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Gary Cohen, Chairman, IBM Africa

Gary Cohen, Chairman, IBM Africa; General Manager, Global Communications Sector

By Gary Cohen

I recently met with the CEO of a company recognized as an IBM Global Entrepreneur — to discuss growth models and different types of innovation percolating throughout Africa. Only 18 months ago, his company had 80,000 customers; today they have 80 million — with plans to quadruple that number within two years.

While such growth is astounding, everything in Africa is defying tradition. Four core technology trends are serving as key transformation enablers in Africa – cloud, mobile, Big Data and social. These disruptive technology trends are enabling the kind of change that many would have thought impossible ten years ago, yet today, they are combining to positively impact the lives of Africans both socially and commercially.

This transformation isn’t being led by traditional industry players — the telecoms, the banks, the retailers. Instead, a new set of business models is exploding across sub-Saharan Africa that are crafted by entrepreneurs tackling specific market breakdowns and friction head on. They’re pulling together a variety of actors — private and public sector, large and small — around specific consumer needs, and forming a ‘needs-based ecosystem’ to capture value that has previously been constrained, if not impossible to realize.

Some have focused on providing nano-credit, from cents to a few dollars, to help tide families over to their next paycheck; others on access to health care services in rural villages where few doctors practice; and still others are focusing on mobile payments that support a wide range of goods and services and help bridge the divide between banked and unbanked populations.

Consider the growth in Africa:

  • 1 in 7 people in the world reside in Africa, with that number projected to be 1 in 4 by 2050
  • By 2016, over 500 million Africans will live in urban centers and the number of African cities with more than 1 million population will reach 65, compared to 52 in 2011
  • 40% of the African population lives in cities, making Africa more urbanized than India (30%) and nearly as urbanized as China (45%)
  • 63% of Africa’s SMB market is concentrated in the retail, heavy manufacturing, general manufacturing, hospitality, and agricultural markets — consisting of over 100 million people
  • 94% of small businesses have fewer than five employees in South Africa, with the number of employees dropping to three or four in other African countries.

 

So, what ties these statistics together? The criticality of small business entrepreneurs (SBEs) and startups as Africa’s growth engine — for employment, for economic opportunity, and for social and political cohesion. Getting this engine to power up faster and stronger is the opportunity to capture explosive value, measured through financial well-being, employment, skills-building and community engagement.

But, this engine faces enormous challenges to ramp up and run smoothly at speed and scale. The rapid growth and urbanization of Africa will require an estimated US$20-25B per year of investment in basic urban infrastructure, an additional US $20B per year in housing, plus billions more in telecommunications and other mechanisms of connectivity, access and training in new capabilities.SP analytics_africa_lab

Given the scarcity of technical skill sets, the challenges of reliable power, and the costs of server-based technologies, it’s only a matter of time before an extensive matrix of cloud services is realized as the key connective tissue of these ecosystems. And, with approximately 700 million cell phones in Africa, the next set of steps is based on a simple question: What will these ecosystems produce?

The answer: Big Data. Lots of it. With analytic capabilities providing new levels of insight and predictive capabilities, these ecosystems will have the ability to interact and influence customer and citizen behavior, objectives and intent, on an entirely new level.

And, beyond these enabling technologies, an opportunity exists to connect startups with seasoned and successful venture capitalists, investors and innovative business leaders, including: universities for business strategy training, critical incubators to help with early stage development, and the venture community worldwide.

It’s clear that the marketplace in Sub-Saharan Africa is going through a transformation.  Transformations involve structural shifts in how value is created, and destroyed.  These shifts always create new winners and losers, resting on new foundations of capabilities and value. Who fuels this engine for entrepreneurial growth will depend on elements of the ecosystem coming together— corporations, venture capitalists, entrepreneurs, governments, universities and others — combined with insights of a disruptive business model, enabled by the technology platforms of cloud, mobile, big data, and powered by innovative financing relationships.

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Related links:

IBM’s Commitment to Africa: Point of View Essay

IBM in Africa Press Kit

Related Stories on Smarter Planet:

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9 Comments
 
December 24, 2013
6:36 am

Gary, thank you for this terrific blog.


Posted by: natthavat
 
December 18, 2013
4:49 am

Gary, this was an interesting read, thanks. My sense is that, while many of what you described ”traditional industry players” (ie telecoms, banks, the retailers) aren’t currently at the forefront of many of the new needs-based business models across sub-Saharan Africa, they will eventually embrace and perhaps encompass these new models.

In the same way so many Silicon Valley startups end up being bought out by established players, I think the more progressive traditional industry players will end up either ”buying in” to these new models.

That could be through acquisition, or possibly by replication. (Africa’s legal frameworks are more ”tolerant” of copying than established western markets.)


Posted by: Greg Ellevsen
 
December 16, 2013
12:21 am

Beautiful article. Sustaining over a period of time is a key issue for SMBs as we see in India. They need massive governmental support and also a steady investment climate to foster. Where enabling technologies are there, ability to bring these entrepreneurs to a platform which provides scale and savings is the main challenge to my mind


Posted by: Tushar K Pradhna
 
December 15, 2013
1:59 pm

Gary,..I totally agree, and see how no Industry can observe all this transfromation and don´t think it will affect them too. For Utilities, the speed of change and growth can´t be matched with traditional electrification (centralized generation and transmission and distribution). This 94% of businesses (with less than 5 employees) will consider PV and storage, or will accept innovative microgrid constructs….but won´t wait 10 years for a well functioning centralized model. In some countries, that lack proper electrification, all this entrepreneurs will be the catalysts for a new Power model.


Posted by: Ricardo Klatovsky
 
December 15, 2013
7:06 am

Gary,

Very well said. I would also add that in Africa, this new breed of leaders will consume business/technology capabilities in different ways. They are born on cloud and SaaS models and conduct business through mobile device. This presents great opportunity for IBM.


Posted by: Bill Battino
 
December 13, 2013
3:03 pm

Gary, you say “The rapid growth and urbanization of Africa will require an estimated US$20-25B per year of investment in basic urban infrastructure”. I would suggest that this figure is one to two orders of magnitude too light. Is it because Africa is unable to absorb more than that amount?


Posted by: Mark Lane
 
December 13, 2013
2:08 pm

I am always fascinated hearing how entrepreneurs develop creative businesses and overcome seemingly enormous challenges given the absence of traditional infrastructures. I recently read a comparison in another blog postulating that in the developing world, power micro-grids may leapfrog traditional utilities (in delivering reliable power) the same way wireless phones leapfrogged landlines for telecommunications. What an intriguing thought and a great opportunity for these regions.


Posted by: Larry Irvin
 
December 13, 2013
12:57 pm

Gary, thank you for this terrific blog. Africa is a great frontier for IBM and we need to bring our full value to this exciting continent.


Posted by: Bernie Hoecker
 
December 13, 2013
12:07 pm

Gary — a thought provoking overview of the acceleration in the rate of change underway in Africa… as discretionary income grows – so will the demand for all forms of content to educate, inform and entertain.


Posted by: Steve Canepa
 
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