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Africa: The New China

Which region promises the greatest expansion? IBM thinks the answer is Africa. It’s not alone among tech companies that are seeking new markets and trainable talent on that continent. While growth tapers off in many more developed regions, Africa offers great potential, particularly as its workforce gains access to education and technology for communication.

IBM has been in Africa for more than 60 years, where it currently has a presence in more than 20 cities. But last year, it decided to really focus on Africa to bring its revenues there up from $400 million to $1 billion by 2015.

Nascent, but huge potential
A recent Bloomberg article quotes Bruno Di Leo, head of IBM’s global sales: “It’s nascent, it’s unstable, but it has a huge potential.” He sees it as having the same potential that was to be found in China a decade back.

To prove itself to the powers that govern the continent, IBM is doing what some individuals do when trying to break into a new area: It’s working for free on Africa’s water problem.

Taking the first step toward expanding its African presence, in August IBM announced the opening of the first IBM Research lab in Africa in Nairobi, Kenya. This lab, one of only a dozen worldwide, will recruit applicants throughout Africa to work with IBM researchers through a Resident Scientist Program. They would be signed on for one year with an option to extend their tenure.

As Anthony Mwai, IBM’s Country General Manager in East Africa, said, “As we build a great workforce in Africa that is aligned with national goals and help governments and industries envision and build Africa’s future, we are establishing a foundation for IBM’s long-term success.”

Next Big Thing?

It's a nascent market, but companies like IBM think Africa  has enormous potential for growth in electronics systems.

It's a nascent market, but companies like IBM think Africa
has enormous potential for growth in electronics systems.

Targeting water shortages
To win the governments’ goodwill and cooperation, IBM offers applications of its tracking technology to their water problems at no charge. Water supplies are a serious problem in the shantytowns that border Tshwane in South Africa, where most people have no plumbing. The water supply for the 32,000 residents comes from large, leaky tanks. Despite its scarcity, a quarter of the water supply ends up going to waste or is unaccounted for.

In October, IBM set up an analytics system to track the water in order to come up with an effective solution to the problem. Perry Hartswick, an architect of IBM’s Smarter Planet program, which applies technology to civic issues, explains the approach as follows: “We’re walking in to say we’re here to be a part of Africa. That’s a very important part of the way we approach any new geography.”

Skin in the game
The term for that kind of commitment, which demonstrates a personal stake in a plan is “having skin in the game.” In an Economist article about high-tech companies’ new interest in Africa, Mark Walker of IDC uses that term to describe today’s approach to global expansion. The companies' approaches call for “investing in local people, so there’s proper knowledge transfer, investing in country offices” to show they are serious about sticking it out even if the first few quarters yield losses.

Following IBM’s lead, companies like Google, Microsoft, and Orange, the French mobile operator, are working on bringing their technology to African markets. Microsoft plans to bring broadband to Kenya even where there is no “electricity, using solar power and ‘white spaces’, or spare broadcast-television frequencies.”

Fernando de Sousa, Microsoft’s general manager in Africa, predicts that broadband will be accessible to 6,000 people in the Rift Valley within a year.

While Africa is far from a safe bet, those companies willing to take a chance on it may be able to not only do good for the region, but do very well for their own bottom lines.

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42 comments on “Africa: The New China

  1. Lavender
    April 18, 2013

    Positioning the emerging markets, including Africa, Brazil and India is a good approach for its great potential and the relatively worse performance in matured regions. Maybe emerging markets will be the last hope for PC industry and featured cellphone. 

  2. Ariella
    April 18, 2013

    @Lily  According to the comments this post generated on my Google+ stream, IBM and the other companies are on the right track in betting on Africa as an emerging market. One of the comments said:

    I lived in Zimbabwe (pre-independence) and South Africa as a child, and I can honestly say the people of Africa have tremendous drive. As education and safe standards of living arrive, the people of Africa are not going to sit back and think it's all done. They have passion for their families and communities just like the rest of the world does. I expect Africa as a region, or as two regions, could be very successful in the next few decades.

    Another commentator pointed out that he agrees about the potential, though some African countries are “much readier for technology than others.”

  3. _hm
    April 19, 2013

    Chinese government knows this very well and they have invested very large amount of money for this purpose. US and Europe missed this opportunity and are now eager to to accelerate the pace.

    This looks very good news and IBM is very respnsible corporate citizen. Along with corporate profit, they should genuinely help local people.

  4. mfbertozzi
    April 19, 2013

    Very great and fascinating editorial Ariella, congratulations. You have talked about a large continent and maybe some regions within will achieve faster then others the aimed development. Speaking for myself, this is the picture. But thinking positive, best regions could push others in making the necessary next steps.

  5. Ariella
    April 19, 2013

    @_hm sure, the additon of technology can help Africa manage its existing resources and expand in new way, opening up future job opportunities for the students of today.

  6. Ariella
    April 19, 2013

    @mfbertozzi Thank you for your most kind words. Why not think positive? Seriously, there are bound to be regional differences, and even with a focus on expansion, the companies can't be everywhere at once. So I would think they would use their own analytics to come up which areas are best to start with and take it from there. 

  7. mfbertozzi
    April 19, 2013

    That's right Ariella; think positive could be the really key for future. Keep fingers crossed !

  8. Wale Bakare
    April 19, 2013

    >>Maybe emerging markets will be the last hope for PC industry and featured cellphone.<<

    PC market yes, featured cellphones not.

    Nevertheless, IBM has been in-road for decades while its server PC series been struggling in Africa markets compared to in US, Europe and Asia. But since many Africa governments have made ICT a panacea to economic development for the region – IBM's market journey to Africa market has suddenly changed to a success story coupled with mobile phone usage in the region. This is not just ordinary phones but high -end ones.

  9. Ariella
    April 19, 2013

    @Wale While some companies will, undoubtedly, continue to focus on cell phone service in Africa, others are looking to expand broadband capabilities and even to bring the advanced computing power that IBM is famous for to work in the context of African needs.

  10. Wale Bakare
    April 19, 2013

    @Ariella, nice article, well done. I quite agree with you on that, IBM is capturing both sectors – PC and mobile at the moment, unrestricting to hardware only but also to value added services for mobile e-commerce.  As i learned from a reliable source, IBM is on a massive project contracts across the region even to agriculture at the moment.

  11. Ariella
    April 19, 2013

    @Wale thank you. Is the agricultural project hush-hush, or could we ask you about it? 

  12. Mr. Roques
    April 19, 2013

    What does IBM have to do with water supplies? I know it moved out of consumer electronics but water supplies? 

  13. Wale Bakare
    April 19, 2013

    Using technology to improve agriculture a tricky one especially on a large scale. But with pervasiveness of computing the challenge could be easily overcome – temperature, humidity, rainfall/irrigation, PH scale with all these wireless sensor network and Zigbee technology integration could help out.

    As per your question – nothing could be disclosed for now, although, as i learned the initial take on would be to assist farmers getting them registered with government agencies. 

  14. Ariella
    April 19, 2013

    @Mr Roques IBM ran some computer analysis of the water supply and designed an app called Water Watchers that launched on World Water Day, March 22nd.  It's explained in some detail here:

    South African citizens can use the app with SMS capabilities to report leaks, faulty water pipes and any problems with their local canals. The app makes the process easy: After taking a picture, the user answers three simple questions about the problem and all the data gets uploaded to a server in real time. After 30 days, the thousands of data points that will have been crowd sourced from all over South Africa will be aggregated and analyzed into a “Water Watchers” report. This report will then be made openly available to local municipalities, water control boards and other water system stakeholders.

    South Africa has traditionally underspent on water services. However, in 2011-2012, there was a 20% increase on water spending, or roughly $900 million. Over the same period, there was a 28.8% increase in water management spending and a 13.2% increase in water infrastructure spending. WaterWatchers hopes to give this new influx of spending a positive direction.

    “This project is about analyzing use, predicting demand and managing the future of our country's water,” said IBM South Africa Smarter Planet Executive Ahmed Simjee. “It's a unique exercise in crowdsourcing for South Africa and we encourage every person to become a 'citizen scientist' – to engage with the environment and help create a big picture map of our water leaks and issues. By enabling countless individuals to gather and submit data, Water Watchers represents a new kind of data aggregation, analytics and visualization for water planners in South Africa – and is exactly the kind of Big Data challenge IBM excels at solving.”

     

  15. Ariella
    April 19, 2013

    @Wale Yes, I'd imagine that the combination of data analytics and sensors that monitor conditions of the soil can work together optimize agricultural practices. Most intriguing, thanks.

  16. Eldredge
    April 19, 2013

    @Mr. Roques – Probably part of the 'smarter planrt' campaign!

  17. Eldredge
    April 19, 2013

    Technology expansion to the African continent was almost predictable. The instability in the region is probably the most serious drawback. It will be interesting to see how / how rapidly this occurs.

  18. ITempire
    April 20, 2013

    By giving their input in public utility projects like the water tank example, technology companies are showing their intention of a longer term commitment to the region as they realize that without proper infrastructure, education and security, doing business in the region will not be easy. I hope that the benefits of these investments will also trickle down to the unfortunate population of Africa.

  19. ITempire
    April 20, 2013

    @ Eldredge

    Your concern about the timeline of technology introduction (in spirit) in Africa is valid. There are a lot of obstacles such as corrupt politicians, natural limitations (such as scarcity of water), security issues and weak economy that will hinder in the way of development.

  20. ITempire
    April 20, 2013

    “But since many Africa governments have made ICT a panacea to economic development for the region – IBM's market journey to Africa market has suddenly changed to a success story”

    @ Wale

    I am really impressed with the vision of IBM to capture the emerging markets because it knows that it's position in the mature markets has weakened. It is a win-win for both Africa and IBM with IBM having to invest or atleast assist the governments in improving infrastructure.

  21. t.alex
    April 20, 2013

    IBM did really make bold moves and stick with their strategy to invest in Africa. As IT infrastructure is booming, other sectors such as manufacturing, product R&D will benefit as well. 

  22. mfbertozzi
    April 20, 2013

    @t.alex: I agree on that; in fact, if we think for a bit about the current their footprint there, we could conclude there are several possibilities for enlarging it in a reasonable time; hope it is going to happen, especially for people living there.

  23. mfbertozzi
    April 20, 2013

    @Ariella: breaking down your interesting post, I was thinking possible obstacles in front of tech development, could be raised due to political issues; after all, that vast region is still suffering some problems on that matter.

  24. Ariella
    April 20, 2013

    @Eldgredge you're right. The water programs do fall under IBM's Smarter Planet program, as detailed here. With respect to the instability of the area, see my response to mfbertozzi.

  25. Ariella
    April 20, 2013

    @WaquasAltag ” I hope that the benefits of these investments will also trickle down to the unfortunate population of Africa” Realistically, not every single person in the region will necessarily see a real improvement right away, and most will not be hired by the high tech companies. But there will be job and educational opportunities for some that will improve the economy. And the hope is that arriving at solutions for serious water shortages will improve conditions for all in affected areas. 

  26. Ariella
    April 20, 2013

    @Mfbertozzi “@Ariella: breaking down your interesting post, I was thinking possible obstacles in front of tech development, could be raised due to political issues; after all, that vast region is still suffering some problems on that matter.” You are 100% correct. To keep the post within the usual length for the board, I did emphasize the positive, but I did find some who point out the negative.  For example, the  Bloomberg Businessweek article I linked at the beginning of the post  is entitled “For IBM, Africa Is Risky and Rife With Opportunity”. It includes this paragraph:

    The continent is also a maddeningly complex and risky place to work. Richard Soultanian, an IBM shareholder who has done business there for 15 years through NUS Consulting Group, says Africa, with more than 50 countries, lacks the centralized structure and rules of China and India. “In Africa, there are smaller, newer governments, and some of them are going to go off a cliff,” he says. “Africa is an idea, not a market.” And IBM's brand sometimes gets lost in translation: In Senegal, where IBM opened an office in 2011, country general manager Mamadou Ndiaye says he recently fielded a call to fix a printer-a business IBM divested back in 1991.

  27. ITempire
    April 21, 2013

    @ Ariella

    True. This is just the beginning of a long poverty eradication process. However, when big high-tech giants step in, others follow too which would result in boom in the economy. Obviously, no one will dare to step in without evaluating substantiated facts.

  28. ITempire
    April 21, 2013

    @ t.alex

    100 % agreed. It was really a bold move to step into a region where the company will be solely responsible for setting up the infrastructure for its operations from the scratch with little government help. It is really inspiring to see companies such as IBM to evaluate other region's option in difficult times at core regions where they operate.

  29. mfbertozzi
    April 21, 2013

    @Ariella: good point, I've taken a look at that article for collecting other impressions, in addition to my feeling; I am happy for sharing, all together, similar important key point, thanks again for the fascinating editorial.

  30. HM
    April 21, 2013

    That's a good move from IBM. Not sure how much profitable this move would be but companies like IBM who have been in businesss from decades must consider this as CSR move to uplift these regions. Not sure if Africa can be the new China. I guess its a big comparison.

  31. Ariella
    April 21, 2013

    @mfbertozzi, I'm very glad you found it of interest. 

  32. Ariella
    April 21, 2013

    @HM well, that's what making prediction is all about. It really amounts to a guess, but an educated one, backed by research and a thorough going over of the various factors involved. Some things, though, are beyond the realm of prediction, and we've experienced a number of  black swans of late, even in the US. 

  33. FLYINGSCOT
    April 21, 2013

    I read a while back that China is investing heavily in Africa.  This is a very smart move and China is really investing well for the future.

  34. Ariella
    April 21, 2013

    @Flyingscot interesting, both the direction and what that reveals about how far China has come.

  35. Adeniji Kayode
    April 22, 2013

    @ Ariella,

    You are right on that, some part Africa are not that backward as some other part s of the world think.

  36. Ariella
    April 22, 2013

    @Jordan, @Adeniji It's true that Africa encompasses many different regions, and some are more stable or technologically advanced than others.

  37. Wale Bakare
    April 22, 2013

    >>they'll also need to look at the culture and educational background of these places<<

    I can tell you  – i dont think any nation in the world has educated youths more than few Africa nations, Nigeria especially, may be China and indian exceptional due to their numerical advantages. Not just educated but raw talents, highly skilled and potentials both inside/outside the country.

  38. JordanHoong
    April 22, 2013

    Yea,i think you guys are right.sorry I didn't check correctly.

  39. Eldredge
    April 23, 2013

    @WaqasAltaf – Only time will tell if investing significanlty in this region was a bold and astute move, or a mistake. I suspect that there are significant natural resources available for development, whihc would be beneficial to both industry and society.

  40. ITempire
    April 25, 2013

    @ Eldredge

    You have raised a very valid point about natural resources. I believe that Africa is full of unexplored/unextracted natural resources. Diamonds in southern Africa are an example.

  41. Eldredge
    April 25, 2013

    While I am not knowledgable regarding the natural resources in Africa, I would not be surprised if significant resouces are present – perhaps many yet to be discovered.

  42. t.alex
    May 2, 2013

    FLYINGSCOT,

    Yes I did read about China investing a lot in Africa sometime back. I think it is more focusing on manufacturing to make use of the competitive labour market there.

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