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A continent slowly awakening to the opportunities

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by Chris Yelland, investigative editor, EE Publishers

From small beginnings, Africa is slowly awakening to the opportunities of engaging on its own terms with the international science, engineering and technology, food and agriculture, manufacturing and business communities to achieve appropriate foreign investment and sustained economic growth.

These are views of Alec Hogg, executive director of Moneyweb, speaking at a recent business breakfast briefing in Johannesburg, hosted by the Association of Distributors and Manufacturers of Electronic Components (ADEC) on his return from the World Economic Forum on Africa in Addis Ababa in May 2012.

Guest speaker Alec Hogg from Moneyweb, Thulani Mpetsheni, Department of Trade and
Industry, and Chris Yelland, EE Publishers, at the recent ADEC breakfast.

Currently, the USA has 24,3% of global GDP, with China having 8,7%, and Africa a mere 2%. However, says Hogg, we are living through a rebalancing of global GDP, with China’s GDP increasing steadily towards its natural share of 23%, while Africa is only just starting. In this, Africa needs to appreciate that economic growth is not just about mineral resources, mining and commodities – the continent needs to unleash its human potential.

Africa is only now emerging as a serious market, estimated at $1,7-trillion by 2020 with over a billion consumers. But while economies are on the march, and governance may be improving, the politics of the continent still presents challenges and dangers, with contestation evident between the Western and the Chinese political and economic models.

Attendance at the Africa WEF 2012 was significantly oversubscribed, with political and business leaders from around the world reflecting a new and different business interest of pragmatic optimism in the continent this year – an interest in the its emerging markets, its young people and the global shapers of Africa.

Hogg gave insights into current developments on the African continent based on his experiences in Addis Ababa and elsewhere in Africa, and suggested how companies may position themselves for the future. He indicates that developments are happening fast, and that astute business leaders are looking to invest in Africa – but in a different way. Hogg believes that the demographics of Africa, with some 60% of the population under 30 years of age, offers a significant potential dividend, but this needs a considerable investment in education.

A consistent theme at the WEF event was that African governments were prioritising economic growth. “For eight of the last ten years, the so-called ‘African Lions’ of the continent have grown faster than the ‘Asian Tigers’, clearly indicating a sustained trend rather than a flash in the pan,” said Hogg. “From mining, food and agriculture, telecommunications, banking, consumer goods and retail, Africa is on the move, and this presents significant opportunities for the farsighted.”

Hogg indicates that some 70% of the world is not being tilled, with much of this being in Africa. He adds, however, that by 2050 the world will not be able to feed itself without Africa. Like Brazil in 1974, the agricultural and food processing opportunities on the continent are enormous. Hogg believes that the age of the African farmer has arrived, with the big corporates working with small farmers. To understand his point, one only has to look at the unrealised agricultural potential of a country like Malawi, with its ample fresh water resources, low wages and vast plains of arable land in the warm Rift Valley.

In the fields of science and technology, South Africa, with its eight partner countries – Botswana, Ghana, Kenya, Madagascar, Mauritius, Mozambique, Namibia and Zambia – have recently won the lion’s share of the Square Kilometer Array radio telescope project after nine years of effort.

“The SKA project is a global scientific enterprise to build one of the largest scientific instruments ever envisaged. It is being designed to answer fundamental questions in physics, astronomy and cosmology in order for us to understand the origin and workings of the universe better, and to reveal new and unexpected phenomena that will enthrall and challenge us. Since 2005, we have awarded nearly 400 grants and bursaries to postdoctoral fellows and PhD and MSc students and undergraduate students,” said the South African minister of science and technology, Naledi Pandor.

Other opportunities presenting in Africa include leapfrogging the traditional phases of industrialisation and technology development, and examples of this can be seen in the fields of information technology, mobile wireless communications and digital satellite television. There are 616-million mobile phones in Africa, greater than the whole population of North America, and this brings new business via smart phones through wireless banking, e-commerce and the internet, direct to the youthful and growing population.

The recent inaugural African ICT Indaba hosted in Cape Town in June 2012 by the South African Department of Communications (DoC) and International Telecommunications Union (ITU) has an objective to formulate a continental agenda and approach to expanding the growth of the ICT sector. At the ICT Indaba, the South African minister of communications, Dina Pule, said that discussions must shape the framework for using technology in order to achieve socio-economic development and create sustainable jobs.

During a panel discussion at the indaba, MTN CEO Karel Pienaar responded that the foundation to enabling a knowledge economy is a quality broadband infrastructure, and that delays in the roll-out of broadband in Africa could result in thousands of job opportunities being lost, with a significant negative impact on GDP.

But while internet access is increasing, the cost of bandwidth, priced up to a thousand times higher than in developed countries, remains an inhibitor instead of an enabler. Hogg says that there is an urgent need for Africans to get onto level playing fields with the rest of the world, to empower women, and to enable new business models. All of these may thus be seen as opportunities rather than impediments.

Similarly, Hogg believes that poor infrastructure and urbanisation in Africa may be seen as both problems and opportunities, with low wage rates providing a competitive advantage for Africa that could attract significant investment and as many as 500-million jobs from China.

While economic development is often severely hampered by a lack of consistent electric power, the continent is rich in energy, particularly renewable energy, such as hydro-electric power from the Inga Falls on the Congo River. There are also massive new natural gas resources in Mozambique and shale gas resources the Karoo in South Africa. “We have the potential but do we have the will?” asks Hogg.

In manufacture, Hogg suggests that USA and China built their economies on an ability to effectively distribute their goods and services, and that Africa should follow suit. While high technology local manufacture may not be feasible in the short and medium terms, he points to several significant examples of local African service, assembly and repair facilities as pragmatic approaches that make a start.

In South Africa, significant new initiatives are underway to make electronics manufacturing in South Africa more globally competitive. Whilst somewhat fragmented, there are in fact some strong electronics manufacturing niches in the country, such as prepayment electricity meters, television sets, DSTV decoders and set-top boxes, vehicle tracking and security systems, and contract manufacturing.

Hogg’s advice to business wanting to invest in Africa is to arrive early and take a long term view, embark on true partnerships, forget about colonisation, be engaged and vigilant, and maintain a diversified portfolio.


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