The fifth edition of the Transform Africa summit kicks off today and is themed around building digital economies. It is through creation of digital economies that countries can increase the impact of technology on job creation, economic growth and other sectors.
However, the ambitions and plans of developing the continent’s digital economy are against a background of a number of challenges, including the lack of an ideal ecosystem, skill gaps and regulation.
Business Times’Collins Mwai spoke to Tom Archer, US Technology Industry Leader for PricewaterhouseCoopers, on best practices in getting past these challenges. Archer, who has close to 30 years of experience working with tech firms, is currently based in Silicon Valley and is taking part in the Transform Africa Summit 2019.
Often, the African continent has been said to lack an ideal and favorable ecosystem for innovation and development of the tech sector. What are the characteristics of an ideal ecosystem?
A core element is that the technology and infrastructure around ICT has created a new innovation velocity and ecosystem than was there 20 years ago. The first thing is to think about how we can create an innovation ecosystem and culture. As I have travelled around the world, I can see how that has played out in different countries, it is interesting that all these countries have research and development operations, countries are innovation for their domestic markets, while others have been innovating for global markets. Most countries are innovating for their local market. The design principles of how you think through the innovation and aspects such as how you understand the user, benefits, value among others, at the same time you have to think about how are you architecting the data and the human parts so that it can be scaled to markets other than the domestic market.
One of the interesting things I see on the African continent is the ability to put things into place to allow that scaling across diverse countries in ways that did not exist before. As the continent goes through the process of up-skilling people and putting in regulation, the continent can create an innovation economy that can benefit its stakeholders probably more than other countries have done.
I was looking at the Israel Model recently and they are known as the Start-up Nation. One of the things that created that innovation ecosystem was about necessity. The necessity led them to find ways to think about how to create jobs and growth in a place where there was not much natural resources. They brought together key factors of building an ecosystem such as capital, education, enabling infrastructure elements, regulation, Intellectual property protection as well as the ability to scale.
Where innovation does not work well is where most of it is based in a research lab as opposed to the market, it’s important to understand the user needs among other aspects. It’s also important to have a customer feedback loop in the innovation process.
Multiple studies also show that there is a shortage of skills necessary to develop the digital economies, what are some of the avenues to bridge these gaps?
It’s a combination of factors. What you put in place to drive the skills development around the technology part but also in the business development aspects. The solution has to be in such a way that you have an ecosystem that brings the two together. How do you bring business and technology together to bring about the growth? Through the Smart Africa Initiative, it will be important to bring all these aspects together; business and industry knowledge and an up scaling programme to build capacities. To be honest, developed countries also have the same challenge as industries as worried about being disrupted but do not have deep tech insights.
Access to capital has also been termed as a challenge for a while now with venture capitalist and angel investors being the last option for most firms in the tech sector. What are some adjustments that local firms could make to be more attractive to such capital?
In my conversation with the venture capital space and private equity space, what is important for them in order to look for new opportunities, they are looking to make a financial return on their investments. Their return is going to be strengthened by the enabling components that allow for growth and the business to thrive.
Things like having standards and ICT infrastructure are important, things like regulation and intellectual property are all important have to be part of the equation to further show potential of perfoamance.
Collecting taxes from the digital economy is proving to be a headache, both for developing and developed nations. Any best practices Africa could borrow?
Taxation broadly is a very important topic around the world. All countries are looking for a fair collection of new taxes. Taxing the digital economy is slightly more complicated due to factors such as physical presence issue and the general global distribution. The topic more broadly is getting a lot of audience at various levels including the OECD. Tax structures need to be part of how government are thinking more broadly in terms of standards and allocations.
It is a very important societal conversation at the moment so as to have a collaborative sense of commonality and fairness in the way taxes are being approached.
Regulation is often cited as a threat to the growth of the digital economy, what are your thoughts about parameters of regulation that do not stifle firms?
In tech it has become particularly hard, the conversation is very strong on things like responsible Artificial intelligence, responsible block chain, big data, in autonomous vehicles among other aspects.
You have to have the governments involved in the new emerging markets that are being created, you need public-private participation. In the process and ambitions to to create public trust around some of the innovation, regulation helps to provide guard rails of sorts for the public to feel comfortable about it.
Regulation needs to help establish guard rails without stifling innovation.
Governments, especially in Africa, have been accused of not being at par with the pace of innovation, which makes them unable to provide a conducive ecosystem for growth and at times stifles digital economies. Any tips for governments ?
One of the things that is key, as innovation speeds up its velocity with new business models every day, it is important that from the government side and regulators to operate at the same velocity that they did in the past. How they are thinking about developing as fast to be able to create an enabling environment for the rapid innovation. Like the private sector side, they need to be able to think about their pace of up-scaling and re-skilling to ensure that they are where innovators are and are not stifling innovation.