BD Insider, Letter 139: 36% reduction of airfares within Africa?

BD Insider, Letter 139 examines the single African air transport market, Ghana's e-levy and the 5G launch in Zambia.

BD Insider, Letter 139: 36% reduction of airfares within Africa?
Single African Air Transport Market

This month has been filled with startup and ecosystem tech events in London and Lagos. As the year winds down, it's almost as though everyone is trying to get in their event.

You can catch a roundup of all the November events written by Benjamin.

For Letter 139, we examine:

  • The 15 African countries that will pioneer the Single African Air Transport Market.
  • Ghana's reduction of its e-levy fee to 1%
  • MTN 5G launch in Zambia

and other noteworthy information like:

  • the latest African Tech Startup Deals
  • opportunities, interesting reads and more

The Big Three!

Nigeria and 14 other African countries to pilot the Single African Air Transport Market

The News: Fifteen African countries, including Nigeria, Kenya, South Africa and Ghana have agreed to open their air routes to one another under the Single African Air Transport Market (SAATM) scheme of the African Union.

SAATM is a flagship project of the African Union's (AU) Agenda 2063, to create a single unified air transport market in Africa, liberalize civil aviation and drive the continent's economic integration agenda.

The Declaration on the establishment of a Single Africa Air Transport Market was adopted by the African Union (AU) Assembly in 2015. SAATM was formally established and launched on January 29, 2018, by African Heads of State and Governments.

The SAATM was created to expedite the full implementation of the Yamoussoukro Decision [pdf]. This 1999 AU treaty establishes a framework for the liberalization of air transport services between African countries. Currently, SAATM has 36 signatories.

Why it matters: A survey by the International Air Transport Association (IATA) states that if 12 key African countries open their markets and increase connectivity, these countries will create 155,000 jobs in the aviation sector with a $1.3 billion in annual GDP.

With air service liberalisation, the IATA survey states that there will be a 25-36% reduction in intra-Africa airfares. It will also shorten the flying time between many cities. For example, in 2013 there was no direct service between Algeria and Nigeria—the most convenient routing available was via Morocco (Algiers-Casablanca-Lagos).

The SAATM pilot implementation pioneers are: Kenya, Ethiopia, Rwanda, South Africa, Cape Verde, Côte d’Ivoire, Cameroon, Ghana, Morocco, Mozambique, Namibia, Nigeria, Senegal, Togo and Zambia

Zoom out: In Nigeria, a member of the Airline Operators of Nigeria (AON) said that the local operators were unaware of the test run of SAATM. "Now, they are opening up our market without the local operators in the know. Even if the unborn Nigeria Air will represent the country, we the airlines are also stakeholders and should be part of the operations. Otherwise, there is a sinister plan to run us out of business and we will surely resist that," the operator told TheGuardian Nigeria.

Meanwhile, the SAATM pilot implementation will enable the proposed joint airline deal between Kenya Airways (KQ) and South African Airways (SAA).

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Ghana's 2023 budget pegs e-levy at 1%

The news: The government of Ghana has reduced the e-levy rate from 1.5% to 1% of the transaction value. The country's Finance Minister, Ken Ofori-Atta disclosed this last Thursday (November 24, 2022) during the 2023 budget presentation.

Why it matters: In May 2022, Ghana's Electronic Transfer Levy Act, 2022 (Act 1075) was passed—imposing a 1.5% levy that is deducted at the time of any electronic transfer over $13—to raise $900 million in the nation's revenue so as to address unemployment and high public debt in the country.

According to Ofori-Atta, the levy which was introduced in the 2022 budget "has not yielded the resources as expected". Following the implementation of the e-levy, the Bank of Ghana disclosed that the total value of mobile money transactions in the country declined by 3%, as of May 2022.

A July 2022 survey by Afrobarometer, a pan-African research network revealed that only two in ten Ghanaians approved of the e-levy. The e-levy was also opposed by the minority wing of Ghana's parliament.

Zoom out: In September, Tanzania scrapped its mobile money transfer fee after one year of implementation citing that "the collection of transaction fees has enabled the Government to provide basic services for our citizens in the financial year 2021/2022."

Other African countries including Uganda, Zimbabwe and Cameroon also charge similar levies. Meanwhile, Kenya, Nigeria, South Africa, Egypt and Mauritius are among the countries that are exploring plans for digital money taxes.

Get funding for your Agro-related ideas

  • UNDP and FCMB are inviting agritech startups, agribusiness entrepreneurs, engineers, innovators, and tech solution enthusiasts across Nigeria to participate in its AgroHack Challenge, which seeks to crowdsource innovative solutions to the challenges faced across the agricultural ecosystem in Benue State and Nigeria at large.
  • The winners will receive funding, incubation support for 3 months, and other exciting benefits.
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MTN becomes the first telco to roll out 5G in Zambia

The news: MTN Zambia has launched its 5G network, becoming the first mobile operator in Zambia to offer 5G services commercially after successfully undertaking trials of the transformative technology over the past 11 months.

Why it matters: "5G can transform business and livelihoods beyond simple connectivity, with the potential to unlock many new use cases. In Zambia, we see great opportunities across many sectors, and in the mining industry in particular," Mcebisi Jonas, Chairman of MTN Group, said.

Currently, the MTN 5G service in the country covers 15% of the population with plans to reach 100% coverage by 2023. According to Bart Hofker, CEO of MTN Zambia, the introduction of 5G is part of a wider network strategy for MTN Zambia.

Other programmes involve the optimisation and modernisation of existing 3G and 4G networks, the building of a fibre ring in Zambia with MTN GlobalConnect, as well as the extension of coverage in more rural areas. Through our rural connectivity programme, MTN Zambia and our partners plan to use cost-effective coverage alternatives to launch 45 rural sites in 2022 and another 100 in 2023.

Zoom out: In the last four months, the 5G network was launched in a few African countries—including Nigeria, Kenya and Botswana. However, adoption is low due to the high cost of 5G-enabled devices.

For instance, the average price of a good 5G-enabled phone in Kenya is around $330, this is out of reach for more than 80% of Kenya’s 54 million population.

Smartphone brands that support 5G in Kenya include Samsung, Huawei, and Oppo. The iPhone and other 5G-labelled brands require a software update.

Kenya's President, Williams Ruto recently disclosed that the East African country wants to manufacture "the cheapest smartphone in Africa" by 2023. He did not state if these devices will be 5G enabled.

Two months after the launch of its 5G network in Nigeria, MTN in partnership with Intelligra launched a financing scheme that will grow smartphone penetration in Nigeria to 60% by 2025 through a Buy Now Pay Later (BNPL) option.

💰 State of funding in Africa

Quick funding facts:

  • Last week, Pan-African VC firm, LoftyInc Capital Management closed its LoftyInc Afropreneur Fund 3 (LAF3) at $14.3 million to invest in Seed-to-Series A technology-enabled companies founded by African entrepreneurs.
  • Fintech startups jointly raised $49.1 million of the $52.1 million that was jointly raised by African startups.
  • Per BD Funding Tracker, African fintech startups have raised over $1.3 billion out of the ~$3.4 billion that have been jointly raised by startups on the continent, as of November 29, 2022.
Credit: BD Funding Tracker

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