Africa’s Mobile Commerce Segments

M-Pesa Kiosk An article posted earlier this week acknowledges Africa as the global leader in the adoption of mobile commerce (m-commerce). Published on 9 November 2011 “Africa Leads World in Mobile Commerce” highlights the rapid diffusion and adoption of m-commerce, in general, and mobile payments systems, in particular, within the continent.

This article reinforces something that my colleagues and I have known for a while. Africa is using mobile technology to leapfrog the older, more capital intensive, communications infrastructures in use in developed countries. In a recent publication, Dr. Godwin Ariguzo (@ariguzo) and I develop segments for the diffusion of mobile commerce in Africa. With data obtained from the International Telecommunications Union (ITU)  and the 2011 CIA World Fact Book,  we use model-based cluster analysis to identify groupings of countries who are similar given three variables related to m-commerce: Internet Users per 100 People (IUP100 from ITU), Mobile Cellphones per 100 People (MCP100 from ITU) and Gross Domestic Product per Capita (GDPC from CIA World Fact Book).

The first two variables serve as surrogate indicators for the adoption of new(er) communications technologies within a country and the potential for accessing the Internet via mobile phones. The third variable, gross domestic product per capita (GDPC), is used as a surrogate indicator for the standard of living within the country. Not without its critics (and rightfully so, in our opinion), GDPC remains one of the most widely used indicators of the level of development an economy has achieved. Complete 2009 year-end data (data for all three variables investigated) is available for African 53 countries.

The results of the model-based cluster analysis suggest that three distinct m-commerce segments exist within Africa. The number of countries within each segments ranges from 15 to 21 (15, 17 and 21). Countries included in the three segments, along with the average segment scores for each variable investigated, are presented below.

African Mobile Commerce Segements and Segment Means

Based on the results, we propose that the 15 countries in the third segment offer the best opportunity for the roll-out of m-commerce within the African continent. Interestingly, the four North African countries (Algeria, Egypt, Libya and Tunisia) at the center of the political revolution in the Middle East and North Africa are contained within this cluster. The impact of mobile phones and mobile phone technologies in fostering and fueling these revolutions is well established.

The graph below presents the segments in three-dimensional space. Clearly, the three segments are distinct with little overlap. Just as interesting, the graphical presentation allows one to view the impact that each variable has in determining segment membership.

African Mobile Commerce Segements in Three Dimensional Space

In summary, those seeking to launch m-commerce endeavors in Africa should consider implementing them in the third segment (15 countries) first, followed by the first segment (17 countries) and then segment two (21 countries). The full article is available for download from the Social Science Research Network (SSRN).

Africa is a leader in the adoption and implementation of m-commerce. How long will it take for the rest of the world to catch up?

Citation:

Ariguzo, Godwin C. and D. Steven White (2011), “Africa’s Mobile Commerce Segments: A Model-Based Cluster Analysis”, Review of Business Research, Vol. 11, No. 4, pp. 38-44.

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