Africa

A democratic Africa – a basic economic model

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In business terms innovators always want to be the next disruptive innovator.  A disruptive innovator, let me deal with this first.  A disruptive innovator is someone who changes the way business works.  Not innovation with incremental improvements in an existing industry but someone who creates a whole new industry.  Of course people will challenge my definition, but without making it to complex a simple example may help.

Compact disks created innovation in the music industry, a massive step over vinyl, but in essence a step up in technology.  This is not a disruptive innovation, it was a logical progression for the music industry.

Friendster and others, created a new business model.  Social media – an engagement platform for friends and family. Facebook has gone on to turn this into a business model which was unthinkable 20 years ago.  This is a disruptive innovation.

Here is the thing about building disruptive industries.  These industries create employment for millions of people.  Think about how many people are employed building web sites, running advertising on platforms like Facebook and other technology innovations from the last 4 decades.  Not only is employment created but employment with great opportunities that prioritise skill and knowledge over raw power.  In other words brain power versus muscle power.  With the greater level of brain power the higher the standard of living.

You may read this and think, well this is not true.  I agree, it is not always true.  Look at how much sports stars are paid.  But in reality this is a fraction of the population.

To get back to the title of this blog post.  It refers a democratic Africa as the only viable economic model.

Well here is the major point.  Africa needs disruptive innovators.  Innovators which lead to the creation of millions of jobs.  My point is that it is just not going to happen unless there is an environment that fosters this.  I believe the only environment is a democratic environment.

Thousands of youngsters dream of making it really big. Bringing an idea to life and changing the world.  Improving their thoughts into something material that makes the world better.  Some do this every day now, but not by creating a disruptive industry but by working in industry that is established and one that was once disruptive.

The problem with working in an existing industry is that all industries are dominated by capital.  Capital runs the world in reality.  If you have capital in your economy you will have industries which employ people.  But mature industries want to drive costs down so capital is always looking for cheap and inexpensive labour.  One where a little bit of brain power is required, but not a lot.  Stamina and desperation are better.  Workers who need to work for meagre wages to survive.  Add this to the fact that the capital comes from well- developed industrialised countries and all the effort the worker puts in ends up returning the real returns back to those who already have the capital.

The key is to break the cycle of capital dependency by creating new industries, one driven as a disruptive innovation and then build it into a Microsoft or a Facebook.

Here is where the problem lies for Africa.  Disruptive innovations require 2 essential components to be successful.  Firstly, an environment which is stable and breeds innovation.  A place where people can go, congregate, collaborate and work with their ideas aiming to realize them.  Yes, you may have a crazy inventor in a garage but the best models are one where people share thoughts and ideas.  Where the thinking is progressive and informed.  Explicitly this implies some level of education.  People need to be enabled to go to school, to learn and to foster the right attitude.  The second ingredient is once again capital.  Innovators need backers.  People with strong business skills that know how to commercialise a product to sell in the world.  People who have money to turn the innovation into a commercial success.

Okay, so the problem is clear – you need a strong education system that encourages broad and diverse thinking.  People need to be capable of going to school to learn in a stress free environment, free from discrimination and free thinking even if this is contrary to accepted norms.  Let me deal with the proverbial elephant on the page – this means that there can be no limiting factor, be this religion or gender or social standing.  Everyone goes to school and everyone can say and think what they want.  The more people doing this the more likely the hot bed of innovation will grow.

The problem is that you also require capital.  I mentioned existing industries.  Well existing industries bring capital to economies.  This means that economies need investment to bring capital.  One thing that capitalists don’t like is volatility.  They don’t like civil wars, religious violence, rampant corruption and political bullies.  Look at many countries in Africa to see how devastating the lack of capital is and how stagnant economies are – places like Egypt, Libya, Sudan, Zimbabwe and the Central African Republic.  The list goes on and on. It is not likely that large capital injections are going to appear overnight in these countries.

From my argument I cannot foresee any of these economies becoming or developing the next silicon valley.  Arguably this is the best place to be in the world if you want to see innovators in full flight.  A place where free thinking is the most valuable commodity on the planet.  The free thinkers are there, so what else is there.  Capital.  The venture capitalists are there by the dozens.  The free thinking brought them.  The capital did not bring the free thinking – nope, it happened the other way around.  Many countries have lots of capital – the gulf states and obviously China are good examples.  But these countries don’t value free thinking.  They value cheap labour, innovating in existing industries where they can drive costs down.

So innovation materially requires free and liberated thinking. It is an absolute. I believe it is a non-negotiable.

If Africa was a person here is what I would say – “Listen up, get to it.  Build a democracy, where greed and corruption are dealt with.  Where wars cannot flourish.  Where people can be free in their faith without fear.  Where everyone goes to school.  Free thinking my friend, be free.  Yes you may be scared.  The horrible news station may say something bad about you.  You may go to jail.  You know what – to stop this from happening – just stop doing bad things.  It is that simple and let everyone be free.  Everyone, not just your friends and cousins and generals.  Everyone.  Only then will the economic dependence on oil, minerals and agriculture change.”

Can Africans afford smart technology?

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This has been an interesting year for me.  I have been fortunate to travel to various countries on the African continent.  I have had time to reflect on this and here are my thoughts.

My expectation on the continent was to discover very little technology.  This is not true.  I was astounded to see that in some countries the speed and diversity of access to internet and array of smart technology was excellent.  The technology is available but the access of the technology to the general population is limited.

If you have the opportunity to visit a country such as Angola the harsh realities of living there sink in.  There are currently more than 176 land mine fields.  This is a legacy of their civil war that only ended just over a decade ago.  The effect of this is inability of the agriculture sector to produce large scale commercial farms.  Almost all of the food is imported.  In addition, the country has an array of natural resources, mainly diamonds and oil.  The result is the emergence of a super-rich class who have made money from the oil industry.  This is however only a fraction of the population.  When you move around Luanda, the capital of Angola, there are more than a million people living in one of the largest squatter camps in the world.  This is by itself anomalous.  Luanda is the most expensive city in the world.  I did not believe it until I was there.  It is definitely more expensive than New York or London.  There are suburbs in the city (such as Talatona), modern and well appointed, surrounded by squalor.  The average Luandan struggles to survive and even many of those who have employment live in shacks.  A rental income for a 2 bedroom apartment is in excess of USD7,500 per month.  A single tomato costs USD2.50.

The impact of this is that buying smart technology is not really an option for the mass population.  Possibly a small group of people can afford this, so having the technology available is to a large degree pointless.

The basis of living changes from country to country as the economies are different, but the story is the same.  Malawi is struggling with massive corruption and interest rates above 30%.  Small businesses struggle to flourish and economic growth is difficult.  People are employed, but the day to day living of the average Malawian excludes luxury purchases. Smartphones are simply out of the reach of Joe average in Malawi.

Cell-phones are however pervasive across the continent; these are predominantly functional phones.  Smartphone penetration in the market is limited and I think this reflects the recent sales reports from the major manufacturers that show that they are not meeting sales targets.  Smartphone penetration is approaching a point where growth in sales will probably reflect growth in economic value terms, linked to GDP.

I keep wondering if this is unlikely to change.  I would think that at the moment there are really only 2 ways for this to improve.  Rapid economic growth or a rapid reduction in smart technology prices.

I personally do not think rapid economic growth is likely in the next 5 years.  My rationale for this is the skill level of many Africans.  In essence those that are educated are employed.  When you look at the availability of education in the African countries it is extremely limited and is really only available for those who can currently afford it.  This means that unless there is a shift in government policies not enough Africans will get educated to transform the economic landscape. Economies will remain driven by minerals, resources and agriculture.  The exception is the banking sector with the banks entering the markets and I believe influencing the development of the economies on a large scale.

Simply put, there are not enough tertiary training institutes of quality to create skills that are competitive on an international scale.  There are not enough engineers, IT professionals, accounting professionals and professionals who work in government to bring about social services for the populations they service.

This then leaves a reduction in prices.  Will prices come down?  Maybe a simpler device with less features and longer battery life?  Looking at the manufacturers who produce devices, this seems unlikely, but maybe I am not seeing something.  What do you think?

What the hyena saw.

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Today I was told a story about flying out of Gaborone, the capital of Botswana.  The plane, a Boeing 737, bound for South Africa, was on the runway, accelerating to take-off.  Halfway down the runway, the plane started to shudder and skid. The engines were screaming and the plane was shedding speed rapidly.  The passengers on-board were starting to panic.  Eventually the plane stopped.  Everyone was looking around bewildered wondering what was going on.  The pilot came on to the radio, “Sorry about that ladies and gentleman, but a hyena just ran across the runway.  We had to avoid hitting it!”

Can you imagine being the hyena – this massive white tube bearing down on you.  What would you do? Stand and live on a hope and prayer?  Run?  The hyena has no idea of the complexity of issues that would emerge if the plane hit it.  The hyena is probably only focused on survival.  Yet the hyena could possibly alter the course of history forever: for the air industry in Botswana, for the passengers on the plane and for the aviation industry world-wide!  It does not know this.

There are some striking comparisons here.  Just maybe small under-developed nations can alter the course of history forever.  Maybe they should not just live on a hope and prayer that the bigger developed economies will choose to avoid them.  Maybe they have a bigger role to play than they could possible know.  Maybe they should find out.

Probably the biggest difference in this comparison is that the hyena has no agenda, no need for greed and no intent in being politically dominant.  So maybe the under-developed countries can learn something here.  If you act in a way that furthers your survival and that of your people, just maybe the bigger economies will take time to avoid causing you harm.

The next thought that crossed my mind; what is it that is valuable about a hyena?  It is life, a gift of nature that is considered sufficiently valuable that it should be saved by the pilot.  The pilot made that decision and had little time to change the course of the plane on the runway, yet he did.  The hyena is a highly specialized predator that brings value to Botswana in many ways; it cleans the bush of dead animals, it balances the eco-system and generates tourism revenue.  So keeping it alive was worth the effort.

Maybe there is another lesson here.  Maybe building valuable industries such as a really good, strong IT sector may make the bigger economies look at Africans in a different way.  Maybe we can bring that balance to the world-economy the same way the hyena does to the eco-system.  Maybe we should stop trying to compete with low-end under paid mass jobs but rather focus on niche specialisations which make us sufficiently valuable that the big economies value us – so much so that they will make sure that the plane does not hit us.

Maybe I am just rambling – but it got me thinking.

Mike – May 2012

Building for the future – can Kenya get it right?

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I recently presented some of my thoughts on the skills shortage in the IT industry to 7 universities as a part of an IBM initiative to enhance and improve IT skills in terms of the training programmes offered by academic institutions. The idea is to bring business closer to academia and ensure that young IT professionals emerge from university with skills linked to current trends in IT. In the presentation I asked a few questions; amongst these were if anyone knew what the definition of big data is or what the hot trends in IT are now? I did not mean reading a Gartner report or an IDC survey but really understanding what these were and how they affect Africa.

Let me start by writing about the 4 hot trends in IT.

These have been identified by a few research organisations; IDC, Gartner, Forrester and others, so I am rehashing what they have said, but for completeness let me quickly run through them.

Top of the pile is mobility. This is going to the case for the next 2 to 3 years and there is a world-wide shortage of mobile skills; analysts, developers and solutions providers. Mobile is hot right now.

Next is cloud computing. Let me put it bluntly, if you are not in cloud now, you will be by 2020 and this will probably become the main focus in the second half of this decade. So prepare yourself if you have not already. (On a personal note, I like cloud technology and think there is loads of interesting things happening here). This is not a cloud post but my conversations tend to make me think that most people don’t understand cloud, so maybe I will write about this some other time.

The next 2 hot topics are social business and big data.

Social business is I think the easiest for people to understand. It is beyond turning Facebook or LinkedIn into a marketing platforms but rather using social business as a delivery platform to add business value and engaging with the next generation of youth who use social media to communicate. It will probably replace email and ultimately business applications will be built within social business where people can actually integrate their work into a social media platform. (You may be thinking how? Or this sounds like rubbish. Another topic for another day and if anyone wants me to write about this, I can, leave me a comment).

Big data is possibly the most perplexing. Data has been around for millennium but the rate at which we gather it today is accelerating all the time. This is ‘big’ data – not just the volume of data that is added to the world every day but also the type of data. As an example, big data includes pictures, video clips, blogs, large documents, scanned images, and so on. Think of it this way, how do you know what is in a YouTube video? You can read the byline and tag it; but what if a computer could scan it to determine what was actually in the video without any text? The process of determining this and being able to report on it is what big data is all about – there are issues of storage, the network congestion and reporting tools to getting meaningful information out of it. As more and more big data is created applications are developed to find out what can be gained from it. Here is an excellent example. As recently reported on the 1st of May, Al Qaeda plans for a terrorist attack were hidden within a pornographic video. Having the ability to mechanically scan a video would obviously be beneficial to finding this out quickly, and then taking action to prevent any attack would benefit society.

On the 30th of April, Kenya announced, that they are going to roll-out one of the largest fibre networks on the African continent. Liberia has made a similar announcement. This may seem like an innocuous announcement but this is actually a massive step to bringing these countries into the international IT arena.

One of the major issues facing all 4 of the hot trends is the capability of the network infrastructure to manage the transmission of data for each of these big trends. Without the right networking infrastructure to support the emergence of these trends, the in-country IT industry cannot develop and grow. Any country with ambitions to become an emerging regional IT hub has to ensure that they can attract and support businesses that specialize in these technologies, which in turn leads to job creation. Without the infrastructure the under-developed country will have to rely on the developed economies to provide the support for these trends (even for their own needs). It will effectively be the same economic terms between the developed economies and the under-developed economies. The under-developed will be living off the scraps of the economic powerhouses unless they make the changes themselves.

So when Kenya and Liberia want to build high-speed capable networks, it makes you think that maybe they are going in the right direction.

Does technology dictate our lives?

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Here is an interesting question – do we have a choice to use technology or not?  This may seem like a silly question that has no meaning.  But …

There are two basic ways of thinking about this – technology is inevitable, it is a progression over which we have no choice.  We must accept it.  It is human nature to want to innovate and improve the way we live. We want more efficiency in our lives.  We want a better standard of living.  Let me present an example.  If you are reading this blog, you have access to a computer or smart-phone, internet connectivity and probably a telephone.  Think about looking for employment.  You would probably Google “job seeker” (or something like that), search on LinkedIn or Facebook, search different job listing sites and even register with some of them.  You find an opportunity.  How do you communicate with the employer?  Email, telephone, Skype maybe.  You are connected.  You can gain access to hundred of thousands of jobs.

Shift your perspective a bit.  You don’t have access to the internet or a smart-phone.  Now look for a job.  Would you go back to the telephone book? Buy a newspaper hoping to find a position and hope for a phone number, instead of an email address or web link? It would probably be harder to get a job but at least you can still phone.

Shift your perspective even more – now you don’t even have a telephone.  You need to walk door to door in the hope you get lucky and find a job.

This thought experiment highlights the issue.  Your probability of getting employment diminishes with each step that reduces your access to technology.  The less you have the less opportunity you have to find a job.

The supporters of the idea that technology dictates the way we live, think about technology as inevitable.  This inevitability means that ultimately we think we are making a choice, but the choice we actually make is inevitable.  If you don’t have a smart-phone or an internet connection, then you limit your opportunities.  Sure you can elect not to use them but the reality is that you will struggle to actually get that job.  Improving your odds of getting a job require you to be as connected as possible.  So what does this mean for you as a person?

In Africa, poor and disconnected communities have very little choice.  Opportunities are scarce and the government carries responsibility for creating these opportunities.  We pay taxes right? So why do we have any reason to contribute to change this?

My point of view is a little different.

Governments in Africa are often corrupt and if not corrupt then they lack funds.  They lack skills and sometimes even the will to change society for the better.  Some governments look at the recent events in places like Libya and get scared.  It cannot be left to governments alone.  We all need to make a change for the good. So each of us need to contribute.  If we stand together we can create the technology for Africa to transform and to change.  We can give all people opportunities and guess what, if governments don’t like it, fear it or try  to stop it, we should all still just do it.

I mentioned that there are two basic ways of thinking about the question whether we have a choice to use technology or not; I believe that the inevitability  of technology is not something I am willing to accept.  I want to have a say about what technology means in my life, how and when I want to use it.  I am not sure how yet, but I know it needs to change.

What do you think?

Blackberry saved by Africa!

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This may seem like a strange hypothetical headline of the future.  Maybe it will be.

It is conceivable that the manufacture (RIM) of Blackberry smartphones is saved by the African market.  Why?

Here is my take on it.

I think it is safe to say that Apple, Nokia and Samsung (and possibly others) may have a better device with more services than Blackberry.  (I can hear the howls from the Blackberry execs already – hey this is my opinion.)  But there is a big difference between Blackberry and the other smartphones.  Let me lay it out.  The Blackberry proposition to the customer is that you pay a fixed fee every month.  For this you get the usual cellular services, calls and SMSing.  But you also get internet browsing and instant messaging with BBM.  This cost is defined and you can do everything you need to; Facebook, Tweet watch YouTube and so on.  The cost is fixed.  The other devices offer the same service but for these services you need to purchase a data bundle which is not necessarily fixed.  So the value in the offering from the other providers has potentially a larger cost to the consumer.

This is definitive – the consumer.  The African consumer has less purchasing power than any other consumer in the world.  Cellular services compete with the little pleasures of life like cold drinks (Coke and Pepsi) and luxuries like beer and cigarettes.  I don’t mean compete in the Western sense of competing. We choose how we manage our budget with thoughts like “I will buy less beer and get more data”.  Often the choice to the African consumer is I have 2USD – “I buy beer or airtime – I dont have a choice to cut back”.  For the African consumer this is an either or choice and they have to give up lots just to be connected to the world, an experience many of us don’t comprehend.

So enter the Blackberry proposition – a fixed cost with unlimited chat, no SMSing required, less phone calls and still connected to social hubs.  The value in the Blackberry proposition to the consumer is there.

I started out by stating that maybe this is a hypothetical headline of the future.  For RIM, I hope it is reality, but the problem facing RIM and the Blackberry offer is that the device will still have to improve as will the accessibility to the apps. They have time to still do this.  But Africa is moving; living standards are improving and more importantly, there is a massive telecommunications roll-out.  Costs are starting to come down.  If the costs get as low as they are in say India, then the cost of bandwidth may not be an issue for the African consumer.

Getting back to my point.  Africa may save them but they had better  move fast.  Improve the apps and build a proper development community, improve the device and innovate. Do it or we may never see the future of Blackberry anywhere!

Mike Backeberg – April 2012

South Africa lacks technology infrastructure.

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The latest World Economic Forum “The Global Information Technology Report” (2012) places South Africa in 71st position along with Colombia.

As a country ranked in the top 25 in terms of GDP South Africa clearly lacks the will to improve the technology infrastructure.  This is a brave statement, so why make it?

Technology infrastructure accessibility has been shown to bring competitive benefits to the economy and open up new economies for workers traditionally excluded from mainstream economic activity.  As an example, to build a competitive call centre industry in an economy requires access to affordable labour and reduced IT costs.  Telecommunications and the infrastructure associated for this at a cheap price is key to this success. South Africa lacks both.

Addressing poverty by opening the economy to more people requires the will on the part of the government to make it happen.  This is not only related to the technology industries but all industries.  With technology, business and consumers are acutely aware of this though.  With poor infrastructure and a national carrier protected by the government the ability for businesses to compete on a global stage is hampered.  Is this reality though?  In Mozambique, a country further down the ranking than South Africa with a massive expansion programme, a 4mb ADSL line costs the equivalent of (USD 118) R920 per month.  The equivalent offering in South Africa is 3 times that price. In addition, IT labour costs are at least 30% cheaper in Mozambique than they are in South Africa.  Sure Mozambique is a smaller economy but building a services business that relies on new technologies specifically linked to technologies such as cloud or mobile where the technology can be housed anywhere, makes you wonder how long it will be before businesses in South Africa move more services off-shore.  South Africa has already shifted technical skills to the Asian sub-continent primarily due to the lack of adequate training in South Africa, highlighting even further the lack of government desire to truly sort this problem out.

This is of course an opinion, but as a business we experience poor service and inadequae support all the time.  We have regular telecommunications outages, so much so that we are now required to use two suppliers to ensure we have a back-up service available.

It is difficult to see how small tech businesses in South Africa can build a global footprint and compete internationally when the key to the industry is so poor.

To see the full report – http://www.weforum.org/reports/global-information-technology-report-2012.

Mike Backeberg – April 2012