SOUTH AFRICA’S SEVEN KILLER APPS

I came across this article in this magazine (Acumen, Issue 2, Fourth Quarter, 2012) that is published from South Africa and it was about how South Africa has readied itself to take the African market. They are the eyeing of a billion people in Africa and they have what it takes to dominate. I wonder what our National economic strategists are thinking about. 

SOUTH AFRICA’S SEVEN KILLER APPS

Words of Professor Nick Binedell 

In a flat and competitive world, every country has to dig deep to make sure that its sense of self and its approach to the future is based on realism about its location, economy, politics and social structure, says professor NICK BINEDELL, dean of GIBS.

South Africa has seven “killer Apps” at play. Following the reasons of well-known historian Nial Fitzgerald, these killer Apps are critical strategic factors that define the business landscape for South Africa. They will play a critical role in determining our long-term economic growth, prosperity and overall success. I list them in no order of strategic importance.

KILLER APP NO. 1: PRIVATE SECTOR STRENGTH

No country of similar –sized economy has produced more world-class companies. In a variety of industries, South Africa has a company in the world top ten. It begins with our history in Agriculture, then to mining and now a complex diversified economy with a strong financial sector. We have always attracted capital to these shores, starting with a discovery of diamond and gold and we stand out among emerging economies of our size in this regard. Our stock market, the JSE, is ranked 20th by the world federation of exchanges in terms of market capitalization, but first by the world Economic Forum in terms of regulations of securities exchanges. Although there is always room for improvement, we have a strong capital raising capability. A significant number of entrepreneur have built businesses from scratch into sizeable enterprises-among them companies like Discovery, RMB, Holdings and Aspen pharm care.

KILLER APP NO. 2: INSTITUTIONAL STRENGTH 

Despite complaints and difficulties, we have a strong institutional framework. We are a constitutional democracy driven by the rule of law. We have a functioning parliament and a state bent on ensuring transformation and development. Institutions in civil society are also effective, having played a strategic role in our transformation in the 80’s and 90’s. They continue to be a lively source of ideas, contestation and support to many. Even though these institutional dynamics are contested, they are, relative to other emerging economies of our size, a tremendously competitive advantage.

KILLER APPS NO. 3: INFRASTRUCTURE

We have a highly sophisticated for an economy of our size. This is a great legacy and a critical one in terms of our future, in capturing value in both the continent and the global economy. 

KILLER NO. 4: AFRICA’S ONE BILLION PEOPLE

Many citizens of Africa are largely untouched by effective government or by the private sector. This is true of many places and spaces in Africa and these billion people are the centre pin for many company strategies for the next decade. Africa has not reached its economic potential for two reasons: It has not used its human resources effectively and undoubtedly, its natural resources are going to be key to the world’s economic development. Africa will thus receive the appropriate strategic attention. 

“….THIS FRONTIER MENTALITY HAS SERVED US WELL……”

KILLER APP NO. 5: OUR FRONTIER MENTALITY 

In South Africa we have an attitude of resilience, competitiveness and contestation, which flows from our history, whether it’s about politics, how we run the country or the economy. Johannesburg became the country’s largest business city in the space of just six years after gold was discovered in 1886. By 1892, it had overtaken Cape Town. South Africa as a whole remains the largest economy in Africa, even though Nigeria is making great efforts to catch up. Although this frontier mentality has served us well, in the years ahead it is going to be strongly challenged by East and West Africa. We need to be ready for the fight.

KILLER APP NO. 6: ENGLISH LANGUAGE

Our main business language, if not dominant spoken language, is a soft asset, giving us access to world markets. Compare, for example, the struggle of the Japanese in the 1970s and 80s, and the Chinese now, where understanding each other in English is a major challenge. It is a great advantage to South Africa, as well as to many other countries on African continent. 

KILLER APP NO. 7: GEOGRAPHICAL LOCATION 

South Africa benefits from its location in a central time zone and the multidimensional nature of our strategic relationships. We have a long history on linkages with the west. We are also building a linkage to Asia. To the north, lies an entire continent inviting us to grab the opportunities presented. 

To View video: www.gibs.co.za /acumen/binedell/killerapps

The Rise and Fall of Pioneer Bus.

Over 20 years back, Uganda government got compensation from its neighbor Kenya for the EAC assets. Uganda lost when the EAC broke up in 1977. The present Kenya airways with all the routes were the famous East African airways. There were many other such assets which Uganda lost as a result of the breakup. As good neighbors, Kenya agreed to compensate Uganda. You know Uganda is Kenya’s largest market. Kenya gets edgy if Uganda gets angry. But it is never worried because there is nothing Uganda can do for the time being to out compete Kenya. Uganda got over 100 buses and they were given to people’s transport, the Jinja based Government Company and Ugandan Support Company and the Kampala based company. After a few years, the buses were no longer on the road and the companies wound up. Nobody knows why but it could be attributed to government, management or market failure. I suppose it was a management problem. The problem with all parastatals in Kampala and government enterprises is management failure. There is the story pioneer bus launching a bus company with about 100 buses mass transport market. All I know about pioneer is what I have read in press but I gather they got a loan of USD 10m to import 100buses. The costs consisted of an estimate of USD 5.5 million including freight. When the buses arrived they were Godsent, UTODA was about to strike and this private company and government want on to solve problems allowing them to operate before paying taxes on the buses and without number plates( government failure). In less than a year, pioneer was dead. They had failed to pay (management failure) the original tax when they imported the buses to the URA despite the easy payment plan that government negotiated for them (government failure). The stories you hear are that there was no system of managing the finances. I am not sure whether this was correct but if they collected the money and failed to pay it, then it would be correct. The other stories were about who was managing, influence of relatives and at the end of the day the company had to collapse. Questions. If this investment was owned by government, would it have survived? If this investment was owned by some Indian or Chinese investor, would it have survived? What would be the survival tactics? Why are Ugandan owned businesses failing to succeed?

Luneburg, the City

I am in Luneburg Germany, one of the small cities near Hamburg in Germany. Hamburg is the second biggest port in Europe after Rotterdam. Rotterdam is bigger just because of its location. Hamburg for years was Germany's port that served its economic juggernaut from the early times to date. Whenever I have visited Germany, I have never been worried about the quality of anything possibly because they now do some imports. You may be worried that their quality may not be excellent but that's not true. They have control systems that enable them deliver literally high quality goods and services throughout the country. Germany is known for everything good and the Germany bashers always deride them just because they are very good at delivering high quality goods and services and therefore would out compete them. Germans are known for their clockwork system of doing things including keeping the time itself. Reading one of the manuals for international students, those coming to study in Germany are told about the importance of time keeping to Germans and its true worldwide their trains, buses leave and arrive on time. How they do that, that their culture. One of the things that you find in many of these developed countries is the fact that their development did not start 100 years ago. Their development is hundreds of years and it involved taming or nurturing the environment they are in, exploiting those opportunities all for their benefit. Today in the West, many people work four days a week, they use machines to clean the house, to wash dishes, wash cloths and now with the smart phones and advances in technology, they have all the information they need both held in their hands and at the touch of the screen. The story of Germany is something to learn from. Britain conquered the world and went everywhere establishing colonies everywhere and sold to these markets including huge markets like India, unrestricted. The late comers to trade namely Germany, Italy and Japan did not have markets. France of course was an imperial power by itself. It had its colonies in Africa, North America and Asia. We learn in history that the World War I & II were about markets. Having been locked out in the markets, those countries without colonies wanted a share of these growing global markets. Today, no country will grow without exports. Of course as we know today, Japan, Germany and Italy lost the war. As a result both Japan and Germany are very shy countries. They do not want to raise their voices in international affairs lest they are misunderstood as wanting to fight again. In fact, the Japanese army was for defense alone until recently.They hardly participate in peace keeping around the globe. Both Germany and Japan don't contribute troops in the hot spots around the world for fear of being accused of militarism.  But what is amazing is that both Japan and Germany have been able to win over the hearts of consumers without firing a shot. Today the best cars are either Japanese vehicles or German vehicles. If you are looking for machinery it should either be German or Japanese. 

Visiting Leuphana University in Luneburg, one German told me in a sarcastic manner that Luneburg University was preceded by a college established in army camp by the British to re-educate the Germans. I could feel the heart in the voice that was it possible that the English could re-educate the Germans when Germany had superior production systems? Last night watching BBC in Germany, there was a debate on whether Britain should get out of the European Union (EU). By the time the debate ended, 80 percent of the people said it should. What were the reasons? The British could not accommodate German control of their lives. The proponents of the debate actually thought the EU was a dictatorship  a group of unelected people issuing orders and controlling numerous countries which were ruled by elected people. When the European Union was formed, each country had its objectives. For Germany, they wanted to be able to sell the products without hindrance to the entire Europe. The French wanted an alliance with Germans in which they were senior partners to be able to block English designs over Europe. Britain looked at the formation with suspicion. They saw a group of people who wanted to reduce British influence  The British dropped out of the Common Currency system and maintained their Pound Sterling. Today, Europe is trying to take away British financial muscle. All that is in the politics of control and being able to sell what you produce. That is the politics of integration. Today, Germany is the fourth largest economy in the world after the US, China and Japan. Britain is no. 8. France is no. 7. Britain is the 4th largest manufacturer in the world coming after China, Japan and Germany. Germany clearly controls Europe and all the troubles in Europe must be borne by Germany. It has a challenge of supporting failing states. The European Union created a boom where countries like Ireland, Spain  Portugal, Cyprus, Greece which were economically weak, rode ob credit to drive growth  When the economic boom stopped, the countries were spending more than what they could earn. This means the countries were bankrupt. To recover, they had to get out of the Euro zone and re-introduce their currencies. If this happened, the EU as an idea would be failing hence the support by Germany who are the biggest beneficiaries of the EU.  They are because they don't have to get license to export to any of these countries. Since they have good products, they will always sell. This is global politics, it is about putting bread on somebody's table. It is about who does it most efficiently or who can intimidate the other like many African countries are intimidated out of their right to export. When coupled with their inefficiency the African countries will for a long time remain poor. What do I pick from Germany, two words, hard work and discipline. My German friend who was sarcastic about the British re-educating the Germans concluded by saying the Euro will collapse, it is a matter of time and what will emerge is a much stronger Mark.