Elon Musk Struggles to Operate Internet Business in Africa 

Elon Musk, a man who wants to conquer the world, runs many companies, one of which is Starlink, a subsidiary of his rocket company SpaceX. Starlink provides internet connectivity services by deploying a constellation of satellites into low-earth orbit. 

The company announced ambitious plans barely two years ago to enter into the African market to provide last mile connectivity. It received hype for that announcement, but Starlink seems to have hit bumps even as it rolls out internet on the continent that desperately needs broadband connectivity.

Who would have thought that Musk, until recently the richest man in the world, would struggle to operate an internet business in Africa? He has the financial muscle, the lobbying power, and the experience and expertise to run business operations. 

If you are able to launch rockets in space, produce the most reliable electric vehicle in the world, and implant a chip into a human brain for the first time in human history, then running an internet business would be the least complex business to run.

That’s not the case, at least in Africa’s case.

"Starlink might be the number one technology over time that improves people's standard of living around the world,” Musk once bragged about the power of Starlink.

Starlink may have struck deals to establish presence in Nigeria, Kenya, Mozambique, Rwanda, Malawi and Zambia, but the connectivity company is struggling to roll out its internet services in Ghana, Botswana, South Africa, Senegal, and Zimbabwe.

There are a few things at play here. One, it makes sense for Starlink to want to expand in Africa because the continent needs internet connectivity. 

Africa has the lowest internet penetration rate at 39 per cent compared to the global average of 60 per cent. This means that nearly 600 million Africans out of 1.4 billion do not use the internet.

In actual sense, this digital divide implies that the 600 million people or majority of Africans don’t have access to basic services such as knowing when their farm produce will be hit by a worst weather condition, they won’t have access to the basic information such as healthcare, they are locked out of online education, and in most cases, they cannot even easily make financial transactions or operate businesses efficiently. 

There is, therefore, a clear business case that attracts players like Starlink to Africa. Any sensible business would want to go to a market that is untapped, and that’s exactly what Musk is doing with his Starlink business. The question then becomes, what areas of potential should a business invest in. 

To be fair, internet connectivity has improved for the last decade, thanks to increasing investment into broadband connectivity. While most Africans lack access to the internet, 86 per cent of the continent is covered by a mobile broadband network.

The problem is that 56 percent of those covered by a mobile broadband network use the internet. It simply means that even when connected, many people in Africa use the internet in a limited way.

More interestingly is that Africa still pays a high price to access the internet compared to the rest of the world. According to the Alliance for Affordable Internet, Africans pay on average 8.8 per cent of their monthly income to purchase 1GB of data, compared to 3.6 per cent in Latin America and 1.5 per cent in Asia. 

In some cases, like Chad, the Democratic Republic of Congo and Central African Republic, 1GB was found to cost as much as one-fifth of earnings. 

I think this is where the issue lies. When Starlink launched in Africa, their business model was to invest in rolling out internet connectivity infrastructure, basically deploying satellites that beam internet on ground stations that can then provide internet even to the most remote areas. 

Granted! While satellite internet isn't as fast as fiber or cable, it's widely available. That makes it a good fit in rural parts of the country, where broadband alternatives are often scarce. That said, satellite internet is expensive.

When Starlink unveiled its service offerings, the cost of acquiring the hardware (think of a dish, modem and other items that allow you to get connected to the internet) was $599 for home users. The cost of subscription for home users was $111 per month.

That’s nowhere closer to what existing internet service providers offer. Many existing service providers in the region provide and install fixed internet devices for free or for a fee not exceeding $50 and charge monthly subscription fees of anywhere between $15 and $30.

It defeats the logic. If you want to extend internet connectivity to the most remote areas, it then doesn’t make sense to tag your service with exorbitant prices. I bet no rural consumer can afford this service. Even if the government decides to subsidize the service, why would any efficient government choose Starlink over other available and affordable service providers?

Navigating the Waters 

Starlink has possibly penetrated markets whose regulatory regimes seem open like Rwanda, Zambia and Mozambique, but it has and continues to struggle to scale to countries where internet service providers have strong presence.

Last year, Ghana’s telecom regulator, the National Communications Authority (NCA), issued a warning against use of Starlink following reports of equipment being sold and operated in the country illegally. 

Regulators in South Africa, Zimbabwe, and Senegal have recently issued similar warnings to the public and Starlink resellers operating without permission.

The Independent Communications Authority of South Africa said in November that Starlink products were being distributed in South Africa without a license from within the country and from neighboring countries. 

In South Africa, Starlink must comply with a legal requirement imposed by the Electronics Communications Act (ECA), which mandates that historically disadvantaged groups (HDGs) must own 30% of a company before it can get the necessary telecoms licences to operate a broadband service locally.

These disadvantaged groups include black people, youth, women, and people with disabilities. Since Starlink has not met this requirement it could not get the necessary telecommunications licenses to operate.

Starlink is mostly struggling to acquire licenses in Southern Africa, particularly in Zimbabwe and Botswana. Botswana is the latest country to reject Starlink’s proposed operations after the regulator reportedly found the company did not share all the necessary information.

In Zimbabwe, Starlink was given two options: the company can either apply directly for a license or collaborate with a registered public network within the country to offer its services.

The other country in west Africa is Senegal where authorities recently cracked down on those marketing and selling Starlink’s internet services and kits. The Senegalese government arrested five people for selling Starlink terminals without the required licence or authorisation. 

The truth is, Africa no longer has a coverage problem and I think it’s a losing proposition for any connectivity company to invest in extending coverage when we know clearly that currently coverage outpaces usage. What Africans need right now is affordable and accessible internet services. 

There is no question about the power that the internet has to transform economies. It has been proven that the internet could revolutionise agriculture and food security in Africa by giving smallholder farmers access to markets and finance. 

In the health sector, much of the internet’s potential remains untapped, with limited use of smart devices or remote diagnostics to date. 

However, Starlink will have to rethink its business strategy in Africa.