The South African government has identified the technology industry as a key sector to promote growth and employment in South Africa. IT jobs are generally high quality ones, and of course, there is plenty of untapped potential for innovative technological solutions to common emerging market problems – something South Africa has first-hand experience with. However, while the opportunity is certainly there, South Africa has a long way to go before it becomes a tech hub. Indeed, South Africa isn’t even the most innovative tech destination in Africa – East African nations like Kenya and Ghana have invested heavily in R&D and tech hubs, and South Africa will have to play catch-up if it hopes to compete with these regional leaders. In this interview, IDC expert Mark Walker discusses the opportunities that exist for South African tech, and the challenges the country will face as it tries to build capacity and create jobs. – FD
To watch this CNBC Power Lunch interview click here
GUGULETHU MFUPHI: The IDC today released predictions for 2014’s critical events in the ICT sector in South Africa. The focus was placed especially on technologies that will define market dynamics. In the studio, joining us to explore these predictions, is Mark Walker, Director of Insights and Vertical Industries for the IDC Middle East, Turkey and Africa. That’s a huge region, which you cover.
MARK WALKER: It is pretty big; it’s Cape Town to Casablanca, and Casablanca to Karachi – a nice big area.
ALEC HOGG: Why is Turkey in there?
MARK WALKER: They were developing markets, similar in characteristics in terms of population, demographics, growth rates etcetera, to the rest of the African region – believe it or not.
ALEC HOGG: You know Turkey well. You know tech well, so you have to tell us about Turkcell.
MARK WALKER: I thought there was going to be a catch. There are long stories around Turkcell, but I think that’s for the next interview.
ALEC HOGG: Is Turkcell a substantial player?
MARK WALKER: Turkcell’s a very big player in the global market, and they certainly have a lot of the Turkish market. They have investments internationally, they are a significant player, and the Middle East as a market has been very open in terms of the players there: Etisalat and a couple of others that are very prevalent in that region through dynamic and very high penetration rates. I think it’s obviously attractive from a business point of view, so one can expect robust competition.
ALEC HOGG: So they’re a legitimate player. Don’t write them off if you’re on MTN’s side. We’re talking about what you think of the future, or your big trends of the future.
MARK WALKER: I think the key things that we’ve seen in our research and we see in Africa especially – the previous person also spoke about it – Africa is the new reality, if you like. A lot of reality has set in. There’s a big demand for relevance. There’s an expectation from an African technology point of view of ‘Africa’s not five years back/late or slow to adopt’. We are here and now, we expect the same ‘here and now’ levels of service, and levels of technology that you would expect in any part of the world and I think that’s very prevalent. The key difference is that South Africa as well, but in Africa especially, is relevance. If the solutions that are being offered from a technology perspective are not solving African problems – like the banking system in Kenya that was referred to… If they’re not solving those kinds of problems, don’t come and talk to us. We will develop it ourselves, which leads us to an innovation discussion…places like Kenya and Cape Town. In Ghana, they’re developing ICT hubs specifically to generate employment – high quality employment, and also to generate foreign direct investment, overall investment, and come up with innovative solutions especially based on mobile platforms using new technologies like Cloud, and using those technologies to come up with really good solutions that solve African problems for African challenges.
GUGULETHU MFUPHI: Could you give us examples of some of those solutions? You touched on mobile money, but from a South African perspective where we have a wild bank market: what do we need?
MARK WALKER: Mobility: in the South African context you’ll see banks like FNB that have outperformed other banks purely on the basis of being very aware, technologically, admittedly to a very specific portion of the bank population, but stealing customers away from those areas. If you look at other banks like Capitec for instance, who have designed from the word go where they’ve gone, and designed their entire ‘go to’ market strategy and their technology infrastructure, to support the smaller individuals and the smaller bank individuals. It’s using technology to operationalize that, delivering solutions through innovative channels, using your mobile phone as your platform to actually transact with your bank, transfer money, and move money. It has moved well beyond using your phone just to check balances. That technology is still relevant, however. If you think of the rest of Africa…the rest of Africa is not LTE and 4G yet. A lot of it is still 3G and many African consumers are still on feature phones, so there’s a lot of functionality that works on a very basic platform – feature phone type based technology – that becomes relevant, and technology has been innovated around it. What we’re seeing as well is that internationally in other developing markets…places like Indonesia and Latin America where they will look at the technology delivered in Africa – developed and delivered here – and they’re using it there. They’re starting to use it there because they face the same problems, so just become a net exporter of technology and innovation.
ALEC HOGG: If you have a look at the area that you’re an expert in, where is the magnet for the entrepreneurs?
MARK WALKER: It’s a very interesting question Alec, because what we see is…this is where government has to come into play and there are a couple of things that have to be done. (1) The success factors: there must be a well-defined clear national ICT policy, so that everybody is pulling in the same direction.
ALEC HOGG: Who has that?
MARK WALKER: Places like Rwanda, Kenya, and Tanzania who has had one for over 15 years. These are the places where you see…the previous person on the show mentioned about innovation to East Africa being technologically advanced. That’s the reason why. It started at the top, so that infrastructure was laid, if you like. Once you have the policy in place, you can set up ICT hubs, and around that, create business innovation support networks etcetera. Kenya and Nairobi, for instance have the ICT hub. It’s like a hive, if you like, where they attract the cleverest, brightest, and most innovative, and put them in an environment with other clever and innovative individuals to come up with good ideas. Understand that they’re all local. They understand the local conditions, what the problems are, and build the solutions to solve those problems – amazing stuff. Agricultural solutions: everything is agricultural and IT…well, not really. You see the stuff that they’re doing: sell a goat on the internet.
ALEC HOGG: Sell a goat on the internet.
MARK WALKER: Sell a goat. You take a photo, take a photo of your goat, and post it.
GUGULETHU MFUPHI: Can you imagine how easy lobola negotiations would be?
ALEC HOGG: Don’t tell the Daily Sun about this.
MARK WALKER: Seriously, though it’s from that very basic level and also from a far more sophisticated level, where new channels are opening up to transact business…South Africa and the rest of Africa…inter-African trade. To travel from here to Morocco, I have to do a 33-hour flight. There’s no direct flight. Big infrastructure challenges: technology shrinks time and space. We can do video conferencing and we have the technology infrastructure to back that up from a business perspective, and I think that’s…
ALEC HOGG: So we can all learn, from the continent, what’s going on in East Africa?
MARK WALKER: Definitely. East Africa at this stage is far ahead of the game, and continuing to move in that direction.
ALEC HOGG: How far behind are they, from Silicon Valley?
MARK WALKER: The one big difference for Silicon Valley, is that there are many more cleverer minds concentrated in one place, and there’s a lot more capital available. However, and this is another example of innovation ingenuity here: in Africa, there isn’t funding, so guys come for things like Indiegogo, Kick-starter, and [unclear 7:12], which are specific funding mechanisms to fund African technology. It starts with getting money from people in the street. Let’s put it all together – that kind of concept – and fund this. Everybody is putting in $5.00. All those $5.00 end up to 125,000 dollars eventually, and because the costs in Africa are a lot cheaper, you can develop at a much more effective rate at a cheaper cost, so that becomes a very innovative thing. To answer your question directly, I think there isn’t really a time lapse, but the fundamental difference is what is relevant in Western Europe or America, is not relevant here and even on the vendor side, that is very strongly realised these days. In the past they would have an Africa strategy – this big blob – and they’ll take the strategy for Texas, put it on, and say ‘well; now it’s going to work’. There’s a strong realisation now that Africa is very unique culturally, language-wise, business practice, regulatory, compliance, etcetera. It differs by every single region and you have to compensate for that in your rollout and plans..
