Digital economy sets the stage to accelerate growth for African entrepreneurs

The technology world has always been prone to buzzwords, some of which make the cut into day-to-day conversation, while others disappear in a lexicon haze. For example, the cloud is now very much a player, whereas you seldom, if ever, hear about the information superhighway anymore.
The ‘networked enterprise’ is the latest in potential jargon to arrive on the ICT landscape but it has more going for it than the usual candidates. Coined by analyst firm McKinsey, the networked enterprise is already a living, breathing part of the business world. It defines the broad adoption of advanced technologies and methodologies into a company. Such companies, says McKinsey, are “not only more likely to be market leaders or to be gaining market share, but also use management practices that lead to margins higher than those of companies using the web in more limited ways”.

Yet this is also simply the latest in a larger trend, which SAP would define as digital transformation within the digital economy. So-called next-generation concepts are rapidly opening doors that frankly never existed before and these are translating into new business opportunities.

The go-to-example for this trend across most of the globe has been Uber, the epitome of technology disruption. Uber is using technology to turn an outdated business model – that of the global metered taxi industry – on its ear. This is not new – disruption of the old guard has been a hallmark of our time. Just observe the shifting sands of the film, music and publishing industries; you could almost say that those disruptions were inevitable.

Other examples include Kenyan-born M-Pesa which is creating a still-underappreciated mobile money revolution; Meerkat and its peers are causing a live-broadcast paradigm shift. Those savvy with social media and online outreach are becoming YouTube millionaires. There is no truth to the adage that “if you build it, they will come”. Instead, Web 2.0 allows the focused and dedicated to tend their virtual gardens and reap the fruits.

The digital economy is perfect for entrepreneurs as it presents business opportunities and access to markets around the world where individuals can now offer innovative services that can be customised to clients and also serve larger companies. Economies of scale would never have kicked in had enterprises not joined the fray, renting virtual servers, hosting services and the numerous cost-efficient perks that now arrive through the convergence of internet connectivity. This wholesale investment business network has significantly lowered the barrier to entry, putting enterprise-grade tools into the hands of more entrepreneurs.

Web 2.0 services also cultivate their own ecosystems, usually through developer application programme interfaces (APIs) and thereby creating even more opportunities. Some of the most ground-breaking business applications were developed by third parties. The most obvious examples are the mobile worlds of Apple and Google: nearly every application that makes them stand out is from other, often tiny, development teams.

The digital economy and digital transformation is a perfect stepping stone for local entrepreneurs to become competitive. However, to make waves, African innovators should find the right technology tools to help realise their ambitions – be it engaging through an online business network such as Ariba, seeking out development gaps in current business software APIs, or delving into solutions that will serve the continent’s growing mobile device market to increase Africa’s prosperity.

At the same time, larger enterprises can continue to engage governments and consumers with the rollout of improved connectivity making technology available to all. The dividends are evident in countries such as Rwanda, which has invested heavily in internet infrastructure.

Digitisation is fostering huge economic growth worldwide, creating six million jobs in 2011 alone. As a result, software coding is everywhere and computer literacy will soon become a significant driver in establishing future generations in the workplace. However, less than one percent of African children leave school with basic coding skills. Research firm IDC predicts that by 2020, there will be a 15 million skills gap for digital roles (app developers, coders, etc). The imbalance is glaringly obvious and it’s critical for businesses and government to work together to drive initiatives to promote skills development in this space.

Although opportunity is forever growing in the digital economy, easier entry also means more competition. The result is that local entrepreneurs must not languish or rest on their laurels, nor should larger businesses ignore their own responsibilities. The digital transformation has linked the two like never before. If global corporate giants are sniffing out good acquisitions, they are certainly looking across Africa – and Africa needs to embrace this. If the continent is to continue its rise, enabling people to grab hold of the digital economy is perhaps the most important thing we can all contribute to.

(Pfungwa Serima is the CEO of SAP Africa).