Africa and The Information Economy: Foundations, Opportunities, Challenges and Research Agenda

Excutive Summary

A draft issues paper to be presented at

(UNECA)

Alemayehu Molla

(amolla@commerce.uct.ac.za)

Center for Information Technology and National Development In Africa (CITANDA)

Department of Information Systems

University of Cape Town

July 23, 2000

Africa’s Achilles heels are innumerable or may be not so as the enigmas and challenges we are facing emanate from our poverty if the latter is going to be considered a cause rather than an effect. While the continent is still grappling to provide its citizens with the most basic requirements of life, the rest of the world, especially the developed one, is fast heading towards a globally networked information economy (IE) and society. What does the information economy hold for Africa? What are its opportunities, challenges and impacts when in fact the continent is juxtaposed with the urgency to provide the most basic services of food, education, health, shelter, safe drinking water, etc? Is it prudent for Africa to go global, without successfully meeting its local obligations to its population by catering to their basic needs? Does Africa has a choice? Such are the nature, essence and magnitude of the questions that are haunting many involved in this discourse.

The study presented here doesn’t attempt to provide answers to the above challenges and to the gamut of issues that surround these questions. Rather, it is intended to pose many questions than it actually answers and hence functions to provoke discussions and spark debates. The diagram that follows depicts what we attempted to cover in this paper.

 CONCEPTUALIZING THE INFORMATION ECONOMY

There are many definitions and understandings of the information economy. In its metaphorical sense, the term is used to describe the ongoing economic and social transformations following the pervasive applications of ICT. In its "sectoral" sense it represents an emerging and fast growing economic sector. These two views are yoked together and any attempt to conceptualize the information economy must have the robustness to address both. Hence we conceptualize the information economy to include the following: (1) the design, production and distribution of information and communications technology (ICT) goods, (2) the development and operation of network backbones and infrastructure and other telecommunications services (3) the design, production and distribution of software packages and application solutions (4) the design and provision of professional services (5) the design, packaging and distribution of contents (6) e-commerce related activities and (7) the informatization of the economy and society through the use of ICT and lastly the expected benefits to the whole economy from the above 7.

FOUNDATIONS OF THE INFORMATION ECONOMY

It is crucial that the long term information and communications technology strategies of African countries should focus on making the technology home grown, socially constructed element and not something alien and imported from elsewhere that is often perceived in conflict with the embedded values and norms. Being an affluent information society shouldn’t only mean being a leading edge user. It requires being a leading edge producer as well and rarely does one exist without the other. Plus a real catching up process can only be achieved through acquiring the capacity for participating in the generation and improvement of technologies, rather than in the simple use. The following describes the foundations for the information economy

THE INFORMATION ECONOMY IN AFRICA OVERVIEW

In all the dimensions of main stream information economy sector, e-commerce and informatization, Africa is a very poor player with little informatization of its economy and society, with very small share of the world’s ICT market and with an infant e-commerce experience (see the table and figures next page).

• The global ICT market has surpassed the US $ 2 trillion mark in 1999 with an annual growth rate of 10% and is expected to reach US $ 3 trillion by the end of 2004.

• Telecommunications services is the fastest growing global market (see figure next page)

• E-commerce statistics are fraught with definitional problems. But, UNCTAD estimated that countries outside OECD accounted for scarcely more than 2% of global E-commerce revenues.

• In terms of informatization, there is a big divide within th

continent itself with South Africa better positioned than the rest of the continent. For example in terms of internet hosts, South Africa has as much as 10 times (almost 90%) the total number of Internet hosts in Africa distantly followed by Egypt (3.%) and Botswana in the third place with 1%. 6 countries (South Africa, Egypt, Botswana, Zimbabwe, Namibia and Morocco) account for 98% of the total number of internet hosts in the continent and the number of Internet hosts in 4 of the above SADC countries represent 94% of the total figure. The same trend with different magnitude can be observed in terms of main telephone line density, mobile density, PC density and others (see the table in the next page).

Source: World Development Indicators (1999) and African Development Indicators (2000)

• Though Africa’s share of the global ICTs market and spending is very small, figures from some countries indicate that the market is in fact growing and the economy is getting momentum. This follows the global trend that even if the North American market accounts for the lions share of the total ICTs spending, regions with the smallest ICTs base are outpacing the others with mature ICTs infrastructure hence indicating where the future potential market might be.

• One trend that is observed in the African Market is that despite the global trend which is dominated by software and professional services, hardware still constitutes the largest proportion accounting for as high as 60% of the total market revenues. Within the software and professional services categories, the strongest performing market segment is packaged software, which accounts for as high as 70-80% of total revenues in the sub-sector. These trends show Africa’s obvious dependence on imported ICTs and the infancy of its own indigenous industry.

• The telecommunications reform and privatization drives have started to open the African telecommunications market for competition. So far 9 countries (Cape Verde, Central African Republic, Guinea, Guinea Bissau, Ghana, Cote D’ivoire, Madagascar, Sao Tome, South Africa and Senegal) have sold part of the share of the PTO (which ranges from a high of 60% in Guinea to 30% in Ghana and South Africa). More countries are expected to follow suit and some are in the process of preparing the sector for offering.

• Mobile cellular telephony has demonstrated a rather significant growth within a span of five years. Cellular services are now available in 42 countries and outside South Africa comprises about 20% of the total phones on the continent. The market ranges from pure monopoly by the PTO (in Ethiopia, Mauritius), to up to five providers as in Tanzania, 2 being most common. The service is gaining wider popularity and market.

• The role of institutions in general and that of government in particular is very crucial for the development of the information economy and rather than an either government or private sector approach, best results are obtained when the two forge strong partnership and alliance.

CHALLENGES AND OPPORTUNITIES OF INFORMATION ECONOMY IN (FOR) AFRICA

Information economy does provide a window of opportunities in terms of

• Hardware (assembly- gradually builds the technological capability)

• Software (niche domestic market for application solutions due to language, tax and regulations)

• Professional services (pride in made in Africa consultants)

• Content production (the content market is untapped and Africa is still dependent on foreign sources from text books to news)

• Telecommunications services (Mobile service provision (both in urban and rural areas (following the Grameen model), running telecenters for business, internet service provision)

• E-commerce (teleservices and opportunities due to WAP)

The following diagram summarizes the opportunities and challenges of information economy for (in) Africa

THE WAY FORWARD

The AISI’s vision, which is subscribed by African countries, is set to lead the continent to a sustainable information society by the year 2010. The current trend of encouraging aggressive use of ICT without an equivalent recognition and development of the information economy sector might lead to trade deficit problems as Africa continues to depend and pay dearly on hardly earned foreign currency from the black box to the skill needed to implement the black box. Being an information affluent society requires mutually reinforcing relationships between being an effective user and a capable producer. Rarely does one exist without the other. The following are outlined as major challenges that should be considered on the way ahead by African policy makers and researchers.

THE AWARENESS CHALLENGE

The information economy, its nature, structure, composition and benefit are not well recognized. There is too little policy appreciation of the value to be obtained from this emerging economy. Hence,

• Recognize the size, impact and importance of the information economy

• Recognize the role information and communications technology plays in the economy

• Recognize the importance of the information economy sector (the information industry) on its own right

• Recognize the supporting and enabling role the information economy sector (information industry) plays in improving the competitiveness of the other sectors of the economy

• Launch sectoral, and national awareness programs on the whole aspect of the information economy

• Promote local, national, sub-regional and regional economic learning on ICTs

• Implement a holistic national information economy policy and strategy

THE LEADERSHIP CHALLENGE

Experiences both from the developed and developing countries indicate that a robust government involvement in various ways is instrumental in the development of the information economy. African governments must provide leadership and lead the information economy by example.

• Move from solo dancing (sporadic initiatives) to opera (a coordinated activity of information economy that cut-across traditional ministerial levels)

• Appoint a high level position for coordinating the national information economy activities (at ministerial level)

• Conduct a national assessment of the information economy, its size, past and future trends and set the scenarios in terms of opportunities, challenges, and current (or easily attainable) strengths and set short-to-medium and long term goals for realizing opportunities

• Set aside an information economy development fund to implement major opportunities identified

• Promote the establishment of SMME’s in the mainstream information economy sector and assist and guide in consortium formation

• Drive the application of information and communication technologies across government

• Leverage the development of the local information economy through government purchasing

• Protect locally produced software from piracy, eliminate pirated software from public institutions (especially locally produced software)

• Create an enabling political, legal, and institutional setup

THE INVESTMENT CHALLENGE

Except in a few cases (such as telecommunications, mobile and Internet services), it might be difficult to attract large-scale foreign investment in information economy in Africa. Africa’s poor FDI performance, however, may not necessarily be because of unattractive return on investment but rather it is to be blamed to the lack of investment protection and security issues. A UNCTAD study indicates that returns from investment in Africa are three and two times more than the average returns attained in South America and developing countries respectively. However, without investment in the production, distribution and application of information and communications technologies, developing the information economy and society will be very challenging.

• Establish a preferential treatment for investment in the information economy

• Lead the investment attraction in this sector at the highest level of government involvement by lobbying, establishing contacts, and encourage and support their realization

• Provide investment security and guarantee and institute a reliable exit and dispute resolution mechanisms

• Reduce the complexity and bureaucratic requirements of investment licensing

• Encourage local ICT investment and provide market guarantee such as exclusivity period, government sales guarantee, etc

• Encourage the development of venture capital. Assist ventures by providing business planning, entreprenuership, project management , marketing and other related training

• Provide taxation incentives both on input and final outputs of the information industry

• Provide incentive and create mechanisms to attract the participation of the Diaspora in local investment

• Revise tax and general business rules that irk investment

The use of ICT besides improving the productivity, performance and competitiveness of the economy and social players can also create local demand, which is one of the factors that determine competitiveness in the information economy. Hence, encouraging and empowering local use of ICT can provide a double edge advantage.

• Increase the ICTs awareness of local economy players

• Encourage and recognize innovative applications of ICTs and help in instituting mechanisms to spread best practices

• Create a national demonstration and help desks to assist SMMEs in ICTs choice, implementation and maintenance. If possible, provide motivation to encourage SMMEs’ use of ICTs through various mechanisms

• Facilitate, support and encourage e-commerce applications through establishing appropriate frameworks, removing hurdles and leading by example

• Accelerate improving the information and communications infrastructure

• Encourage the development of low cost access technologies for addressing the need of the rural majority

• Coordinate and promote rolling out multi-purpose community centers using low cost access technologies and encourage those involved in this line of business

• In the long term institute a directive that can require organizations to use certain minimum applications of ICTs in their engagement

In the Information economy knowledge is elevated to become the most important source of sustainable competitive advantage. Nations should turn to the cultivation of human capital athwart and cut to a bare minimum unproductive military spending. Schools and not Su 27s and Mig 29s should be the priority of Africans.

• Institute compulsory courses in information and communications technology as early as possible into the curricula

• Encourage local hardware shops to collect-refurbish and rollout computers that are gathering dust in most offices to high schools and elementary schools, at least where there is electricity, so that students will get exposure at an early age

• Ensure that tertiary education curricula reflects changes in the global environment

• Expand tertiary level information and communications technology education

• Establish specialized institutions (like the Egyptian Information technology and South African software development institute) to prepare young cadres for the information economy in collaboration with the local private sector and other international institutions

• Encourage, recognize, accredit and certify private institutions involved in high level ICTs training

• Set requirements and (social) obligations for organizations to provide ICTs skills to their staff and provide incentive and motivation.

• Institute distance, flexible and life long learning mechanisms

THE RESEARCH AND DEVELOPMENT CHALLENGE

Policy makers need to understand the tsunami of changes that are either caused or enabled or facilitated by ICTs and by the emerging information economy. The vision of the African information society could be bring to fruition if appropriate policies and institutional arrangements are in place to harness key ICTs and skills required for the socio-economic development of the continent. Future bases of competitiveness and Africa’s role in the global economy urge us to attend to this issue as a matter of high importance. The effort to build an ICT capacity should be twined with a no less effort of promoting research in the area. Research could be instrumental at redressing the lack of indigenous capacity in the design, production and use of ICT. The research and development challenge ranges from establishing and setting appropriate policies and institutional frameworks to identifying research areas, prioritizing them, ensuring their conduct and dissemination of findings.

Policy and Institutional Frameworks

In terms of policy and institutional frameworks

• Establish national institutional frameworks that encourage innovation in information economy and that involves all the stakeholders (especially the private sector)

• Forge partnerships with the private sector in research and development, institute cost sharing mechanisms through matching fund arrangements and set aside national fund for research and development in ICT

• Ensure that research outputs have industry focus and leave the shelves of researchers

• Bridge the sharp schism that exists between the research institutions and practitioners so that research findings will not age on the shelves of researchers

• Encourage regional (and international) collaboration in research and development and provide the necessary institutional framework and political support for the success of such collaborations

• Cooperate and not compete in attracting international research funds

• Create mechanisms to convert the brain drain to brain gain

• Create centers of excellence in IT and recognize and award best results

• Provide incentive in the form of tax breaks for the private sector’s research and development expenditure

Research Areas

Regarding research areas, priorities might depend from country to country reflecting existing researching capability and future goals. Major categories of research might, however, include: product and process development research, application research, and market research

Product and process development research

The status of this research will determine whether Africa is going to continue on downloading and being dependent on imported technology only or whether it has a chance to play proactively in the global information economy. The research in this category might range from basic research with limited application potential to the ones with immediate payoffs. Considering Africa’s situation; its by and large limited researching capability and its priorities, basic research might not be a feasible way to go and research needs to be focused on those with short to medium term payoffs. Following are some potential areas

• Development of low cost access technologies to address the majority of the rural community

• Software and user interfaces development research

• Appropriate models and processes for e-commerce, community telecenters, public information points, distant education, telemedicine, teleservice, etc

• Designing, producing and packaging contents-glocalization- with multimedia focus

• Designing and developing mechanisms to utilize African indigenous knowledge

Application research

Africa’s experience with information technology is little investigated. What are the impacts of the information technology on the workplace, work environment, organization (business or otherwise), industry, nation, region, etc., are not well known. By the same token, the impacts of the African culture, business environment, political setup, etc., on the development of the information economy and the implementation and use of ICTs are yet to be researched. Learning institutions and policy makers are starving for African success and failure case studies. The application research might help to unravel information in these areas and include the following in no significant order

• Analysis and synthesis of government, community and business information and ICTs and ICTs and information related literacy and training needs; identification of application areas.

• The impact of ICT on the worker, work environment and work place, human computer interactions and behaviors in the use of electronic media

• Use of ICT in improving business and government service delivery, in fighting corruption (at least the petit ones); in curbing red tapes

• Security issues related to viruses, electronic fraud, hacking, privacy, etc

• E-commerce applications

• Political, organizational, social, cultural, psychological, legal, regulatory, traditional, etc., issues in the application and use of ICT in government, organization, community and family

• Ethical, moral, legal and gender issues in the application and use of ICT

• Longitudinal studies of ICT within organizations, government and the community

• Use of advanced practices such as smart cards application

• The application and use of indigenous knowledge

• Use of community telecenters and public access points

• Globalization and the emerging information economy and their impacts nationally, sub regionally and regionally

• Case studies in all the above areas

Market research

One of the biggest challenges in Africa is lack of information about the African Market. Market research will help to prove the business case, attract investment capital, and reduce the effort required by investors and operators. This information serves as a plank from which policies and future plans could be made. It also enables national authorities to address factors that interfere with more effective practices for developing human resources and this will unravel facts and systems for the measurement and recognition of skills and abilities.

Modalities for the Implementation

The modalities for the implementation of the various research might include the following