Africa Online's Ayisi Makatiani is introucing debit cards to make getting on the Internet easier. (Globe Photo / Khalil Senosi)

THE WIRING OF A CONTINENT

Internet visionary hopes his plan has the E-Touch

MIT-trained Ayisi Makatiani using cybercafes to lay the groundwork for better African connections

By Hiawatha Bray, Globe Staff, 7/23/2001

SUNDAY: New undersea cables will provide Africa with its first world-class connections to the global telephone network and the Internet. Africa goes online A $1.8 billion ring around Africa MONDAY: Thousands of people are flocking to African cybercafes to get online. Entering the queue Internet visionary hopes his plan has the E-Touch TUESDAY: To put its fledgling telecommunications infrastructure to use, Afriva needs all the computer programmers and technicians it can get. Dearth of talent frustrates fledgling Internet efforts Critics don't deter Internet visionary

AIROBI - From Ayisi Makatiani's corner office on the 15th floor, downtown looks like any prosperous modern city. But Makatiani knows better.

He knows the Kenyan capital is a place where garbage lies heaped in the streets and it can take months to get a telephone line installed. Many households here subsist on a few hundred dollars a year, in homes that lack running water or electricity, to say nothing of personal computers.

Nairobi, in short, doesn't appear to be the most promising place to launch a major Internet company. Unless you're somebody like the 34-year-old Makatiani, Kenyan-born, MIT-trained, ferociously ambitious. Already, he's built one of Africa's biggest Internet service providers, with 33,000 subscribers and operations spread across the continent. And he's just getting started.

It's a measure of his ambition that his Nairobi-based Internet firm is called Africa Online. Yet Makatiani doesn't plan to mimic the world's biggest Internet company. ''We've had to take a model that fits Africa,'' he said, ''rather than one that follows America Online.''

Tailoring the Internet to Africa will force Makatiani to be a good deal more aggressive, in some ways, than AOL chieftain Steve Case has ever needed to be. After all, Makatiani is up against a challenge unlike any that Case ever faced - Africa itself, with its impoverished citizenry and primitive communications networks.

It'll be decades before the average African home boasts a computer, which means that Makatiani hasn't a prayer of signing up millions of users at $25 a month, as AOL has done.

So Makatiani has fallen back on cybercafes, which draw thousands with the promise of cheap Internet access. Anybody can open a cybercafe, and a stroll through Nairobi or Accra confirms that hundreds have. To stand out from the crowd, Makatiani will need more than a few obsolete computers linked to a phone line. And he plans to offer a good deal more.

It helps that Africa Online's cafes - called E-Touch centers - are stylishly decorated, with cleaner floors and newer machines than many low-budget rivals. There used to be about 600 E-Touch centers scattered across the continent, many run by local entrepreneurs in a franchise arrangement, but quality-control problems led Makatiani to close nearly 400 of these. ''We're coming back with a new model,'' he said, ''which will include mostly company-owned E-Touch centers.''

But the key feature of the centers is the magnetic card reader attached to each computer. Customers can purchase a card, and pay in advance for as much Internet use as they want. In Kenya, an hour's online time costs about four US dollars. To use an E-Touch computer, they simply slip in the card and get to work.

The cards set Africa Online apart from its rivals and help build up a base of loyal customers. But they offer another benefit that could prove to be far more powerful. In Africa, cash is king. Outside of South Africa, there are fewer than a million credit cards in circulation on the entire continent, according to Cardweb.com. In turn, few merchants accept credit cards. And that means that few of them sell their goods on the Internet, where the credit card is the only safe means of payment.

Makatiani thinks his E-Touch card is the perfect solution to the problem. It amounts to a kind of debit card, similar to those used by millions of Americans. Many Africans don't have bank accounts, but with the E-Touch card that doesn't matter. The Kenyan with a few extra shillings can just walk into the local E-Touch center and buy as much Internet time as he can afford.

For now, the card is only good for Web surfing, but Makatiani is working on deals with African merchants who'll accept E-Touch card credits as payment for goods purchased over the Internet. ''Once you plug that card in, you are within our secure system,'' he says, ''and we can actually take units of money off of your smart card and allow you to be able to purchase goods.''

The next step is transforming the E-Touch cards into full-fledged debit cards, usable at stores all over Africa. That's where Barclays Bank comes in. The big British bank is working with Makatiani to develop such a system.

But Michael Ehret, the general manager in Zimbabwe of the South African Internet provider M-Web Ltd., thinks Makatiani is wasting his time. Ehret notes that outside of South Africa, there are few African shops with those point-of-sale terminals that lets merchants accept credit or debit cards. That's largely because the various countries don't have the communications systems needed to link merchants to a card-verification center.

''You need to be able to rely on reliable infrastructure,'' Ehret said. ''In Africa, one doesn't have reliable infrastructure.''

Still, Makatiani calculates that even if the customers can only shop at one of his E-Touch centers, it's a start. Eventually, African merchants will get access to the same wireless data links he uses to connect his E-Touch centers. This would enable them to embrace the plastic-based economy, and Africa Online could become one of the continent's most powerful financial services firms.

Prodigy partnership

Makatiani comes from a middle-class background. His father, an agronomist, trained at California's Fresno State University; his mother is a schoolteacher.

Though he comes from a nation of renowned long-distance runners, Makatiani is a sprinter. He won the NCAA Division III national title for the 400-meter dash in 1990 while a student at MIT, where he earned a degree in electrical engineering and computer science. After graduation, Makatiani worked for a number of technology firms in Massachusetts. He and two fellow Kenyans also launched an Internet service called KenyaNet, to connect Kenyans at home with those in America.

By 1994, Makatiani had moved to White Plains, N.Y., to work for Nynex, an ancestor of today's Verizon Corp., when he launched Africa Online out of his apartment. A friend in Nairobi ran the Kenyan side of the operation, also from an apartment.

But Makatiani already had bigger plans. He approached Prodigy, once one of America's biggest online services, and suggested a partnership. Prodigy agreed, hoping that an investment in Africa Online could reinvigorate its company, which was losing ground fast to America Online.

It didn't work out. Prodigy itself was acquired by a Mexican firm that had no interest in expanding to Africa. So Makatiani and his partners bought back control of the firm. In 1998, they sold control of Africa Online to British-based African Lakes Corp., an old trading company from colonial times that's reinventing itself as a technology business.

Makatiani says he still owns a sizable chunk of the firm. And he predicts that Africa Online will turn a profit by the third quarter of this year. That would make his stock worth more than the Internet's usual handful of nothing. It could also spawn a host of competitors: other independent Internet firms, for example, or the various national telephone companies of Africa.

Like its American namesake, Africa Online is moving quickly to lock down a dominant position here. It's already put down roots in Ghana, Ivory Coast, Namibia, Swaziland, Tanzania, Uganda, and Zimbabwe. The company has recently purchased Egypt's second-biggest Internet provider, and even has designs on South Africa, by far the continent's most advanced, lucrative, and competitive market.

Makatiani believes that half of all Africans soon will be regular Internet users: ''You'll be able to see that kind of penetration... in the next five to 10 years, because you will not be able to survive without it.''

This story ran on page A8 of the Boston Globe on 7/23/2001.
© Copyright 2001 Globe Newspaper Company.