In Africa, Cooperation + Connection = Communication
The undersea cable system has delivered voice and data services to at least 20 African countries. © EASSy
In Africa, the world’s second-largest continent by area and population, distances between countries are vast—and so is the task of connecting people.
The Eastern Africa Submarine Cable System, a 10,000-kilometer undersea cable system deployed in 2010 along the east and south coast of Africa, has accomplished that and much more. Known as EASSy, it is the first system to deliver direct connectivity between east African nations and Europe and North America. It has improved access and lowered bandwidth costs for more than 250 million Africans.
Its introduction has transformed the ease of business transactions, offered a new financing model for similar projects, and spurred the creation of networks throughout the region. This breakthrough initiative, which has delivered voice and data services to at least 20 African countries, was coordinated by IFC with the World Bank.
Ambitious about Access for Africa
The idea to construct the system along the coast of East Africa, in an era when no submarine cables existed in the region at all, seemed wildly ambitious when it was first considered by telecommunications companies in 2003.
At the time, the need for regionally integrated high-capacity networks and fast international connectivity was greater than ever. Internet access, delivered via satellite, was spotty. It was also expensive and unreliable. When the project began, several hundred million people, along with public institutions and private companies, lacked access to low-cost, high-capacity communications.
The project targeted nine coastal countries—Djibouti, Kenya, Comoros, Madagascar, Mozambique, Sudan, Somalia, South Africa, and Tanzania—and 12 contiguous landlocked states. Ultimately a total of 26 telecommunications operators were involved in standardizing and implementing the EASSy cable.
A New Financing Model
That’s where IFC’s coordination, alongside the work of the World Bank Regional Connectivity and Infrastructure program, proved essential. Working with development finance institutions and a large number of stakeholders across east and southern African states, IFC advocated for a model of private ownership. This was critical because many of the telecommunication operators did not have the capacity to fund their participation.
The system’s consortium structure also required a certain minimum shareholding for each consortium member in order to keep the functioning of the consortium manageable. In addition, wide participation was essential to entrench the principle of open access in the region. Open access is meant to ensure non-discriminatory access to the cable by any licensed operator in the region.
To facilitate this wide participation, IFC helped establish the West Indian Ocean Cable Company, or WIOCC, now known as “Africa’s carriers’ carrier.” In WIOCC, the smaller telecommunication operators clubbed together their investment. WIOCC is jointly owned by 14 major African telecommunications companies—all Tier-1 operators or licence holders in their respective markets.
IFC developed a financing structure where WIOCC’s $92.5 million investment in EASSy was financed by a $69.9 million in loan financing, $11.6 million in grants, and $11 million in equity. The shareholders committed to buy capacity and pledged their shares in WIOCC to support the 12-year loan. In addition to gaining international connectivity at a very low investment, the shareholders also leveraged their say in the EASSy management consortium. That’s because WIOCC, their representative, is the largest shareholder in EASSy.
IFC lent a total of $32.7 million to WIOCC; the total cost of the EASSy cable was $235 million. A key element of our support included work on four associated advisory projects for nearly three years.
A Model for New Networks
The onset of the EASSy cable spurred development of at least four other cables along the eastern coast of Africa. Together, all of these cables have revolutionized telecommunications in eastern and southern Africa. Today the price of international bandwidth is a fraction of what it was in 2007. Usage has grown significantly.
For the world’s second-largest continent, EASSy’s effort to get people communicating with each other has been more than just talk. It has changed the way African telecoms operate, and it has helped African businesses interact with one another—as well as with countries across the globe.
To learn more about IFC’s work in telecommunications, visit: www.ifc.org/TMT.
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Published in October 2016