Telecommunications Infrastructure: The Bedrock of Small and Medium Enterprises' (SMEs) Prosperity - Babajide Areola

A nation's economic development story is incomplete without recognizing the pivotal role of Small and Medium Enterprises (SMEs) at all levels of the country. Countries like America, China, and others have thrived due to the emergence of SMEs, while the poverty in many developing nations can be linked to the neglect of these crucial entities. Before 2000, small businesses in countries like Nigeria were hindered by their limited reach, unable to compete with larger corporations employing traditional advertising methods such as billboards, radio, and print media. The untapped potential of SMEs, capable of significantly boosting a nation's economy, remained hidden. It is essential to understand that SMEs are fundamental to economic growth in Nigeria, employing 90% of the workforce and accounting for 90% of businesses. The frustration of having potential without a platform, is higher in comparison to having no potential at all. The challenges faced by SME owners during an era when communications infrastructure to support their businesses was non-existent, are now unconceivable.

The Game Changer

The emergence of the communications infrastructure industry, notably tower companies (towerCos), which host mobile network operators’ (MNOs) equipment, introduced a new dimension to the nation's economic landscape. According to the Bureau of Labor Statistics, in the first quarter of 2023, the telecom industry contributed N2.508 trillion to the nation's Gross Domestic Product (GDP), representing 14.13% of the total GDP. As of May 2023, active voice subscriptions had reached 221.3 million, equivalent to a teledensity of 115%, while internet subscriptions had risen to 160 million. On a global scale, the telecommunications market was valued at USD$1,700 billion in 2021 and is projected to grow to USD$3102 billion by 2030, at a Compound Annual Growth Rate (CAGR) of 6.2% during the forecast period (2023-2030). The core of this economic transformation lies in the range of communications infrastructure spread across the nation and globally. Despite facing macroeconomic challenges, multiple taxation, landlord activities, and local community issues, towercos continue to be the bedrock of the nation's GDP growth.

Nigeria's economic ascent was largely made possible by the sustained investments and efforts of companies managing communications infrastructure, such as IHS Towers, a company that originated in Nigeria and which today is one of the largest independent multinational towerCos globally. In this fast-paced 21st century, supporting and preserving communications infrastructure to foster digital growth, the enabler of economic prosperity, should be a central focus for every government.

It's hard to imagine how we lived before the advent of telecommunications and its towers. I remember traveling from [[Lagos]] to [[Ilorin]] for school in the [[90’s]] with no means to contact my family at home, no internet, no social media, and no email. Back then, we relied on writing letters and sending them by snail mail or telephone calls using phone services provided by the sole telecommunications company at the time, Nigeria Telecommunications Limited (NITEL), which often meant enduring long queues and still not getting reliable network. Today, we not only have access to telecommunications, but also to the widespread towers that allow MNOs to collocate their equipment on towers owned by towercos, extending coverage to regions where SMEs domicile, providing both data and voice services, and other value-added services. Towercos have successfully connected people from various walks of life, boosting their economies, providing access to jobs, and creating employment. Meeting people online, across the globe, is now easier with the help of communications infrastructure.

These towercos contribute significantly to economic growth, job creation, social connectivity, innovation, global engagement, gender inclusion, and diversity. They have phenomenally increased the scope of the value chain of telecommunications services and other businesses across Nigeria. To speak to the value chain that towercos provide, using IHS Towers’ operations in Nigeria as an example, as at September 2023, the company is stated to own over 16,000 towers, have circa 1,200 direct employees, 40,000 indirect employees, generate over 250MW of electricity collectively to power its sites, move circa 1,500 trucks across the country monthly for its logistics operations, occupies circa 3.6 million square meters of land for its operations across the country and utilizes over 3 million liters of diesel annually to power its sites.  The jobs created across these various enterprises have significant impact on the nation and its economy. The company recently announced a partnership with the Federal Ministry of Communications, Innovation and Digital Economy to provide training in technical skills to 3 million Nigerians. The potential impact of this alone could be hugely significant for the Nigerian economy.

In recent years, the role of communications infrastructure in promoting the growth of SMEs has become increasingly evident. The former Chief Technical Officer of MTN Nigeria and now a board member and Chief Enterprise Business Officer, Lynda Saint-Nwafor, in an interview granted to CNBC Africa in 2015, recounted that towercos, like IHS Towers, enable the achievement of faster and better economic roll-out. This she said, is highly valuable to the MNOs that partner with such towerCos to bring connectivity to less accessible and more rural areas, spurring economic activities in low-income communities while looking beyond profitability.

The Digital Transformation of SMEs

Communications infrastructure is the linchpin facilitating the digital transformation of SMEs. SMEs now have unique opportunities to scale their operations, access new markets, and streamline their business processes through high-speed internet access, mobile connectivity, and reliable networks. The advantages are immense:

i. Market Accessibility: Communications infrastructure enables businesses to tap into a broader customer base and offer services on a global scale. The entertainment industry, a major contributor to Nigeria’s GDP, owes much of its success to the opportunities created by this infrastructure. Through e-commerce platforms, online marketplaces, and social media platforms like Instagram, Facebook, and TikTok, SMEs enabled by this infrastructure can reach not only local, but also national and international customers.

ii. Communication and Collaboration: Effective communication is vital for any business. Telecommunications tools such as emails, instant messaging, and video conferencing enable SMEs to connect with customers, partners, and suppliers seamlessly. Online collaborations among businesses in Nigeria have led to a broader audience and more efficient collaboration and decision-making.

iii. Access to Information: The internet provides SMEs with access to a vast pool of information, market data, insights, and trends. This knowledge empowers SMEs to make informed decisions, adapt to changing market conditions, and stay competitive.

iv. Cost Efficiency: Telecommunications has significantly reduced operational costs. Cloud-based services, for instance, allow SMEs to access software and infrastructure on a pay-as-you-go basis, eliminating the need for costly on-premises solutions.

v. Innovation and Automation: Communications infrastructure supports SMEs in automating various aspects of their operations. This automation not only improves efficiency but also frees up resources for innovation.

Challenges and Opportunities

While the benefits of communications infrastructure for SMEs are substantial, there are challenges to consider:

a. Infrastructure Gaps: Bridging infrastructure gaps, such as limited access to high-speed internet and mobile connectivity in many regions of Nigeria, is essential to ensure that all SMEs can benefit.

b. Cybersecurity: SMEs may lack the resources to implement robust cybersecurity measures, making them vulnerable to online scammers and hackers. Raising awareness and providing support for cybersecurity are crucial.

c. Digital Skills: SMEs need training and a supportive environment to develop digital skills among their workforce. Training and education programs can address this gap.

d. Regulation and Policies: Clear and supportive regulatory frameworks that avoid multiple taxations are necessary to encourage investments in communications infrastructure and protect the interests of SMEs.

Conclusion

Communications infrastructure is a transformative tool for SMEs and not just a utility device. It opens doors to a world of opportunities, enabling them to compete in local and global markets, improve efficiency, and foster innovation. To ensure the continued growth of SMEs in Nigeria, investments in communications infrastructure, along with supportive policies and initiatives, are paramount. Collaborative efforts from the government, industry, and SMEs themselves can help pave the way for a brighter economic future, where SMEs continue to thrive and contribute to national development.

 

Babajide Areola, Financial Analyst, writes from Abuja.