In November a unique group of African and European ICT entrepreneurs gathered at the AITEC Europe Forum in London to explore opportunities to do business and co-operate with the common aim of advancing Africa’s digital economy. These are extracts from the keynote address presented by DR ANIL SAHAI, Group CEO of AITEC, to set the scene for the discussions.

Information Technology (IT) is no longer a competitive edge; it has become a competitive necessity for every business entity in the developed economies. While until the mid-1990s, IT products and services yielded big revenues, Internet technology in the recent years has enabled “partnership opportunities” in every phase of business value chains. These partnerships have resulted in better and more efficient business services, and hence revenue opportunities. It is important to note the dichotomy of IT products and services on one side, and the partnership opportunities as a result of Internet technologies on the other side. More so, this dichotomy plays a key role in developing micro and macro IT strategies. Playing to and sustaining one’s core competencies is key to success in business strategic development. As the African countries (apart from South Africa) are just beginning to realize the immense potential of IT, they face great challenges in racing to reach par with the rest of the world. Lack of funds, poor government leadership and red tape are not the only obstacles. In this presentation I want to develop a structured strategic framework to address how we got where we are, what will it take to “cross the chasm”, what are the costs, and finally what will be the cost if we do not plan and execute the right strategy for Africa to align with the international digital economy.

While Africa lags behind other continents in IT, that same technology is now bringing a wide range of benefits all across the continent.

• Africa now enjoys improved flow of information: Some 120 African newspapers and news magazines are now available online;
• Increased job creation: A major U.S. health insurer is now processing claims in Ghana using telecomputing technology;
• Greater economic integration: A West African women's fishing co-operative has set up a Web site to enable its 7,000 members to monitor export markets and negotiate prices with overseas buyers;
• Enhanced education: Medical students in Senegal are being instructed by doctors in Belgium via video link; and
• Greater accountability: The Southern Africa Development Council's Parliamentary Forum is using the Internet to encourage greater government accountability.

(Source: Report by Ed Royce, who chairs the Subcommittee on Africa in the U.S. House of Representatives):

According to this report, while there has been considerable IT expansion in the African continent over the last decade (every African country now enjoys Internet connectivity), Africa is still not expanding its IT usage as rapidly as the rest of the world. The international community is increasingly focused on this "digital divide," being particularly aware that IT is a significant factor in attracting foreign investment and fuelling economic growth.

The concern is that without IT tools, Africa will be unable to expand, or even maintain, its already very low level of engagement with the world marketplace. Africa also risks forgoing the advantages IT brings to confronting educational, health, governance and other challenges. These concerns led many international agencies like USAID to launch various initiatives in the recent years, like the Leland Initiative to promote Internet connectivity in Africa.

While Africa has an estimated 2.6% of the world's Internet connections today, this figure is expected to decrease to 1% by 2005. The World Bank, USAID and other institutions have been focused on aiding African governments to establish regulatory environments to encourage IT and telecommunications investment.

Added challenges to IT expansion in Africa include training, affordability and illiteracy.

Despite the benefits of IT, some have questioned whether its development should be a priority for African countries. Why, some ask, should resources be devoted to IT when tens of millions of Africans lack running water and electricity? In fact, IT development is now largely a matter of private sector investment, hence it is not a public sector resource drain. In addition, IT is increasingly central to economic growth, which is a prerequisite to addressing the health, environment, government and myriad other challenges Africa faces.

IT-induced economic development

While resources, knowledge, technology, market and economy are the internal ingredients of the IT induced economies, with innovation playing the key role for new product development. Competition plays an important role in enhancing the quality of products and services as well as pushing for innovation. This competition can be from internal players or the external (international) players. However, the empowerment can make or break the whole system. At macro (country) level, government regulations and incentives to promote IT industry provide that. At the micro (company) level, rewarding employees for taking risks and sharing company wealth with the shareholders aids in company growth.

Beg, orrow or Partner
It is not essential to reinvent the wheel all the time, and this especially true in the IT world. As IT has grown substantially in the western world, software and hardware tools are available to develop almost any application. One needs to take advantage of the existing tools and services to develop new products and services. There is little point in investing time and resources in developing which has already been developed, debugged and perfected. Development of new software and hardware tools requires large investment in terms of money, resources and infrastructure. For example, a new FAB costs about $4-6Billion if one decides to manufacture chips!

Semiconductors were invented in US, but then Taiwan and Korea have become the largest suppliers of the semiconductor products. The primary reason being the low cost labor and discipline in culture which provides the precision required for semiconductor manufacturing. VCRs was invented in USA but Japan has mastered the art of manufacturing with quality and at low cost, and thus has become the leading supplier of VCRs. Similarly, PC Hardware and Software were invented in US, but countries like Taiwan, China and India have become major suppliers because they could provide a large supply of low cost but competent brainpower.

Windows technology was initially developed by Apple Computers, but latter perfected by Microsoft, and integrated with its large suites of office applications. Now Microsoft Windows is the most popular operating system in the world. Similarly, the first network technology was developed at Xerox, but Cisco became the champion by developing hardware products around the networking technologies like switching, routing, network management, etc. First personal computers were developed by Tandy Corporation but then IBM perfected the technology, added its own operating system, and now almost all PC based applications run on IBM based machines. As the last example, the first major Internet Browser by Netscape has been almost replaced by the Microsoft’s Internet Explorer.

Focus on Core Competencies
USA has a large pool of resources and a huge consumer market, thus making it a perfect place for innovation, and most new hardware and software products are designed there. Taiwan has a large pool of engineers who bring a lot of discipline from their culture. It provides a perfect environment for semiconductor manufacturing. Similarly, India has a large number of software engineers, but they lack a local software consumer market – the result is that we still have to see a “killer application” coming out of India. Similarly, due to lack of quality control and discipline (possibly from the culture), semiconductor production has had a limited success in India. The bottom line is that Korea, Taiwan, China, India, etc. are production economies for IT products and services – but they have realised that and established a niche in design and development IT products and services instead of venturing into innovating new IT products.

According to IDC, 140,000 new software applications will be needed in next four years to support wireless technology! This is a relatively new applications field, and easier to attain the expertise in par with the other application developers in advanced countries. There are immense opportunities for African-based companies to develop products and services for their local markets which will also position them for partnership with other international companies for the external market.

Reaching a critical mass
The African IT market has been primarily price sensitive in the initial stages of development. IT contracts, products and services were selected mainly on the basis of price. Such a market always suffers from quality and hence it is an impedance to IT growth. However, that trend appears to be changing. At recent AITEC events in Kenya and Tanzania, for example, leading international companies like HP attracted a good number of customers. As customers start becoming “quality” sensitive. Only companies offering better products and services will survive. Also, the enabling technologies and businesses will start taking IT more seriously as part of their value chain.

Strategic framework
The following table provides a possible strategic framework to bring IT into the mainstream economy of African countries:

We need to take a multi-dimensional approach. Government has to provide incentives and create an environment to support IT companies. This includes legal infrastructure to support e-business, regulatory reforms and economic incentives to IT centric companies. Companies have to start sharing their prosperity with the employees and all shareholders – it cannot be limited to the owners of the company. They need to create a work environment that encourages innovation and manages risk takers efficiently and humanely. They need to work with the government to help structure those reforms and infrastructure based on their business needs. The companies also need to work with other companies to develop partnerships for technical, business and commercial alliances. A good example is developing financial clearing houses for the financial institutions to automate online financial transactions.

UN Secretary-General Kofi Annan recently remarked at MIT’s Sloan School of Management:
“Business is well placed not only to generate employment, investment, and growth, but also to advance global citizenship. Even one corporation, acting responsibly, makes a difference. Business do not need to wait for legislation to know what’s right. Together, we can and must move from value to values, from shareholders to stakeholders, and from balance sheets to balanced development. Only then will we bring solutions within reach.” (11 October 2002)

Partnership based Business Opportunities
The recent economic slowdown in the US and European ICT markets could provide some business opportunities for African-based IT companies. US-based non-IT companies are looking outside US for their products and services to cut costs. While it is difficult to compete in this market against established software companies from countries like India, partnership opportunities do exist with IT companies in India where local African companies can provide local low-cost software engineering personnel and/or integrate applications solution modules. There are also opportunities for setting up call centers to provide customer support services, leveraging the English-speaking capability of local graduates and using VoIP telephony.

The following table provide a viable business strategy for companies offering IT products and services in Africa.

New Applications Opportunities
According to IDC, 140,000 new software applications will be needed in the next four years to support wireless technology! This is relatively a new applications field, and easier to attain the expertise in par with the other application developers in advanced countries. The accompanying graph shows the worldwide revenue up for grabs for mobile based products and services over the next ten years. There are immense opportunities for African-based companies to develop products and services for their local markets which will also position them for partnership with other international companies for the external market.

In summary
Africans have been on the Internet for quite some time. They have started realizing the importance of IT growth and its implications to their economy in general, and prosperity in particular. They also understand the cost of not leveraging the IT-enabled economies. IT growth is gaining momentum and it is a matter of time for African countries to have the critical mass to attract continued external investment for economic growth.

The following table summarizes the strategic framework for IT growth in Africa: