Could East Africa become an outsourcing hub?

DAR ES SALAAM, Tanzania — Ramadhan Mubarak shook his head as he gestured to his six forlorn PCs.

“I believe that many people want to use the internet,” he said. “But most Tanzanians are poor, so they can’t manage the cost.”

Mubarak owns two of the handful of internet cafes in downtown Dar es Salaam, and he can barely cover his overhead of $1,500 a month. Like many people here, he’s hoping that will soon change: East Africa’s new fiber-optic cable has been laid across the Indian Ocean and made landfall here on July 23. When it goes into use in late August, it is likely to dramatically reduce costs and improve connectivity speed.

The cable, which is a two-year, $650 million project of the private venture Seacom, connects East and Southern Africa to India and Europe and will end the dependence of Tanzania’s internet on satellites. Even accounting for exaggeration — some boosters have promised it will improve education and healthcare and curb corruption — pretty much everyone who uses the internet here agrees that fiber-optic connectivity is nothing short of a revolution.

“I think you’ll see a wave of creativity and new business opportunities as more and more Africans come online by the millions,” wrote Jon Gosier, a founder of the Uganda-based software development firm Appfrica in an email message. East Africa could become an outsourcing hub, said Gosier, who maintains a blog on African tech innovation. “I think in 5 years or so we’ll be where places like India and Singapore are now.”

At Dar es Salaam’s iStore — the city’s Mac vendor — employees were optimistic that fast Internet would make their high-end machines attractive to more businesses and home users.

“The fiber cable’s going to work,” said Kishan Vadher, a salesperson. “Especially because of the way we are used to the internet.”

What Tanzanians web surfers “are used to” is fickle and crushingly slow browsing. The internet is also astronomically expensive. Businesses signing up for a connection of one-megabyte-per-second (MBps) with BensonOnline (BOL), a Tanzanian ISP that offers unlimited data transfer, pay $4,800 a month. In contrast, in the United States consumers can pay less than $100 a month for that kind of bandwidth.

Even “normal” BOL subscribers — who get 256 kilobyte-per-second connections — pay $1,500 per month for their subscriptions. When small businesses split the bandwidth between several computers, basic internet activities can be excruciating.

“If you divide this between 20 users, you probably get 8 to 12 kilobytes fluctuating,” said David Adila, who works in customer support at BOL on the 16th floor of the PPF building in Dar es Salaam. “You can imagine 8 to 12 is horrible. You could watch YouTube, but it would take a long time.” In other words: load, pause, wait and — after a few minutes of downloading — play. Uploading content to YouTube is even slower.

The fiber-optic cable will mean a dramatic reduction in cost for BOL, which is a client of Seacom. BOL currently pays about $60,000 a month for the 20 MBps it rents from a satellite connection, which it then repackages and sells to consumers. With the Seacom cable, it expects to pay just $15,000 a month for 150 MBps — though BOL doesn’t yet know how much government fees will affect costs.

After investing some of the savings into expanding its network, BOL hopes that the cable will bring a 90 percent price reduction for consumers. That’s the same savings figure that was tossed around in Kenya before the SEACOM launch. But when the Seacom cable "went live" in Kenya last month the cost savings were drastically re-estimated to a price reduction of 20-30 percent.

But even if prices for, say, BOL’s “normal” subscribers decreased by 90 percent, the $150 per month would still be far out of reach for most Tanzanians, where the gross domestic product per capita is about $540. Personal computers are also prohibitively expensive for most people.  Computers are all imported and marked up to often twice their price in the United States. Computer hardware would need to be locally manufactured in order to bring down its cost to a level that would allow many more consumers to enjoy the cable’s full potential for East African economies.

In fact, there are many obstacles to Tanzania becoming an internet utopia in the next few months. For one thing, only about 5 in 100 people use the internet here, according to the International Telecommunication Union, so there will be a steep learning curve.

There are other unique challenges, too: Pirate attacks delayed the launch of the Seacom cable earlier in the summer. And when a damaged undersea cable in West Africa paralyzed the internet in several countries there a couple of weeks ago, it was a reminder that Africa’s internet connectivity is still a long way from other parts of the world.

That hasn’t stopped an air of excitement from creeping into local tech circles.

“When fiber-optic comes, I’m talking a vast difference,” Adila said with a glint in his eyes. “I’m talking way faster.”