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All eyes on Africa tech

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Forget bootstraps, Africa is a continent dragging itself up by its code strings to become a global player – but it needs more software developers, writes BRETT PARKER, SAP Africa Managing Director.

Over the last year, all eyes have been on Africa’s technology sector. And for a very good reason: infrastructure growth is booming. Between 2010 and 2016, seven new undersea cables brought fast data connections to the continent, with two more already under development. Meanwhile, mobile providers have invested $13.6billion into getting 500,000,000 Africans online by 2020.

But as necessary as infrastructure investment is, it alone won’t take African business global. So what technological development or product has the potential to make African businesses global players?             

Tech sector already outperforms expectations

A common misconception is that raw materials are the big African growth story of the last decade. But according to research by Freshfields, since 2004 Africa’s technology companies have delivered 19% annualised returns, compared to just 11% in commodities.

A clue to why the African tech sector is growing can be found in the East African mobile payments industry. In most of the world, mobile payments is a niche sector, because consumers have many other convenient ways to pay –bank cards, credit cards and banking transfers, for instance.

But in Sub-Saharan Africa, only 34% of people have a bank account. This used to be a significant barrier to any transaction that wasn’t small-scale or local. Or, in plain English, it was a huge inconvenience.

Change began in 2007, when local telco Safaricom teamed up with Vodafone to develop the mobile-payment system M-Pesa. Its creators expected M-Pesa to have 250,000 customers by the end of its third year. After just two years it already had over two million customers.

By 2014, the East African mobile-payments market was worth US$61 billion. There were 41 new African mobile-payment start-ups. A huge 80% of all the world’s mobile payments were African. And global players were looking to Africa to see what lessons they could learn.

So is mobile-payment the technology that could take African business global? There’s clearly huge potential for the industry to grow and act as an enabler for other sectors: in particular African SMEs and sole traders, who need a means of making and accepting online transactions. But for a fundamental transformation to take place, it needs to be about more than just one industry.

Overcoming barriers through technology

Another brake on the globalisation of African business is the tariff and non-tariff barriers that inhibit the growth of a single African market. This is something that African businesses need to change if they are to grow to the point of being ready to operate on a global scale.

Here again, signs are positive. For instance, the NGO, TradeMark East Africa, worked with the Ugandan government to develop an online reporting system for non-tariff barriers (NTBs) to trade.

Exporters in East Africa can now report NTBs online or via SMS, resulting in a 20% reduction in the time taken to move goods around the region. This is expected to lead to increased trade, lower costs and higher regional GDP.

At the same time, the adoption of online revenue, legal and other government systems is helping African countries cut red-tape and increase the speed at which businesses can operate. In Addis Ababa, for instance, tax assessments can now be made online: giving taxpayers access to faster decisions, with less form filling.

Without doubt, institutional barriers to trade and growth need to be broken down, if African business is to go global. But technology is only one part of the solution. Much more depends on political will and clout.

The foundation of any technological revolution

To take on the world, African business will need investment in technological infrastructure. It will need break-out technologies that allow it to disrupt and then likely lead existing global markets. And it will need technology solutions to problems that currently hold it back. But there is something more fundamental than all of these factors:

Africa is the world’s youngest continent. This will give it a demographic dividend, just as the last generation of economic tigers is beginning to age. But only 1% of the 11 million African young people who come of age every year have even basic software coding skills. This is a waste of talent and a barrier to growth. Without basic STEMS skills, let alone coding knowledge, African entrepreneurs won’t be able to grow their businesses to the point of being ready to compete on the global stage.

In April 2016, Africa Internet Group (AIG) – the holding company for a range of online businesses – was valued at US$1 billion, making it the first ‘African tech unicorn’. AIG’s success is not a one-off. M-Pesa in Kenya, the mobile advertising platform Twinpine in Nigeria, and South Africa’s content-distribution service 8bit – among many other successes – prove that.

“If it works in Africa, it’ll work anywhere”, jokes Juliana Rotich, the co-founder of BRCK, a Kenyan-made Wi-Fi hotspot and battery designed for use in the field. And there are hundreds of African technology companies with innovative ideas, ready to prove her right. But in order to do it, they need access to a skilled, digital workforce.

The technology that will take African business global? As AIG and M-Pesa have shown, it’s the software developer’s kit, in the hands of an African programmer and entrepreneur who’s been trained to use it. The time to start training the next generation of African programmers is now.

Africa News

Africa’s fintech is migrating

Africa’s fragmented markets and lack of legacy foreign exchange trading infrastructure means that the continent has become a melting pot of fintech activity and innovation, writes TIM HUTCHINSON, Head of Digital for Financial Markets, Standard Bank.

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The evolution to electronic foreign currency trading in Africa, while slow to start, is today gaining tremendous traction. 

In South Africa, only five years ago, almost 90% of foreign currency trades happened over the telephone. Today, despite challenges around illiquidity and complicated political and capital control environments, approximately 75% of trades are conducted digitally, with a mere 25% conducted on the phone. 

With 57.6% of the world’s 174-million active registered mobile money accounts in Sub-Saharan Africa, the continent is becoming a world leader in fintech generally, and in mobile money in particular. As African citizens and business people transact globally, Africa’s highly developed fintech culture is not only deepening on the continent, but is also migrating out of Africa.  

The foreign exchange flows that Africa’s expanding fintech culture supports are very important to the continent’s financial services providers, most of whom are developing fintech capabilities or partnering with the most popular or effective home-grown African fintech’s to ensure that they capture this flow.

Standard Bank has been an integral part of driving this rapid evolution to digital in Africa’s foreign exchange trading landscape.  

In order to function as an effective market maker, we need to source liquidity in market. We also need to, instantly, formulate risk-based pricing in an ever-changing world. Thereafter we need to distribute price. 

In Africa this requires developing solutions that allows retail, corporate and institutional customers to access foreign exchange markets across multiple jurisdictions. At the same time in most markets, “we also need to show central banks what we are doing,” adds Mr Hutchinson. All transactions need to be transparent and electronically traceable so that local authorities are prepared to approve digital trades. 

Today, however, banks are not only expected to provide the systems and networks to facilitate basic transactions but are also required to provide insight and guidance beyond pure execution by offering additional value-based services across research, hedging and, most importantly, settlement capability. Currency research for example, is increasingly a big client requirement. Having on the ground experience and local expertise as well as the ability to deliver this digitally, “differentiates Standard Bank’s distribution capabilities in this regard”. 

In addition, banks are also increasingly required to inform and guide clients through the broader economic, legal and political landscapes in which transactions occur. For example, one of the considerations in developing Standard Bank’s digital capability was how to combine market intelligence and research with real-time pricing, trade execution and post-trade services. Today it is not enough just to execute trades. It is equally important that we advise and inform the broader universe in which trades happen.  

From a technology point of view Regulatory Technology (Regtec), for example, is assisting Africa to manage new regulatory developments in heavily currency-controlled environments. Similarly, the rise in robotic process automation (RPA) and artificial intelligence (AI), “has allowed Standard Bank to develop solutions that leapfrog traditional business problems”. 

Digital trading in Africa is also evolving in its own often very different way. We have found that it is not just a question of importing developed world systems. Our approach with clients is to work with them to help understand their internal needs in terms of governance and operational efficiency. We then partner with clients to develop and implement digital solutions that talk to the heart of their business need. 

Standard Bank’s own Business Online (BOL) platform provides an example of how the bank has built digital transaction capabilities that exactly meet client need. BOL, for example, allows clients to view balances across the continent while making third party currency payments and also supporting general cash management. This kind of broad, business-wide digital cash view and capability puts control back in the hands of the clients while also allowing clients, rather than the bank, to manage their own cash flow.

From an Institutional perspective it’s very important to be able to offer customisable solutions to clients managing money on behalf of their investors. Standard Bank’s investment in Application Programming Interface (API) technology, for example, is tracking exactly its client’s growing ability to build these capabilities into their own systems. 

On the retail side Standard Bank’s SHYFT app – a digital wallet allowing global transactions in USD, EUROS, GBP and Australian dollars has extended this control element to the man in the street. SHYFT has been recognised both globally and locally for its innovation.

Standard Bank presents a very compelling, unique and globally competitive digital trading proposition to local and developed world clients seeking to access Africa. Our footprint across 20 territories – most at different levels of digital development – provides a compelling pan-African proposition for global and local clients alike.

While Africa’s record in digital adaptation and innovation is impressive, the technology part is often the easier part to implement. The human and cultural systems, and client behaviour changes, required to give this digital evolution life – like getting customer analogue systems to start pricing electronically to make trades visible 24/7 – is often a lot harder to achieve than the technology upgrade. In short, bank employees, customers and regulators all need to undergo fundamental cultural shifts in how they do things and understand the world.

It is often these broader cultural and market shifts that Standard Bank as a pan-African bank is called on to advise as clients seek to understand and engage Africa effectively. 

Given the rapid pace of digital evolution within Africa’s varied market, customer, legislative and cultural landscapes, we need to balance customer value and efficiency – and regulatory pressures to be more transparent – with what is, in the long run, best for the market. 

As a pan-African bank inextricably committed to the growth and success of the continent, Standard Bank’s digital journey requires a judicious blend of developed world technology with African insight and innovation. This blend should be capable of balancing customer need and legislative oversight in the development of efficient and inclusive markets that sustain long term growth. 

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PC drops 5% in Africa

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The Middle East and Africa (MEA) personal computing devices (PCD) market, which is made up of desktops, notebooks, workstations, and tablets, declined 5.3% year on year in Q1 2018, according to the latest insights from International Data Corporation (IDC). The global technology research and consulting firm’s Quarterly PCD Tracker shows that shipments fell to around 5.7 million units for the three-month period, which represents the lowest quarterly volume recorded for more than six years.

While the overall PCD market experienced a slowdown in Q1 2018, PC shipments recorded healthy year-on-year growth, with both desktops and notebooks gaining traction across the region. “The overall market decline stemmed from falling demand for tablets,” says Fouad Charakla, IDC’s senior research manager for client devices across the Middle East, Turkey, and Africa. “These devices are falling out of favor across the region, with the biggest year-on-year decline seen in Kenya, where a massive delivery for the education section sector that took place in Q1 2017 was not repeated.”

There was a considerable year-on-year decline in PCD shipments to the UAE in Q1 2018, where a significant slowdown in consumer demand was witnessed, in line with IDC’s expectations. “The country had a slow start to the year owing to the introduction of 5% VAT, while April’s edition of the renowned IT and consumer electronics sales event, GITEX Shopper, was cancelled,” says Charakla. “However, this decision was well received by the PCD vendor and channel community as it enables them to focus their efforts on the October edition of this event.”

On the flip side, South Africa’s overall PCD market performed better than expected, with shipments into the country growing year on year. “This was spurred by the country’s improved economic situation and the strengthening of the local currency against the U.S. dollar, making it cheaper for PCs to be imported into the country,” says Charakla. “Meanwhile, February’s announcement of a 1% increase in VAT encouraged market players to ramp up their shipments into the country ahead of its implementation from the start of April.”

Another area of positivity is gaming PCs, which continue to act as a driver for the MEA region’s overall PCD market. “The higher-than-average price points and profit margins associated with gaming PCs is maintaining strong interest among market players in these devices, ” says Charakla.

Looking at the PC market in isolation, all the top five vendors maintained their respective positions in terms of market share when compared to the corresponding quarter of 2017. HP Inc. achieved significant growth in terms of market share to maintain its lead by a significant margin.

Middle East & Africa PC Market Vendor Shares – Q1 2017 vs. Q1 2018

Company

Q1 2017

Q1 2018

HP Inc.

26.9%

31.5%

Lenovo

18.8%

19.3%

Dell

16.4%

14.9%

ASUS

8.6%

8.2%

Acer Group

4.8%

5.1%

Others

24.6%

21.0%

In the tablet market, Samsung remained the clear leader and gained market share as well during the quarter. Lenovo climbed to second position in the market, overtaking both Apple and Huawei, which came in third and fourth place respectively.

Middle East & Africa Tablet Market Vendor Shares – Q1 2017 vs. Q1 2018

Company

Q1 2017

Q1 2018

Samsung

19.0%

21.2%

Lenovo

8.8%

10.6%

Apple

9.6%

10.3%

Huawei

9.0%

10.2%

i-life

6.6%

7.4%

Others

47.1%

40.3%

“The sharpest decline in consumer demand in Q2 2018 is expected in the ‘Rest of Middle East’ sub-region, where recently re-imposed U.S. sanctions against Iran have weakened the country’s exchange rate. Consumer demand in Turkey, the region’s largest single market, will also decline considerably due to the uncertainty and instability surrounding the upcoming elections in June. Turkey’s currency has also weakened to new lows against the U.S. dollar, making personal computing devices costlier for home users.”

In more positive news, a number of large education deals, primarily for notebooks, are expected to be delivered in Pakistan, the UAE, and Qatar over the course of the year. However, in the longer term, IDC expects the MEA PCD market to continue shrinking in shipment terms, with slate tablets declining the most rapidly of all the various PCD products.

IDC’s Shipment Forecast for Middle East & Africa PCD Market

Product Category

2017

2018

2022

CAGR 2017–2022

PC

12,310,198

12,902,095

12,950,311

1.02%

Tablet

11,354,777

9,646,870

8,508,807

-5.61%

Total

23,534,986

22,428,025

21,307,495

-1.97%

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