Facebook invest in Uganda

Why Facebook is investing $170m in Uganda

Ugandans have a growing passion for the internet and social media – and it’s being reciprocated. The world’s biggest social networking platform has chosen Uganda for a $170 million fibre infrastructure project.

This investment shows that Uganda is one of Facebook’s top priority countries in Africa.

While Uganda had 23 million phone users and 13 million internet users in 2015, according to government figures, the growth of social media usage has lagged. Out of a total population of approximately 38 million, only 2,2 million Ugandans are on Facebook, the most popular social networking site in the country.

This is significantly lower than a number of other African countries with much smaller populations, including Angola and Ghana.

The gap is not for lack of interest. On the contrary, Ugandans have enthusiastically embraced social networking, with blogging booming and every government department required to have social media accounts to interact with the public. The problem is rather a lack of bandwidth and slow access speeds, averaging only 512 kilobytes per second.

Ramping up the pace

Working with two local telecommunications partners, Airtel and Bandwidth & Cloud Services, Facebook is planning to lay 770 kilometres of new fibre cables in north-western Uganda by the end of 2017, potentially bringing high-speed internet access within the reach of three million Ugandans.

The legal niceties have been concluded and work should commence in the near future. The project fits well with government’s infrastructure plans for the information and communications technology (ICT) sector. Along with energy and transport, ICT is a priority sector for economic growth and job creation.

In last year’s Budget speech, the Finance Minister announced that starting in 2017/18, government plans to increase internet speeds to 4 megabytes per second in rural areas and to 30 megabytes in urban areas.

With support from the World Bank, it also wants to extend the national backbone infrastructure, both within the country and to its neighbours, Kenya, Tanzania, Rwanda, Democratic Republic of Congo and South Sudan. This creates potential for business in Uganda since a wider reach will necessarily mean a wider market.

It’s not yet clear how all this will be funded, but more details are likely to be announced during the Minister of Finance’s 2017 Budget Speech in June…

Data downside

The flipside of efforts to cross the digital divide in Uganda is the lack of a proper regulatory framework.

The present regulatory framework is insufficient in comparison to the speed with which digital services are becoming available. For instance, there are no clear regulatory guidelines on cyber security and data protection. Further, technology cuts across so many industries that it becomes difficult to determine who the proper regulator is.

A case in point is money payments made through mobile phones. These transactions occur at the intersection of finance and technology, with the respective sectors falling under different regulators, neither of whom has developed any laws to guide it.

As a result, this “free-for-all” is a recipe for disaster Financial technology – Fintech – is a grey area because it is not regulated by the central bank or the ICT regulator, the Uganda Communications Commission. Currently, anyone can provide Fintech without a licence. And considering that financial services are historically the most regulated sector in the world, the lack of regulation could create a parallel financial system that could be problematic.

IP rights a grey area

There are other grey areas too, an example being intellectual property rights. Since technology thrives on innovation, how is such innovation to be afforded legal protection? Can a business method be patented, trademarked or copyrighted? If yes, how is the line to be drawn so as not to stifle innovation? Since the Fintech market is highly integrated with so many intermediaries, how are trade secrets to be protected?

There are also money laundering concerns, and it is unclear how technology fits into the current Anti-Money Laundering Act. International money transfers and foreign exchange have been greatly disrupted by Fintech companies like Money Remit. How do our regulators keep track of these transactions conducted by mostly start-ups in different parts of the world? Our notoriously slow regulators are unlikely to keep up with the speed with which Fin-tech transactions evolve, thereby creating a regulatory black hole.

Uganda’s Communications Act 2013 is still relatively new, as is the Uganda Communications Commission, which has its hands full with an unusually wide mandate that includes regulating postal and courier service, broadcasting and ICT, including competition in the industry. At the moment, the UCC’s priorities are clamping down on the sale of SIM cards on the streets (recently declared a criminal offence) and a proliferation of illegal broadcasters (known locally as bizandalos).

There might be grey areas and a free-for-all in some services now, but change is in the air. There are many regulations in the pipeline, such as plans to introduce regulations for Over The Top (OTT) services, and I see the ICT landscape being much more heavily regulated than it is now.

*Brian Kalule, a partner at Bowmans in Uganda, which advised Facebook on the legal, risk and contractual implications of the fibre project.

Source: CNBC Africa