presentation to panel of global and african private sector october 25-29, 1999 mavis ampah...

Presentation to Panel of Global and African Private Sector

October 25-29, 1999

Mavis Ampah Sintim-MisaCEO, Spectrum International Ghana.

CREATING INFORMATION CREATING INFORMATION INDUSTRIES IN AFRICAINDUSTRIES IN AFRICA

INFORMATION

INDUSTRIES IN

AFRICA

Strategies

Infrastructure Requirements

Opportunities

Challenges

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Information Industries

CONTENT CONTENT

THIS PRESENTATION FOCUSES PRIMARILY ON:

TRENDS IN INFORMATION TECHNOLOGY INDUSTRIES

OPPORTUNITIES FOR BUSINESS AND EMPLOYMENT

DEVELOPMENT;

INFRASTRUCTURE REQUIREMENTS;

CHALLENGES AND CONSTRAINTS FOR AFRICA; AND

STRATEGIES FOR CREATING MORE EFFECTIVE INFORMATION

INDUSTRIES IN AFRICA

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INTRODUCTION INFORMATION INDUSTRY - TRENDS INFORMATION INDUSTRY - TRENDS

The information age is a global phenomenon, it is here to stay and it offers a very critical turning point for Africa

• Level of development of Information technology and telecommunications (IT&T) is undoubtedly the single most critical indicator of performance and competitiveness of countries, businesses and individuals. Inreasingly, spinoff information industry founded on the development of faster, more powerful information technologies and communication networks.

• dynamics driving the industry - digitalisation, dramatic increases of computer power at lower cost, public and private networking (internet and intranets) telecommunications deregulation, open standards.

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INTRODUCTION INFORMATION INDUSTRY - TRENDSINFORMATION INDUSTRY - TRENDS

• Unprecedented growth in the sector and growing. IT&T products and services alone worth some US$800 billion. Spinoff service industries resulting from breathtaking developments in IT&T sector is already redefining the scope of the industry beyond all expectations

• Internet phenomenon is at least as significant a technology shift as was the advent of the PC in the early 1980s. Total usage, by business and individuals, continues to double every 9 months. This is driving the emergence of an online economy, characterised by interactive multimedia services and electronic commerce.

• Rapidly growing demand for electronic commerce applications alone is expected to add some additional US$266 billion to the IT&T sector by 2000.

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INTRODUCTION INFORMATION INDUSTRY - TRENDS INFORMATION INDUSTRY - TRENDS

• Information industries provide the systems which underpin the productivity and competitiveness of most manufacturing, mining, agricultural and service businesses.

• global sales of semiconductors expected to approach some US$290 billion by 2000

• Information technology and industry is most developed in North America where, thanks to the rapid growth of the high-tech venture-capital industry, start-up companies have invested extensively in the creation of formidable information infrastructure andservices

• Least developed in Africa due, among other things, to poor basic telecom infrastructure, inconducive business environments and dearth of capital and technological capability.

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OPPORTUNITIES FOR BUSINESS AND EMPLOYMENT DEVELOPMENT OPPORTUNITIES FOR BUSINESS AND EMPLOYMENT DEVELOPMENT IN AFRICAIN AFRICA

Information technology industry incorporates a broad spectrum of business activities - from production of industrial products( telecom equipment, electronic products & components, computer hardware & software); through industrial technology which is applicable across industries, production processes and products; to information support services and production.

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Business Opportunities

• Development of broadband communications networks; convergence of traditionally distinct IT, telecommunications, and broadcasting for sound, text, graphics and images, combined with a burgeoning information-intensive global economy, has unleashed unimaginable business opportunities for both developed and developing world.

• Capital requirement needs and inputs are highest at the production level and relatively lower at the information generation and service provision levels. Fortunately for Africa, value is also shifting from hardware to content, services and software development.

• Implications of online technology for the delivery and use of financial

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services, education, health, retail, and entertainment are phenomenal; an extended value chain has been created which accommodates more players with differing technical and financial resources.

• For the first time in the history of IT, services are also becoming more important than products; and Africa has the unique opportunity to make that quantum leap into the new generation of high value, lower cost information services industry.

• Already, a few small and medium companies in several African countries are creating niches in the design and development of commercial web pages to assist consumers in making informed decisions and choices in anything from politics and banking to tourism and farming. A lot more opportunities exist in these areas.

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• While still below acceptable levels, there’s a current trend of strategic alliances between information-intensive companies and carriers and other value added networks to provide low-priced information to users which needs to be aggressively pursued eg. Canada based Alexander (provider of internet & data communications services) structuring deals with Telcos in Mozambique and Zambia. Similar arrangements in Ghana between Africaonline and Voltacom (service providers) and Ghana Classified and Datamatrix (content developers) respectively.

• IT services are being outsourced worldwide as corporations move to concentrate on core businesses. Much of this shift from non-traded to traded services is being secured by a number of global firms (mostly US), who are now quite active in Africa, and are providing leading edge business practices in this market. Africa needs to capitalise on such emerging opportunities.

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• The online phenomenon offers additional opportunities for small and medium enterprises to enter the content development market in the areas of customised interactive multimedia services with an African flavour particularly for the agriculture, education and tourism sectors.

• Perhaps the most lucrative opportunity, (and quite likely, the most critical since the success of the entire information services industry depends on it) is the ability to develop software that is applicable in large measure to local conditions. Standard software may exist for a large number of activities but there still remains significant unexplored territories in entertainment, policy planning, education, farming etc. for which conditions are such that local characteristics must be considered, and respective countries would need to consider the development of original information systems software.

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• Emerging trends, albeit limited to developed markets, in the development of open source software through the use of freely distributed source code and the communications facilities of the NET. Open source software is developed by uncoordinated but collaborating programmers. Innovative open source projects such as Apache, Sendmail, and Samba allow a rapidly growing open-source community the ability to access to low-priced and innovative software.

• Open source is particularly useful for corporate software developers whose projects may not necessarily be for sale, but simply to solve internal business problems.

• Business opportunities in open-source include sales of latest software releases under reputable name brands and distribution channels, and development of proprietary products to add value to open source for resale on commercial terms.

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• licensees have option to, among other things, create derived networks (traditional commercial software with unpublished source code), add and modify to existing software with the obligation to reveal source code, create and add without revealing source codes etc.

• Open source software development spreads costs across multiple organisations and people and provides a unique opportunity to lower the cost of software development. It is particularly attractive to the African market where dearth of capital prevents many small and medium companies from participating in the software business.

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Employment

• information industries are providers of high value added, knowledge intensive jobs; they underpin employment in many other sectors, in particular service industries that deal in information, such as education and research, health and community services, finance and insurance, and public administration and defence

• but without a viable base of well trained human resource - equipped to install, operate, maintain, manage and develop and use value-added services, new information industries being created will not yield anticipated benefits.

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• human capital accumulation may involve both an increase in the knowledge embodied in skilled workers and an increase in the number of skilled workers, but companies and government departments may also continue to shed jobs by increasing productivity through the application of IT.

• Effective response to IT opportunities will depend on how successfully firms and Governments cope with the loss of jobs in some industries on the one hand; whilst on the other, new and usually better paid jobs are created by growth opportunities

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INFRASTRUCTURE REQUIREMENTSINFRASTRUCTURE REQUIREMENTS

The pace at which African governments can develop a reasonably adequate infrastructure base which can accommodate rapid information technology enhancements, promote the development and use of new services and applications and add value to users, will determine the rate of growth of information technology industries in Africa.

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• An effective information technology industry begins with a formidable telecommunications infrastructure - from sector liberalisation & privatisation and policy & regulatory restructuring to strategic investment in physical infrastructure.

• Significant efforts made in quite a number of African countries towards liberalisation and infusion of private capital, but in almost all countries, networks are inadequately interconnected and inaccessible to majority of citizens.

• Need for policy and regulatory frameworks that are dynamic and responsive to rapid innovations in IT. Governments worldwide are moving rapidly to execute strategies for capturing commercial benefits

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and creating jobs by making essential adjustments to their legislative and regulatory environment, and by building awareness and support for these changes within government agencies, business and civil society.

• Strong research and development base in IT for continuous research in new applications, uses and deployment of information technology.

• Development and sourcing of venture capital for local technology companies. Very important link in the development of a formidable infrastructure and support for information industries.

• Targeted investment in IT education and human resource development at all levels - from engineering to IT policy formulation.

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CHALLENGES AND CONSTRAINTS FOR AFRICACHALLENGES AND CONSTRAINTS FOR AFRICA

• IT&T systems and sub-systems manufacturers typically depend on imported electronic components for more than half of their direct unit manufacturing costs

• Only firms who can access international procurement volume terms (ig. MNC subsidiaries and indigenous firms who have alliances with MNCs) can build products that are competitive in cost.

• Globalisation of the design, engineering and production of electronics and IT & T products - most competitive markets get the business. World production, R&D innovation and trade in these sectors is essentially dominated by less than fifty MNCs. Africa does not compete.

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• The continent as a whole cannot attract investment globally scaled/export oriented foreign direct investment in the electronics and IT&T systems industries partly on the basis of its lack of technological competence.

• Africa currently seen as market for information technology products rather than manufacturing base. Development of market is thus very rudimentary.

• Local companies are not attaining critical mass; the biggest single issue for small local firms in Africa's information industries is access to venture capital. It is impossible to have a competitive industry without competitive capital formation. Other reasons include inadequate skills levels, and low local R&D effort.

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• Inadequacy of office automation and personal computer networks; low demand for IT&T products and services.

• Poor legal and regulatory environments - increased risks for both local and foreign business eg. Lack of legal frameworks for intellectual property protection etc.

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STRATEGIES FOR CREATING MORE EFFECTIVE INFORMATION STRATEGIES FOR CREATING MORE EFFECTIVE INFORMATION INDUSTRIES IN AFRICAINDUSTRIES IN AFRICA

• Leading MNCs who have the requisite capital and other resources are competing intensely with each other by marshalling across national border assets such as capital, creative people, R&D and engineering know-how. They are continually searching for the most suitable locations for major investments, opportunities for strategic alliances, and seeking to build truly global supply chains.

• To the extent that Africa is incapable of absorbing the high cost of information infrastructure development, it would need to aggressively pursue a policy of strategic alliances with multinational corporations for all aspects of information technology and market development.

• A new regional approach is required, which actively promotes the integration and pooling of policies and resources to maximise the development of the region’s competitive advantage

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• In making decisions about where to invest, firms in the information industries consider many factors, but four are most important.

Firms will tend to invest in a country if:

the size of the domestic market is large (or the country concerned is a member of a larger trading area) and there is some requirement to add value locally;

labour and other key costs of production are low and technology can be readily transferred;

specialised resources are available which are unavailable or in short supply elsewhere; or

incentives for manufacturing and/or R&D are attractive.

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• The emphasis should be on targeted investment promotion and willingness to provide positive incentives for the multinational companies to locate production and R&D capabilities in respective countries. Financial incentives have been provided successfully by way of tax concessions (Singapore, Malaysia and Ireland) by grants (UK) and by a mix of both (Israel). African countries, including Ghana, have made notable efforts even though impact has been minimal because of the general nature of investment promotion efforts.

• Part of the Asian ‘miracle’ (eg. Singapore and Malaysia) has been in the active investment attraction policies which have resulted in MNCs establishing major globally scaled production capabilities in these countries. Many were initially based on using the abundant supplies of cheap, low-skill labour.This is now changing as clusters of high value design, engineering and manufacturing skills have been developed.

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• Because of the relatively low costs and high values involved, it is imperative for Africa to position itself as an attractive regional site for the development and deployment of new online services. e.g India. Australia has already demonstrated that it is a competitive location for data and call centres.

• African countries would need to form clusters to specialise in some particular stage of the software development cycle - such as R&D, manufacturing, or distribution/logistics and customer support - the continent’s information industries can gain competitive advantages and become a significant component of global trade flows.

• A lot of house cleaning before Africa’s information industries can qualify for potential alliances and other foreign direct investments. Beyond the market liberalisation, Africa must pursue policies that aim

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to foster the development of it’s local information industries. These vary across a broad spectrum, from a light-handed market-driven approach (where market failure is demonstrated before government considers intervention) to a strong central leadership role. Typically these strategies include:

policies to support manpower development

policies to support applied education and training

policies to promote investment, both local and foreign. Eg.the venture capital industry has been an integral part of the success of the US in growing small local companies into world majors. Good example for Africa. And where the venture capital market is not well developed, governments should develop active policies to attract internationally mobile investment .

policies to influence firms' location decisions

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• Both government and the private sector have important roles to play in the effective development of information industries in Africa -

private sector in the aggressive pursuit to build and acquire technological capability through joint ventures, privately funded research and training and above all development of information businesses.

Government has an even bigger role to facilitate the efforts of the private sector by clearing legal and regulatory hurdles, promoting an IT-oriented culture to increase demand for services and products, assisting in the development of a venture capital market and investing in human resources.

presentation to panel of global and african private sector october 25-29, 1999 mavis ampah...

Documents

africa information industries

spinoff information

information age

africa information tech

africa slide

industry digitalisation

c reating

africa level of development