbers may not sum due to rounding.
18
South Africa 65 6
Nigeria 75 25
Angola 79 -2
Algeria 82 11 0
Ghana 86 6 -2
Kenya 87 6 0
Tanzania 91 6
Senegal 91 3 -2
Cameroon 96 2 -1
Côte d’Ivoire 98 0
Ethiopia 98 0
Mozambique 99 -1
13
63 Egypt
34 14 Morocco
8 82 Average
Private consumption Public expenditure Private investment Trade balance
2 0 1 1
1 1
McKinsey & Company | 8
Senegal and Kenya are leading the way on the continent
SOURCE: Gartner; IHS Global Insight; Organisation for Economic Co-operation and Development; International Telecommunication Union; International Data Corporation; World Health Organization; ICD; iConsumer US 2012; Euromonitor; H2 Gambling Capital; PhoCusWright; Pyramid Research; UNESCO (United Nations Educational, Scientific and Cultural Organization); McKinsey Global Institute analysis
Africa Emerging countries2
Developed economies
The Internet’s contribution to GDP (iGDP) is much lower in Africa iGDP, 2012 % of GDP1
iGDP by country, 2012 %
Canada
Ghana Cameroon Tanzania Côte d’Ivoire South Africa Brazil Mozambique Italy Argentina
Angola 1.2 0.5 Ethiopia Nigeria 1.5 0.8 Algeria 1.1 0.8 Russia Turkey Vietnam Egypt Mexico
Kenya France Germany India Senegal United States Hungary Japan Malaysia South Korea Taiwan United Kingdom Sweden
China Morocco
1 GDP assessed by expenditure method, with a share of each category attributed to the Internet. 2 Aspiring countries data is from 2010.
3.4x
iGDP adjusted for oil revenues
McKinsey & Company | 9
Aspiring countries
Developed economies
Africa
Developed economies
Africa
xxxx
If government and business successfully drive adoption and demand, the Internet could contribute 10 percent to Africa’s economy by 2025 …
SOURCE: McKinsey Global Institute analysis
2025
9–11
2012
Matching countries that are best in class … iGDP, %
… combined with an uptake similar to that of mobile telephony… Mobile voice revenue as % of GDP
… could produce a leap forward in Africa’s iGDP growth iGDP, %
×
3.4x
3.4x
8– 10%
McKinsey & Company | 10
Private consumption could reach $154 billion by 2025
SOURCE: McKinsey Global Institute analysis
$ billion
NOTE: Numbers may not sum due to rounding.
2025
2012
Device revenues Internet access and usage revenues
Mobile finance revenues
e-commerce sales
Total private consumption
McKinsey & Company | 11
Global comparisons reveal significant scope to increase public expenditure on the Internet Public expenditure $ per capita
SOURCE: McKinsey Global Institute analysis
Average spending
Morocco
Japan France Germany
Canada Sweden 281.69 United States 330.55 United Kingdom 371.00
Senegal
Argentina Malaysia Brazil Hungary Taiwan Ethiopia Mozambique Côte d’Ivoire Cameroon Tanzania Ghana
Kenya Nigeria Angola Algeria Egypt South Africa
Turkey
Sample
Developed world
Emerging countries
3
32
190
McKinsey & Company | 12
Private investment in Internet-related infrastructure and digitisation is significantly higher in other emerging markets $ per capita
14.2522.58
0.030.030.24
0.370.530.72
1.831.99
2.552.77
3.28
5.257.12
8.29
Algeria
South Africa Egypt Morocco
Mexico Malaysia Taiwan 57.91
Argentina 76.94
Hungary 84.77 Ethiopia Mozambique Côte d’Ivoire Cameroon
Tanzania
Nigeria Ghana Kenya Senegal Angola
SOURCE: Gartner; IHS Global Insight; Organisation for Economic Co-operation and Development; International Telecommunication Union; International Data Corporation; World Health Organization; ICD; iConsumer US 2012; Euromonitor; H2 Gambling Capital; PhoCusWright; Pyramid Research; United Nations Educational, Scientific and Cultural Organization; McKinsey Global Institute analysis
McKinsey & Company | 13
The internet will transform six sectors in particular
SOURCE: McKinsey Global Institute analysis
Potential for capturing benefits ▪ Device
penetration ▪ Online fulfilment ▪ Information
asymmetry ▪ Need for high-
speed bandwidth
High
Low
Number of people impacted
High Low
Tourism
ICT
Transport
Professional services
Construction Manufacturing Mining
Financial services
Health
Government Agriculture
Education
Retail
McKinsey & Company | 14
Implications for the six sectors (1/2)
Financial services
▪ Opportunities in payments (P2P, B2P, P2B) micro-credit, micro-insurance could be up to US$20 billion and drive financial inclusion
▪ Interoperability will be a key issue ▪ Will require customer education, establishment of a broader ecosystem
and enabling regulation
Education
▪ Opportunities in content and learning aids, end-to-end low-cost private models, teacher instruction, management systems for schools
▪ Governments and private sector will need to work together to address gaps in infrastructure, improve access to devices and ensure buy in from teachers and
Government service delivery
▪ Three key opportunities: digitisation to improve efficiency and transparency, revenue collection, improved convenience and better service delivery for citizens and businesses
▪ Governments will need to address gaps in infrastructure, skills and devices
▪ They will also need to develop a co-ordinated ICT strategy
Implications
SOURCE: Lions go digital
McKinsey & Company | 15
Implications for the six sectors (2/2)
Agriculture
▪ Opportunities driven by increasing access to markets, and therefore, price realisation and improving access to information
▪ Number of initiatives under way, but scaling up is difficult due to limited skills and funding in some cases. Providers will therefore need to develop alternative revenue streams, e.g. logistics, insurance, etc.
Health
▪ Opportunities in automation of health care systems, remote diagnostics, practitioner training, patient education
▪ Challenges include complex ecosystem, reliance on donor funding, limited access to smart devices by patients
Retail
▪ Key opportunity is in creating access to formal retail experience, improving selection / assortment. Additional opportunities in logistics and payments
▪ Retailers could differentiate by targeting specific segments, e.g. youth, cost conscious
▪ Challenges include under-developed payments and logistics and building consumer trust in online
Implications
SOURCE: Lions go digital
McKinsey & Company | 16
i5F scores by country
SOURCE: McKinsey Global Institute analysis
Score per i5F dimension %
Angola 38 31 18
Algeria 27 39 40
Côte d’Ivoire 38 44 37
Mozambique 48 48 31
Ethiopia 56 39 33
Tanzania 48 53 25
Cameroon 46 51 30
Nigeria 49 54 25
Ghana 49 58 34
Senegal 68 53 26
Egypt 49 53 41
Kenya 59 54 38
Morocco 57 58 50
South Africa 45 67 43
National ICT strategy
Business environment
Infrastructure Financial capital
ICT skills base i5F score
50
48
47
42
39
39
37
36
36
34
33
33
28
21
McKinsey & Company | 17
The McKinsey I5F correlates with the IGDP – showing that when countries focus, they can drive their iGDP
SOURCE: McKinsey Global Institute analysis
i5F score %
51 50 49 48 36 35 34 33 32 31 30 29 28 27 26 25 24 23 22 38 37 47 46 45 44 43 42 41 40 39
iGDP %
21 0
Algeria Angola
Nigeria South Africa
Morocco
Egypt
Côte d’Ivoire
Senegal
Cameroon
Kenya
Mozambique
Algeria
Ghana
Tanzania
Angola
Nigeria Ethiopia
Adjusted for oil revenues
Standard iGDP
Punching below their weight
Emerging
Leaders
Followers
McKinsey & Company | 18
Backup
McKinsey & Company | 19
Penetration and usage vary widely across the continent
SOURCE: Internet World Stats; International Telecommunications Union statistical database 2012; World Economic Forum Global information technology report 2012; Euromonitor; World Economic Forum Global competitiveness report; McKinsey Global Institute analysis
Internet penetration and usage, 2012
1 Not adjusted for multi-SIMming, i.e., individuals may own more than one SIM card and be counted multiple times. 2 Fixed line only.
Mobile pene-
tration1
% of population
Internet pene-
tration % of
population
Urban Internet
penetration % of
population
Face-book
users Million
Online retail pene-
tration %
High-speed Internet
penetration2
% of population
Internet use within
companies Index, 0–7
Government departments
online %
Government information
systems online
%
Algeria 103 14 52 4.1 0.39 2.5 3.1 10 1
Angola 49 15 49 0.6 0.49 0.1 3.4 34 7
Cameroon 64 5 – 0.6 0.01 0 4.6 15 16
Côte d’Ivoire 96 4 – – – 0 3.9 32 17
Egypt 115 36 46 12.2 0.37 1.8 4.6 53 29
Ethiopia 24 1 47 0.9 0.40 0.8 3.6 20 4
Ghana 100 14 55 1.6 0.43 0.2 4.5 15 9
Kenya 72 28 78 2.0 0.73 0 5.0 24 23
Morocco 120 51 52 5.1 0.50 1.6 4.5 24 13
Mozambique 33 4 – 0.4 – 0.1 4.5 17 11
Nigeria 68 28 50 6.6 0.04 0.1 4.5 10 1
Senegal 88 18 70 0.7 0.44 0.6 5.3 18 3
South Africa 135 17 54 6.3 0.49 1.5 5.3 31 19
Tanzania 57 12 – 0.7 – 0 3.8 17 4
McKinsey & Company | 20
Private consumption could reach $154 billion by 2025
SOURCE: McKinsey Global Institute analysis
$ billion
NOTE: Numbers may not sum due to rounding.
2025
2012
Device revenues Internet access and usage revenues
Mobile finance revenues
e-commerce sales
Total private consumption
McKinsey & Company | 21
Global comparisons reveal significant scope to increase public expenditure on the Internet Public expenditure $ per capita
SOURCE: McKinsey Global Institute analysis
Average spending
Morocco
Japan France Germany
Canada Sweden 281.69 United States 330.55 United Kingdom 371.00
Senegal
Argentina Malaysia Brazil Hungary Taiwan Ethiopia Mozambique Côte d’Ivoire Cameroon Tanzania Ghana
Kenya Nigeria Angola Algeria Egypt South Africa
Turkey
Sample
Developed world
Emerging countries
3
32
190
McKinsey & Company | 22
Private investment in Internet-related infrastructure and digitisation is significantly higher in other emerging markets $ per capita
14.2522.58
0.030.030.24
0.370.530.72
1.831.99
2.552.77
3.28
5.257.12
8.29
Algeria
South Africa Egypt Morocco
Mexico Malaysia Taiwan 57.91
Argentina 76.94
Hungary 84.77 Ethiopia Mozambique Côte d’Ivoire Cameroon
Tanzania
Nigeria Ghana Kenya Senegal Angola
SOURCE: Gartner; IHS Global Insight; Organisation for Economic Co-operation and Development; International Telecommunication Union; International Data Corporation; World Health Organization; ICD; iConsumer US 2012; Euromonitor; H2 Gambling Capital; PhoCusWright; Pyramid Research; United Nations Educational, Scientific and Cultural Organization; McKinsey Global Institute analysis
McKinsey & Company | 23
iGDP composition varies by country
SOURCE: McKinsey Global Institute analysis
NOTE: Numbers may not sum due to rounding.
18
South Africa 65 6
Nigeria 75 25
Angola 79 -2
Algeria 82 11 0
Ghana 86 6 -2
Kenya 87 6 0
Tanzania 91 6
Senegal 91 3 -2
Cameroon 96 2 -1
Côte d’Ivoire 98 0
Ethiopia 98 0
Mozambique 99 -1
13
63 Egypt
34 14 Morocco
8 82 Average
Private consumption Public expenditure Private investment Trade balance
2 0 1 1
1 1
McKinsey & Company | 24
Global iGDP leaders tend to exhibit a lower reliance on private consumption
SOURCE: McKinsey Global Institute analysis
Taiwan 29 6
United Kingdom 59 25
Sweden 46
United States 60 24
Hungary 29 8
Japan 47 45
Malaysia 39 8
South Korea 69 31
24
Public expenditure Private consumption Private investment Trade balance %
NOTE: Numbers may not sum due to rounding.
McKinsey & Company | 25
McKinsey’s i5F Index gauges the capacity of countries on the five foundations of the Internet
SOURCE: World Economic Forum; United Nations; United Nations Educational, Scientific and Cultural Organization; Venture Expert; International Institute for Management Development; World Bank; McKinsey analysis
1 Infrastructure is viewed as being a “threshold” factor where increases above a certain level do not confer additional advantage. All ratings above 60 (our defined threshold) are set to 60.
Quality drivers
Quantity drivers
ICT skills base Infrastructure1 Business environment
National ICT strategy Financial capital
McKinsey i5F index
▪ University/industry research collaboration
▪ FDI and technology transfer ▪ Brain drain ▪ Quality of math and science
education ▪ Tertiary education enrolment
rate ▪ Availability of scientists and
engineers ▪ Researchers in R&D per
capita ▪ Personnel in R&D FTE per
capita
▪ Ease of access to loans ▪ Venture capital (VC)
availability ▪ Financing through local equity
market ▪ Value per capita of VC
investment (semiconductor/other electronics, Internet, software computer, hardware computer)
▪ Number of VC deals per capita
▪ Researchers in R&D ▪ Personnel in R&D FTE ▪ Graduate in science ▪ Doctorate in all science and
engineering fields
▪ Value of VC investment (semiconductor/other electronics, Internet, software computer, hardware computer)
▪ Number of VC deals
▪ Overall infrastructure quality
▪ Quality of electricity supply
▪ Secure Internet servers per capita
▪ State of cluster development
▪ Time required to start a new business
▪ Burden of government regulations
▪ Intellectual property protection
▪ Effectiveness of antitrust policy
▪ Ease of doing business index
▪ Capacity for innovation
▪ Irregular payments and bribes
▪ Government prioritization of ICT
▪ Importance of ICT to government vision of the future
▪ Government procurement of advanced tech products
50%
50%
50%
50%
McKinsey & Company | 26
i5F and iGDP are closely correlated
SOURCE: McKinsey Global Institute analysis
0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
Germany
United States Hungary Japan
United Kingdom
Sweden
Angola
Algeria
Mozambique Côte d’Ivoire
Ethiopia
Senegal
Tanzania
Cameroon
Nigeria
Ghana
Egypt
Kenya
Morocco
South Africa
iGDP %
i5F score %
80 75 70 65 60 55 50
Brazil
40 35 30 25 20 0
Turkey
45
Argentina China
India
Malaysia
Italy
Canada France
Mexico
McKinsey & Company | 27
Four clusters emerge based on each country’s current Internet economy and its foundations for future performance
SOURCE: McKinsey Global Institute analysis
44 43 41 40 39 42
iGDP %
i5F score %
51 50 49 48 47 46 45 38 37 36 35 34 33 32 31 30 29 28 27 26 25 24 23 22 21 0
Algeria Angola
Nigeria South Africa
Morocco
Egypt
Côte d’Ivoire
Senegal
Cameroon
Kenya
Mozambique
Algeria
Ghana
Tanzania
Angola
Nigeria Ethiopia
Adjusted for oil revenues
Standard iGDP
Punching below their weight
Emerging
Leaders
Followers