Growth in Ghana's ICT sector supported by expanding mobile money market and improved access to data

Ghana has the second-highest data penetration rate in sub-Saharan Africa, the fastest-growing mobile money market on the continent and a burgeoning tech start-up scene. ICT therefore represents one of the most dynamic areas of its economy. Recognising the sector’s potential, the government has stepped up efforts to stimulate market activity and pave the way for the rollout of 4G and 5G technology. Nevertheless, taxes and spectrum costs have dampened growth and emerging tech firms continue to struggle for financing.

Oversight

The ICT sector is regulated by the National Communications Authority (NCA), which is tasked with granting licences and authorisations for communication systems and services, ensuring market competition, protecting consumers and upholding industry standards. Oversight is provided by the Ministry of Communications (MoC), while the ministry’s ICT-specific institution, the National Information Technology Agency (NITA), is tasked with implementing government policy, developing industry guidelines and conducting research to identify obstacles to continued sectoral growth.

Mobile Market

In line with global trends, the number of mobile subscriptions in Ghana has steadily increased in recent years, rising from 38.9m in May 2018 to 41.2m in May 2019, according to the latest figures from the NCA. This brought the mobile penetration rate to 138.4%, considerably above the sub-Saharan African average of 84.4%, according to data from research firm GSMA Intelligence. However, as in other markets, penetration rates vary across different demographic and socio-economic groups, with the overall figure inflated by some consumers owning multiple SIM cards to take advantage of different offers or buying new SIM cards without deactivating old ones.

Following the finalisation of the merger between Airtel Ghana and Tigo Ghana to form AirtelTigo in November 2017, there are four telecoms firms active in the market. By far the largest operator in the mobile market is MTN Ghana, which is majority owned by South Africa’s MTN Group, with a minority stake listed on the Ghana Stock Exchange. As of May 2019 the firm had 21.2m subscribers and a market share of 51.4%, up from 47.5% one year earlier, according to the NCA. The second-largest mobile operator is Vodafone Ghana, with 10.2m subscribers and a market share of 24.6% in May 2019, a slight increase from 23.5% a year earlier. The company is majority owned by UK-based Vodafone, with the government retaining a 30% share. Vying for second place is AirtelTigo, with 9.1m subscribers in May 2019 and a market share of 22.2%. While figures for the merged company are unavailable for 2018, the combined market share of the two firms stood at 27.2% in May 2018, suggesting an erosion of the customer base following the merger. The smallest operator in Ghana is Glo Mobile, a subsidiary of Nigeria’s Globacom, which had 726,000 subscribers as of May 2019 and a total market share of 1.76%, down from 1.86% a year earlier.

Fixed Line

In comparison to the mobile market, fixed-line telephony is marginal, with a total of 284,000 subscriptions as of May 2019, or roughly one fixedline subscription for every 145 mobile subscriptions. Fixed-line infrastructure and services peaked in 2006 at around 360,000 active subscriptions, before losing pace with the expanding mobile market. Nevertheless, the market has remained stable and even exhibited some growth over recent years. This can be attributed to the fact that fixed-line connections offer robust operability for office-based businesses and institutions.

Two operators provide fixed-line services in the country, namely Vodafone Ghana and AirtelTigo. By far the most significant of these is Vodafone Ghana, which had 274,000 subscriptions or a 96.5% market share in May 2019, according to the NCA. It was followed by AirtelTigo, which had 10,000 subscriptions, or 3.5% of the total market. The dominance over the fixed-line segment held by Vodafone Ghana can be largely attributed to its ownership of the lion’s share of the country’s fixed-line telephony infrastructure, an outgrowth of its origins as the state-owned Ghana Telecom, the privatisation of which began in 1996.

Internet & Data 

Driven by government efforts to improve connectivity, falling costs of internet devices and market competition, access to the internet has risen steadily in Ghana. In January 2019 there were 10.3m active internet users, or 35% of the total population, up from 10.1m users in January 2018, according to data compiled by Canada’s social media management platform Hootsuite and the UK’s digital marketing agency We Are Social. As with telephony, the internet market is dominated by mobile phone usage, with 9.4m consumers using mobiles to access the internet in January 2019, or 90.8% of the total. While far from saturated, the mobile data market is well established. There were 27.3m data subscriptions as of December 2018. Around 66.7% of all mobile subscriptions are data subscriptions, with a mobile data penetration rate of 92.7%. This is high by regional standards; while comparable figures for all data subscriptions are unavailable, the penetration rate of 2G and 3G subscriptions in Ghana was 88.8% in December 2018, second only to South Africa (105%) in sub-Saharan Africa, according to the NCA and GSMA Intelligence.

The main operator in the mobile data segment is MTN Ghana, with 15.6m 2G and 3G subscriptions in December 2018 and a 59.7% market share. This was followed by AirtelTigo, which had 6.1m subscriptions and held 23.2% of the 2G and 3G market; Vodafone Ghana, with 4.2m subscriptions and 16.1%; and Glo Mobile, with 253,000 subscriptions and a 0.97% market share. The country’s emerging 4G segment is much smaller – with 1.1m subscriptions as of December 2018 – and possesses a somewhat different structure. MTN Ghana was the first firm to enter the market, having been granted an 800-MHz spectrum licence by the NCA in December 2015. The company established a network of 4G sites across the country, enabling it to offer LTE services to all regions upon its launch in June 2016. It has since retained dominance of the market, though a number of smaller, domestically owned companies operating only in the 4G segment have since made inroads. In December 2018 MTN Ghana had 1m 4G subscriptions, controlling an overwhelming 92.9% of the segment. It was followed by Surfline, which had 55,100 subscriptions and a 4.9% market share. The remaining 2.2% of the market was divided between Broadband Home and the more recently launched Blu, which held 25,100 and 347 subscriptions, respectively.

With an increasingly affluent population and a rapidly expanding offering of digital platforms and services, the Ghanaian mobile data market has considerable growth potential. “Most people in Ghana are excited about the prospect of having more reliable, faster internet on their mobile phones, particularly in terms of what is offered by 4G and, eventually, 5G technology,” Timothy Kotin, co-founder and CEO of data analytics and artificial intelligence (AI) firm Superfluid Labs, told OBG.

Nevertheless, bottlenecks exist to ongoing expansion, the most notable of which relates to the pricing and allocation of spectrum. “One major ongoing issue is spectrum costs,” Chris-Samson Andoh, co-founder and CEO of domestic start-up TechFin Innovations, told OBG. “This issue hinders competition and increases overall operational costs, which are then passed on to the consumer.” In Ghana’s first auction of 800-MHz spectrum for 4G technology in December 2015, the NCA offered two lots of 2x10-MHz spectrum at a reserve price of $67.5m per lot. However, only MTN Ghana was able to meet this reserve price, allowing it to secure a near monopoly in the 4G market.

As a result of relatively high data costs, many subscribers use mobile internet services sparingly. This limits uptake among lower-income consumers and inhibits growth of digital services. In July 2019 Ken Ofori-Atta, the minister of finance, announced the communications service tax would increase from 6% to 9%. The tax will be levied on all companies offering communications services, including mobile phone operators and firms providing data services. While the minister emphasised that revenue from the tax would be directed towards developing the ICT sector, concerns have been expressed regarding the impact on entrepreneurship and new entrants to the market. “This new tax has been levied on an industry still in its early stages of development,” Daniel Abunu, CEO of domestic mobile data firm ZroNet, told OBG. “Taxes and regulations are being placed on innovative companies before they get the opportunity to grow.”

LTE Development

In an effort to diversify the 4G market and boost access to high-speed mobile internet, the NCA held a second spectrum auction for the 800-MHz band in September 2018, inviting tenders for three blocks of 2x5-MHz frequency. The auction attracted two bids, one from Vodafone Ghana and the other from energy company Quantum. In December 2018 it was announced that Vodafone Ghana had been awarded the licence in a $30m deal and, following extensive LTE infrastructure upgrades, the company launched its 4G offering in March 2019. Furthermore, in January 2019 Surfline completed an upgrade of its 4G-LTE infrastructure, expanding coverage to 93 more locations in the Greater Accra Region. In a sign that increased competition is stimulating dynamism in the market, MTN Ghana announced the activation of 4G+ services using LTE-A technology the same month. The new service uses carrier aggregation to combine the company’s access to the 800-MHz and 2600-MHz spectrum and is supported by 625 4G LTE-A enabled sites. MTN Ghana also announced in April 2019 that it had allocated $160m to improve its network and foster greater reliability and coverage, with the aim of deploying 900 4G-LTE sites, 277 3G sites and 450 2G sites. Work is also under way to prepare for the longerterm introduction of 5G, which will offer significantly increased capacity and mobile internet speed. In late February 2019 the government announced a partnership with the international telecoms firm Nokia to lay the ground work for the introduction of a 5G network.

Network Expansion

These efforts dovetail with a broader drive by both the government and private firms to upgrade and expand ICT and telecoms infrastructure. The country is well connected to international undersea telecoms cables including the African Coast to Europe system; the Glo-1 cable between the UK and Nigeria; the South Atlantic 3/West Africa cable running from South Africa to Portugal and Spain; the West Africa Cable System; and the Main Onelink between Portugal, Nigeria, Ghana and several other West African countries.

Work is nearing completion on the government’s Eastern Corridor Fibre-Optic Backbone project, an 800-km network connecting 27 towns and municipalities, strengthening the country’s existing network and boosting connectivity outside of major cities. Unveiled in May 2015, the $38m project was funded by the Danish International Development Agency and designed by France’s telecoms equipment firm Alcatel-Lucent. It is scheduled for completion by 2020. As part of the broader effort to improve connectivity in interior areas that have economic potential, the Ghana Investment Fund for Electronic Communications announced a partnership with Vodafone Ghana and GSMA to find innovative solutions to boost access to mobile internet. The 18-month project, which began in July 2019, will provide funding, land and tax exemptions of up to 30% for mobile internet infrastructure. In a move expected to improve rural connectivity and bring greater competition to the internet market, AfricaOnline Ghana, a subsidiary of the pan-African telecoms provider Gondwana International Networks, launched a new satellite broadband service in April 2019 in partnership with UK-based Avanti, promising coverage across the whole country through multiple spot beams.

Digital Technology

The expansion of internet networks and smartphone ownership has supported a rapid rise in digital services and the application of digital technology to business practices. While the country’s digital transformation remains in its early stages, certain segments have undergone swift development and none more so than digital money. Recognising the potential offered by the sector, the Bank of Ghana (BoG) issued agent and e-money guidelines in July 2015 that allow telecoms companies to own and operate mobile money networks under the supervision of the central bank. This stimulated rapid investment in the segment, with MTN Ghana taking the lead in recruiting agents and establishing infrastructure for high-volume payments. The segment has since expanded rapidly to become one of the fastest growing on the continent, with the total value of transactions carried out on mobile platforms reaching GHS223bn ($43.2bn) in December 2018, up 43% on the previous year, according to the latest available figures from the BoG. “Mobile money has had a very positive impact, speeding up financial inclusion by providing opportunities for people who would not have used traditional banking,” Andoh told OBG. “It has also been positive in terms of the business environment and entrepreneurship in Ghana.”

Increased Interoperability

The segment received further support with the introduction of the Mobile Money Interoperability System by the BoG in May 2018, which harmonises transfers across various mobile money networks and reduces operational costs. “This is one of the most important achievements in the industry; it highlights that the current administration is able to work with the private sector, and provide them with the support needed to streamline mobile money,” Derek Laryea, head of research and communications at the Ghana Chamber of Telecommunications, told OBG.

New mobile money products entering the market should also support further growth. One of these products is SmartCedi, a debit card linked to the MTN Mobile Money Wallet that is expected to be launched in November 2019. The first of its kind in Ghana, the card can be used to withdraw cash and make online and in-store payments. The expansion of the segment has also increased the offering of other financial products. Fidelity Bank, one of Ghana’s major financial institutions, launched Yello Save, a mobile money savings platform intended for small businesses in partnership with MTN Ghana in February 2017. Furthermore, launched in 2014, the domestic mobile financial services platform JUMO offers micro-credit and savings options to previously unbanked segments of the population. It has since expanded its operations into other African markets. Significant potential exists for the continued expansion of the mobile platform market through the application of new disruptive technologies. “Voice-recognition software is what is really going to take the digital market to another level,” Abunu told OBG. “Once you can interact with a platform using voice, this opens it up to a much wider audience, particularly if the product allows one to interact in one’s local language.”

Start-Ups

A new generation of firms has emerged to harness the potential of digital technology such as big data analytics and AI in Ghana, with the country hosting an increasingly dynamic start-up scene. Agriculture has considerable scope for start-ups, and accounted for 19.7% of GDP and around one-third of employment in 2018 (see Agriculture chapter). A notable entrant to the market is Farmerline, which offers an integrated mobile platform that provides farmers with a range of services including weather, price data, and information on certification and sustainability standards delivered via voice technology in local languages, in addition to features that allow farmers to order inputs and access financial services. The sector has been highlighted as a priority by the AI research and development centre established by US tech giant Google in Accra in April 2019. The new centre is made up of a team of 10 research scientists and software engineers, who collaborate with domestic universities and policymakers to find AI solutions to economic challenges. Health care is another sector in which tech start-ups are having an impact. For instance, the company mPharma, established in 2013, utilises big data to streamline pharmacy inventories and logistics to deliver pharmaceutical products (see Health chapter).

However, access to credit presents a major issue for start-ups, with many of the more successful emerging firms driven to look overseas for capital investment. “The lack of credit for start-ups limits a great deal of potential,” Andoh told OBG. “Domestic banks need to do better, but for this they need the support of the government.” Indeed, the government has taken important steps to support the development of the start-up ecosystem. In March 2019 it launched the Ghana-Oracle Digital Enterprise Programme (GODEP) in collaboration with US ICT giant Oracle. GODEP is set to support up to 500 domestic tech start-ups by providing them with access to Oracle’s cloud computing network. Furthermore, the MoC launched the Ghana Innovation Hub in collaboration with local stakeholders in October 2018. This project, which received $1.4m in funding from the World Bank, offers an incubation programme for tech start-ups. Tech start-ups also benefit from a number of incentives introduced in 2018 to reduce youth unemployment. The reforms extended a five-year income tax exemption for all entrepreneurs under the age of 35 operating in ICT and other high-value industries. Eligible start-ups receive reduced taxes, ranging from 5% to 15% based on the location of the business.

Government Drive

These efforts form part of a broader plan from the government to establish Ghana as a leading centre of ICT innovation in sub-Saharan Africa. The government’s primary plan for the sector is its ICT for Accelerated Development Policy, which was first established in 2003. However, in May 2019 the government announced the release of a new digital roadmap to update the policy programme (see analysis). The strategy aims to support the private sector by expanding digital services to rural and underserved communities, in addition to improving education and training in digital skills. Furthermore, in April 2019 Ghana announced the establishment of the Cyber Security Authority to oversee matters related to cybercrime and to improve security in the digital services market.

Outlook

The rapid expansion of mobile data penetration and mobile money platforms has had a transformative effect on the Ghanaian economy, boosting financial inclusion and providing companies with new avenues to develop and market their products. These platforms have also opened up new opportunities for start-ups, introducing a range of new innovative products to the market. The government recognises that ICT is a central driver of economic development and has sought to harness its potential both through the digitisation of public services, and the provision of ICT infrastructure and incubator programmes to support start-ups. The market is far from saturated, with many consumers using mobile data sparingly and smartphone penetration low among less affluent Ghanaians. The future of the industry appears positive; however, if it is to achieve its full potential and become a central driver of development, further efforts will be needed to reduce data costs and improve financing for start-ups.