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SA ICT firms add to Kenya's US$672 million FDI in 2017

SA ICT firms add to Kenya's US2 million FDI in 2017

South African ICT companies Naspers, MTN and Intact Software Distribution made a significant contribution to foreign direct investment (FDI) into Kenya in 2017, helping the East African country record an increase of 71% to reach US$672 million.

This is according to the 2018 United Nations Conference on Trade and Development (UNCTAD) World Investment Report released last week.

The report referenced growing local demand in Kenya and inflows into the country's ICT industry that included expansion by Naspers, MTN and IT security software distributor Intact Software.

Intact Software Distribution opened its Nairobi office in June 2017 in a move the company's CEO Simon Campbell-Young described as "a key step in an ongoing growth strategy."

"Kenya is a rich and exciting economy and is very much under-represented in terms of security tools and solutions." said Campbell-Young at the time.

MTN Business Kenya opened a US$13 million tier-three Data Centre in Nairobi in March and despite having closed its OLX classifieds business in February, Naspers continues to run its ShowMax SVoD business in the country.

Meloy Horn, Head-Investor Relations at Naspers would not be drawn on details about any further investments into the Kenyan market or respond to the latest rumours that the company is looking to invest in Singapore-based mobile app start-up Carousell.

APAC investment

According to local media Naspers is reportedly in early stage talks with Carousell in a plan to make it the South African firm's key play in Southeast Asia and other parts of APAC (Asia and Pacific Islands).

"It is our company's policy to neither acknowledge nor deny our involvement in any merger, acquisition or divestiture activity, nor to comment on market rumours," said Horn.

Mukhisa Kituyi, Secretary-General of (UNCTAD) warns that even as investment by technology companies grows into countries like Kenya, there is need to ensure that this investment does not increase inequality and serious economic disruption.

"New technologies offer promise possibilities of industrial upgrading and leapfrogging. Cheaper transportation and communication, coupled with more efficient logistics, can also help developing countries better link to global value chains. Some of the most advanced emerging economies are already on the verge of becoming global technological leaders in a number of industries. Yet, the new economic age and the accelerating pace of technological innovation could also result in serious economic disruption and inequality...challenges are particularly pronounced in Africa. Despite a period of strong economic growth, the level of economic transformation has been low."

Africa was found to have received US$ 42 billion in overall FDI which is 21% less than in 2016.

The report predicts that FDI inflows into Africa from the rest of the world will increase by 20% to US$ 50 billion in 2018 largely due to the impact of foreign-financed infrastructure projects like the Mombasa-Nairobi section of the Chinese funded and operated standard-gauge railway on whose construction ICT firm Huawei played a part.

The railway is expected to eventually connect several East African countries.

East Africa is the fastest growing region in Africa with US$7.6 billion in FDI directed there in 2017, although this represents a 3% decline compared to 2016.

"United States companies were also prominent tech-oriented investors, with Boeing, Microsoft, and Oracle all investing in the country." notes the report which also highlights that neighbouring Tanzania registered a 14% decline in FDI during the twelve months compared to the preceding year despite FDI inflows in 2017 totalling USD 1.2 billion as a result of investment by technology companies that include Uber, Facebook and India's Bharti Airtel into that economy.

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