IISS: Emerging Africa Geo-Economics, Resources and the role of Technology and Innovation

By Mbwana Alliy  |  April 12, 2013


Earlier this week, a group of African business and political leaders, academics, journalists and researchers met in the Gulf island nation of Bahrain for the first Geo-economics conference focused on Africa organized and hosted by the International Institute for Strategic Studies (IISS), “The Geo-Economics of Resource and Conflict in Africa”. Who the heck are IISS? I asked myself the very same question when I got the invite, but it turns out they are quite a big deal when it comes to bringing together people who would not otherwise convene to discuss some of the toughest  issues. From producing the Military Balance to organizing South East Asia and Middle East Security conferences that are often behind closed doors, now seemed like a great time to organize the first one on Africa given the rising global interest in the region. As the only “techie” among the delegates, I felt like a fish out of water in the presence of former President of Nigeria Obasanjo and titans in Africa Private Equity as well researchers who were able to go deep into Africa’s toughest problems from drug trafficking to terrorism.

The often forgotten force of technology and innovation: Fred Swaniker of the Africa Leadership Academy kicked off the conference with the “five fundamental forces at play” in Africa. 1) Improving Political Governance 2) Young and growing population 3) Growth of African cities 4) Better educated workforce and 5) Changes in Global Demographics & Geopolitics. I don’t know whether many of the business and political leaders dismiss technology as a toy or as just an afterthought in Geo-Economics. I had to remind the audience the impact of mobile money and communications technologies and I even challenged one of the IISS researchers to name an issue and I would provide a means that technology can play into that issue. So what you say? Let them not care, techies unite! Who needs them? But actually they should pay attention due to the disruptive forces that challenge the status quo that technology provides as well as economic development opportunities. For instance Dr. Martyn Davies of Frontier Advisory Group said that MTN has largely won the mobile war in Africa due to first mover advantage, but I argued that in new areas such as mobile money or targeting youth there will bring new challengers or a whole new host of “Over the Top” competitors such as Mxit, Facebook, Whatsapp that will turn those mobile operators into Dumb pipes as smartphones grow- network effect advantages are probably better bets than first mover which tends to be old world thinking. Savannah fund’s first investment in biNu is making reading material more accessible than any other platform to come before it, Ushahidi and social media helps crowdsource information on disasters or sensitive political events. If technology and innovation are not a force, then it’s the quantum physics unseen in the air to use another Physics analogy- and indeed the best technology or innovation is so simple that you don’t even notice is there anymore, and maybe that’s why Fred didn’t need to mention it.

One of the points I tried to nail home is leapfrog benefits and contrarian thinking in terms of technology- one central belief brought up by some delegates is the importance of industrialization and manufacturing in creating sustainable economic growth and I challenged the need for Africa to thrust itself headlong into these industries and whether there could be leapfrog benefits similar to what we saw in mobile (vs landlines) around opportunities in 3D printing to complement mass manufacturing.

The BRICS are coming or should we say BRI(N)CS, how much does it matter? There was much talk about the role of the BRICS countries, but it was clear that the grouping may not mean what we hope, it is probably better to focus on the individual countries’ trade, influence and investment patterns- also not  to forget the big huge African elephant in the room that is Nigeria. Former President Obasanjo highlighted the important leadership role that South Africa and Nigeria play on the continent, generally the better those countries d,o which include trading with each other, the rest of the continent will follow. For tech they are important sources of talent, financing as well as ready market of increasingly wealthy consumers, I am always advising startups in Kenya to think about broader markets vs battling with the local mobile operator Safaricom to serve just one market and then complain if their idea gets “replicated”. But Nigeria has its risks in tech, a majority of cybercrime on the continent originates from Nigeria as has anyone who has tried to set up an ecommerce business in Africa knows. Fraud rates up to 20% of transactions are not unheard of.

The financial hub of Africa is actually in Dubai but this brings risks and opportunities: One of the most startling insights that was unanimously agreed by everyone is the central role that Dubai plays as Africa’s hub. This is a testament to the huge investments that UAE has made over the past decade or more. It starts with one simple premise, 75% of the world’s population is within 8 hours flying time of Dubai and this includes all of Africa. Dubai simply connects Africa to the rest of the world in the similar way that Singapore and Hong Kong acted as trading hubs for India and China respectively as Dr. Sanhaya Baru, a Director of Geo-economics and Strategy remarked. Yes, we have all seen those African cousins of ours lugging massive suitcases of goods bought from Dubai or even further afield from China but only made possible by that connection in Dubai. Flights out of Africa via Dubai are often cheaper than regional flights and then we complain that there is not enough African regional trade? Techies at the iHub complain that Konza city is a waste of money, but if the vision turns into reality, Nairobi could truly be transformed into a true tech hub. Dubai offers an important lesson that Africans should examine, you can do it with infrastructure, but the payoff will be in many years. Or we can outsource our infrastructure to the middle east like we have let the aid industry dictate our destiny for the last 50 years.
With these opportunities  also come some risks; Money movements between Dubai and Africa are probably the weakest link in global anti money laundering – this drives up compliance costs and red tape for the rest of the continent which, for instance, can affect how quickly startups can be financed or opening up business accounts across the board as I am seeing with running Savannah Fund. It might also simply be a historical perception issue.Terrorism and Drug Trade, a whole separate session tackled by the IISS delegates are important issues that can hamper the growth of Africa’s financial and ecommerce systems beyond just the Nigerian scammer. As my last post on Bitcoin and Africa tries to explain, technology may yet offer other opportunities and challenges around financial services.

The Africa Resource boom can be wealth for the future, but it also affects talent: I brought up the role of Sovereign Wealth funds and what we might learn from the Gulf and Norway in tapping and reinvesting the oil and gas wealth with their many 100s of billions of dollars. It was apparent that governance is a key issue, and whilst the Gulf states have clearly tapped that wealth to build infrastructure, there is low transparency around the true returns of these investments, contrast that with Norway that publically states fund performance. Angola and Nigeria are one of the early movers in Africa in creating sovereign wealth funds and they might be an important source of indigenous/local investment into infrastructure including Universities as well as powering regional private equity. For countries like Kenya, James Mworia of Centum reminded me that their coming oil boom may only contribute 18% of GDP and we should not expect a surplus like Botswana or Angola in the medium term- in other words, he doesn’t need any more money for his PE fund (yet!). James further argues any surplus should be reinvested in infrastructure like roads and ports which would boost the productivity of his investments. But in Tanzania, new found resources can easily be a source of conflict as the main future GDP growth driver and draws its own economic terms including “resource curse” to “dutch disease” the later is often not talked about, it might shift the focus of talent in areas such as tech to the Oil and Gas sector. If entrepreneurs in Kenya think they can’t find coders and designers in Nairobi, they should come to Tanzania and see how the even fewer qualified talent is being lured away into the higher paying oil and gas industries. Ditto, watch the interactions between Cape Town and Johannesburg talent in South Africa.

You can slice up Africa in a number of different groupings and Geo-Economic lenses. But Technology Empowers : It is so easy to generalize and simplify Africa and the mainstream media is one of the culprits to blame here but the more you look into Africa, the more you realize the different angles and lenses you can view it. Brazil and Portugal offer a unique corridor of collaboration around the common Portuguese language countries Angola and Mozambique. China is a mega force behind the biggest infrastructure projects on the continent. The gulf region and Africa, particularly the north and Swahili Coast is a major trading route with big geo-economic implications. And there is the old world of aid that is being disrupted by both the new players as well as by technology itself. Technology is empowering to Africa. Even if the Africa startup boom we experience leads to a huge number of failures  that is a short term thinking- long term, a new generation of Africans would have learnt how to take charge of their own destiny from tacking a problem, trying mobilize resources for it- and that’s a good thing for Africa in the long term. In conversation with Zachary Latif of TLG Capital, he seemed to be quietly whispering to delegates that the long term effects of patient private equity in Africa is to empower an indigenous entrepreneurial class.