Studies have shown quite conclusively that investment in information and communications technology (ICT) correlates quite directly with a country’s economic growth and prosperity. Partly for this reason, there is considerable global interest in the capital and operating expenditures of ICT firms and governments especially in broadband infrastructure which facilitates Internet access.
Ghana and West Africa are no different.

To the extent that most nations understand that their main challenge is how to create Knowledge Economies, and to make the transition and transformation from either agrarian or industrial-country status to a Knowledge Society, funding and investment in ICT infrastructure has become a central concern amongst national financial decision-makers. However, many developing nations, including Ghana, have difficulty in promoting investment in telecommunications networks to provide universal access, which is their common goal, due in part to a lack of access to adequate venture capital, project finance and long-term funding. Foreign direct investments by telecom operators and equipment suppliers have demonstrated the profitability of emerging market opportunities in the mobile telecom sector, but they have not yet provided the broadband access that is needed for national transformation.

There are domestic telecom operators in emerging markets with the experience to invest in meeting these needs, who are potential business partners, but the economics of broadband investment suggest that various partnerships need to be formed to enable a more rapid diffusion of Internet access. Already it is to be noted that in funding undersea cable systems, telecom companies and financial institutions have had to form various consortia or clubs of sometimes 10-20 companies in order to fund projects whose costs can range between $200 million and more than one billion dollars. Many national fibre backbone projects in Commonwealth emerging markets similarly range between US$50 million and US$300 million or more.

In recent years, aware of the need for governments to stimulate investment in ICTs and especially broadband infrastructure, many of the advanced economies of the Commonwealth have embarked on programmes for a “Digital UK” or a “Digital Australia”, and Singapore, India, Malaysia, Canada or New Zealand have all mounted their various national broadband agendas. President Obama, as part of his economic stimulus package announced some US$800 million for broadband infrastructure investment in the USA. In Ghana, Nigeria, Sierra Kenya, Trinidad and Tobago, South Africa, Fiji, Sri Lanka, and Tanzania, various national broadband initiatives are afoot.  In the process, these nations are injecting billions of mostly public-sector funds in bringing fibre-to-home to their citizens, thereby ensuring “broadband  for all”. It was partly in appreciation and in deference to these laudable initiatives on the part of Commonwealth governments and ICT operators, that the Commonwealth Telecommunications Organisation (CTO), at its 8th Annual Forum, held in Sri Lanka in September 2010, identified the theme of “A Digital Commonwealth: Towards Broadband for All” as a fitting tribute.

At that forum and in other previous Commonwealth fora it has been widely acknowledged that notwithstanding the volume of funds that has gone to the higher end of the funding spectrum for broadband projects in emerging markets - mostly for undersea cables and national broadband projects-a funding gap exists for the smaller down-stream connectivity requirements beyond regional and district capitals of emerging markets, particularly for last mile and fibre-to-home (FTH) projects. This is despite the large pools of grant and debt finance available to and/or in most countries.  The provision of the Universal Service and Access Fund (USAF) subsidy for initial capital funding has not attracted sufficient co-investment from either individual entrepreneurs or local telecom operators for discrete projects at the margins of the market (see diagram below: The Telecom Project Funding Gap).



Partly due to this situation, the CTO has also helped to create an African Universal Service and Access Funds Association (AUSAFA), to enable the managers of these funds to collaborate, exchange knowledge on best practices, become more pro-active in seeking partnerships, and become more efficient in implementing various sub-district and rural connectivity projects. To many in AUSAFA, the prospects for profitable investment in providing broadband communications access, even to rural areas of the Commonwealth, are not in doubt. While projects at the margins of the current market are seen individually as high-risk in nature and difficult to finance, viewed collectively, experience has shown that the provision of network access and local service across many communities will generate strong revenue growth.
The previous diagram shows that although a variety of global and domestic funds so exist for ICT investment in
developing countries, there is a gap in the quantum of equity funds at both the global and domestic level, which is
needed to assure more rapid investing and financing of broadband connectivity.

Current funding options

The current range of investment funds targeted towards infrastructure investment in Africa, the main target region, covers many different sources of capital, models of governance, project size and types of financing. There are sources of debt finance, notably development finance institutions, commercial banks and grant sources such as the EU-Africa Infrastructure Trust Fund, managed by the European Investment Bank (EIB). There are a small number of private, commercial funds investing in telecommunications equities, of which the Hermes fund, listed in Dubai and established in 2000 has under $50m invested mainly in established telcos in the Gulf states, Egypt and South Africa, with very strong medium-term returns.

There are very few funds focussing on telecoms investments willing to finance projects of moderate  to smaller sizes - projects of between US$2 million and  $15 million. One small facility is the US venture capital fund called Telecom Development Fund which has raised $50m and is targeting projects from $0.5m-$5m. The much larger Pan Africa Infra-structure Development Fund’s (PAIDF) focus is on larger infrastructure projects. It has made an investment in a new entrant in the east African mobile market, but for a network roll-out of significant size with no special focus on more marginal rural markets. Other funds include such long-established sources as the Commonwealth Development Corporation (CDC), which has spawned the investment banking subsidiary Actis. The CTO, through the creation of the Commonwealth Telecom Development Fund (CTDF), to raise some US$300 million aims to assist many of the developing economies to move towards bridging the digital divide both in telephony and even more so in general connectivity and access to broadband/Internet services. Ghana, having already made enormous strides in the fundamental areas of ICT policy and relatively stable regulation, should be able to reap heavy rewards from such a new funding source.