Lauri Elliott

This is an article I wrote for Brainstorm Magazine of South Africa. It appeared in the December 2009/January 2010 issue.

The penetration of mobile phones and mobile data will serve as catalysts for a growing mobile gaming market in South Africa. The question is how well the industry will navigate these opportunities.

Globally, gaming is a hot market – from console, to PC, to online, to mobile. Pyramid Research’s recent report, Mobile Gaming in Emerging Markets, says that mobile gaming will grow at least 20 percent per year from 2009 to 2014 in the Africa and Middle East regions.

Jan Ten Sythoff, research manager for Pyramid Research, says that mobile phone and mobile data penetration serve as catalysts for this market. While Africa has good mobile phone penetration, there are differences between consumers in mature markets like the United States and those in emerging markets like Africa.

Says Matt Benic, a developer with I-Imagine: “While we have high mobile phone penetration, our potential consumers in South Africa typically have low levels of disposable income (also typical of the rest of Africa).”

This means handsets used by consumers are lower-end devices, and the cost of games needs to be lower than in developed markets. In addition, consumers would not necessarily have previous experience with other gaming platforms like consoles and PCs. Says Danny Day, owner of QCF Design: “The first provider that offers a truly engaging, massively multi-player, micro-transaction-enabled game on phones is going to win big.”

Benic says there is also huge opportunity with sports, like soccer, and SMS-based games in South Africa. A “taxi”-driving game might be an appealing concept in South Africa too. This is tapping into what consumers know and feel comfortable with.

Sythoff says the challenges facing emerging markets include game cost, affordable handsets and piracy.

Benic mentions that the misperception that game development is inexpensive is a challenge in the local industry. Companies that would pay to have games developed for advertising and promotional purposes are often shocked when quoted a price.

Furthermore, according to Benic, the lack of sufficient numbers of skilled developers is slowing down the mobile game development industry. And then there is the ongoing issue of the cost of internet access. There are many free and inexpensive tools online to support mobile game development but the data usage expense can be prohibitive for small firms.

Challenges impact the consumer too, says Day. “Poor visibility, commodity-focused instead of product-focused marketing, shoddy after-sales support and lack of penetration by local mobile developers means…potential players have to wade through sheets and sheets of poorly advertised games.” In addition, the games are not localised to suit consumers.

Challenges notwithstanding, Sythoff shares several business models with the potential to succeed in African markets. First, there is gaming for advertising, or adver-gaming: players are allowed to download games for free, but the games contain advertisements. The vendor and developer generate revenue by selling advertising space.

A second potential business model allows consumers to play games for free until they reach a certain level, after which they must pay. This is a good way of getting consumers hooked on a game, providing motivation for them to pay to continue.

In some instances, a game developer will work with a data provider to provide games. Both share the revenues while keeping the price of games lower. Day says QCF Design is looking into another business model – subscriptions.

No matter which business model is employed though, says Benic, a game has to make it the first month it is released.

Sythoff says there are potential spinoffs in digital content and educational games, while Day says his firm “has had some success with mobile-based learning games”.

Sythoff points out that new mobile game developers need to address several issues. First, they have to find channels to reach potential consumers. This will normally result in partnerships with mobile phone operators or aggregators. Second, developers need to consider how they will bill the end-user.

Third, games should be localised to match language and culture.

Unlike the iPhone Appstore, which shook the US mobile game industry by allowing new and more agile mobile developers to enter the market, local developers find it difficult to enter the market. Day says “commissioned game development is currently more lucrative”.

Up, up and away

As for the future, Day provides several insights. “New studios are applying lessons learned from digital distribution games on consoles and PCs to the mobile space. These are studios and products that will change the mobile gaming sector in South Africa.”

Also, says Day: “Watch content creators that produce content for local consumers, as well as the Indian mobile game development industry… (it) will inform developers here.”

Finally, Day says to track MXIT.

“MXIT is a heavyweight in the industry. It’s one to watch for future growth in the mobile game sector, especially if it acts as an aggregator for quality local content.”

The sector will also be tamed. “New gambling control laws and changes to premium cost services should help reign in the `Wild West’ nature of many mobile businesses,” according to Day. This will reduce exploitation of consumers.

Overall, two possible scenarios will develop in South Africa’s mobile game sector. Mobile games will be overtaken by flash- or browser-based games as phones evolve, if the mobile game industry does not respond on time. Or, the industry will shift from its current business models to more customer-focused models, which focus on alternative revenue streams.

Sythoff says the mobile game sector is complex. Navigating this complexity successfully is a key enabler for firms wanting to enter this space. Success will come to firms like Apple, which are able to deconstruct the complexity and tap into the potential of the sector. With the potential revenue stream and under-tapped market, it’s definitely a sector to consider.

Originally posted at htp://www.afribiz.info/?p=2137.

Shashank Bengali of McClatchey Newspapers wrote “Africa is gripped by one of the greatest population explosions ever recorded” in a recent article entitled, “Africa’s Perilous Baby Boom.” In fact, while it is widely reported that India’s population (1.6 billion projected) will surpass China’s population (1.4 billion projected) by 2050, Africa will beat both with a population close to two billion according to the United Nations Population Division.

Bengali paints a picture of the horrible conditions under which and into which many children are born in Africa.  However, the problem is the conditions not the population growth.  Africa is a continent that has vast resources, which if managed effectively, can sustain a booming population.  In addition, Africa as a region has one of the lowest consumption rates globally when compared to developed countries. 

In fact, this population boom is a tremendous global business and economic growth opportunity.  Dominique Strauss-Kahn, Managing Director of the International Monetary Fund, shares the world can no longer expect U.S. and Western households to drive global economic growth.  Developing markets like China, India and Africa are the future economic growth engines.

This shift sounds frightening to many in the West, but no one has to lose.  Businesses and entrepreneurs globally need to shift their strategy to account for this phenomenon.  Remember, the United States served as a major channel for China and other countries to grow their economies.  The pattern does not have to change, but the roles the actors play.  Africa, China and India can be used to drive economic growth in the United States, Europe, and elsewhere, in the future.

 

Part of this shift requires a change in the way the African population is viewed.  C.K. Prahalad, in “The Bottom of the Pyramid,” points out that businesses have traditionally treated the poor and disenfranchised as victims instead of consumers.  Businesses tend to devalue these populations without taking into account the current and future value of these markets, if developed.  Businesses have the opportunity to create their own consumer markets while solving endemic problems like poverty.

Once businesses see Africans as consumers, they need to consider the challenges faced by their consumers and those challenges in serving them, including those painted by Bengali.  The key is to design a business model accounting for and overcoming these challenges. 

For example, Africa lags far behind in broadband coverage, yet the World Bank noted that broadband coverage contributes to economic growth.  Also, if it is available, it tends to be expensive.  Two companies, SEACOM and O3B Networks, have taken on the challenge to cover Africa with affordable broadband within five years.   SEACOM has already landed in over ten countries in Eastern and Southern Africa.

In addition to the potential, businesses need to consider the importance of timing and position.  Now, is a perfect time for many businesses to position themselves in the African consumer markets.  Nations recognize this.  While China looks to Africa resources, it is not the only reason.  John Lee, in “China Woos Africa” points out that China is positioning itself to take advantage of the growing (in size and income) African consumer market. 

 

In another example, could the potential in the African consumer markets be one reason the U.S. government is shifting from supporting food aid in Africa to investment in agricultural systems?  Remember, part of the role of  diplomatic missions in foreign countries is to further the interests, including economic, of a nation.

On a final note, the issues and problems of Africa continue to provide fodder for the media more than the potential of Africa.  But there is a hidden message in all of it for entrepreneurs.  Entrepreneurs will recognize the challenge of Africa not as perilous or problematic, but as potential and powerful markets.

This is an article written by Hilton Tarrant and myself as part of the ICT in business sector series for Brainstorm Magazine in South Africa.

There is no question that the healthcare sector in Africa represents a huge challenge and opportunity. The question is how, and how well, ICT will meet the challenge.

Most African countries have a critical shortage of healthcare workers, and the majority of African healthcare systems are low-ranked internationally, according to the World Health Organisation.

Dr Dirk Koekies, Chief Executive Officer of GeoAxon, states plainly that the challenge is “creating a healthcare system out of nothing, which can deliver quality basic primary healthcare services to those without it”.

While this situation is a critical challenge, it presents a tremendous opportunity for ICT in the health sector. The opportunity is particularly good in the mobile sector (mHealth) due to the penetration of mobile phones on the continent.

The United Nations 2009 report mHealth for Development says: “Mobile phones reach further into developing countries than other technology and health infrastructures.”

One mantra for mHealth is “make available the right information at the right place at the right time and in the correct form,” according to a 2008 Rockefeller Foundation report.

This mantra, when actualised, translates to several benefits, according to Tyson Greer, CEO of Ambient Insights.

First, clinicians and patients can make more informed and intelligent decisions. Second, real-time data is provided for communication, consultation and notification. Third, mHealth increases efficiency and speed of care, and increases productivity of healthcare workers. And finally, it provides on-demand access to information and continual learning for healthcare professionals.

There is a unique opportunity to provide ICT-based products and services to the private healthcare sector.

Firstly, because private sector healthcare already represents a good portion of services provided to Africans compared to public healthcare. And secondly, African governments are using private healthcare providers to augment and enhance public healthcare systems, which are overtaxed.

This creates a sizable opportunity for ICT firms. Specific business opportunities in mHealth, according to the mHealth in Development report, include education and awareness, remote data collection, remote monitoring, communication and training for health care workers, disease and epidemic outbreak tracking, and diagnostic and treatment support. Koekies also says that developing centralised, electronic medical information records is a low-hanging fruit opportunity.

GeoAxon is delving into business opportunities presented in diagnostic and treatment support. Its “Tele-medicine Doctor in a Box” allows a doctor to examine a patient over the internet, using devices the patient interacts with locally. These devices transmit data, which would normally be assessed in a face-to-face consultation with a doctor, remotely to the physician.

While mHealth seems to be gaining momentum, it still has several challenges. mHealth is still in the pioneer stage with many projects in pilot, but little empirical evidence to prove its impact. Koekies indicates that funding for innovative solutions is still difficult to come by. And while the technology may be there, the ecosystem for the mHealth sector is still immature.

Recognising that eHealth*, and mHealth, are still emerging markets in Africa with high potential, ICT firms might want to first look for low-hanging fruit opportunities and those that leverage its strengths.

Big opportunity

The healthcare market is huge. A recent report by research and consulting outfit Markets and Markets says the healthcare IT systems market will be worth $53.8 billion in five years’ time.

One of the major areas of growth in the space is tele-medicine. This is by no means new technology, with policies put in place and applications created over a decade ago.

A new push, by networking giant Cisco, is through a pilot programme demonstrating that tele-medicine is real and it works. The so-called HealthPresence programme saw remote clinics linked up in Aberdeen, Scotland and San Jose, California.

This service provides what Cisco terms “care at-a-distance over the network”. It uses Cisco’s TelePresence teleconferencing technology, with patients and physicians able to see life-sized images of one another. The system also collects physiological data from a variety of linked devices such as a stethoscope, blood pressure cuff, pulse oximeter and other diagnostic equipment.

The Aberdeen trial started in January last year and found that 90 percent of the patients who used the technology were satisfied with the experience, 95 percent said the visit felt confidential and 93 percent said they would recommend it.

“In almost every case, we could accurately identify the degree of urgency and make a diagnosis,” said Dr James Ferguson, national clinical lead for the Scottish Centre for Telehealth.

He added: “Cisco Health- Presence can enable us to deal safely and effectively with 90 percent of the cases we see.”

The Medical Research Council is currently running five separate tele-medicine projects around the country.

Obviously bandwidth constraints mean that the implementation of tele-medicine is difficult in both South Africa and Africa. In addition to bandwidth, the MRC identifies other obstacles such as the lack of easy-to-use, robust diagnostic instruments and no dedicated tele-medicine centre to act as a hub for tele-medicine.

The deployment of terrestrial fibre networks in South and East Africa, as well as the commissioning of Seacom, has helped solve the bandwidth problem, however.

At a recent exhibition, Seacom showcased healthcare teleconferencing applications, and earlier this year at GovTech 2009, Moses

Mtimunye, then acting CEO of Sita, said that in the near future, similar technologies to Cisco’s TelePresence “will make for commercially available tele-medicine projects providing people in rural areas with world-class healthcare services”.

The national Department of Health says its long-term goal is to “make tele-medicine live up to its potential as a valuable tool to improve access to high-quality and cost-effective health care services in South Africa”.

Beyond structured implementation of tele-medicine systems, Cisco believes that HealthPresence could mean a revolution: “Instead of making a dash to an urgent care facility or emergency room, what if you could use your television or other networked device to connect with a medical centre?”

Cisco believes this is not fantasy, it reckons it could become reality within the next three to five years.

*eHealth is the use of ICT for health services and information.

There is a ground swell of interest growing about business and investment in Africa.   Too often that interest wanes because businesses know very little about how to evaluate and enter opportunities in Africa.  This segment, “Practical Insights for Investing in Africa,” started a three-part series on investing in Africa to help those interested take those first steps.

We were joined by Attorney Peter Hansen, who specializes in African Investment Law.  Also, Professor Richard America, who teaches a course on investing in Africa at Georgetown University and specializes in management development in Africa, contributed to the conversation.

Throughout the discussion, we emphasized a critical element for any venture into Africa – a focused strategy.  For investment, the investment plan is your instrument.  Some issues to consider are:

• What are your financial goals?
• How much money do you have to invest?  Have you established a budget?
• What level of risk can you tolerate?  What returns do you want?
• What is your investment timeframe – short-term, mid-term and long-term?
• How much effort will go into managing the investment?
• What are the tax issues with which you will deal?

Peter Hansen said that many investors want to “shoot from the hip” when they invest in foreign markets.  Hansen says that investors will have different plans and legal expectations for African countries, so preparation is essential.

Hansen also emphasized a good mindset for business/investment in Africa for both the investor and Africa is focusing on sustainable business opportunities.  This involves developing open and honest business deals.

For Americans investing in Africa, Hansen shared that there is anti-corruption legislation, the Foreign Corrupt Practices Act (FCPA), to which we must adhere.  He suggests that every investor establish an anti-corruption plan before venturing into international business and investment.

Richard America mentioned that there are investment opportunities in enhancing the value chains in Africa in sectors like timber, minerals.  These sectors have typically focused on exporting raw materials, but building local capabilities is becoming an imperative.  The host, Lauri Elliott, suggested that enhancing the capabilities of workers and managers can be a business strategy to help investors succeed in Africa.  African governments are looking for ways to develop their local workforce, so investors can create goodwill by helping them do so.

America also crystallized the importance of the local partner.  He shared what a critical asset a local partner, who is honest, trustworthy and knowledgeable, can be.

Both America and Hansen mentioned resources for investors and business people.  These are the Overseas Private Investment Corporation (www.opic.gov), African country investment and promotion agencies (http://www.afribiz.info/?p=647) and the World Bank’s Doing Business website (www.doingbusiness.org).

As a final note, America suggests to evaluate which country to enter, check out the countries that have received development funds from the Millenium Challenge Corporation (www.mcc.gov).  Countries go through rigorous analysis for policies promoting economic and political freedom before receiving funds from MCC.  Some African countries that passed the challenge include Benin, Kenya and Morocco.  Several other African countries, e.g., Liberia and Malawi, are eligible to receive funds and are currently going through the approval process.

Attorney Hansen prepared a brief on the issues he raised, which you can download from http://media.afribiz.info/practical-legal-issues-investing-africa-hansen.pdf.   To access the archived show, check out http://www.blogtalkradio.com/afribiz/2009/10/28/Practical-Insights-into-Investing-in-Africa.

To learn more about doing business in Africa, first visit our radio show page at http://www.blogtalkradio.com/afribiz.  Then, visit our information portal at http://www.afribiz.info.

This is a part of the ongoing series I write on ICT across sectors for ITWEB/Brainstorm Magazine South Africa.  This article is on manufacturing.  It was a collaborative piece with Hilton Tarrant who focused on South Africa while I focused on the African continent and global trends.  Enjoy!

Originally posted online at Brainstorm Magazine.

ICT is a key enabler for the manufacturing sector. It’s transforming the global manufacturing arena while opening opportunities in the African market.

Africa lags behind its global counterparts in industrial and manufacturing development. Even when comparing the percentage manufacturing contributes to the gross domestic product (GDP) in African countries to other developing countries, manufacturing contributes about ten percent in African countries and 21 percent in other developing countries.

In Africa, but outside South Africa, there are pockets of manufacturing success stories. The Ethiopian leather industry has made a name for itself in global niche markets. Robert Parker, group VP of research for IDC Manufacturing Insights, says the one significant manufacturing segment in Africa is the remanufacturing of computer and electronics.

However, the picture is getting brighter. Globalisation, innovation and ICT are transforming many sectors to anywhere, anytime platforms. In the manufacturing sector, the mantra is “design anywhere, make anywhere, sell anywhere,” says Parker.

One shift is product manufacturing, separated into tasks and spread across manufacturing facilities. This is seen as a huge opportunity for new, smaller manufacturing entrants in low income countries, including Africa, according to the Industrial Development Report 2009 by the United Nations Industrial Development Organization (UNIDO).

Parker speaks of a similar shift from mass to micro to pod manufacturing. Historically, manufacturers built one facility to serve the world. With pod manufacturing, manufacturers can download designs and methods from anywhere to localised manufacturing equipment to serve the local economy.

Pod manufacturing has reduced cost tremendously and increased flexibility. For example, there is equipment to manufacture wine, starting at $3 500.

Parker also says that local African manufacturers will be able to “bring more diversified and custom products to their local consumers”. For example, Digiskin allows customers to go online to design skins to cover gadgets, including cellphones.  A company can purchase a production machine to provide some of these skins locally to customers.

For a long-term opportunity, Parker says that African governments need to leverage access to their abundant resources and require firms to develop manufacturing and processing facilities locally alongside extraction operations. In some instances, deposits in Africa may account for 80 to 90 percent of global deposits of certain precious minerals or metals. They need to play the leverage game like China. China recently limited the export of rare metals to boost the price. African governments can use the same principle in a different way.

In every aspect, ICT is embedded in the manufacturing value chain from infrastructure to intelligent manufacturing. Without sufficient broadband infrastructure, approaches like pod manufacturing might not be possible.

Parker also sees another opportunity with the pervasive wireless infrastructure in Africa, allowing African firms to tap into and manage the full manufacturing value chain almost anywhere with technology like remote sensing and radio-frequency identification (RFID).

While there may only be pockets of manufacturing on the continent, the global manufacturing shift opens new, even immediate, opportunities for ICT firms looking for new pastures, e.g. industrial clusters in Uganda and Tanzania, as they develop. It will be important for ICT firms to continually scan the environment to take advantage of these emerging opportunities.

Manufacturing convergence

Further south, leveraging information, communication, control and power is helping South African manufacturers innovate and compete.  Manufacturers have two options during the global economic downturn: cut back and try to weather the storm, or take the opportunity to be more innovative and aggressive. However, because South African factories struggle to manufacture products at the same cost as is possible elsewhere in the world, and due to a strong currency, local manufacturing concerns face these two options all the time.

Rockwell Automation believes that even though convergence has become a cliché over the past decade, “today the combination of technology maturity and economic necessity has made manufacturing convergence a manufacturing reality”. Manufacturing convergence sees the merging of functions and systems that have been separate. The theory is that with people, processes and technology working together, manufacturers can perform better.

Convergence within manufacturing leverages information, communication, control and power.  It’s no use simply having systems and machines recording data. Information must be in a manageable form: the new goal is presenting information in context.

Sources of information can be “streamlined to allow configuration, visualisation, maintenance and optimisation of manufacturing processes and plant assets,” Rockwell says.

Immense value is created when IT and manufacturing departments are able to share information seamlessly and securely, while running multiple applications over the same network. An enterprise manufacturing approach that is particularly suited to larger distributed companies envisions the enterprise as a “virtual manufacturing network”.

EOH, during an implementation at Coca-Cola’s greenfields Bloemfontein plant, was able to capitalise on available technologies while the rest of the group used mostly manual or semi-automatic systems. In time, improvements to its other factories will mean that they can join the network across the Coca-Cola SABCO enterprise.

The trend nowadays sees standard, unmodified Ethernet being adopted broadly across the plant and enterprise for data collection and real-time control. Add to this newer functionality such as voice, video and mobility, which are beginning to appear in the plant environment.

However, despite these advances, manufacturing convergence is a complex environment and cannot be delivered by a single supplier. Locally, system integrators like Bytes and EOH implement solutions from companies as varied as Cisco, Microsoft, SAP, Wonderware and Dassault Systems.

Beyond this, original equipment manufacturers are embracing new so-called “smart” service business models enabled through embedded software, wireless connectivity and online services.  This shift has significant implications for manufacturers.

Lifecycles of products are becoming ever shorter as releases will begin to ship in “real-time” with software devices delivered to products over networks when needed. Oracle’s manufacturing VP, Manish Modi, reckons it’s hard to accurately predict what manufacturing operations will look like five years from now, but “factors we experience today are likely to have a residual effect on the supply chains of tomorrow.”

Modi says that many of the top manufacturers will have leading “service-oriented architecture suites in place to enable supply chain evolution as well as needed flexibility to quickly respond to changing markets and inevitable shifts in buying patterns”.

He also suggests that most manufacturing systems will support Web or Enterprise 2.0. “The future adoption of tools like wikis, blogs and mash-ups to create store, and collaborate on information by skilled manufacturing users should not come as a surprise. Touch screens and sophisticated wireless devices should be a common part of leading factory floors.”

But, the biggest problem in converged manufacturing is not the availability or implementation of technology: it’s changing the mindset of the people themselves.

Exporting is the commercial activity of selling and shipping good and/or services to a foreign country.  It is typically seen as a growth and expansion strategy for an established firm.  However, even start-up firms can find foreign markets more attractive than home markets. No matter the rationale for exporting, the approach is to enter the market cost efficiently and reach a break-even point as soon as possible. 

An export-ready business has considered the following: (1) company/product/service strengths, (2) rationale and objectives for exporting, 3() growth potential in other markets for products and services, (4) context of foreign country and the industry in the foreign country, (5) legal and regulatory requirements, (6) target market in foreign country, (7) financial requirements and (8) market entry issues.  We zoom in on market entry strategies in our discussion, “Preparing for Exporting – Getting to the Customer,” on AfribizTalk on October 21, 2009.

We were joined by two experts – Dr. Patrick Wilson and Dr. Emeka Nwankwo.  Dr. Patrick Wilson, Administrator of Big-Africa Partnerships Secretariat (BAPS), shared how the technical issue of labeling impacts the marketing of an African good exported to the United States.  Dr. Emeka Nwankwo, CEO of Vertical Optimization LLC, shared the process they use in Export-Path , which illustrates both the issues exporters should address and an approach for success.

Dr.  Pat indicated labeling should be informative, truth and not misleading.  Also, anything you put on labeling you must be able to prove.  Therefore, you should follow the mantra, “Do what you say and document what you do.”

Dr. Pat stressed the importance of having a good relationship with the distributor and buyer of your product in the foreign market.  Since in many cases you will not be local, the distributor and buyer will handle the presentation and placement of your product to your potential customers.  You want to work with those who will place your business opportunity as a priority.

Dr. Pat’s point leads into the larger discussion of export readiness.  There is a distinct difference between being export “willing” and export “ready.”  You may want to export, but have you developed the strategies and capacity to do so?

Dr. Nwankwo said there are three key challenges faced by exporters.  First, exporters need to access appropriate information to help shape their decision about exporting. We agreed that this is a key gap in how many businesses approach exporting.  Two, exporters need to have appropriate resources, e.g., human capital, equipment, and financial capacity.  Three, exporters need access to the marketplace, meaning the physical process of getting the products or services to the customer.  This includes elements like customs clearance, transport, warehousing, distribution and marketing.

We finally zoomed in on the challenge of access to information.  This is a challenge consistently mentioned by experts and clients alike.  Dr. Nwankwo says information, or the lack thereof, impacts a decision to pursue or not pursue exporting.  The first consideration is the exporting business concept.  This “straw-man” serves as input to the information gathering process.  It could be an existing business plan along with basic information about the idea for exporting, e.g., rationale and objectives, potential export country, target audience, timing, issues.

According to Dr. Nwankwo, the Export-Path process walks potential exporters through four key steps.  These steps include considering the concept, gathering intelligence on the opportunity, developing the product prototype and completing a risk analysis. After gathering the intelligence, potential exporters will be able to decide to pursue exporting or not. After completing the risk analysis, an export plan is generated.  The export plan is key to acquiring finance, if needed, for developing production capacity.

Since appropriate information is critical, we recommend that you first seek out and review existing information that is readily available and free.  Our Afribiz Info Portal will help you do just that.  In addition, we provide an on-demand seminar outlines a path for plunging into business in Africa.  It can also be applied to other ventures into international business.  The seminar, “Setting a Path for Success in Africa: in Business, Investment and Life,” is also available at the Afribiz website.

Listen or download the recorded radio show here.

Check out other AfribizTalk shows here.

I write a monthly article for Afribiz to help businesses focus on how to strategically and practically get business done in Africa.  This month pose questions for determining which countries might be most conducive to starting new ventures in Africa.

Originally posted at http://www.afribiz.info/?p=1092.

There is no lack of opportunity in Africa. But the road to converting those opportunities to business success is often paved with obstacles. The question becomes not what opportunities exist in Africa, but how to make them work. If we look at opportunities only, we might focus on countries with large populations like Nigeria and Ethiopia.  In doing so, sometimes the best place to successfully start a business in Africa is overlooked.  For instance, in some sectors it might be easier and more impactful to start in Namibia than South Africa even though it has a smaller market.

Identifying an environment that promotes the development of your business can be considered a key strategic decision.  It is more important to establish a successful business model, which can be replicated and expanded when you start a venture in Africa.  While economic opportunities abound everywhere, you need to determine which environments will leverage your strengths to take advantage of those economic opportunities. Consider the following questions, quick facts and resources to inform your decision.

1. Which African countries demonstrate the best overall governance?  Good governance is a boon for business and economic growth through the constraint of corruption.  According to the Ibrahim Index of Good Governance 2009 developed and maintained by African institutions, the top seven governance performers in Africa are Mauritius, Cape Verde, Seychelles, Botswana, South Africa, Namibia and Ghana.  Of special note, Rwanda was recognized by both the World Bank and Transparency International for making significant improvements in the last few years.
2. Which African countries possess the most economic freedom?  While there is no single definition of economic freedom, one of the key components is the ability to enter and compete in markets.  According to the Index of Economic Freedom, the top seven African performers compared globally are Mauritius (18^th), Botswana (34^th), South Africa (61^st), Uganda (63^rd), Namibia (71^st), Madagascar (73^rd) and Cape Verde (77^th).
3. Which African countries have the best environment to facilitate business?  The top seven African nations are Mauritius, South Africa, Botswana, Namibia, Rwanda, Zambia and Ghana, according to the Doing Business Report 2010.
4. Which African countries and regions have the best infrastructure for trade?  Infrastructure includes power, roads, rail, air and telecommunications.  Historically, the Southern Africa region has remained at the top in all categories with South Africa leading the way.  The Maputo trade corridor between South Africa and Mozambique is the most developed corridor on the continent.  In the broadband infrastructure arena, East Africa overtook Southern Africa this year. The East African countries involved include Burundi, Kenya, Rwanda, Tanzania and Uganda.  Currently, there are initiatives underway to link and modernize infrastructure across the continent.  For example, SEACOM is connecting the entire African continent to its international broadband infrastructure.  The company has connected most of their coastal nodes and is moving inland, working from the East coast to the West coast.  Countries like Malawi and the Democratic Republic of Congo will be online within six months.
5.  Which African nations have diversified economies? Diversification means there are broader economic opportunities present, strengthening the ability of the economy to absorb shocks.  The Diversification Index of the African Economic Outlook report says that the top seven most diversified economies in Africa are Tunisia (75%), Morocco (67%), South Africa (45%), Tanzania (30%), Senegal (22%), Kenya (22%) and Madagascar (21%).
6. Which African countries are experiencing the fastest economic growth? The top seven fastest growing economies (GDP%) in Africa this year are Ethiopia (7.5%), Congo Brazzaville (7.4%), Uganda (7.0%), Malawi (5.9%), Rwanda (5.3%), Tanzania (5.0%) and Liberia (4.9%), according to the Regional Economic Outlook for Africa October 2009.  They are also in the top twenty growing economies globally.   These countries are expected to maintain similar growth through 2010.  However, Congo Brazzaville (12.2% GDP) and Liberia (6.3% GDP) are expected to significantly outperform their growth from this year in 2010.

These questions serve to help you navigate doing business or investing in Africa.  However, they assume you have developed a high-level strategy. One of the first principles for doing business in Africa is do it with purpose.  A strategy provides the framework for implementing your business purpose in Africa.

We at Afribiz can help you formulate and implement that strategy. To start, learn from our online seminar, “Setting a Path for Success in Africa:  In Business, Investment and Life.” And visit other resources we have at www.afribiz.info.

I am writing a series of articles for AfriBiz on the business landscape of important sectors in African economies.  This month gives you a tantalizing introduction to the agricultural sector.  There is alot of momentum growing in this sector.  You won’t want to miss the opportunities.  Enjoy the read, then engage with me to learn more!

In general, Africa journeyed from a net exporter to a net importer of agricultural products over the past fifty years.  This means Africa no longer produces enough food to feed its own people much less supply world markets.  The recent food crisis exacerbated the situation.  The future looks bleaker because the population of Africa will go from about 900 million to over 1.5 billion in 2050.

With so much arable land and bio diversity, why is Africa facing these challenges?  Research points out that Africa continued with a traditional agricultural paradigm, which produces the same products using the same methods by small-scale farmers.  In essence, Africa as a whole has not tapped into its potential.  With all the challenges the African agriculture industry face, the biggest impeder is the systems upon which it operates, according to a World Bank report.

From a business and investment perspective, the events of the past few years have pushed attention to developing sustainable, long-term solutions to the global and African food problems. Capitalized countries, such as China and South Korea, seek out arable land in Africa to assure food supply for their people and reduce reliance on imports. Foreign investors see the profit potential.  Deutsche Bank recently published a report called “Investing in Agriculture: Far-Reaching Challenge, Significant Opportunity,” which highlights the issues and opportunities for private sector stakeholders.  The question becomes will Africa benefit from others releasing its potential?

There are new business ecosystems and models combining existing structures with transformative innovations arising.  For example, instead of focusing money on large agricultural producers, the government of Malawi developed a stronger support network for its small-scale farmers.  It included simple innovations like fertilizer for higher yield crops.  One successful result is Malawi produced enough maize this year to feed its own people and sell the excess to world markets.

In a private sector example, Africa Invest Malawi (AIM) found success along similar lines with high quality crops like chilis.  AIM incorporated small-scale farmers in its commercial agribusiness ecosystem to increase overall output.  In both instances, the challenges of global and African food supply are met while broadly providing increased economic opportunities.

The impact of new business models like these will be felt throughout African economies. Agriculture already represents a considerable portion of African GDP, but imagine if it increased the annual income of 300 million people by even just $100 per year.  This adds 3 trillion dollars to African economies each year.  This is possible since 50% to 70% of the African population derives income from the agricultural sector formally or informally.  With more money flowing in the African economies, there is growth potential in other sectors that serve African consumers.

The business and investment opportunities in the agricultural sector are not just in production.  They exist along the entire value chain – from inputs to production to processing to wholesaler to distributer to retailer to consumer.  Also, there are opportunities in supporting sectors like finance, business management, and transport.  In addition, the opportunities scale from a single agricultural facility (small or large) to agricultural cooperatives/clusters to large producers/processors to entire segments.  Thus, opportunities are available to small and large investors and businesses alike.

For example, businesses like Kickstart make money by providing basic inputs to farming, e.g., irrigation pumps. Some firms like Yara, who develops agricultural trade corridors or ports, make money by building infrastructure.  Others like Google make money with a technology platform to provide agricultural information.

While the opportunities are endless, the key is to formulate a successful strategy.  Next year, Afribiz will launch products and services to help you shape a successful strategy for key sectors like agriculture.  In the meantime, visit the following information resources that give different perspectives on the agricultural business opportunities in Africa.

Food Business Opportunities in the African Consumer Markets

Making Agriculture and Food Market Opportunities in Africa Work

The Impact of the African Growth and Opportunity Act on Africa and America

List of Agriculture-Related Reports

This piece was commissioned by ITWeb/Brainstorm of South Africa for August 2009.  It expresses another strategic view of competitiveness, which places Africa, or anyone, as a competitive leader when fighting in their own unique space.  It’s about creating more value through innovation in your unique competitive space.  It reflects the paradigm of the Vision Society in which everyone, including organizations, is designed for a purpose and has a unique space on this earth.  Let it influence your mindset about approaching your own competitive space.

Is Africa ready to compete globally? If you read the Africa Competitiveness Report 2009 by the World Economic Forum, you get the sense that it isn’t. Although progress is being made, we still hear about the need to address the same issues around infrastructure, health, education, etc.

Malik Fal, MD of Endeavor South Africa, says these are “tangible issues but not the real issue”. And competitiveness is more about creating ‘unique’ value than productivity.

The Africa Competitiveness Report suggests that nations compete and evolve along a continuum, moving from basic factors to efficiency to innovation. Dr Paul Romer, Senior Fellow at Stanford Institute for Economic Policy Research, says: “Economic growth occurs whenever people take resources and rearrange them in ways that are more valuable.”

In the end, it is innovation-driven economies that are best able to raise and sustain the living standards of their people.

Says Fal: “Africa’s mistake has been competing on basic factors like natural resources and cheap labour, which promotes poverty instead of prosperity.”

He strongly believes that if African nations, industries and firms compete on their assets in innovative ways, they can compete head to head globally, and regionally. In the book he co-authored, In the River They Swim: Essays from Around the World on Enterprise Solutions to Poverty, there are several examples of industries across the globe – Cuban

Cigars, Rwandan Coffee, Afghan Dried Fruit and Nuts – providing unique value while operating amid political, social and economic upheavals.

Fal states that economies prosper if the focus is on a pragmatic, strategic approach to create more value on the assets inherent in industries and firms. With the Rwandan Coffee industry, the government augmented and filled gaps to help the industry deliver more value by building roads to and from plantations, as well as improving airport infrastructure. One lesson is that focusing on innovation to deliver more value increases economic growth and can simultaneously deal with the tangible issues, if approached correctly.

There is no better example for the ICT sector in Africa than the mobile industry in Africa. Think how it not only opened economic opportunities to the operators but to an entire ecosystem. At the same time, mobile infrastructure development has incrementally pushed overall infrastructure development, according to Ethan Zuckerman, founder of Geekcorps.

At the World Economic Forum on Africa in June 2009, the African mobile market was recognised as one of the fastest growing in the world. The future isn’t written yet, but already there is diversification in mobile applications, e.g. mobile payment systems, agriculture, health, reporting. The social benefits of mobile phones are being experienced by communities that were formerly disconnected.

This is also translating into a larger market for the ICT sector. The benefit is not only to African firms, but also to global firms that are able to gather more real-time data in developing markets because of the proliferation of mobile phones.

Delivering on unique value also results in sustainability. Even during the economic downturn, the ICT sector in Africa continues to grow. Some, like computer manufacturers, have had to change how that value is delivered.

For example, instead of focusing on the laptop market, many firms have grabbed a hold on the netbook market, which is the fastest growing computer equipment segment globally .

Ory Okolloh, executive director of Ushahidi, emphasises that Africans should be creators of the technology for this mobile revolution, not just its consumers. Fortunately, there exists an ecosystem of diverse stakeholders based on innovation and collaboration that supports this idea.

This ecosystem reflects a strong, intangible asset of the African business culture – the social fabric of community interwoven in all aspects of society. How to leverage this asset to increase a firm’s unique value still poses a challenge for many, though. Verna Allee, president of ValueNetworks.com and author of the Future of Knowledge, stresses the increasing importance of leveraging the social dimension in the business context to be more competitive. She adds that, “Intangible assets account for 50 to 70 percent of a business’ (economic) value.”

Both Allee and Fal agree that company and industry competitiveness starts with knowing the full value, tangible and intangible, a company brings. Then, developing the space to deliver and leverage that value. The African mobile industry has demonstrated its unique value in many ways. Business models like pre-paid services, started in Africa, are gaining ground in the United States. The key for the African ICT sector to increase its leadership competitively is to continue in the same vein – concentrating on unique value.

In a bid to help companies realise their full value, Allee developed the value network methodology, which helps to map and leverage both the tangible and intangible assets of organisations.

According to Allee, a value network “is any web of relationships that generates tangible and intangible value through complex dynamic exchanges between two or more individuals, groups, or organisations. Any organisation or group of organisations engaged in both tangible and intangible exchanges can be viewed as a value network, whether private industry, government or public sector.”

A value network is structured by the roles people play. Figure 1 (above) illustrates the rich set of value exchanges within the value network of a technology firm.

In the end, African ICT firms will gain competitiveness due to innovation. While basic factors and efficiency augment innovation, innovation finds ways to trump them on the competitive field. In other words, African companies will remain economically viable and competitive if they are able to deliver on their unique value amid the turbulence of the business environment.

Original publication

Originally posted at www.afribiz.info.

The one-two punch of mobile phones and high-speed bandwidth on the African continent is fueling a boom in the ICT sector.  The  “Information and Communications for Development 2009” report by the World Bank says that voice communications offered through mobile telephony has lead the way for people in developing countries to realize the potential of ICT for economic and social development, and that broadband expansion is “catalytic” in the development of trade and e-government.  Expect the ICT sector to drive how you do business with Africa and open immense opportunities for doing business in Africa over the next five to ten years. 

Availability of high-speed broadband in Africa will increase over 200% in the next few years.  The first of the undersea fiber cable projects, SEACOM, provides high-speed international broadband to East and Southern  Africa .  This is not only important for the Internet market but also for the mobile phone market as consumer experience converges to the mobile platform.  In addition, the African mobile market remains one of the fastest growing markets worldwide.

Another interesting trend in the ICT sector is the rise of East Africa.  South Africa has been the clear leader in ICT sector development in Africa, but the Eastern African Community (EAC), including Rwanda, Burundi, Tanzania, Kenya and Uganda, has prepared itself to serve as a competitive ICT hub to South Africa and other global regions.  The SEACOM project removes one of the few remaining obstacles to this vision.

Many of the trends in the ICT sector are causing the African consumer markets, which were traditionally considered too small and too disconnected for many firms, to become connected and consolidated.  For the first time, African consumer markets are able to tap into real-time data and firms outside the continent receive real-time data from Africa.  For example, local farmers are able to check market data for their produce, empowering them during business deals.

As a business person or investor, the opportunities in the ICT sector are not only in the wave of infrastructure development projects, but also the products and services that can be provided over these “virtual” trade routes.  To give yourself a glimpse into some opportunities in the ICT sector in Africa, review the:

• “SA ICT Rocks!” article
• “Kenya is Calling” article
• “Moving Ahead with Education” article
• “ICT Business Opportunities in the African Consumer Markets” radio broadcast.

 You can also check out brief profiles for the ICT markets in each African country this month by subscribing to our daily BizBits twitter feed.