Africa banks on IT to improve global competitiveness

Increased investment in IT infrastructure and research and development, mobile penetration and reforms in the business sector are some of the strategies Africa is pursuing in ensure inclusion in global competition indices.

African countries were largely missing in the 2009 IT competitiveness index issued by the Economist Intelligence Unit and sponsored by the Business Software Alliance (BSA), even though the region recorded average economic growth rate.

"Though most African economies have averaged a healthy 4 to 6 percent growth rate in the last ten years, they trail considerably behind Asia and Latin America in quality of human capital, growth in IT infrastructure, broadband penetration and investment in research and development," said Yaw Owusu, managing director of Gateway Innovations, an IT and outsourcing services provider in Ghana.

Low levels of mobile and broadband penetration, difficulty in obtaining correct and sufficient data in many countries, software piracy and copyright theft were some of the possible reasons the region was largely missing from the study.

The study measured, among other things, legal environment -- which encompasses intellectual property. Typically, across Africa, software and IP piracy is in the 70 percent to 85 percent range, said Francis Hook, IDC East Africa regional manager.

"Human capital and research and development are other aspects that made Africa miss out while the addition of mobile penetration as a new metric may have pushed the scores down," added Hook.

Apart from investment and infrastructure issues, many African countries are considered challenging when it comes to data collection. In many cases, there is no data and in other cases it is unreliable.

"The amount of effort which would have to be invested in obtaining and analyzing the data from many African countries versus their level of development is not worth the trouble; there is probably also a finite budget to this study, as normally is the case," said Dobek Pater, senior telecom analyst at Africa Analysis.

The study gave South Africa the highest ranking of any country on the continent. It was ranked 43 with a score of 35.3 out of 100; Egypt was ranked 53 with a score of 26.8; while Nigeria was ranked 65 with a score of 18.8. The study, now in its third year, assesses and compares the IT industry environments of 66 countries.

The study looks at overall business environment, IT infrastructure, human capital, legal environment, research and development environment and support for IT industry development.

Although South Africa had Africa's highest score, its rank dropped from 37 in 2008 to 43 in 2009. The decline was attributed to changes in the country’s performance as well as to improvements in the sources of data used to measure some indicators.

"Brazil, Russia, India, and China improved their 2009 rank at the expense of South Africa, partly because they attracted heavier investments in IT (mostly via offshore outsourcing) and invested more in IT education and research and development than South Africa," Owusu said.

However, analysts are optimistic that the aggressive investment if fiber optic cables and the push to spread broadband infrastructure into rural areas and development of other IT sector will improve Africa's performance next year.

"The situation in a number of African markets will improve significantly with the development of the relevant broadband infrastructure domestically and the landing of new submarine cables," said Africa Analysis' Pater. "Additionally, we should see a new wave of investment in IT infrastructure (e.g. data centres) and applications in larger African markets."

Pater identifies expansion of the business market segment, growing penetration of IT into the small and medium-size enterprise market segment and growth in business applications such as software-as-a-service as the major drivers of the IT sector in the region.

"Emergence out of the economic downturn over the next two years will probably coincide with replacement cycles for hardware / software and greater capex committed," added Pater.

Whilesome signs may be positive, Gateway's Owusu feels that business environment, a heavily weighted indicator in the Economist ranking, needs substantial improvement in Africa.

In the latest World Bank Doing Business Report (2009), South Africa ranked 34, Ghana 92, Egypt 106 and Nigeria 125 out of 183 countries. All six countries at the bottom, including Chad and Central African Republic, are in Africa.