Innovation upswing

Think of South Africa, and the country’s wealth of natural resources will probably come to mind. Your mind might run a mental video showcasing tourism hotspots, such as Table Mountain or the Kruger National Park, or agricultural scenes of the Western Cape winelands or KwaZulu-Natal’s sugarcane fields. You probably wouldn’t think of the country’s ICT sector. Yet, according to new research by Stats SA, in 2014 the sector’s contribution to the national economy was – at 2.7% (or ZAR93 billion) – larger than the agriculture industry’s (2.4%), and only slightly lower than tourism’s (3.1%).

Breaking it down into simple terms, Stats SA notes that ‘for every ZAR100 that the economy produced in 2014, ZAR2.70 was due to activities related to ICT.’

Research published in June by the GSMA Ecosystem Accelerator shows that Africa has seen the number of innovation hubs double in the past two years alone. The big three (Nairobi, Lagos and Cape Town) are rapidly being joined by a new wave of incubators in North Africa, including Casablanca, Cairo, Sousse and Algiers.

World Bank chief economist for Middle East and North Africa Region, Rabeh Arezki, noted in a statement that ‘when it comes to sustainable funding, African tech hubs tend to focus on demand-driven service models that solve problems and support the specific needs of an ecosystem. To succeed, a modern innovation hub needs to pinpoint a niche in growth areas and deliver that proposition. Key areas ripe for development are start-ups looking at improving internet infrastructure, payment systems and education. These are the types of businesses we see succeeding’.

Across sub-Saharan Africa, countries such as South Africa – together with the likes of Kenya, Nigeria, Rwanda and Zimbabwe – are investing in tech innovations, each with their own ambition to become a regional tech hub.

Yet a glimpse at the regional rankings in the latest edition of the International Telecommunications Union (ITU) Measuring the Information Society report reveals that many of those countries are lagging behind their global counterparts. Just four African nations ranked among the top 100 in the report’s ICT Development Index (IDI), with Mauritius (72, up from 75) and Seychelles (90, up from 92) improving their ranking slightly, while South Africa (92, down from 88) and Cape Verde (93, down from 91) both slipped. The ITU ranks the progress of 176 economies globally for their development, based on what it says are official and internationally comparable statistics.

‘Drawing conclusions from the report, it is clear that the area of ICTs is very dynamic, and that another digital revolution is approaching – one that will transform business, government and society,’ says Brahima Sanou, director of ITU’s Telecommunication Development Bureau. ‘Four key developments are at the heart of this revolution: the internet of things, cloud computing, big data analytics and artificial intelligence.’ Given those factors – which rely so heavily on progress in enabling technologies such as broadband, data centres and cloud services to drive the digital transformation – it’s best to measure the ITU rankings against another report, Huawei’s Global Connectivity Index (GCI), which charts 79 global countries in terms of progress and performance made in precisely those fields.

South Africa ranked 46th in the 2018 GCI, followed by sub-Saharan friends and neighbours Kenya (68), Ghana (69), Nigeria (70), Botswana (71), Namibia (72), Tanzania (74), Uganda (75) and Ethiopia (79).

‘Bandwidth in South Africa has seen significant improvement this year and a one-point growth was also reflected in cloud migration. In addition, South Africa experiences improvements in mobile broadband subscription and smartphone penetration. More investment in ICT infrastructure is necessary to support and facilitate the development of ICT in the country,’ the report states. It adds that a single-point increase in a country’s GCI score can reflect a 2.1% rise in competitiveness, a 2.2% increase in innovation and a 2.3% rise in productivity across an entire economy. That’s significant – as is the fact noted in the GCI report that the global digital economy has been growing at a rate of two-and-a-half times faster than global GDP over the past 15 years. Such is the growth that the GCI was forced to broaden the research scope of its latest report from 50 countries to 79.

Against this background, the University of the Witwatersrand released the 2017 Joburg Centre for Software Engineering (JCSE) ICT Skills Survey, which highlights the need for more rapid transformation and empowerment as well as recognition of the ICT sector’s value as an economic contributor.

‘In some respects, it is more of the same,’ says JCSE applied research manager Adrian Schofield, pointing to an increased demand for cybersecurity practitioners. ‘But there is an undeniable urgency to make progress if South Africa is to benefit from the impending global upswing in the ICT market, which is estimated to reach US$4 trillion in 2018. In this scenario, demand for relevant skills will continue to outstrip supply, giving South Africa an opporportunity to empower its black youth to fill the gap, boost the economy and extend these benefits into the broader continent.’

Tech-driven transformation is a top priority for Africa’s governments and business leaders. In Kenya, Joseph Mucheru, Cabinet Secretary of the ICT Ministry, recently revealed plans to introduce tax incentives for manufacturers in the ICT sector in order to reduce reliance on imports. Speaking at the launch of the Connected Summit 2018, Mucheru said that Kenya currently imports the bulk of its technology devices, as local manufacturers often lack the knowledge needed make world-class products. ‘We are therefore going to put in place tax incentives that will help to attract global manufacturers of ICT devices to serve the growing local demand.’

Mucheru noted that Kenya will require more than 50 million smart devices in the next two years due to increasing reliance on technology to fuel all sectors of the economy, and said that the country plans to be an export hub for the ICT market that will be created by the Smart Africa Alliance, which could include as many as 600 million consumers.

South Africa, too, is looking to shift away from relying on tech imports. Its government plans to create state-owned IT and ICT infrastructure companies by 2020 – the former, a remodelling of the State Information Technology Agency (SITA), and the latter, the result of a merger of Broadband Infraco and Sentech.

Speaking recently to ITWeb about the proposed changes, Telecoms and Postal Services Minister Siyabonga Cwele said the state wants SITA to increase its internal capacity by becoming a manufacturer of products.

‘We have the capacity to manufacture things for the education sector at a reasonable cost. We are engaging with SITA in terms of localisation of technology so that we are in line with the Fourth Industrial Revolution,’ said Cwele.

This shift away from imported products and towards locally manufactured goods is a key trend in Africa’s growing ICT space. In June, South African ICT group Yekani Manufacturing unveiled a new ZAR1 billion factory in East London’s industrial development zone that will manufacture electronic products.

‘What we are witnessing today is a company that is getting into this space, which is very important as we prepare ourselves for the [Fourth Industrial Revolution],’ Trade and Industry Minister Rob Davies said at the opening of the factory.

‘This is an example of what we can do if we put our minds to it. So I think this is an investment to celebrate at a number of levels in an industry that is of strategic importance and key to job creation.’

As the continent’s ICT sector continues to grow, that strategic importance will become increasingly significant – as will the demand for business leaders who prioritise real tech-driven transformation.