- African Economic Research Consortium

Transcription

Foreword
The process of technological innovation in the late 20th century has led to significant
developments in new technologies such as biotechnology, new materials and microelectronics
together with innovations in software development. The combination of advanced
microelectronics and innovations in software development has led to systemic technologies
which have come to form a pervasive cluster of information and communication technologies
(Mansell, 1994)1. As information and communication technologies (ICTs) diffuse into all
branches of the economy their impact has come to be very pervasive. They have come to impact
virtually all aspects of productive activity in the economy.
The use of ICT to enhance economic development and transformation in Africa will
entail addressing the impact of ICT on changing the structure of the African economies
(composition of agriculture, industry and services), expanding economic and social development
opportunities, facilitating diversification, exploring options for building competitive advantages,
facilitating efficient functioning and responsiveness of institutions (including markets) with a
view to creating vibrant markets and institutions.
The chapters in this volume analyze the impacts of ICT policy on economic development
in Africa. The analyses are conducted on both supply and demand sides. The book provides an
overview of the digital divide and Africa’s economic development. It provides also a
methodological framework for assessing the impact of ICT on Africa economic transformation
as well as analyzing the ICT industry in Africa. The volume raises issues, opportunities and
challenges posed by ICTs for Africa’s sustained economic growth and development. The book is
an outcome of the Collaborative Research Project on “Impact Analyses of ICT on Economic
Development in Africa.
The African Economic Research Consortium (AERC) strengthens African capacity to
conduct rigorous, independent research bearing on economic problems facing the management of
the economies of Sub Saharan African Countries via learning by doing and supports graduate
training in economics through collaborative master and PhD programs. AERC aims at advancing
economic policy-relevant research and training with activities targeting policy formulation and
implementation. AERC is the foremost non-profit organization in Africa that undertakes such
endeavor that spans the entire sub-continent.
The research findings reported in this book should be highly valuable to African leaders
and policy makers in addressing the challenges posed by the rapid ICT development to Africa’s
economic growth. I strongly recommend this book to anyone interested in understanding the
impact of ICT on Africa’s economic development as well as policies that can be implemented to
take advantage of the opportunities resulting from the use and / or production of ICT.
1
Mansell,R. (Ed.).The Management of Information and Communication Technologies: Emerging Patterns of
Control. Science Policy Research Unit. Published by The Association for Information Management, London, 1994.
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Table of Contents
A Review Of Methodology For Assessing Ict Impact On Development
and Economic Transformation, Prof. Samuel Wangwe Daima Associates1
The Political Economy of ICT Policy Making in Africa,
Prof. Alison Gillwald, Dr. Lishan Adam
26
A Review of the Methodology for Assessing the Impact of ICT Development
and Economic Transformation, Prof. Samuel Wangwe Daima Associates51
Methodology for Value Chain Analysis in ICT Industry Frameworks
for the Study of Africa By Dorothy McCormick, Joseph Onjala69
Information And Communication Technologies and Agricultural Development
in Sub-Saharan Africa Julian May, Joseph Karugia, Mimi Ndokweni 103
ICTs and Industrial Development:Transformation and Employment
Generation By Banji Oyelaran-Oyeyinka, PhD144
The Vision and Challenges of ICT Production in Africa: Software
Production and Services A Framework Paper Draft By Prof. O. A. Bamiro
177
The Vision and Challenges of ICT Production in Africa: Computer
Hardware Production A Framework Paper Draft By Prof. O. A. Bamiro215
Human Capital Development Programme for Effective ICT in Africa
By Nimal Nissanke243
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List of Tables and Figures
Table 1.1: African mobile and cellular statistics for 2004 (GSM) Table 1.2: List of agreed projects required for fulfilling the objective of establishing
a Basic Rationalized Regional Broadband ICT Network in Eastern and Southern Africa Table 1.3: Major initiatives concerning ICT for economic development in the SADC region
Table 2.1. Privatization proceeds between 1995 and 1997
Table 2.2. Progress in telecommunication sector reform and regulation
in AfricaReform initiative
Figure 1. Evolution of ICT Policy Formulation in Africa
Figure 2. Approaches to ICT policy-making in Africa
Table 2.3. Telecommunications sector performance in sub-Saharan Africa over a decade
Table 2.4. A comparison of the Digital Opportunity Index and Instability Ledger
Table 2.5. Telecommunications Sector Performance 1995–2005
Figure 3. Comparison of Internet costs and number of users. Figure 4. Degree of maturity of regulatory institutions in African countries.
Table 2.6. Suggested methodological approaches in studying ICT
policy-making and policy processes
Figure 4: ICT consuming activities
Figure 5: Interactive use of ICT
Table 4.1: Internet, mobile subscribers and penetration by region, 2006
Table 4.2: Countries proposed for the pilot study
Table A1: Internet use by country
Table 5.2: Computer usage in farm enterprises in developed countries
Table 5.3: Measuring digital poverty
Table 5.4: ICT access in sub-Saharan Africa
Table 5.5: Proposed research projects on ICT and agriculture
Table 6.1: Regional distribution of Internet users (millions)
48
80
81
85
94
97
118
127
129
134
146
Table 6.2: Industrial output, by region (1990 and 2002)
148
Table 6.3: Economic wealth and other determinants of Internet use
in sub-Saharan Africa (2000)
Figure 1: Internet users and telephone density in sub-Saharan Africa (2000)
Table 6.4: PC ownership by income level, 2001, 2002 and 2004
Figure 2: Fields of applications of converging technologies
Table 6.4: Activities, technologies, and scientific knowledge bases in aquaculture
Figure 6.3: An analytical framework
Table 7.1: Revenue comparison for various streams in 2001–02 and 2002–03
Table B.1: Characteristics of SEI—CMM levels of quality assurance
Table B.2: Profile of quality certifications of Indian software firms in the past few years
Table 8.1: Basic policy instruments for the development of the computer industry Table C1: Computer components: Different types and makers
Table 9.1: Expenditure on education, India and Mexico (2000–02)
Table 9.2: Literacy rates, India and Brazil (2003)
Table 3: Student enrolment in primary, secondary and tertiary institutions,
Indonesia and Costa Rica
Table 4: Use of ICTs, Mexico, Malaysia, Thailand, Peru (2003)
Table 9.5: Comparison of subjects studied by students in selected African
and non-African tertiary education institutions 4
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149
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242
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CHAPTER 1
A Review Of Methodology For
Assessing Ict Impact On Development
And
Economic Transformation
Prof. Samuel Wangwe Daima Associates
Dar Es Salaam Tanzania [email protected]
African Economic Research Consortium (Aerc)
Contribution to the AERC Project on The Impact of ICTs on Economic Development and
Transformation, July 2007
1. Introduction
T
echnological innovation in the late 20th century has been dominated by new
technologies such as biotechnology, new materials, microelectronics and innovations
in software development. The combination of advanced microelectronics and
innovations in software development has led to systemic technologies which have come to
form a pervasive cluster of information and communication technologies (Mansell, 1994).
Information and communications technology (ICT) refers to technologies that pertain to the new
science of collecting, storing, processing and transmitting information whereby information,
computing and telecommunications are converging. These technologies represent a myriad
stand-alone media, including fixed line and mobile telephony, radio, television, video, teletext,
voice information systems and fax, as well as computer-mediated networks that link a personal
computer to the Internet.
In 1998, member countries of the Organisation for Economic Co-operation and
Development (OECD) agreed to define the ICT sector as a combination of manufacturing and
services industries that capture, transmit and display data and information electronically. ICTs
break the traditional dichotomy between manufacturing and services, making it possible for
the production and distribution of ICT products to pervade all sectors of the economy. The
definition, thus, paves the way for understanding the multi-dimensionality of ICTs and their
applicability across various sectors.
ICT can be thought of as an integrated system that incorporates the technology and
infrastructure required to store, manipulate, deliver and transmit information, the legal and
ICT Policy and Economic Development in Africa
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economic institutions required to regulate ICT access and usage, and the social and inter-personal
structures which allow information to be shared, facilitate access to the ICT infrastructure,
and through which innovation takes place. Three broad sub-systems make up the ICT system,
each of which comprises further sub-systems: technology and infrastructure (comprising
communication and data processing), institutions (comprising legal and economic institutions)
and social structures and processes (these influence ICT usage and the inter-personal links that
facilitate the transfer of information).
The world is experiencing a new industrial and technological revolution which is bringing
about a significant, fast and extensive transformation of society and economic activity resulting
in the rapid transformation of the processes of production and the transmission of goods and
services produced. The ICT systems are pervading virtually all forms of human endeavour:
work, education, leisure, communication, production, distribution and marketing as well as
the content of information networks. ICT plays a major role in all aspects of national life: in
politics, in economic life, and in social and cultural development. It is transforming the lives
of people, the way they do business, access information and services, and communicate with
each other. It provides entertainment and has benefits relating to human rights by supporting
the freedom of expression and the right to information. ICT is a pervasive input in almost all
human activities and breaks barriers to human development by providing knowledge, breaking
barriers to participation and breaking barriers to economic opportunity (e.g. by requiring less
initial capital investment and by being more labour intensive, though skill intensive ).
ICTs have diffused into all branches of the economy and their impact has an impact on
virtually all aspects of productive activity in the economy. The nature and extent of ICT
adoption has been explored quite extensively in recent research, though in Africa such work is
still limited. The nature and extent of adoption in Africa has been addressed in a few research
programmes (e.g. Research ICT Africa) supported by the International Development Research
Centre (IDRC) and the African Technology Policy Studies Network. This information is useful
in understanding the pervasiveness of ICTs and the extent and patterns of access. What has not
been explored adequately to date is the impact of ICTs on economic development. This project
aims to contribute to filling this gap.
This paper presents an overview of the ICT evolution, status, and its future in Africa in
relation to its impact on the development and economic transformation of Africa. The objective
of this study is to investigate the impact and implications of ICTs on economic development
and transformation in Africa.
More specifically, this study will address two main questions:
1. Identify the status of ICT access and adoption in production and growth-generating
activities that could lead to economic transformation in Africa.
2. Explore options and possibilities of using ICT to enhance economic development and
transformation in Africa.
2. Evolution of ICT
The world has undergone an evolution in terms of structural change and technological
transformation. However, Africa is still lagging behind in this modern world whose development
is largely determined and led by technological advances. Increasingly, ICT plays an important
role in determining levels of development and the quality and accessibility of services in
our modern societies. It is in this context that governments and world leaders made a strong
commitment to building a people-centred, inclusive and development-oriented information
society for all, where everyone can access, utilize and share information and knowledge (WSIS,
A Review Of Methodology For Assessing Ict
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2003, 2005).
2.1 The Information Technology Era
Information technology (IT) is a term that encompasses all forms of technology used to create,
store, exchange and use information in its various forms (business data, voice conversations,
still images, motion pictures, multimedia presentations, and other related forms) including the
telephony and computer technology that have been the driver of what has often been called “the
information revolution”.
Electronic calculating machine: In 1946, the first entirely electronic calculating machine,
ENIAC, was made up of 30 separate units, weighing 30 tons and occupying 1,800 square feet
with 17,468 vacuum tubes. The machine had the capacity to perform nearly 400 multiplications
per second.
Mainframes: Thereafter, 1950s to 1970s are considered the decades of organizational
mainframe and minicomputers. In this mainframe era, an IBM computer that could perform 10
million instructions per second cost a hefty US$10 million in 1975.
Evolution of the Microprocessor: In 1969, Intel produced the first microprocessor i4004.
This was the a computer’s entire central processing unit (CPU) was placed on a single silicon
chip. The rapid development of microprocessors in the 1980s, the microprocessor revolution,
brought about a major acceleration of downsizing; replacement of traditional mainframe and
minicomputers with micro-based alternatives. This trend also drove users to low-cost solutions
based on personal computers (PCs), local area networks (LANs), network servers, and multiple
microprocessor-based systems.
The Internet era: The Internet is a worldwide system of computer networks, communicating
and facilitating rapid information flows. Today, the Internet is a public, cooperative, and selfsustaining facility accessible to hundreds of millions of people worldwide. More recently,
Internet telephony hardware and software has allowed real-time voice conversations.
2.2 Evolution of ICT Applications
Data processing: This is characterized as transaction-based, cyclically processed, usually
batch-oriented, and usually operating in a current time frame.
Information management: Management information systems (MIS) facilitate and control
the day-to-day business in organizations with decision support systems (DSS) enabling
decision-makers to make fast, effective and strategic decisions.
Knowledge management: Knowledge management refers to the state of affairs whereby
organizations comprehensively gather, organize, share and analyse knowledge in terms of
resources, documents and human skills. The challenge is to select or build software that fits the
context of the overall plan and promote information sharing.
2.3 Evolution of Government Information Systems
This is mainly characterized by the development of internal government information
systems for data processing systems, MIS and DSS.
Evolution of Goals Pursued: Transaction-based, cyclically processed, usually batchoriented, and usually operating in a current time frame. In general, the goals of computerization
are to make government business more effective, efficient and productive without affecting the
organizational structure of government.
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2.4 Evolution of Gaps and Inequalities in Access
The “digital divide” refers to the separation between those who have access to digital
technology, thus benefiting from the digital age, and those who do not. This great divide between
rich and poor countries and between rich and poor sections of societies within countries has
reinforced the long observed inequalities in economic wealth and social conditions. According
to the Orbicom-CIDA Project (2002), statistics related to the digital divide show that about 201
million people in the world have internet access; of these, 95% of the world’s Internet users are
in Europe and North America. Sub-Saharan Africa has about 10% of the world’s population
(626 million people), but only 0.2% of the world’s 1.0 billion telephone lines. The encouraging
development is that ICT is growing faster in Africa than the world average (Table 1.1), albeit
from a very low initial level.
Table 1.1: African mobile and cellular statistics for 2004 (GSM)
GSM as % of total 12 month % growth
3 month % growth
% Pre-paid
12 month % growth (forecast)
World
70
52.49
10.74
18.57
33.65
Africa
95.61
101.85
21.22
26.67
60.13
Source: CellularOnline, http://www.cellular.co.za.
Within countries, the digital divide is best illustrated by differences in access between cities
and villages, especially in Africa.
The digital divide also exists between the educated and the uneducated. Education is also
likely to affect the level of web use skill since people with higher levels of education are likely
to have had more exposure to computer technology and to have access to the Internet.
2.5 ICT Development Paths
As the paths that can be adopted to develop the ICT industry in Africa are considered,
it is instructive to position Africa and other developing countries with similar economic
backgrounds on the ladder of the historical phases that the developed world went through in
its ICT development. Particularly in Western countries, ICT development took place in several
relatively easily identifiable phases as identified by Nissanke (this volume). These are:
a) Early adopters and primitive tools (1951–1962).
b) Regulated environment and frustrated users (1963–1974).
c) End user computing and decentralization (1975–1984).
d) IT as a competitive strength (1985–1995).
e) E-commerce and ubiquitous (anywhere-anytime) computing (1996 to date).
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Nissanke argues that this historical perspective provides Africa (and other developing
countries) with a basis for developing a strategy for the development of its ICT. Though the
early phases can be skipped to some extent, Africa needs to adopt (d) as its immediate goal
in relation to all her economic activities, industry, agriculture, social services and government
administration, and (e) as one of the key areas where early demonstration of local competence
may project an image of Africa as a region with high ICT capability.
The early stages of ICT development can benefit from the experience of the now developed
countries in terms of the core institutional structures that they had to put in place in order to
facilitate and regulate the development of ICT.
3. Status Of Ict And Its Diffusion In The African Economy
The African ICT sector is undergoing tremendous advances, which have changed people’s
lives and the way they participate in development activities using various information and
communication devices such as mobile cellular phones, radios, faxes, televisions and computers.
Where incomes are low, infrastructure is undeveloped and population density is low,
challenges to accessing ICT are great though not insurmountable. Alternatives to individual
access are being developed in terms of facilities shared by communities such as telecentres,
cyber cafés and community information centres. Strategies to draw people to use these facilities
are essential for developing African countries.
3.1 Status of Broadcasting in Africa
Hundreds of new local and community radio stations are operating and satellite TV is
also widely available on the continent. Communication is essential to rural development with
importance now attached to grassroots participation and sustainable development. Rural radio
is the most inexpensive, popular and socio-culturally appropriate means of communication and
is also the most accessible by most of the population in Africa. Radio is still by far the most
dominant mass medium in Africa, with ownership of radio sets being much higher than that of
any other electronic device.
Satellite-based broadcasting has seen major activity on the continent in the last few years.
For example, many countries in Africa are now connected to the South African company
M-Net, which deploys the digital direct-to-home subscriber satellite service called DSTV. This
type of service provides access to several video channels and audio programmes to the whole
of Africa at an affordable cost for many middle class people.
The Africa Internet-A Status Report (2002 ) revealed that over 60% of the population
of Sub Saharan Africa the is reached by existing radio transmitter networks while national
television coverage is largely confined to major towns. Some countries still lack their own
national television broadcaster. An increasing number of commercial stations are being
established following liberalization of the sector in many countries. However, the news and
information output of these commercial stations is often either a re-broadcast of the national
(state-controlled) broadcaster’s news, or that of an international broadcaster or news agency.
Local news and current affairs, especially if focusing on events outside of the capital, is rarely
broadcast and community broadcasting has generally been slow to take off in the region.
However, Ghana, Mali, Niger, South Africa, Tanzania and Uganda have seen notable numbers
of new community radio licensees. In 1997, radio ownership in Africa was estimated by the
United Nations Educational, Scientific and Cultural Organization (UNESCO) at close to 170
million with a 4% per annum growth rate. This puts estimates for 2002 at about over 200
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million radio sets, compared with only 62 million TVs (Mansell, 1994).
The community radio also provides a unique avenue for women, to express themselves
in the language which their particular community can understand. Due to the convergence of
technologies, some community radios are broadcasting on the internet and helping women to
reach even broader audiences.
3.2 Status of the Internet
The spread of the internet in Africa in the early 1990s was one of the phenomena that
triggered concerns about connectivity, access and cost-based pricing. It rapidly became clear
that connectivity is just one part of the IT development equation.
The internet has grown relatively rapidly in most urban areas in Africa. However, the
differences between the development levels of Africa and the rest of the world are much wider
in this area. The Africa Internet-A Status Report, 2002, estimated that only one in 160 people
in Africa use the internet compared to a world average of about one user for every 15 people.
As of mid 2002, the number of dial-up internet subscribers was close to 1.7 million, 20% up
from 2001. This was mainly attributed to the growth in a few of the larger countries such as
Egypt, South Africa, Morocco and Nigeria, with North Africa and South Africa accounting for
70% of this growth.
The use of ICTs has grown relatively rapidly in most urban areas in Africa, with the internet
spreading to every major city. More mobile cell phones are in use on the continent than the
number of fixed lines laid in the last century. The number of mobile phone subscribers in Africa
increased from 15 million in 2000 to over 80 million in 2004, an increase of 433% (UNCTAD,
2006). Among African countries, South Africa, Nigeria, Egypt and Morocco continue to be the
leaders in terms of the number of subscribers. In 2007, there were some 778 million people
in sub-Saharan Africa, of whom 152 million were mobile phone users and 20 million were
internet users (MIT, 2007; Internet World Statistics, 2007).
Computers are still by far the most important gateway to the Internet even though the Internet
is increasingly being accessed through a variety of devices. Computers are indispensable for
the development of the information economy and in particular for the application of ICT in
e-business. Computer penetration rates are lowest for Africa (1.4%), compared to 66.8% for
North America (UNCTAD, 2006). Ownership of PCs is as high as 74% in the OECD countries
compared to 5.6% among the lowest-income countries, an evident impact of the nexus of
income-digital inequality.
Although broadband access to the internet has become a regular feature in the enterprises
of developed and subscriber growth rates in Africa are very high, the number of broadband
subscribers in most African countries is extremely small, and penetration rates are less than
1%, even in countries that are more advanced in ICT, such as South Africa, Mauritius, Egypt
and Tunisia (UNCTAD, 2006). There were more than 12 million internet users in 2003 in
Africa.
Most African capitals now have more than one Internet Service Provider (ISP); the Africa
Internet—A Status Report (2002) indicated that there were about 560 public ISPs across the
region (excluding South Africa). Twenty countries had five or more ISPs, while seven countries
had 10 or more active ISPs: Egypt, Kenya, Morocco, Nigeria, South Africa, Tanzania and Togo,
but 16 countries still had only one ISP. Although Ethiopia and Mauritius are the only countries
where a monopoly ISP is still national policy, there are other countries in which this practice
still continues, predominantly in the francophone and Sahel sub-regions, where markets are
small. With the exception of some ISPs in Southern Africa, most of the international internet
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circuits in Africa connect to the USA and Canada, with some connecting to Belgium, Germany,
the Netherlands, United Kingdom, Italy, and France (WSIS, 2003, 2005).
3.3 Websites
A brief analysis of African government websites shows that, more than three-quarters of
all countries in Africa have a web presence. There is also a notable increase in official general
government websites providing information that was not available before. However, the extent
to which governments use the internet for existing administrative purposes is still quite limited.
Many administrations are beginning to streamline their operations and improve internal
efficiencies by adopting ICTs. For example, the Government of Lesotho recently declared
that all announcements for cabinet and committee meetings would be made only by e-mail.
Administrations such as those in South Africa, Algeria and Tunisia now provide immediate
global access to tenders via the web. Health and education departments in many countries are
beginning to electronically transmit operational MIS statistics such as disease occurrence and
pupil registrations. In South Africa, the results of blood tests are being transmitted to remote
clinics that are off the telecom grid via mobile telephone text messages. As greater numbers of
public officials are gaining low-cost access to the web, the vast information resources available
via the internet are becoming increasingly important tools in ensuring informed decision
-making.
However, most sites have an external focus as demonstrated by the type of information
provided (tourism, business/investment opportunities, and general introduction to the geography
and culture of the country). Most sites are in English rather than in African languages.In contrast,
many of the political party sites, appear to have more of an internal focus. These sites tend to
include more detailed information about the current political situation, the party platform, the
people involved, and often an interactive component such as a discussion forum/chat room
or e-mail addresses to which feedback can be sent. Outside of these political party sites,
government websites generally do not have interactive formats, with a few notable exceptions.
Most sites are vehicles for disseminating information rather than two-way information flow.
Only about a fifth of all sites have any significant two-way information flow or interactivity
features.
3.4 Status of Infrastructure
The realization of the potential of ICT in Africa is in most cases hampered by inadequate
reliable infrastructure (physical and regulatory) and lack of access to technology in rural or
remote areas and among the poor and the underprivileged (generally women and minorities).
Prevailing illiteracy, both computer-based and otherwise, and lack of content in local languages
further aggravate the difficulties. Although ICT has made a real contribution to the economic
development in Africa, important challenges remain.
Africa is taking up the challenge of developing a modern telecommunications sector
capable of supporting broad-based national economic and social development. As a result of
telecommunication sector reform, many parts of the continent are making improvements in
the telecommunications network. This improvement is paying off in many African countries.
Digital exchanges and microwave technology have connected thousands of new subscribers.
3.4.1Telecommunications Infrastructure
According to The Africa Internet—A Status Report (2002), changes in the telecommunication
sector in Africa have perhaps been even more marked than in broadcasting. A substantial
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increase in the rate of expansion and modernization of fixed networks is occurring along with
the explosion of mobile networks.
Infrastructure is the physical hardware used to interconnect computers and users. It includes
the transmission media, including telephone lines, cable television lines, and satellites and
antennas, and also the other devices that control transmission paths. Infrastructure also includes
the software used to send, receive and manage the signals that are transmitted (eThink Tank
Information Document, June 2000).
The developments in the telecommunication sector have shown that leapfrogging is
possible in Africa. The prevalence of wireless over fixed line communication devices in many
countries in Africa is a clear example of leapfrogging. The mobile technology brings modern
communication to whole communities that previously had little or no access to fixed line
telephones. Mobile telephone services have proved to be easier to access and more flexible
to deploy than fixed line communications. Furthermore, mobile coverage delivers the basic
infrastructure of communication to communities that road, rail and other communication
infrastructure cannot reach as easily.
One of the major limitations to ICT development in Africa is poor communication
infrastructure in most countries, mostly due to the lack of terrestrial backbone infrastructure
with the consequent dependency on satellite communications. A number of ICT initiatives have
beng developed in the last two decades that were intended to bridge the digital divide within
Africa and between Africa and the rest of the world. These include the Africa Information
Society Initiative, the Africa Connection, and the e-Africa Commission.
The successful development of the infrastructure calls for close collaboration with the
operators of telecommunications networks, electricity supply authorities, gas and oil pipeline
and railway operators, that have built or are building optical fibre systems in order to maximize
the ICT opportunities in the region.
The Eastern Africa Submarine Cable System (EASSy) project, which was initiated in
2003, aims to connect countries along the eastern coast of Africa via a high bandwidth fibre
optic cable system to the rest of the world. It is considered a milestone in the development of
information infrastructure in the region. Table 1.2 provides a list of agreed projects required for
fulfilling the objective of establishing a Basic Rationalized Regional Broadband ICT Network
in Eastern and Southern Africa.
The New Partnership for Africa’s Development (NEPAD), which is a vision and strategic
framework for Africa’s renewal to address the current challenges facing the African continent
such as the escalating poverty levels, underdevelopment and the continued marginalization of
Africa, aims to accelerate these developments, hence bridging the digital divide within Africa
and between Africa and the rest of the world. This is noted in many African countries, which
are now taking the necessary steps such as increasing the teledensity, establishment of cyber
cafés and development of ISPs.
Table 1.2: List of agreed projects required for fulfilling the objective of establishing a Basic Rationalized
Regional Broadband ICT Network in Eastern and Southern Africa
Project
Links
Project Owners
/ Promoters /
Builders
Routing
Ethiopia-Sudan
Comtel
Addis
Khartoum
Ethiopia-Kenya
Comtel
Addis Ababa-Nairobi
Ready For
Service Date
Ababa-
2007
2007
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Project
Links
Sudan-Uganda
Djibouti-Eritrea
Nairobi-Mombasa
Kenya-Uganda
Project Owners
/ Promoters /
Builders
e-Africa *
Commission
Comtel
EASSy / Kenya
Pipeline Company
Comtel / EASSy /
KPC
Tanzania-Zambia
Com-7
Tanzania-Malawi
Comtel / SRII
Tanzania-Burundi
Com-7
Namibia-ZambiaBotswana
Zambia-Zimbabwe
ZimbabweMozambique
M a l a w i Mozambique
SRII
SRII
Comtel
SRII
9
Routing
Ready For
Service Date
Juba-Kampala
TBD
Djibouti-Asmara
2007
Nairobi-Mombasa
2006
N a i r o b i - To r o r o Kampala
Dar es Salaam-MbeyaKasama-Mpika-Kapiri
Mposhi-KabweLusakaLivingstone
Mbeya-MzuzuLilongweBlantyre
Dar
es
SalaamDodomaTabora-KigomaBujumbura
Katima MuliloLivingstone-Kasane
Lusaka-Kariba-Harare
Harare-MutareChimoio
2006
2007
2006
2007
2005
2005
2007
Blantyre-Tete-Chimoio 2006
DRC-Angola
Comtel
Uganda-Rwanda
Comtel
DRC-Zambia
Com-7
Burundi-Rwanda
SwazilandMozambique
Comtel
LumumbashiBenguela2007
Luanda-Kinshasa
Kampala-Kigali
2007
Lubumbashi-Ndola2007
Kapiri Mposhi
Bujumbura-Kigali
2007
SRII
Namasha-Maputo
Comtel
B u j u m b u r a 2007
Lubumbashi
Burundi-DRC
2007
Source: Compiled by Author from “Report of the Workshop on the Integration and Rationalization
of ICT Broadband Infrastructure for Eastern and Southern Africa (Held in Johannesburg 28-30 July,
2004)”
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3.4.2 Human Resource Infrastructure
Africa’s competitiveness is heavily dependent on the skills of its people. The effective use
of ICT and its spread is limited by the level of requisite human skills. Therefore the future of
ICT in the continent depends on the ability to develop the skills to cope with the changing ICT
environment.
3.5 Status of Regulatory Authorities
The foundations of the current progress in ICT policy and regulation were built in the 1990s,
although information policy issues date back to the 1970s when computers were introduced
to Africa. By the end of 1960, mainframe computers had been introduced to most African
countries; they were concentrated in the headquarters of ministries, central statistics offices and
major public utility agencies. In several countries, computers were categorized as luxuries and
were only imported under strict controls.
Telecommunication policy in many African countries, like elsewhere, has evolved over the
last decade or so, with ongoing sector reforms in the form of privatization, liberalization of key
market segments and consequent competition. The liberalization of the sector has resulted in
an increasing number of players in the sector, such as investors in telecommunications, ISPs,
and cellular phone provider operators. This has also meant that demands for regulation have
increased. Thus the number of ICT regulatory authorities in African countries has increased
dramatically in recent years to referee the market place.
The regulatory functions are:
• Promotion of universal service to basic telecommunication services.
• Fostering of competitive markets to ensure efficient, reliable, quality and affordable
services.
• Delivery of other regulatory functions such as licensing for new services and transparent
practices.
• Prevention of the abuse of market power by dominant firms
• Protection of consumer rights, including privacy rights.
• Promotion of increased telecommunication connectivity through the efficient use of
spectrum and interconnection.
Regulatory authorities are operational in many African countries. This has been seen as
key to the effective development and management of the ICT sector with its numerous players.
In many countries regulatory institutions remain weak and unable to deal with complex
issues such as competition, cost-effective tariffs and investment. Regulators in the region are
not equipped to deal with emerging policy and regulatory issues such as spam and consumer
concerns regarding privacy, which were not issues of concern many years ago. Except for
a few, they lack the requisite leadership to serve as functionaries of the ministry. This is
exacerbated by limited traditions of rule of law, information asymmetry between the operators
and themselves, scarce skilled human resources and ineffective competition laws.
3.6 ICT Policies and Initiatives for ICT Development in Africa
ICT policy in Africa in particular highlights some of the telecommunication policy issues
and their potential to have an impact on development (Chakula, 2004). The issues range from
sector market structure, network access, licensing, universal policy, competition policy and
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essential telecommunications services (e.g. basic telephone service and Internet access) in the
context of the universal access policy, to licence obligations that all carriers should comply
with.
The early 1980s saw a significant development in scaled down mainframe computers then
known as “minicomputers”, triggering new interest in the formulation of national informatics
policies with attention to the acquisition of computer technology, human resources development,
the storage and use of databases by public and private sector institutions, the use of computers
in academic systems, the protection of intellectual property rights and participation in
international information exchange. The introduction of minicomputers sparked off several
initiatives around the world based on cooperative information system models where countries/
institutions were required to contribute to central databanks in order to access joint information
resources.
The Pan African Development Information System (PADIS) was created in 1980 around
the cooperative information service model. PADIS and UNESCO were at the forefront of
promoting national information policies as early as the 1980s. This was followed by Africa’s
interest in launching its own regional satellite network (RASCOM) to facilitate communication
and access to information, albeit with no success to date.
As Gillward and Adam (this volume) have indicated, the ICT policy and regulatory process
in Africa two major routes over the last two decades. The first route was taken by the countries
that continued to pursue the international reform of the communication sector that began in the
early 1990s. The opening up of the telecommunications sector, primarily through privatization
and new private investments, especially in mobile telephony, enhanced the role of foreign
direct investment in the sector in expanding access to communication services. However, there
was relatively less emphasis on policy goals of delivering affordable access to the population
and other reform elements such as competition and effective regulation. Little attention was
paid to institutional capabilities, resources, markets and governance and policy coordination
issues at national levels. The second route was adopted by countries that followed the advice of
development agencies in creating comprehensive national ICT policies, strategies and plans to
deliver broader socio-economic outcomes through the appropriation of ICTs.
There has been a significant divergence between sector reform agendas and efforts to
develop national e-strategies in Africa. Sector reform efforts failed to recognize the implication
of integrated ICT policies, while national ICT strategies fell short of capitalizing on national
reform efforts towards a competitive environment for affordable access. These failures could
have serious implications on Africa’s integration into the global information economy. The
political economy of the ICT sector reform was shaped by external factors, policy choices,
domestic power relationships and vested interests of different groups. It is in this context that
Gillward and Adam (this volume) review national ICT policies, telecommunication sector
reform initiatives, emerging policy issues, associated research questions and methodological
challenges to analysing the political economy of the ICT sector in Africa.
On telecommunication sector reform, Gillward and Adam (this volume) observe that early
experiences in breaking up telecommunication monopolies in Latin America, Europe and USA
and structural adjustment programmes of the World Bank and the International Monetary Fund
(IMF) were influential in driving reforms in the telecommunication sector in Africa as early
as 1990. The reform involved the revision of policy and regulatory frameworks, separation of
postal telecommunications services, enacting of sector laws, creating autonomous regulatory
agencies, privatization of the state-owned telecommunications operator and liberalization of
the mobile and Internet sectors.
Tremendous progress has been made in liberalization of the cellular market throughout
12
Africa with the exception of a handful of countries. The Internet market is fully liberalized in
the region except in Ethiopia.
Although the competition in the cellular and internet markets has driven access and
widespread availability of communication networks, the experience of telecom sector reform
shows that privatization did not lead to fixed line network growth; neither competitiveness nor
universal access were achieved. The regulatory institutions did not build up quickly enough to
speed up the gains and introduce competition that could have resulted in cost reduction and
further improvement in network rollouts.
In the last 10 years sub-Saharan African countries have gone through two major ICT policy
shifts which have influenced progress in access to ICT and telecommunication system operators’
(TCSO) participation and networking. The first policy regime was the drive for privatization of the
telecommunications sector. This was spurred by several factors, including sector reform around
the world, the desire to improve telecommunications services, rapid changes and convergence
in technology, tightening the public sector budget, the basic telecommunication agreement for
accession to the World Trade Organization and the structural adjustment programmes driven by
international financial institutions. As a result, a fair degree of liberalization has been achieved
in some domestic telecommunication markets, particularly in mobile services in Africa and
private investment in internet services has become commonplace.
The second policy regime was the shift from telecommunication policies to broader ICT
policies. Consequently, a number of countries initiated national ICT policies and strategies.
The status of ICT policies indicates that by 1999, 10 countries had developed their e-strategies.
By 2002,the number of countries increased to 16; 25 by 2004 and 32 countries by 2006. Since
1994, 41 African countries have opened their mobile markets up to competition. Consequently,
40 countries have now established independent regulators, setting the foundations for further
expansion in telecom services.
In spite of the large number of countries that have formulated integrated policies and the
rhetoric of commitment at national and international levels, in the 1990s the vast majority of
African countries were not able to optimize the potential of ICTs due to weak markets, financial
constraints, limited human resources and ineffective institutions. ICT policies and plans that
were developed by ICT experts in the 1990s with little or no involvement of development
experts and other stakeholders were hardly implemented. The shortfalls at the implementation
level were associated with challenges of governance and leadership, challenges of creating
predictable and stable investment frameworks, shortfalls in political stability and inadequate
incentive structures for private investment.
Consistent with the wave of political liberalization and democratization in Africa, the 1990s
saw the involvement of stakeholders from civil society and the private sector in ICT policy
debates and expansion of knowledge about the role of ICTs in development. The emphasis
on multi-stakeholder partnerships was useful in shifting ICT policy-making away from the
exclusive domain of government policy-makers to include non-governmental and transnational
actors, including pointing out the role of ICTs in achieving the Millennium Development
Goals (MDGs).
During the last 25 years, a number of initiatives have taken place in Africa with the aim
of advancing the focus on ICT for development. Some major initiatives indicating that Africa
is committed to harmonize ICT development in the region for its economic development are
summarized in Table 1.3.
• Southern African Development Community (SADC) Initiatives
The status of ICT development and policies in the continent is still at varying degrees
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13
across SADC member states. For example, South Africa has made great advances while other
countries in the region still have more to do. The infrastructural gaps between countries and
regions can be partly explained by the inheritance from Africa’s colonial past, which will take
some time to bridge.
• World Summit on the Information Society (WSIS)
The building of today’s information society cannot be over-emphasized. During the World
Summit on the Information Society (WSIS) held in Geneva, Switzerland, in 2003 and in Tunis,
Tunisia, in 2005, governments and world leaders made a strong commitment to building a
people-centred, inclusive and development-oriented information society for all, where everyone
can access, utilize and share information and knowledge.
• Donor Initiatives to Support ICT Infrastructure in Africa
With the growing importance of internet connectivity and the potential of ICTs in furthering
economic and social development, defining national ICT policies and strategies is now high
on the agenda. A number of donor and executing agencies are supporting African countries
in formulating ICT policies in accordance with the prevailing development priorities of each
country.
Table 1.3: Major initiatives concerning ICT for economic development in the SADC region
Year
Initiative
Purpose
2003
The project, funded by the World Bank and the Development Bank of
Southern Africa, was initiated in January 2003. It is an initiative to connect
countries along the eastern coast of Africa via a high bandwidth fibre
optic cable system to the rest of the world. It is considered a milestone
Eastern Africa Submarine
in the development of information infrastructure in the region. EASSy
Cable System (EASSy)
is planned to run from Mtunzini in South Africa to Port Sudan in the
Sudan, with landing points in six countries and connections to at least
five landlocked countries.All these countries will no longer have to rely
on expensive satellite systems to carry voice and data services
2003
Adoption of the Common
Market
for
Eastern
and Southern Africa
(COMESA) ICT Policy
and Model Bill
Member states are in the process of integrating the policy and the bill into
their regulatory frameworks. ICT policy guidelines and strategies already
adopted are: interconnection, licensing, universal access competition
and pricing and consumer protection. The overall ICT strategy aims to
cooperate and coordinate the activities of the member states to develop
and maintain their ICT networks, with particular focus on the development
of ICT services inrural areas.
14
Year
2003
2002
2001
1998
1998
1997
1997
1996
Initiative
Purpose
Launching
of
the Supported by COMESA, this is a consultative and collaborative forum to
Association of Regulators exchange ideas and experiences among members on issues related to ICT
of
Information
and regulation.
Communications
in
Eastern and Southern
Africa(ARICEA)
The e-Africa Commission Created by the NEPAD Steering Committee, it is responsible for the
formulation and implementation of NEPAD ICT programmes.
Declaration
on
Information
and It seeks the construction of a favourable environment for ICT growth in
C o m m u n i c a t i o n the region starting from national policies and laws.
Technology
Creation
of
the
Its main objective is to harmonize interconnectivity in the SADC region.
Southern
Africa
It operates under two key committees, namely: Policy and Strategy; and
Te l e c o m m u n i c a t i o n s
Technology and Infrastructure.
Administrations (SATA)
COMESA ICT Policy Inspired by the experience of SADC, COMESA developed an ICT
and
Regulatory institutional framework and launched a number of ICT initiatives with the
intention of harmonizing policies among its member states.
Harmonization
Programme
Creation
of
the
Te l e c o m m u n i c a t i o n s
Regulators’ Association
for
Southern Africa
(TRASA)
TRASA is made up of the 14 member states of SADC. It was created
to harmonize ICT regulation across the region by developing guidelines
on key issues such as universal access and service, licensing policy for
telecommunication services, tariffs, interconnection, fair competition and
wholesale prices for the ICT sector.
This committee is responsible for advising the United Nations Economic
Formation of the African
Commission for Africa (UNECA) and its partners on the implementation
Technical
Advisory
of programmes and projects emphasized by AISI, as well as playing an
Committee (ATAC)
advocacy role, identifying best ICT practices, and assisting UNECA to
mobilize resources for its work programme.
Africa
Information This is an action plan to build up Africa’s ICT infrastructure. It has served
Society Initiative (AISI) as a basis for numerous ICT initiatives in the continent, assisting over 28
African countries to initiate, formulate and implement their national ICT
strategies for socioeconomic development.
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15
Year
Initiative
Purpose
1981
Creation of the Southern
SATCC is responsible for the coordination of telecommunication issues
Africa Transport and
within SADC. It focuses on the rehabilitation and development of the
Communications
regional transport and communication infrastructure, acting as a broker
Commission (SATCC)
for investment as well as coordinating programmes of action.
Source: Compiled by author from Innovation Systems for ICT: The Case of Southern African Countries
(by Erika Kraemer-Mbula and Mammo Muchie), and Internet. WEBSITE?
Policies for access and effective use as well as those related to applications, content and the
development of a domestic IT industry should go hand in hand with connectivity. The launching
of the African Information Society Initiative (AISI) in 1996 with a core mission of assisting
African countries with their ICT policy-making provided an opportunity to improve awareness
and connectivity, promote sectoral applications and content development, and advance an
enabling policy and regulatory environment. However, on the ground, African countries took
many different routes to develop their national ICT policies and strategies.
3.7 ICT Use in Selected Sectors
3.7.1 Health
Some of the most promising and clearly demonstrated applications for ICT in development
are in the improvement of healthcare delivery. In many developing countries and communities
, ICT is used to facilitate remote consultation, diagnosis and treatment. In the Gambia, for
example, nurses in remote villages use digital cameras to download images of symptoms onto
a PC and transfer them to nearby towns for examination by doctors. The same model is being
applied to facilitate collaboration among physicians. When an expert opinion is required, doctors
in rural towns send the images captured by the nurses to specialists in the United Kingdom for
advice. The principle of ICT-facilitated collaboration also extends to medical research. This
is illustrated in West Africa, where malaria researchers use a network of satellites and ground
stations to submit data for clinical trials conducted at tropical disease research facilities in
London and Geneva.
Another promising application of ICT for Africa is the HealthNet system of local
telecommunication sites used to provide low cost access to healthcare information in developing
countries via the Internet. Users, mainly physicians and medical workers, can connect to the
network through local telephone nodes to access services such as physician collaborations,
medical databases, consultation and referral scheduling, epidemic alerts, medical libraries,
e-mail and shared research reporting databases.
On the issue of community sensitization and education, radio, television and the internet
are used in African countries to promote HIV/AIDS education and prevention. The radio, for
example, is used to sensitize people on the use of condoms for safe sex .Television programmes
are also used to tackle issues through discussions and question-and-answer programmes, which
can be viewed by many people at the same time, hence promoting awareness and educating the
general public on various health issues.
3.7.2 Education
Across a range of educational applications, ICT is being harnessed to improve the
efficiency, accessibility and quality of the learning process. Distance learning is reducing
16
barriers of affordability and geography, especially in tertiary education. In the case of primary
and secondary education, ICT has been found to significantly enhance learning by enabling
increased access to knowledge and adoption of more collaborative and interactive learning
techniques.
Through distance learning, the use of educational software and IT-related professional
training programmes, ICTs can help provide access to culturally appropriate educational and
job training, thus producing a work force with better skills. Many universities offer non-credit,
remedial and specialized certification programmes via satellite-based educational networks. For
example, the University of Namibia offers a distance learning bachelor’s degree programme in
nursing in which women constitute 90–95% of the students .
ICT enables distance learning and effective adult education. Multimedia technologies such
as radio, projectors, public address systems, CD-ROMs and television are making their way
into educational institutions.
In the area of research, rapid advances in ICT have made it possible to handle digital data and
information in large volumes at ever-increasing speeds and have resulted in sharp reductions in
the cost of storing, filtering, processing, compressing and retrieving data for interpretation and
retransmission. ICT has increased the ability of researchers to access information by supplying
them with increasingly powerful tools at decreasing cost, thus enabling new ways of working.
Improved communication due to ICT is also contributing to the creation and strengthening of
professional networks.
3.7.3 Agriculture
The emerging technologies can transform the way production is organized in Africa’s agricultural
and rural development. ICT offers means of exchanging and mass distributing advances in farming
techniques, pest control and agri-exports (Gokhale). Telecentres can facilitate distance learning and
enable farmers in the rural areas to use ICT to access knowledge, share information and acquire
farming skills to enhance their crop production, thus creating a culture of information and experiencesharing within African communities.
To address the challenges of land degradation, remote sensing data is being used to produce
maps to show areas with potential soil erosion hazards, thus enabling decision-makers to make
the necessary intervention.
3.7.4 Environmental Management
The provision of public information and easy access is one of the most direct routes to broad
participation in environmental management and better environmental decisions. The use of
ICT in environmental management in Africa has started to shed some light in many parts of the
continent. For example, in Ghana, an Environmental Information Network (EIN) project that
uses ICT to link the databases of two national environment agencies has been developed. The
database is publicly available free of charge. Local and international researchers, government
agencies and other environmental organizations can use its information to support decisionmaking, intervention strategies, and awareness campaigns about environmental protection, and
they can contribute to the knowledge pool.
In East Africa, Kenya, Tanzania and Uganda have joined hands to manage the Lake Victoria
basin. ICT is being used in various ways, including the use of geographic information systems
(GIS) to map soil erosion hazards in affected areas and preparing overlay maps to establish the
relationships between water quality and fish biodiversity. This has improved the management
of the lake basin and at the same time educated East Africans on the application of ICT in
environmental management.
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3.7.5 Tourism
Globalization and ICT are radically transforming the tourist industry. The growing use of
the Internet is enabling Africa to tap the potential of the tourism industry in terms of promotion,
marketing and sales. In June 2004 the United Nations Conference on Trade and Development
(UNCTAD) launched an e-tourism initiative, which aims to enhance the capacity of developing
countries to present information on their tourist attractions, and match it with international
demand. It includes locally produced information about what is on offer in a country, and
value-added online services such as hotel reservation. Countries which receive large numbers
of tourists such as Egypt, Kenya and South Africa can use the model to promote and develop
tourism and tap into the potential of ICT for better management, organization, promotion and
cost reduction. For example, with e-tourism, an official guide of the country’s hotels can be
provided with information on hotel rooms and facilities for online reservation.
ICT is providing an effective means for African countries to market and sell their tourism
services online, especially through the Internet. This is increasing the capacity of these countries
to respond fast to the needs of today’s travellers, including quick access to information,
customized software products and secure, online payment facilities.
3.7.6 Trade
Web-based systems are increasingly being used in commerce worldwide. Traders are using
ICTs such as telephone, e-mail and websites to maintain business relations with partners outside
their respective countries. This has increased outlets for goods and services. Information such
as markets, market regulations, prices and potential suppliers and buyers may be posted on
the web for easy accessibility. There is an increase in the use of other technologies such as
electronic shopping facilities, credit cards, etc. to enable traders to gain competitiveness and
the unprecedented opportunities offered by the digital revolution for economic development.
3.7.7 Governance
Governance can be defined as the process through which institutions, businesses and
citizen groups articulate their interests, exercise their rights and obligations and mediate their
differences. ICT can help to sustain this process by supporting tasks that involve complex
decision-making, communication and decision implementation; automating tedious tasks; and
supporting new tasks and processes (ADR, 1999).
One important role of ICT is the enhancement of e-governance for rural development in
Africa. It can help to:
• Reduce poverty by creating a more skilled workforce and increasing the penetration of
aid and subsidies among the underserved.
• Provide basic needs by improving the quality of healthcare, providing educational
opportunities, planning for basic service delivery, and helping to improve agricultural
productivity and commerce.
• Improve public administration by facilitating informed decision-making, managing
the burden of foreign debt, revitalizing local economies, improving policing and public
safety, improving public administration and efficiency, facilitating regional, national,
and sub-national coordination and communication, improving the quality of public
services, and facilitating better post-conflict reconstruction and administration.
Enhance democratization and citizen empowerment by establishing an “open” online
government, enhancing interactions between the government and citizens, stimulating civic
institution and public debate, and promoting equity and empowering minorities. In South Africa,
thousands of ordinary South Africans and their elected representatives participated in writing
the country’s new constitution. The Constitutional Assembly’s website gave the public access
to a database containing official documentation, draft constitutional text, submissions from
18
political parties and the public, committee reports and minutes, and other public documents
(http://www.uneca.org/adf99/governance.htm#35#35). In Tanzania, Maasai pastoralists living
in Ngorongoro have used the Internet to voice their opposition to the government conservation
management policy that threatened their land and their livelihood (http://www.uneca.org/
adf99/governance.htm#36#36).
4. IMPACT of ICT ON ECONOMIC DEVELOPMENT
ICT can contribute to income generation and poverty reduction, and can facilitate
economic transformation in Africa. The use of ICT to enhance economic development and
transformation will entail addressing the impact of ICT on changing the structure of the
African economy (composition of agriculture, industry and services), expanding economic and
social development opportunities, facilitating diversification, exploring options for building
competitive advantages and facilitating efficient functioning and responsiveness of institutions
(including markets) with a view to creating vibrant markets and institutions.
In this information age, information asymmetries are one of the major causes of high
transaction costs, uncertainty and therefore market failure. A reduction of information
asymmetry will also create new opportunities and therefore enhance the efficiency of resource
allocation.
Technological leapfrogging offers an opportunity for developing countries to catch up with
modern ICT resources. It provides more cost-effective and user-friendly options. For instance,
internet technologies support the global flow of information and the establishment of distancefree personal and organizational relations. Wireless technology and satellites can help circumvent
the cost of infrastructure for remote or rural areas or for areas without a critical mass of users.
In this context, a wireless local loop has the potential to provide an effective solution for lowcost access. The Bushnet project in Africa uses high frequency radio to distribute internet and
email services to remote subscribers. NGOnet is an initiative aimed at creating internet access
for non-governmental organizations (NGOs) in Africa to enhance communication and provide
access to information. The African news media is now relatively well-represented on the web,
with different newspapers and magazines available on the Internet.
The impact of ICTs on development and economic transformation can be mediated through
several channels. These include:
• Its impact on the ways and the speed of acquiring information and knowledge (impact
on education and learning) across societies and sectors.
• Its impact on production and the way the production process is organized whereby the
technology impacts on the organization of the workplace much in the same way that
electricity brought about different modes of production.
• The impact on productivity impact and the consequent impact on wealth creation
by transforming traditional production systems as well as creating new production
regimes.
• Its impact on networking whereby linking people, places and events all over the globe
occurs, revolutionalizing the way various actors interact and relate to other actors in
the country, region or globally. This impact includes the way business and research are
carried out.
The literature on developed countries indicates a substantial and increasing rise of returns to
IT investment. Oyelaran-Oyeyinka (this volume) has enumerated the stylized facts as follows:
• At the level of the firm, there is “strong evidence of excess returns” to IT systems,
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equipment and labour investments (Lichtenberg, 1995).
• There is a strong relationship between IT and improvements in the economic
performance of the USA and that the impact of IT on aggregate economic performance
has increased over time.
• However, externalities are equally important. The complementary effects of
investments made in research and development, computers and human capital in other
areas of the industry and sectors reinforce, and could in fact be indispensable to, the
observed positive impact on productivity in a particular sector. In other words, ICTs
should be seen in the category of what some economists conceptualize as a “general
purpose technology” (GPT). GPT exerts widespread and productivity-raising effects
in all parts of the economy and sector.
• There is a time dimension to IT investment because of the learning effect of technological
investment within which firms master techniques and by which “network effects” begin
to be felt. Policy makers should therefore plan for lags in investment. For instance,
the adoption of advanced manufacturing practices may require significant changes in
work organization that may sometimes be disruptive while making a positive impact
on productivity (Siegel et. al., 1997).
The emergence of ICTs and other new technologies has led to the merging of several
technological techniques to provide wider applications in industry and society. This process has
been termed “convergence technologies” and has been defined as “the synergistic combination
of nanotechnology, biotechnology, information technology and cognitive sciences” (Roco and
Bainbridge, 2003). The benefits attending convergence include new organizational production
structures and gains in communication as elaborated further by Oyelaran-Oyeyinka (this
volume).
ICTs are affecting the way businesses are organized. Business organizations and other
institutions are applying networking technologies, including the Internet, on a general basis.
Currently, there is relatively widespread use of ICTs by firms in developing and developed
countries in all business activities. The term “e-business” has been used to encompass the
application of ICTs in all business processes from office automation, production, coordination
with other plants, customer relation management, and supply chain management to the
management of distribution networks.
The impact of ICTs on development and economic transformation may be determined at the
aggregate level or at a disaggregated level. Analysis at the aggregate level would try to establish,
at the macro level, the impact of ICT on economic growth or on economic transformation. The
rationale behind the aggregate approach is that the dynamism of ICT is expected to come from
several sources including the decline in the prices of information processing, convergence in
communication and computing technologies and the rapid growth in network computing. The
communication networks and interactive multimedia applications are providing the foundation
for the transformation of existing social and economic relations into an information society
(Pohjola, 2001). The studies which have adopted the aggregate approach have largely been
done in the developed economies. They have found that the OECD countries that improved
performance in the 1990s were generally able to draw more people into employment, increase
investment and improve factor productivity (Pilat et al. , 2002). ICTs contributed to this growth
by increasing investment through capital deepening encouraged by the steep decline in ICT
prices and by facilitating factor productivity growth. However, data requirements for this
kind of aggregate impact analysis are more difficult to obtain and results are not likely to
be meaningful. It is in this context that relevant evidence relating to the impact of ICTs on
economic growth and productivity has not yet been produced for developing countries (OECDDAC, 2004a).
20
The impact analysis will therefore be done at a more aggregated level. Two types of
disaggregation are adopted. The first is disaggregation in terms of types of ICT, where the
main categories are ICT production and ICT use. The second type is by category of users
(individuals, households, businesses and government).
In African countries it is likely that ICT production is not significant and that it is the ICT
use that will be dominant. However, both should be addressed to establish their significance
and draw policy implications on each of the two categories.
In the context of Africa, ICT hardware may be disaggregated into telecommunication
equipment and computer hardware manufacture and assembly. The latter should cover the
manufacture and assembly of computers (branded or unbranded/clones) and include clusters
that are emerging in activities associated with the repair of computers (see Bamiro this
volume). Telecommunications hardware should cover the manufacture, assembly and repair of
telecommunications related equipment such as cell phones (see Bamiro,this volume).
ICT - using sectors will be selected from the most likely users. The framework papers have
addressed users in agriculture and industry for illustrative purposes. However, it is hoped that
case studies will explore other potential users such as the financial sector, the trade sector and
other services sectors to be selected after preliminary investigation has been carried out at
country level. Applications of ICT may also be categorized by type of user. These users range
from personal use or household use, to use in business and government.
Mobile phones have economic importance for many users in developing countries, as they
are enablers of business, in particular for micro-entrepreneurs. Artisans advertise themselves
by giving a mobile phone number, taxi drivers are contacted by cellphone, and retailers do
their pre-shopping over the phone. A large majority of small businesses use mobile telephones;
many of them had no form of telephone access before the acquisition of a mobile phone. The
use of phones has resulted in increased turnover and greater efficiency in business. Grameen
Bank has pioneered ICT work among the poor starting with the mobile telephone programme
called Grameen Phone, to become the largest mobile operator in Bangladesh, with 70% of
the market share. It has recently expanded to other ICT sectors, becoming the largest ISP
in Bangladesh, with Internet kiosks in villages and franchising of IT education all over that
country to build human resource base for the growth of IT businesses. Simple e-healthcare
services are also provided.
It is important to define needs at various levels and explore what ICT can do to meet those
needs. At the national level, for instance, it is important to define the national development
objective and strategy as a basis for posing the question of ICT use for realizing the national
objectives. In the context of Africa, concern over growth and poverty reduction would have to
be addressed along with concerns over the transformation of the African economy into a more
dynamic economy which can better cope with the global competitive environment.
One effect of the diffusion of ICT is the disruption of established economic relations as
new possibilities come within reach. Changes in how the economy works will also have effects
on employment. Creation of new jobs and a loss of jobs that become redundant, new contents
and quality of work, relocation of firms and maybe most important, the skills required are all
affected by the spread of ICT (ILO, 2001).
In most African countries, small and medium enterprises (SMEs) account for a significant
share of production and employment and are therefore directly connected to broad-based
growth and poverty reduction in the continent.
- Wangwe -
21
4.1 Basic Social Services
Provision of basic social services such as health and education is being facilitated by ICT
development in Africa. Health systems such as the HealthNet have had a significant impact in
most countries in the continent. Many physicians in developing countries rely on HealthNet as
their sole source of information on the treatment of AIDS and tropical diseases, essential drugs,
paediatrics and promotion of public health promotion. For example surgeons from Mozambique,
Tanzania and Uganda can consult on patient treatments and learn new re-constructive surgery
techniques.
4.2 Agriculture
Lack of timely information is known to be the largest constraint to small-scale agricultural
production and natural resource exploitation—a sector that provides a livelihood for 70–80%
of Africa’s population. However, thus far the potential for ICTs to have an impact on this sector
has not yet received much attention.
In Kenya, mobile phones are helping farmers obtain a fair price for their produce in the
country. Vodafone’s associate company, Safaricom, has introduced a text messaging service
which provides quick and easy access to updates on agricultural markets. Buyers and sellers of
agricultural commodities can keep track of prices using the Sokoni Short Messaging Service
on their Safaricom mobile phones. The Sokoni service transmits daily reports from the Kenya
Agricultural Commodity Exchange (KACE), an NGO that helps to link farmers and traders,
and provides daily reports on commodity prices from all major Kenyan markets. Users simply
text the name of the commodity they are interested in, such as “maize” or “sheep”, and they
receive an instant reply with an update on its price that morning at each market. This enables
them to assess the best place and time to buy or sell. By using the Sokoni service, traders and
farmers can get market updates the same day, rather than waiting for the next day’s newspaper.
The service also allows traders to offer their goods for sale or place bids, as well as post short
messages or agricultural questions.
In Tanangozi, a farming community in west Tanzania, most butchers cannot stock large
amounts of meat because they have no electricity or cannot afford a refrigerator. Butchers
frequently run out of meat and cannot serve their customers. Customers can now use mobiles
to place orders ahead of collection, enabling butchers to buy the right amount to satisfy their
customers’ needs, enabling efficiencies in the whole value chain.
4.3 Industry
The impact of ICTs on industry in Africa is addressed in detail by Oyelaran-Oyeyinka (this
volume). According to Oyelaran-Oyeyinka and Lal (2004), the intensity of ICT tools adoption
was not affected by factors such as profitability, size of operation, age of firm, and per capita
investment at the industry level. However, there are significant variations in the conduct and
performance of firms that used the lowest levels of e-business tools and the more advanced users
of new technologies within an industry (see Oyelaran-Oyeyinka, this volume). It is suggested
that supply factors significantly affect the adoption of new technologies in SMEs. The most
important factors are availability of physical infrastructure, technological infrastructure as
represented by the availability of Internet connectivity and speed of communication and human
knowledge and skills represented by the availability of a computer literate work force.
22
4.4 Governance
African countries can adopt ICT to enhance governance in reducing poverty, providing
basic human needs, improving public administration, and enhancing democratization. Despite
efforts by African leaders and their development partners, Africa’s use of ICT to improve
governance is inadequate. Where it has been used effectively it has had a significant impact,
including facilitating informed decision-making, regional coordination and integration, intragovernmental coordination and communication, enhanced interaction between the government
and citizens and improving public administration and efficiency.
In Egypt, through the use of customized software that can help to forecast resources, policymakers can make better decisions. The software computes requirements for hospitals in each
of the 27 governorates in the next 20 years, thus helping to develop analytic capability in
the health sector. In Ghana, an environmental information network has been established to
strengthen the effective information handling capacity in networking between participating
institutions and to improve the system of information delivery to the users of environmental
information. This has enabled environmental institutions to gather information faster and
enhanced the capacity for data collection, storage, processing and dissemination. ICT has also
enhanced interaction between the government and citizens in South Africa by enabling them to
communicate while through the Constitutional Assembly’s website and a database containing
official documentation, draft constitutional text, submissions from political parties and the
public, committee reports and minutes, and other public documents writing the country’s new
constitution.
In Morocco, the Public Administration Support Project is an effort to use ICT to enhance
the efficiency of its ministries of finance and planning. Such functions as tax administration,
auditing, public investment planning, and monitoring have been carried out with the use of
computers and computer modelling to assist with expenditure management, resource allocation
and collaboration between different ministries involved in economic management. The
coordination of the activities of different ministries is also enhanced by the use of ICT and
since the project began in 1989, the time required to prepare the budget has been halved.
In Tanzania, ICT has promoted equity and empowered minorities—the Maasai pastoralists
who have used the Internet to voice their opposition to government conservation management
policy that threatened their land and their livelihood by putting their stories on the Internet, in
the-Maasai. The website has made them feel less isolated from the rest of the world.
5. The Future of ICT and Implications on Economic Development and Public
Policy
IT is considered a key resource essential to development goals but not a goal in itself;
instead .it is a means of achieving development goals. Thus, the modernization of information
systems and the introduction of ICT should be fully integrated in the process of organizational
and societal change, driven not by technology but by the real needs for economic, social and
institutional development.
The rapid growth in mobile telephony offers prospects for extending basic telecommunications
to a broader user base and for overcoming some aspects of the digital divide.
The challenge is to foster internet development through the liberalization of international
gateways; the development of low-cost fixed wireless technologies for broadband access;
and the establishment of national Internet Exchange Points or (IXPs) so that intra-African
information flow does not have to be routed through USA or Europe.
Promoting value-added services poses a major challenge for Africa if the continent is to
- Wangwe -
23
carve itself a niche in this part of the “value-chain”. The production and use of ICT stand on the
pillars of information infrastructure, human capital, and an innovative system. An appropriate
policy regime for promoting production, trade and investment is needed.
The development of capabilities to produce and use the appropriate information is a major
challenge. The bulk of the appropriate information has to be locally generated and managed,
that is, gathered, analysed and synthesized, maintained and made available in a form beneficial
to the interested parties. The categories of information that are relevant in the African context
include market information (costs, prices and suppliers of products and services); research,
development and experiential information; regulatory and normative information (information
on standards, norms and good-practice); and performance information (information on actual
quality of products and services or actual performance levels of industries and institutions,
etc.).
One important area of future concern is the prospect of improving official statistics on
ICT, and making the available data more comparable internationally. The challenge is still
on capacity building and training and in creating regional and international databases on ICT
indicators.
Policy initiatives will need to be undertaken to grapple with the challenges of spreading
the use of ICTs, especially to the rural areas in Africa. The main challenges include geography
which plays a very strong part in the determination of communications costs and functionality,
especially where the population is sparse. The penetration of television and radios is increasing
but is still not sufficiently high in rural areas. The adoption of content to reflect local conditions
and the use of language that is widely understood in African countries is also a major challenge.
Another challenge is that of establishing the information needs and skills of the majority
of users if ICTs are to effectively enhance market integration, especially in the rural areas in
Africa.
The transformation from the hardcopy style of dealing with transactions and markets and
trade to sophisticated and technologically advanced digital methods and standards presents
its own complexities. These include the digitization of relevant literature on development,
especially rural activities and the integration of searchable databases which can then be
accessed by the majority of small and medium-sized producers.
A major concern relates to the implications of ICT for women and other disadvantages
groups in society. Although the potential of ICT to serve as an empowering force for these
groups is real, the currently low participation of these groups at the ICT kiosks suggests the
risk of further marginalization unless deliberate initiatives are taken to address the challenge.
Policy implications include the following:
1. Various actors, such as SMEs, need institutional support for their survival in the era of
globalization and rapid technological advances.
2. State policy should encourage greater private sector participation in setting up training
and information service centres within industrial clusters.
3. Human development policies need to emphasize both general and specific knowledge
types and training. Human resource development is an important dimension of the
existing knowledge gap. In today’s world, knowledge gaps may be filled through
international educational and technological collaborations and strategic industrial
alliances. Given such opportunities, what is important for African countries, therefore,
is to set appropriate developmental goals, realistic and achievable over a given
24
timescale and using available resources; to identify the gaps in knowledge, and to
concentrate efforts to remedy the situation, that is, to acquire, assimilate, adapt or
refine the missing, or insufficiently developed areas of knowledge.
4. Infrastructural support is necessary for the adoption of advanced e-business
technologies to reap the benefits of ICTs and to develop the capabilities to contribute
to economic development. Policies and programmes aimed at providing the required
infrastructure need to be initiated in developing countries in order to make various
economic activities more competitive in the domestic and international markets. One
such policy is the provision of collective services.
The experience of developing countries which have been transformed in recent years suggests
that the following factors are important determinants of the successful application of ICTs:
•
•
•
•
•
•
•
•
Visionary political leadership.
The need for a liberal economy and an appropriate stable political framework.
Proactive governments.
Instilling a sense of “common purpose” among citizens.
Having a strategy for raising the level of the human capital.
Timely setting up of the required technological and other infrastructures.
Having a strategy for phased development of ICT and other high-tech industries.
Promotion of English as the language of technical education.
This overview of the evolution, status, and future of ICT in Africa shed some light on the
challenges Africa is facing on its journey towards the digital economy of today’s globalized
world.
Awareness and capacity building remain some of the major challenges to ICT policy
formulation and implementation in the region. The development of national and sectoral
strategies, and the implementation of programmes and projects in key areas of development
requires highly skilled and committed policy makers.
There are options of learning from the experiences of good practices in other countries but
these have yet to be effectively harnessed.
There is room for increasing regional cooperation and integration among African countries
to fully harness the potential of ICT for economic development.
References
“Telecommunication policy trends in Africa—highlights of key issues”. CHAKULA issue. 10, May 2004.
Erika Kraemer-Mbula and Mammo Muchie Innovation Systems for ICT: The Case of Southern African Countries
Report of the Workshop on the Integration and Rationalization of ICT Broadband Infrastructure for Eastern and
Southern Africa (Held in Johannesburg 28-30 July, 2004)”
eThink Tank Information Document 22 June 2000. Country presentations to the Forum on Telecommunication
Regulation in Africa, Gaborone, Botswana, 25-27 October 2000.
Jensen, M. 2002. “African Internet - A Status Report.” Global Competitiveness Report. Switzerland: World
Economic Forum (2003)
Lichtenberg, F. 1995. The output contribution of computer equipment and personnel: A firm level analysis.
Economics of Innovation and New Technology, 3(3–4): 201–17.
Siegel, D.S., D. Waldman and D.W. Youngdahl. 1997. “The adoption of advanced manufacturing technologies:
human resource management implications”. IEEE Transactions on Engineering Management, 44.
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Mansell, R. ,ed., 1994. The Management of Information and Communication Technologies: Emerging Patterns
of Control. Science Policy Research Unit. London: The Association for Information Management.
World Summit on the Information Society (WSIS), held in Geneva in 2003 and Tunis in 2005.
CellularOnline, http://www.cellular.co.za
Pohjola, M. ,ed., 2001. Information Technology, Productivity and Economic Growth. International Evidence
and Implications for Economic Development. WIDER Studies in Development Economics. Oxford University Press,.
Pilat, D., F. Lee and B. van Ark. 2002. “Production and use of ICT: A Sectoral perspective on productivity growth
in the OECD area”. OECD Economic Studies No. 35. Organisation for Economic Co-operation and Development,
Paris.
OECD-DAC. 2004. “ICTs and economic growth in developing countries. DAC Network on Poverty Reduction”.
DCD/DAC/POVNET (2004)6/REV1. Organisation for Economic Co-operation and Development, Paris, December.
Roco, M. and Bainbridge , W.S. (eds). 2003. Converging technologies for improving human performance.
Dordrecht.
unctad.org/en/Docs/sdteech20061_en.pdf
26
CHAPTER 2
The Political Economy of ICT Policy
Making in Africa
Prof. Alison Gillwald1
Dr. Lishan Adam2
Historical Contexts of Regulatory Frameworks, Policy Performance, Research Questions
and Methodological Issues
1. Introduction
T
he ICT policy and regulatory process in Africa took two major routes over the last
two decades. While some countries continued to pursue the international reform
of the communication sector that began in the early 1990s, with different levels
of enthusiasm and success, others were diverted by development agencies into creating
comprehensive national information and communication technology (ICT) policies, strategies
and plans to deliver broader socio-economic outcomes through the appropriation of ICTs. A
few countries such as Ethiopia, acknowledging the growing importance of ICTs, stuck to their
ideological commitment to central planning and provisioning by the state within the sector.
Such countries are an exception rather than part of this two-pronged reform trend.
The opening up of the telecommunications sector, primarily through the introduction of
mobile telephony, often attracted foreign direct investment in the sector, expanding access to
communication services. However, the underlying policy goals of delivering affordable access
to the population was often not realized due to a rush to privatize inefficient incumbents at
the expense of other reform elements such as competition and effective regulation. In order to
maximize the price, those countries that were able to attract buyers often did so by extending
the monopoly on the public switched telecommunications network. Similarly, the enthusiasm
for e-strategies aimed at overcoming the digital divide did not produce the expected digital
opportunities due to an over-emphasis on blue prints with little attention to institutional
capabilities, resources, markets and governance and policy coordination issues at national level.
There has been a significant divergence between sector reform agendas and efforts to
develop national e-strategies in Africa. Sector reform efforts failed to recognize the implication
of integrated ICT policies, while national ICT strategies fell short of capitalizing on national
1 Associate Professor, LINK Centre, Graduate School of Public and Development Management Witwatersrand
University and Research Director, Research ICT Africa! Network
2 ICT in development researcher and member, Research ICT Africa! Network
- Gillwald & Adam -
27
reform efforts towards competitive environments for affordable access. The deviation between
the two routes and failure to integrate policy objectives for affordable access with those of
application and content was one of the major shortcomings of policy processes over the last
decade, which had serious consequences on Africa’s integration into the global information
economy.
However, the number and diversity of African countries meant that the scope, timing
and policy/regulatory outcomes have differed considerably from one country to the other.
The political economy of the ICT sector reform was shaped by external factors, policy
choices, domestic power relationships and vested interests of different groups due to political,
revenue and employment implications of the communications sector. Despite external
pressure for privatization, liberalization and freeing the airwaves, and the enthusiasm for the
implementation of comprehensive ICT policies, the reform processes and policy outcomes
remained incrementally shaped by local contexts and constraints. This paper reviews national
ICT policies, telecommunications sector reform initiatives, emerging policy issues, associated
research questions and methodological challenges in analysing the political economy of the
ICT sector in Africa.
2 Historical Context
The foundations of the present-day progress in ICT policy and regulation were built in
the 1990s, although information policy issues date back to the 1970s, when computers were
introduced to Africa. Penetration of information technology began just after its introduction
to the developed world. By the end of 1960, mainframe computers had been introduced to
most African countries (Ethiopia, 1960; Zimbabwe and Zambia 1961; Côte d’Ivoire, Nigeria
and Kenya, 1962 (Kluzer, 1990). Initially, the mainframe computers were concentrated in the
headquarters of ministries (finance, defence and agriculture), central statistics offices and major
public utility agencies (telecommunications, railways, electric power etc.). The availability
scaled down mainframe computers then known as “minicomputers” in the early 1980s kicked
of off several international initiatives based on the cooperative information systems models
where countries/institutions were required to contribute to central databanks in order to gain
access to joint information resources. The Pan African Development Information System
(PADIS) was created in 1980 around the cooperative information service model. PADIS and
the United Nations Education and Scientific Organization (UNESCO) were at the forefront of
promoting national information policies as early as the 1980s. This was followed by Africa’s
interest in launching its own regional satellite network (RASCOM) to facilitate communication
and access to information, albeit with no success to date.
The introduction of microcomputers to the market in the early 1980s was instrumental in
triggering new interests in the formulation of national informatics policies with attention on
the acquisition of computer technology, human resources development, the storage and use of
databases by public and private sector institutions, the use of computers in the academic systems,
the protection of intellectual property rights and the participation in international information
exchange (Zwangobani, 1989). Contentious policy issues at the time included the reduction of
taxes on microcomputer equipment so that could become affordable and available, the creation
of databases and developing the necessary skills to utilize and maintain microcomputers.
However, most African countries were unable to seize the opportunities of the calls to develop
information technology (IT) policies that seamlessly integrated into their national development
or promote the development of their domestic IT industry. But while IT had the developmental
potential to create all kinds of efficiencies, it was really only with the coupling of IT and
telecommunications, the networking of IT, that the value of paradigmatically.
28
2.1. Telecommunications Sector Reform
The end of the 1980s marked the introduction of low cost communication networks that made
telecommunication polices and regulation imperative. Telecommunication policy initiatives in
Africa took off mainly after the publication of the Maitland Report in 1985, warning of the
“missing link” between telecommunications and development—those that did not have access
to telecommunications would remain at the margin of economic growth (ITU, 1985). Early
experiences in breaking up telecommunication monopolies in Latin America, Europe and the
United States of America, and structural adjustment programmes of the World Bank and the
International Monetary Fund (IMF) were influential in driving reforms in the telecommunication
sector in Africa as early as 1990. The reform involved the revision of policy and regulatory
frameworks, separation of postal telecommunication services, enacting of sector laws, creating
autonomous regulatory agencies, privatization of state-owned telecommunications operators
and liberalization of the mobile and internet sectors.
Sector reform driven by international financial institutions in the 1990s emphasized
privatization as a means of improving the efficiency of underperforming operators. Privatization
was meant to reduce costs and, if adequately regulated, improve quality for consumers by
promoting organic policy and a regulatory environment. The World Bank and IMF used loan
conditions as one of the major coercive tools for ensuring privatization. During the 1990s, as
many as three-quarters of World Bank loans were conditional in part on privatization of state
owned enterprises (Harsh, 2000). The World Bank stopped lending to the monopoly operators
making it much more difficult and expensive for African governments to raise investment funds
for the monopolies, while at the same time, it expanded its finances for privatized telecom
operators.
The sale of some telecom operators began as early as 1976, but the first wave of privatization
only took place in the 1990s. Between 1995 and 1997, six countries sold their national fixed
lines operators for more than US$1.8 billion (Table 2.1). One of the largest privatizations during
this period was the sale of 30% of Telkom South Africa to a consortium of South Western Bell
of the United States and Telekom Malaysia for US$1.3 billion .
Table 2.1. Privatization proceeds between 1995 and 1997
Country
Year
Privatization
million)
Proceeds
(US$ % of share sold
Cape Verde
1995
20
89
Guinea
1995
45
60
Ghana
1996
38
30
Côte d’Ivoire
1997
210
51
South Africa
1997
1300
30
Senegal
1997
190
60
Total
Source: World Bank
1803
By the end of 1997, 13 African countries had privatized their telecommunications firms.
In addition, 19 sub-Saharan African countries had allowed private cellular operators to enter
their domestic markets (World Bank) . Nonetheless, this wave of privatization slowed down
towards the end of 1990s. Some privatization processes stalled, while others were convoluted.
- Gillwald & Adam -
29
Following the bursting of the dot.com bubble at the turn of the century global investment in
telecommunications slowed down. Several endeavours to privatize fixed lines operators across
the continent simply could not attract investors. By 2007 only 19 countries had privatized their
monopoly operators. The state of liberalization, privatization and regulation in sub-Saharan
Africa as of 2007 is shown in Table 2.2.
Table 2.2. Progress in telecommunication sector reform and regulation in Africa
Reform initiative
Privatization
monopolies
Countries
of Ghana, Nigeria and Tanzania (distressed privatization)
% of
Africa
35%
Cape Verde, Côte d’Ivoire, Guinea-Conakry, Guinea-Bissau, Lesotho, Madagascar,
Mauritania, São Tomé and Principe, Senegal, Seychelles, South Africa, Sudan and
Uganda (more than 50% sold)
Central African, Republic, Equatorial Guinea, Mauritius (less than 50% sold)
Somalia (fully private)
R e g u l a t o r y Algeria, Angola, Benin, Botswana, Burkina Faso, Burundi, Cameroon, Cape 80%
institutions
(43) Verde, Chad, Comoros, Congo, Côte d’Ivoire, Democratic Republic of Congo,
Egypt, Ethiopia, Gabon, Gambia, Ghana, Guinea-Bissau, Kenya, Lesotho, Liberia,
countries)
Madagascar, Malawi, Mali, Mauritania, Mauritius, Morocco, Mozambique,
Namibia, Niger, Nigeria, Rwanda, Senegal, Seychelles, South Africa, Sudan,
Tanzania, Togo, Tunisia, Uganda, Zambia, Zimbabwe
Competition
in The whole of Africa, except for Comoros, Cape Verde, Eritrea, Ethiopia, Equatorial 85%
cellular market
Guinea, Guinea-Bissau, Namibia, São Tomé and Principe
Competition in the Fifty-two countries, except for Ethiopia
Internet services
98%
Source: World Bank, International Telecommunications Union
Evidently, progress in the privatization of monopolies remained far behind the introduction
of competition in the cellular market. The mobile sector represents one of the burgeoning
markets in Africa due to inventive business models such as “pay as you go”, short message
service (SMS) and “beeping” or “buzzing” that enabled cellular services to reach out not only
to the affluent part of the population as was originally expected but also to the poor. Tremendous
progress was made in the liberalization of the cellular market throughout Africa, except for a
handful of countries such as Comoros, Eritrea, Ethiopia, Equatorial Guinea, Guinea Bissau
and São Tomé and Principe. The internet market is fully liberalized in the region except in
Ethiopia, which remains committed to a monopoly providing all the communication services.
Although the competition in the cellular and internet markets has driven access and
widespread availability of communication networks, the experience of the telecom sector reform
shows that privatization did not lead to fixed line network growth; neither competitiveness nor
universal access were achieved. While the rise of private capital flows has improved sector
performance in the mobile and internet segments, the regulatory institutions did not develop
quickly enough to speed up the gains and introduce competition that could have resulted in
cost reduction and further improvement in network rollouts. Empirical evidence from 30
African and Latin American countries between 1984 and 1997 revealed that privatization of
telecommunications was negatively correlated to main line penetration and connection capacity
(Wallsten, 1999). In effect, the reform processes often ended up with the transfer of public
30
monopoly to dominant private sector operator/s within a vertically integrated market structure
that had negative effects on competition in the sector generally and the development of fixed
and broadband infrastructure in particular.
2.2. Broad-based Policies and E-strategies
The spread of the Internet in Africa in the early 1990s was one of the phenomena that
triggered concerns about connectivity, access and cost-based pricing. It rapidly became clear
that connectivity is just one part of the information technology development equation. Policies
for access and effective use as well as those related to applications, content and the development
of a domestic IT industry should go hand in hand with connectivity.
The interest in the formulation of integrated ICT policies and strategies was partially induced
by the National Information Infrastructure (NII) initiative that was set off by US Vice President
Al Gore in 1993. The Gore NII proposal was followed by a flurry of national and regional
information society initiatives. The Bangemann Report of Europe and the subsequent creation
of bodies like the Global Information Infrastructure Commission (GIIC) inspired the launching
of the African Information Society Initiative (AISI) in 1996, with the core mission of assisting
African countries with their ICT policy-making. Other objectives of the AISI were improving
awareness and connectivity, promoting sectoral applications and content development, and
advancing an enabling policy and a regulatory environment. AISI greatly contributed to the
concept of an information society and national policy making. By 1999, there were 10 countries
that had developed e-strategies. By 2002, this rose to 16 countries, 25 by 2004 and 32 countries
by 2006.
Figure 1. Evolution of ICT Policy Formulation in Africa
Evolution of ICT Policy Formulation in Africa
100%
90%
21
80%
70%
33
14
50%
9
20%
0%
No policy
16
40%
10%
8
13
31
60%
30%
14
Underway
10
25
11
13
1999
2000
32
Policy
16
2002
2004
2006
Year
Source: United Nations Economic Commission in Africa
• The majority of the countries followed the AISI National Information and
Communication Infrastructure (NICI) plan model that involved the development of
an elaborate policy framework and an implementation plan through a consultative
process. Rwanda is touted as the forerunner of this model followed by Gambia, Ghana,
Malawi and Swaziland.
- Gillwald & Adam -
31
•
A few other countries focused on an incremental yet organic approach to ICT
policy-making with a focus on building blocks such as national educational capacity,
infrastructure, content and public sector service delivery through ICTs. Botswana,
Mauritius, Morocco, South Africa and Tunisia are among the countries that adopted
this route, with differing degrees of success. Mauritius, for example, identified ICT
as having the potential to sustain economic development and has promoted the ICT
sector as a new economic pillar. It focused on building human resources for the ICT
sector and opening its market to foreign investors by creating incubation centres and
promoting attractive investment packages. Tunisia made education a key entry point
for the diffusion of ICTs and creation of an ICT industry. In 2006, Tunisia topped all
African countries and beat some of the developed countries such as Brazil, China,
Italy, India and Poland in ICT investment in the World Economic Forum Rankings).
The experience of Mauritius and Tunisia shows that developing ICT policies and
e-strategies in a more organic fashion by relying on local expertise and focusing on
building blocks such as telecommunications infrastructure, enabling policies and
incentives for the private sector and promoting education could lead to better results
than ambitious and elaborate top-down plans with a shopping list of activities.
• Finally, there were countries that did not develop their ICT policies at all due to
historical and political challenges. Eritrea, Equatorial Guinea, Liberia, Somalia and
Togo are among the countries that did not develop their broader ICT policies by the
end of 2006.
However, in spite of the large number of countries that have formulated integrated policies
and the rhetoric of commitment at national and international levels, the vast majority of African
countries were not able to optimize the potential of ICTs due to weaker markets, financial
constraints, limited human resources and ineffective institutions. ICT policies and plans that
were developed by ICT experts in the 1990s with little or no involvement of development
experts and other stakeholders were hardly implemented.
The surfacing of the issue of the digital divide by the end of the 1990s gave e-strategies
new relevance particularly following the placement of ICT on the agenda of the G8 countries
at their Okinawa Summit in 1999.
Figure 2. Approaches to ICT policy-making in Africa
On the wave of the technology boom at the turn of the millennium, the G8 Digital
Opportunities Task Force was created. As the boom receded towards 2002, there were calls
for more sober assessments of the potential of ICTs in development (McNamara, 2003). This
not only signalled disappointment with ICTs promises, but also the failure of policies and
regulatory frameworks that were built around market forces drawn the from experiences of
developed countries and the uneven implementation of liberalization policies. The overall ICT
sector performance over a decade in Africa is shown in Table 2.3.
32
Table 2.3. Telecommunications sector performance in sub-Saharan Africa over a decade
Benin
Burundi
Burkina Faso
Cameroon
Cape Verde
Central African Republic
Chad
Comoros
DRC
Gabon
Gambia
Ghana
Guinea
Lesotho
Mali
Mauritania
Malawi
Mozambique
Niger
Nigeria
Rwanda
Sierra Leone
Swaziland
Tanzania
Uganda
Zambia
Zimbabwe
Countries that followed the AISI
NICI Model
Indicator
Algeria
Djibouti
Ethiopia
Kenya
Madagascar
Mauritius
Morocco
Equatorial Guinea
Namibia
Eritrea
Senegal
Guinea Bissau
Seychelles
Liberia
South Africa
Libya
Sudan
Sao Tome & Principle
Tanzania
Somalia
Tunisia
Togo
Incremental and organic
approach
No policy
African average, African average, World average, World average,
1995 (%)
2005 (%)
1995 (%)
2005 (%)
Main telephone line 1.9
density
3.07
2.24
19.4
Mobile
phone 0.45
penetration
15.22
5.38
34.02
Personal computer 0.66
penetration
2.20
5.45
13.45
Internet subscribers 0.03
1.21
1.5
6.43
Internet users
3.73
1.8
15.25
0.04
Source: International Telecommunications Union, World Telecommunications Development Report,
2007
While it is evident that Africa performed exceedingly well in the area of cellular penetration
over the last decade compared to the rest of the world, the continent lagged behind in fixed line
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33
penetration. Africa remains one of the fastest growing mobile markets but the slowest fixed line
market. Even in the mobile market, although growth rates are high, these are off a low base and
actual penetration figures are way behind global averages.
A positive result of the excitement of the 1990s was the involvement of stakeholders from
civil society and the private sector in ICT policy debates and expansion of knowledge about the
role of ICTs in development. The beginning of the new millennium saw the first session of the UN
Economic and Social Council dedicated to exploiting the potential of ICTs for development—
giving the whole gamut of information and communication for development issues a higher
international profile. The UN General Assembly endorsed the Millennium Development Goals
(MDGs)—time bound measurable targets calling for progress towards poverty, gender equity,
education, health, sustainable environment and development partnership goals within a 15-year
time frame. The two summits on information society held in 2003 and 2005 were followed by
emphasis on the role of ICTs in achieving the MDGs. The summits raised a host of policy and
regulatory issues that were of a global nature, ranging from telecommunication sector reform
to internet governance. The emphasis of the summits on multi-stakeholder partnerships was
useful in shifting ICT policy-making away from the exclusive domain of government policy
-makers to include non-governmental and transnational actors, at least at the level of discourse.
Nonetheless, as the host of issues expanded, covering aspects such as intellectual property
rights, communication rights, security, civil liberties, convergence regulation, internet
governance and open access, ICT policy and regulation became institutionally dispersed
uncoordinated over a broad range of informal and formal organizations at global, regional and
state levels. In effect much of the “policy” today is made on an ad hoc basis by the designers
and producers of the technology (CTO and Panos, 2002). This does not only raise concerns
about the effective participation of African countries in international ICT policy-making but
also the degree and speed that policy and technical capacity in communication infrastructure
and transactional content should be built at institutional and national levels for effective
participation in international forums.
3. The Political Economy of Telecommunications Sector Reform
The telecommunication sector reform in Africa over the decade was shaped by the underlying
social, economic and political context, particularly the policy choices made by governments,
internal and external market forces and initiatives towards maximizing regional goals and
those aimed at responding to global ICT regimes. External influence in policy-making was also
significant particularly from the international financial institutions that emphasized privatization
of monopolies which were underperforming at the expense of liberalization. The sequencing of
these reform tools has subsequently proved significant to positive policy outcomes. However,
the political economy of structural reform remained sensitive to issues of power relationships,
leadership, incentives and interests due to the revenue streams, employment and political
implications of liberalization and privatization.
3.1 Economic and Political Drivers for Sector Reform
African countries have carried out various initiatives in restructuring their telecommunications
sector over the last decade, partly to meet external pressures towards streamlining monopoly
incumbents. Many of the driving factors were far beyond the control of governments (i.e.
exogenous to the political process) in many of these there was little political buy-in as
governments felt hostage to the reform process; in others, governments had some leverage.
The overall pattern shows that besides the unrelenting pressures from the international financial
34
institutions, some form of political transformation was necessary to pave the way for structural
reforms to be effective.
The wave of democratization, political and economic transitions in 1990s was a key
contributing factor to reform in the ICT sector along with externally motivated conditions
in international politics. Sweeping new legislation in communication and broadcasting
was enacted in the 1990s compared to earlier decades. While it is difficult to fully attribute
democratization and challenges to governance, the following highlight the fact that political
processes and sector reform are intrinsically linked:
• Many countries underwent multi-party elections, adopted new constitutions and
legalized opposition political activities in the 1990s, including Kenya, Malawi,
Ethiopia and South Africa. Pluralistic regimes were established in Benin, Cape Verde,
Mali, Ethiopia, Ghana, Liberia, Mozambique, Namibia, Sierra Leone and South
Africa, leading that led to significant improvement of information and communication
infrastructure in these nations. The democratic process in South Africa was instrumental
to the nature of telecom reform in that country.
• The champions of ICT regulation in the region, including Botswana, Ghana, Madagascar,
Mauritania, Morocco, Seychelles, South Africa, Tanzania and Uganda,which had
achieved significant progress in terms of access and quality of network, were also the
most stable nations, with broader and competitive macro-economic environments.
• Though the differing levels of success undoubtedly correlate with improved systems
of governance in many of the more successful countries, the importance of economic
wealth to bolster the take up and use of services should not be underestimated. In South
Africa for example, despite the very high cost of fixed, mobile and broadband services,
uptake of new services is always dramatic. The relatively high gross domestic product
(GDP) per capita and at least some levels of discretionary income explain this to some
extent.
• Those countries experiencing civil strife, such as Burundi and the Democratic
Republic of Congo and those which were inclined to authoritarian regimes, such as
Chad, Central African Republic, Republic of Congo, Eritrea, Ethiopia, Gambia and
Zimbabwe, had low rankings in the International Telecommunications Union (ITU)
ICT Digital Opportunity Index (ITU, 2007) ratings.
Consequently, some correlation can be drawn between countries at the bottom of the ITU
Digital Opportunity Index and those in the bottom quintile of peace building capacity in the
polity index produced by the Centre for International Development and Conflict Management
(CIDCM) of the University of Maryland. Except for Malawi, all countries with a low Digital
Opportunity Index fell within the bottom or second from bottom quintile in the African
Instability Ledger of the CIDCM (Table 2.4).
Table 2.4. A comparison of the Digital Opportunity Index and Instability Ledger
Bottom eight countries in ITU ICT Opportunity Index Countries in the bottom quintile in peace building
capacity*
Malawi, Mali, Burundi, Guinea, Burkina Faso, Ethiopia, Burkina Faso, Burundi, Central African Republic,
Central African Republic, Niger, Chad, Democratic Cote D’Ivoire, Democratic Republic of Congo, Chad,
Ethiopia, Guinea, Guinea Bissau, Liberia, Nigeria,
Republic of Congo
Rwanda, Sierra Leone, Somalia, Sudan, Uganda
* Marshall et al. (2005).
Source: ITU (2005)
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35
3.2. Rise of Global Governance
The inclusion of enhanced telecommunication services within the Uruguay Round of the
General Agreement on Tariffs and Trade (GATT) negotiations in 1994 was another factor that
put pressure on countries to commit to privatization. By 1996, Côte d’Ivoire, Ghana, Mauritius,
Senegal and South Africa had committed to the World Trade Organization (WTO) multilateral
trade negotiations that paved the way for privatization of their state-owned enterprises. At
the domestic level, users became increasingly sophisticated and demanded better, newer and
cheaper services from operators as increased capital, management skills and technology became
available through the private sector. Governments slowly began to realize the importance of
improved network infrastructure coverage and universal service and increasing access to other
information and communication technologies, such as the Internet, to bolster economic growth.
These and other international regimes, including the reform of international
telecommunication accounting rate systems that cut the revenue from international telephone
traffic by higher margins for African countries, were influential in inducing structural reforms,
with diverse outcomes. On the ground, as argued in subsequent sections, structural reforms
remained contextual to local political and economic settings.
3.3. Policy Choices
Africa’s atypical experience and unique socio-economic characteristics mean that structural
reforms and the implementation of the privatization and liberalization agendas have varied
widely across countries, reflecting not only different national starting points and preferences
but also political difficulties in pushing the reforms forward. Different policy choices underpin
the resulting market structure and sector performance.
Privatization of the public telecommunication enterprises proved contentious in some
countries, particularly in those that relied on the lucrative international accounting rate
settlements. In the 1980s, telecom infrastructure was seen not only as a cash cow but was also
regarded as a tool for remaining in power. Some governments were against conceding this
lucrative sector to market forces.
Other countries had high unemployment rates, underdeveloped capital markets, inexperienced
professionals and unstable political systems that worked against sector reform. Investors were
partly responsible for altering the scope of privatization in the telecom sector. They sought
assurance against expropriation, bureaucratic hold-ups and restrictions that would affect their
profitability. The search for credible and lucrative markets meant that once investors secured
stable countries for investment, their interests in others countries waned. Investors scrutinized
the size and growth of a market, potential for profits, infrastructure availability and partnership
possibilities before committing resources. In some cases, privatization took place mainly with
actors with whom the countries had historical (i.e. colonial) ties. Moreover, all the privatization
plans included exclusivity periods to enable investors to recoup some of their resources before
opening up the field to competition.
Conversely, governments that signed up to international regimes such as the WTO, GATT
and structural adjustment programmes, including Uganda, Ghana, Kenya, Mauritius, Nigeria,
Senegal, Tanzania and Zimbabwe, allowed private investment in low exposure areas such as
cellular telephones and internet services while gradually opening their fixed telecommunication
infrastructure. Investors were comfortable with this approach due to their apprehension about
low level of development in the fixed line segment, which was regarded unprofitable. The
countries were also at ease because they did not have to give up public property. In contrast,
36
cellular communication was regarded as a luxury for the rich and enjoyed limited regulatory
oversight to begin with.
Therefore, the sector reform was uneven and characterized by a continued push for
privatization of state-owned enterprises by international financial institutions in an area where
they appeared able to persuade governments of the immediate gains for the fiscus. There were
also governments that were resistant to liberalization, yet some were opening up low exposure
areas such as the Internet and cellular markets to private participation. This resulted in increased
access to mobile phones, but high costs and low penetration in the fixed line segment(Table
2.5).
Table 2.5. Telecommunications Sector Performance 1995–2005
Indicator
A f r i c a Africa (2005)
(1995)
International traffic (billions of U S $ 1 , 3 4 0 US$3’564.7 million
minutes)
million
Telecommunications revenue
World (2005)
Compared
the world
to
U S $ 1 6 7 ’ 4 8 5 . 2 2%
million
U S $ 5 , 8 1 7 U S $ 3 7 ’ 6 0 4 . 2 US$1’287’088.4 2.9%
Million
million
million
Telecommunications investment per person
12.9
42.8
About 4 times
less
Telecommunications investment as percentage of revenue
14.9%
15.5%
Similar
Satisfied demand
-
96.1%
99.1%
Lags behind
Fixed line penetration
1.9%
3.07%
19.4%
Very low
Household level penetration of fixed lines
14.7%
62.7%
Far behind
Cellular penetration
0.4%
15.2%
34.02%
Catching
faster
Internet users
0.04%
3.73%
15.25%
Far
below
world average
up
Source: International Telecommunications Union, 2007
Africa accounts for about 12% of the world population, but it generated only 2% of the
international telecommunication traffic and 2.9% of global telecommunication revenue in
2005. While the unsatisfied demand for fixed telephone lines improved considerably to 96.1%
in 2005, the region’s fixed line penetration remained very low compared to the global average.
The household level fixed line penetration is four times lower than the global average, an
indication of the failure of privatization in improving fixed line penetration. Private investment
in infrastructure and liberalization did not lead to automatic extension of the most important
technologies such as fixed lines, radios or televisions or reduce the cost of broadband connection
which would have improved access to education, health, jobs and business opportunities.
In most cases, privatization resulted in vertically integrated markets with dominant players
who had a significant amount of anti-competitive behaviour such as:
• Restriction or delay in providing essential facilities to competitors.
• Providing services or facilities to competitors at excessive prices or on discriminatory
terms.
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37
• Promotion of predatory pricing and/or cross-subsidization of competitive services
with revenue obtained from services which are subject to less competition.
• Bundling of services designed to provide the dominant firm with exclusive advantages
in subscriber markets or require a competitor to obtain services or facilities which it
does not truly need.
A survey by Research ICT Africa shows that although a number of countries, such as
Uganda, that have liberalized the ICT sector achieved high mobile phones penetration, access
to fixed lines remained stagnant or declined and broadband access costs remained excessively
high. Monopoly incumbents put high price tags on access and tightly controlled connection to
broadband links, particularly international ones, such as the SAT3 submarine cables.
It was also evident that liberalization schemes did not lead to an automatic increase in the
number of users or in bringing the costs of internet access down (Figure 3). A Research by ICT
Africa (RIA) network survey concludes that liberalization and good regulation alone will not
be sufficient to increase access or reduce costs. Including the disposable income that ordinary
people allocate to the basket of communications and the state of the ISP market should be
considered when analysing the link between regulation, Internet costs and usage.
Figure 3. Comparison of Internet costs and number of users.
Internet users compared to Internet costs for 20
hours access (2002)
Internet costs for 20 hours (US$)
Internet users (est)
3,500,000
140
3,000,000
120
2,500,000
100
2,000,000
80
1,500,000
60
1,000,000
40
500,000
20
0
Cameroon Ethiopia
0
South
Uganda Zambia
Africa
Source: ITU World Telecommunications Indicators 2003
Kenya
Rw anda
3.4 Regulatory Challenges
In most countries, privatization preceded liberalization with periods of exclusivity to attract
strategic equity partners. Privatization often ended up transferring a public monopoly to a
private one or creating vertically integrated dominant operator(s). The regulatory framework
which would have curbed the excesses of private monopolies under such situations has not been
entirely effective. This is largely due to the institutional arrangements which seldom provide
regulators with the autonomy necessary for good governance, particularly where governments
continue to own interests in incumbents while they are still responsible for overall sector policy,
creating severe conflicts of interest.
38
Regulatory institutions in many countries remain unable to deal with complex issues ranging
from managing competition to introduction of cost-effective tariffs, designing and enforcing
universal service obligations, stimulating investment and harmonization of domestic policy
and regulation with international obligations. Regulators in the region are not equipped to deal
with emerging policy and regulatory issues such as spam and consumer concerns regarding
privacy, which were not issues of concern many years ago. There has also been a shift towards
technology-neutral regulatory treatment; Kenya, Mauritius, South Africa and Tanzania have
introduced legal frameworks and regulations that seek to regulate the convergence of IT,
broadcasting and telecommunication. Some governments, including those of South Africa and
Tanzania, have also modified the structure of regulatory authorities by providing them with
the authority to regulate the telecommunications, broadcasting and IT sectors with a single
regulatory agency. Mauritius has drafted and implemented new laws and regulations that deal
with issues such as intellectual property, content, data protection, security and computer crime
which are critical for international e-transactions.
However, the majority of the regulatory bodies remain very weak. Except for a few they
lack the requisite leadership and often precisely to serve as functionaries of the ministry. This is
exacerbated by limited traditions of rule of law, information asymmetry between the operators
and the regulators, scarce skilled human resources and ineffective competition laws. In effect,
their actions lag far behind other regions of the world. The degree of maturity of regulatory
institutions in Africa as of 2006 is shown in Figure 4.
Figure 4. Degree of maturity of regulatory institutions in African countries.
Advanced reform
Botswana, Kenya, Mauritius, Morocco, South Africa
Tanzania, Uganda
In the process
Burkina Faso, Côte d’Ivoire, Congo, Egypt, Ghana, Lesotho, Madagascar, Malawi, Mali,
Mozambique Mauritania, Namibia, Nigeria,
2.2. Rwanda, Seychelles, Senegal, Sudan, Togo, Zambia, Zimbabwe
Early stage
Benin, Burundi, Chad, Cameroon, Cape Verde, Central African Republic, Comoros, Democratic
Republic of Congo, Equatorial Guinea, Eritrea, Ethiopia, Gabon, Gambia, Guinea-Bissau, Liberia
Niger, São Tomé and Principe, Sierra Leone Swaziland, Togo
Source: Author
Interestingly, however, there is no correlation between the level of maturity of the regulatory
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39
environment and the performance of the sector. Prices continue to be high in the countries in
the advanced stage and access remains variable. For example, Botswana does not have a very
open market, though mobile phone prices are lower than South Africa’s. Kenya’s pricing and
access are not markedly different from those of several countries identified as being in an
early state of development, such Ghana and Nigeria. And despite Uganda having one of the
most respected regulators on the continent in terms of the primary public policy objective of
affordable access, adjusted for purchasing power parity, it has some of the highest prices of a
survey of 15 African countries conducted by RIA (Esselaar et al., 2007).
3.5. Regional Cooperation and Policy Harmonization
ICT policy and regulatory changes took place against a backdrop of increasing calls for
regional cooperation and harmonization of regulations, yet the variations at national level
had grave implications for responding to regional cooperation. Some progress was made in
establishing regional regulatory associations particularly in the Southern African Development
Community (SADC) countries, the Common Market for Eastern and Southern Africa
(COMESA), the East African Community (EAC) and the Economic Community for West
Africa (ECOWAS). Regulator associations were largely structured around the European model,
where regional guidelines are developed and implemented at national levels. The degree to
which countries adopted regional harmonization varied considerably, with the EAC leading the
way in enforcing regulatory frameworks at national levels (see Box).
40
South African Development Community (SADC)
Member states: Angola, Botswana, the Democratic Republic of Congo, Lesotho, Malawi, Mauritius,
Mozambique, Namibia, South Africa, Swaziland, United Republic of Tanzania, Zambia, and Zimbabwe.
Harmonization efforts: SADC is among the most advanced regional economic communities with respect
to telecommunication liberalization and ICT issues. However, the transport and communication focal point,
the Southern African Transport Communications Commission, is not in operation. The Communications
Regulators Association of Southern Africa (CRASA) was established in 1997. It has advocated the creation
of independent regulators and developed model ICT policies, legislation documents, and regulatory
guidelines for the SADC countries in key areas such as universal access, licensing, consumer protection,
dispute resolution and numbering. CRASA has adopted a regional frequency plan. The association acted
as a platform for bringing regulators together to discuss key challenges facing the communication sector in
the region.
Economic Community for West African States (ECOWAS)
Member states: Benin, Burkina Faso, Cape Verde, Côte d’Ivoire, Gambia, Ghana, Guinea, GuineaBissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone and Togo. Mauritania left the organization in
2002.
Harmonization efforts: ECOWAS, in collaboration with donors, conducted a telecommunication
harmonization study (Deloitte et al.,) in 2003 to identify suitable options and to draft a timetable for
harmonizing telecommunications policies in the region. The option recommended to ECOWAS was based
on a European model where regulations are initiated at the regional level and member states adapt and
implement them at local levels. The West African Telecommunications Regulators Association (WATRA)
became operational in 2002. Although WATRA is a new institution relative to CRASA, it has embarked on an
ambitious regional harmonization programme. Among the achievements of WATRA are the development of
regional model guidelines and establishment of a secretariat at the ECOWAS premises in Abuja, Nigeria. In
collaboration with ITU, WATRA has launched a series of policy harmonization models in interconnection,
licensing, numbering, spectrum management and universal access.
Common Market for Eastern and Southern Africa (COMESA)
Members: Angola, Burundi, Comoros, Democratic Republic of Congo, Djibouti, Egypt, Eritrea,
Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda,
Zambia and Zimbabwe.
Harmonization Efforts: COMESA has been very active in capacity building of regulators through the
Association of Regulators for Information and Communication for Eastern and Southern Africa (ARICEA).
It has initiated programmes to harmonize ICT policies and attract foreign investment to the region, and
drafted model ICT policies, licensing rules, and frameworks. COMESA has created platforms for regulators
in the broadcasting, telecommunication and ICT sectors to exchange ideas.
East African Economic Community
Member States: Kenya, Tanzania, Uganda, Rwanda and Burundi
Harmonization efforts: Major harmonization work in East Africa takes place through the East African
Regulators Post and Telecommunications Organizations (EARPTO), an organ that comprises the private
sector, regulators, postal service operators and other players interested in the ICT sector in the region.
Originally a fairly loose organization, EARPTO has became a forum for making high-level decisions
that affect policy, regulation and operations across the EAC countries. This is mainly due to longstanding
collaboration between the east African countries in the area of telecommunications where calls were regarded
as trunk (regional) calls rather than international calls. More importantly, EARPTO brings operators and
regulators together to discuss policy issues thoroughly and to make joint decisions. Accordingly, EARPTO
could be regarded as the most efficient governance model for promoting ICTs in Africa.
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41
Regional regulatory associations such as CRASA have made headway in the development
of model guidelines but are still very weak in enforcing these at national levels. However,
the experiences of EARPTO show that influence on the policy and regulatory framework is
indeed possible. The EAC implicitly depends on EARPTO to formulate common policies and
strategies on ICT issues, giving it some political legitimacy. Being small it is easy to arrive at
consensus. The geographical layout of the region was another factor: the EARPTO countries
all share borders with each other, and are bound together by the common resources such as
Lake Victoria and a common language.
A RIA study on regional models of governance demonstrates that the political will to promote
regional cooperation and the legitimacy and capacity of regulatory bodies are the main building
blocks for translating the rules and guidelines into action or achieving regional harmonization.
Regional harmonization cannot be met without giving sufficient attention to redressing the
challenges of privatization and competition at national levels. Integrated national policies and
regulations that promote the transition from vertically integrated markets with a few operators
dominating services to a competitive environment that allows multiple and small players
to provide services using cost-effective access technologies and strategies that emphasize
open access to networks are essential for smooth regional cooperation and harmonization.
Competition is essential to attain faster growth, lower costs and quicker response to user needs.
Privatization with competition is more crucial to achieving faster growth and lower prices than
privatizing monopolies.
3.6. The Impact of International Decision-Making
Added to the regional dimensions of ICTs were international decisions about these
technologies that had considerable implications for African countries. Market access and
regulatory commitments to the WTO have been influential in domestic ICT policies, particularly
liberalization, privatization and competition in the telecommunication sector. Decisions made
at the Internet Corporation for Assigned Names and Numbers (ICANN) determine the use of
Internet resources such as domain names, Internet protocol numbers and protocols. The extent
to which African countries voice their concerns at ITU conferences, including the World Radio
Conference, have an impact on how resources such as radio frequency spectrum and numbers
are allocated. Unicode decisions on language issues affect information and content exchange at
local levels. However, the participation of African countries is uneven due to:
• The predisposition of the international regime towards the interests of multinational
private sector institutions and developed countries (Cohen and Gillwald, 2006).
• The lack of commitment of policy-makers and lack of a coherent ICT policy improve
the credibility and legitimacy of policy-makers at international levels.
• The inadequate technical and policy-making capacities at national levels.
• The lack of coordination between different ministries and stakeholders that participate
in the global issues.
• The sheer number of meetings and the cost of participating in the meetings.
Although African countries send delegations to many such forums, they are poorly represented,
and the majority lack the capacity to influence the agenda, advance their views, implement
decisions and evaluate the outcome, taking domestic challenges into account (CTO and Panos,
2002). Furthermore, the more decisions move away from traditional intergovernmental forums
such as the ITU and WTO towards private sector-led or voluntary and non-profit mechanisms
such as the ICANN the less the participation of African countries, largely because of the much
weaker organization of the civil society. The trend is that governance is moving away “from
the long-stable model of states working in a limited number of organizations to devise heavy
administrative rules, towards more fluid and heterogeneous policy architecture in which the
42
state and increasingly powerful global business community operate and compare in a wide range
of forums to devise market-enabling rules (Drake, 2002).” African countries are ill-equipped
to participate in highly technical and informal networks that make most of the contemporary
decisions on infrastructure and transaction content related issues.
The agenda of international decision-making is often set by experts from development
institutions such as ITU, the World Bank, WTO, ICANN and private sector groups that have
a deeper understanding of the issues under consideration. These experts have a significant
influence on the course of technological development in many African countries. As technology
advances, experts in international institutions constantly update their policy prescriptions,
often based on the interests of multinational companies. The constant shift of opinions
about ICT policies and regulatory issues means African countries are unable to follow up on
emerging issues and engage in cutting-edge and critical discourse with those from development
institutions and powerful corporations.
So far, the participation of African countries in telecommunications policy and regulation,
radio frequency management and ICT for development issues is higher than for issues
pertaining to transactional content. African countries have been actively engaged in “ICT for
development” or “digital opportunity” issues and have participated in meetings organized by
the United Nations and other agencies while at the same time their engagement in the most
fundamental issues such as network-based trade in services and intellectual property rights was
subdued.
It is becoming clear that Africa’s participation in global ICT decision-making requires subregional caucusing (Gillwald 2003) and strong regional cooperation. Among the problems
facing regional collaboration is the division within Africa along linguistic and geographic
lines, particularly between the Anglophone and Francophone, east and west, north and south.
Regional institutions such as COMESA, SADC, ECOWAS, The Intergovernmental Authority
on Development (IGAD) and the African Union (AU) have remained weak with regard to ICTrelated negotiation at international levels because:
• The role of regional institutions is not understood at international levels.
• Regional institutions do not have mechanisms that promote regional caucusing to
consider positions for their presentation at international levels.
• The intention of regional institutions is mainly economic cooperation. Therefore,
functional cooperation in the area of ICTs is still regarded as secondary. For example,
there was very little discussion of World Summit on the Information Society (WSIS)
issues by regional economic communities that should have played a significant role
in the development of common African positions that might have had more resonance
with national stakeholders (Souter, 2005).
A review of the key barriers indicates that improving domestic capacity in policy formulation,
research and analysis are critical for effective participation at regional and international levels.
4. The Significance of National ICT Policies and Strategies
Integrated policy at national levels could create the foundation for regional harmonization
of regulation and markets and more coordinated participation in international forums. Most
African countries have now formulated national ICT policies and strategies aimed at integrating
ICTs in development to achieve wider socio-economic development objectives such as poverty
reduction, and improvement of health and education. Availability and access to the internet,
global experience in integrated ICT policy formulation and schemes such as AISI were also
instrumental in popularizing the concept of NICI plans and e-strategies.
However, it has been difficult to articulate which integrated ICT policies should be used
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43
to achieve national goals and how these policies are linked to regional and international
regimes. There has been a lack of linkage hence contradictions between policies that addressed
structural reforms to bring about affordable access and e-strategies that emphasized content
and application. Most countries that adopted blueprints of e-strategies did not pursue the sector
reform agenda aggressively, while others failed to develop conditions for modern information
infrastructure, applications and content that underpin economic development and growth.
Largely, e-strategies fail to acknowledge the tensions, indeed contradictions, between the
different strategies required to promote universal service, entrepreneurship, innovation, small
and medium enterprises (SMEs) and the range of competing objectives in a comprehensive
e-strategy.
The limited interaction between reforms that address affordable access and integrated
e-strategies that focus on application and content was partly due to the absence of a capacity to
develop integrated policies that bring reform objectives together with the poverty and growth
dimension of ICT infrastructure, content and applications. Experts and policy-makers who
were in charge of elaborating ICT strategies were generalists and or telecommunications/ICT
experts whose understanding of development issues was limited. There has been little or no
involvement of development professionals from concerned sectors such as health, education
and agriculture. Typically, projects and programmes were the results of discussions among
ICT professionals from donor agencies and a relatively small group of ICT for development
specialists from government ministries representing the ICT sectors such as communication,
information, science and technology. Coupled with lack of evidence to support policy
formulation and programme implementation, the majority of e-strategies were unable to realize
the promises they set to achieve in ICT-assisted development.
The impasse between formulation and implementation of integrated ICT policies and
strategies was exacerbated by over-reliance on external experts, the protracted policy
formulation processes, coordination difficulties and the overlooking of resource constraints,
“accessibility, cultural diversity, structural barriers and other problems associated with diffusion
of the Internet such as ICT-related trading (Tipson and Fritteli, 2003).” The extent to which ICT
policies and strategies translated to actions also depended on domestic power relationships and
governance, the maturity of markets, institutions and available resources, and the success of
skill transfer.
However, there are some success stories in the region. Countries that adopted a less formal
approach and built their ICT infrastructure and human capability piece meal, including
Botswana, Mauritius, Morocco, South Africa and Tunisia, had mixed outcomes when
implementing their ICT policies and integrating the policy dimensions with infrastructure,
application and content. The experience of these countries shows that pre-fixed blueprints
and strategies are meaningless, without strong institutions and adequate resources, and when
there is no cooperation between the private sector, civil society, government technocrats and
academia to implement various programmes. National ICT policy research capacity is also
key in developing integrated, appropriate and informed pro-poor and pro-growth policies and
regulations.
5. Towards a Research Agenda in ICT Policy-Making
The impasse between policy formulation and realization and the mixed outcome of the
first phase of telecommunication sector reform are the two major signals of the need for ICT
policy research capacity in Africa to promote innovative, well-informed and organic policies.
Policy and ICT programme ideas generally emanate from international actors or generalists
who fail to appreciate the complex socio-technical, capacity, resource and governance
challenges that make or break ICT programmes. The ICT sector is clogged with anecdotal and
44
“best practice” evidence that does not stand scrutiny and emulation—although “best practices”
were collected and expected to be emulated by developing countries. “Research in the field
of ICT and development in Africa is limited, fragmented and typically undertaken as isolated
and disconnected projects. Most of the understanding of the information age comes from the
theory and experiences gained in the developed world rather than through participatory policy
formulation based on evidence. Africa produces little in the way of independent, primary
research feeding into the ICT policy and regulatory processes” (Gillwald, 2003).
The absence of research in the ICT field has negatively affected policy formulation and
the diffusion of ICTs at national and institutional levels. For instance, there is a high failure or
partial failure of e-government projects in Africa, but there have been few analytical studies of
the success and failure of large-scale ICT projects (Heeks, 2002) in the region. Similarly, Africa
lacks the necessary research base to understand why the small-scale demonstration projects
that dotted the region often failed to scale up. Research is required to measure successes,
standardize evaluation methods and carry out a rigorous analysis of policy outcomes in order
to understand the reasons for their success and failure.
5.1 Research Agenda for ICT Policy-Making
The challenges of ICTs and development in general and ICT policy-making in particular
are vast, therefore no single group of researchers or institutions can attempt to address them;
neither are attempts to list a full research agenda possible. The research agenda for ICTs
and sustainable development has been defined from various perspectives, including applied
research aimed at improving computing hardware and software, network and connectivity,
content and human capacity (Tongia et al., 2002) in different development fields (e.g. ICT
in education), investigations on social implication of computing, development informatics,
community informatics, or through a participatory process. The wide array of issues to be
covered, from economics to law, from content specific to communities to gender issues,
necessitates the collaboration and sharing of experience between different disciplines (i.e.
economics, telecommunications, business, management, computer science, information
systems, political science and sociology, amongst others). So far, there has been limited transdisciplinary research in the ICT sector in Africa. The participation of beneficiaries, end-users,
policy-makers and institutions in the research process is as important as collaboration between
different fields and researchers.
In a narrower sense of ICT policy-making, it is necessary to understand the link between
ICTs, poverty and competitiveness and ICT polices. Understanding the governance, power
relationships motivation and incentives of policy-makers and policy processes is equally
important. Two broad areas for research on ICT policy-making can be distinguished:
• Analysis of the link between ICT and poverty reduction and economic growth in
general, and competitiveness in the ICT sector in particular and the related policies,
governance and regulations.
• Analysis of the mechanics of policy-making including policy processes, governance
and power relationships, incentives and the motivation of different actors.
5.1.1. Pro-poor ICT Policy Research
Although ICTs are seen as one of the major tools for combating poverty and achieving
sustainable human development, there is little hard evidence regarding their impact on
poverty and on the policies that should be formulated to address access to the technology for
the poor. ICTs do not always directly have an impact on the poor because the poor generally
lack infrastructure and resources. Poor people do benefit indirectly from the use of ICTs by
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45
others, even though they have no access themselves. ICT use in business, government and
entertainment and by non-governmental organizations has an influence on most people. When
ICTs make public services and utilities more efficient, or when they improve the quality of
local radio broadcasting, the benefits accrue even to those who have never seen a computer or
made a phone call. At the social level, ICTs offer the possibilities for improved information
and communication flow that leads to shorter and often more complex decision-making. They
allow for potentially more transparent and participatory processes. Concurrently, they pose
challenges and even threats to individuals that need to adjust to new ways. Politically, ICTs
could play decisive roles in the integration and empowerment of all groups in society. In
addition, the use of new technologies in the public sector offers possibilities for improved
governance through greater quality, accessibility and transparency in the use of public services.
However, these benefits were not studied systematically and the subtle links between poverty,
ICT and ICT policies are not well understood. Generally, attempts to understand these linkages
have focused on income as a measure of poverty, which is somewhat easier than examining
consumption as a measure of poverty. With regard to ICT access and usage, the RIA 2005 study
‘Towards an African e-Index: Access and Usage in Ten African countries’ began to analyse
communication consumption across different economic and other categories.
Perhaps less attention has been paid to understanding ICT in terms of Amartya Sen’s
notion of poverty as capability deprivation. This might provide the most useful explanation for
understanding the real gaps and deprivations in relation to ICT and is able to encompass more
traditional concepts of economic growth and more developmental concepts, including social
inclusion.
Knowledge deficits abound in the area of ICT for development in particular in conceptualizing
the different ways in which people and organizations use ICT services to improve their
productivity and livelihoods. The impact of ICTs on poverty reduction and people’s lives at
individual, community, institutional and national levels is as unclear as the impact of change in
technology and market on development.
Some of the research questions in relation to policies that address the dimension of poverty
include:
• What is the relationship between poverty and ICTs?
• How is ICT actually being used by the poor? What ICT benefits accrue to them? How
can the benefits be improved?
• What/where are the impacts of ICTs on poverty reduction? What can be done to
improve ICT usage for poverty reduction?
• How should poverty challenges be prioritized in order for ICTs to bring tangible
benefits?
• How much difference can ICTs make on fields (such as agriculture, environment,
health and education) that underpin poverty alleviation?
• How/when does ICT uptake by the government, private sector and civil society
organizations affect poverty and development?
• What specific ICT policies are required to address these questions?
5.1.2. Pro-growth ICT Policy Research
Pro-growth ICT policies are important for the construction of an information society.
However, there is limited understanding of the impact of ICTs on economic growth in developing
countries. Some evidence from developed countries shows that ICTs could play a key role in
all spheres—at the economic level, in terms of greater competitiveness (innovation) and an
improved business environment (in particular for the SME sector). Studies on the impact of
46
ICTs by the Organisation for Economic Co-operation and Development (OECD) show that
ICTs have a far-reaching impact on economic performance and on the success of individual
firms in developed countries when they are combined with investment in skills, organizational
change and innovation (OECD, 2004). This impact has been observed in firm-level studies for
all OECD countries, but has not yet translated into better economic performance at the sectoral
or economy-wide levels.
Zhen Wei-Qiang et al. (2003) indicated that the impact of ICTs on economic growth in a
developed country could be achieved through i) rapid technological progress in the ICT industry
that drives the total factor of productivity in the economy; ii) high level of investment in the
ICT sector resulting in higher ICT-related capital, which brings about falling prices and new
products; and iii) reorganization of how goods and services are created and distributed. They
asserted that the impact of ICTs on economic growth varies considerably from one country to
the next, prompting different policy and regulatory approaches. They concluded that welfare
gains can be achieved more by those that use the ICTs effectively than by those that produce
them.
As far as African countries are concerned, there is no conclusive evidence on the impact
of ICTs on economic growth and research in this area to suggest what factors, such as
human and institutional capacities, culture, ownership, participation and political will affect
competitiveness and how these can be calibrated to achieve optimum results. Research in the
area of ICT and economic growth needs to address some of the following questions:
• What is the size of the African ICT market? How should its competitiveness be
measured? What policies should be put in place to improve its size?
• What is the level of Africa ICT private sector/SMEs competitiveness in the global ICT
market (e.g. business process outsourcing, software development, call centres, etc.)?
• What are the best strategies to attract the necessary investment for infrastructure
deployment? What governance mechanisms should be put in place to stimulate
investment?
• What complementary factors/social capabilities and building blocks need to be put
in place to speed up the application of ICTs for economic growth and ensure African
enterprises compete at the global level?
• What are the major policy implications of Africa’s participation in the global ICT
market? How should that be negotiated?
However, research which focuses on economic growth will be incomplete in an African
context. Research on what broad and integrated strategies should be put in place in order
to stimulate ICT-led economic growth and development and synthesis of experience on
the integration of ICT with poverty reduction and social inclusion as part of more overall
development strategies is vital.
5.1.3. Governance, Incentives, Power Relationships and Policy Processes
The failure of impressive policies and the unsuccessful protracted processes in agendasetting, policy formulation, decision-making, policy implementation and evaluation in Africa
over the last decade and the mixed outcomes of privatization and liberalization were mainly
due to the prescription of multilateral institutions that tend to make certain assumptions about
the political dimensions of governance and the lack of recognition for power relationships,
incentives, context and the capabilities of the concerned institutions. Insights thus far show that
the more authoritarian the state, the less its interest in Internet diffusion or taking the policy
processes forward. Governance issues, incentive, motivation and power relationships are at
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47
the centre of policy processes and their implementation. Research themes in this area need to
address questions such as:
What are the main political contexts that lead to good policy outcomes? What links can
be distinguished between democracy, governance and ICT policy-making? What are the
preconditions for effective policy formulation? How are policy choices on ICTs made? What
patterns are emerging with regards to power relationships and ICT diffusion?
• How can technical and policy-making capacities of institutions be developed in order
for them to play a key role in the formulation of the next wave of policies, regulations
and legislations?
• What policy choices lead to which market structures? What are the implications of
policy choices and regulatory frameworks on sector performance?
• What second wave liberalization models can be distinguished? How can these models
meet poverty reduction and economic growth goals and foster sub-regional and
regional cooperation?
• How can Africa best take advantage of the emerging digital convergence and Next
Generation Networks and what are the implications for the regulatory environment?
• What are the reasons or incentives for governments to establish effective systems of
governance in the ICT sector in Africa?
• How do civil societies in African countries have an impact on models of participatory
policy processes and accountable regulation?
• What links between national policies and regional and international ICT governance
and regimes can be distinguished? What governance models stimulate the participation
in regional and international ICT policy regimes?
• How are policy processes made consultative and participatory, regulatory processes
made transparent and those responsible for the outcomes made accountable?
6. Methodological Issues
Research questions generally determine what methodologies can be used within specific
constraints. The most common method in ICT sector analysis involves the use of sample
surveys with emphasis on quantitative indicators. Measures of ICT and poverty tend to take
income such as household income or consumption levels and access to technologies such as teledensity into account. The analysis of ICT on economic growth and competitiveness also relies
on a vast amount of quantitative data as exemplified by the World Economic Forum’s Global
Information Technology Reports. In this connection, questionnaire surveys play a dominant
role. However, since these have certain weaknesses, qualitative methods have often been
incorporated to complement quantitative data. This mix-and-match methodology is essential
in assessing some non-income-based indicators of poverty, such as decision-making powers,
authority and the underlying motivation of individuals in using one technology or the other.
However, most assessments of the potential of ICTs in poverty alleviation or economic growth
tend to start from the position ICTs occupy and not from that of poverty and development or
the motivation of individuals and institutions.
Regional research networks such as LIRNEasia, RIA and the Regional Dialogue on
the Information Society (REDIS/DIRSI) in Latin America have been working on refining
methodological approaches towards analysing ICTs in development, along with international
efforts to develop ICT for development indicators spearheaded by ITU and the United Nations
Conference on Trade and Development (UNCTAD) in association with national statistical
offices. LIRNEasia has tackled issues of ICT use on a shoestring budget, the use of microfinance
for access to communication services, ICT accessibility in the agricultural sector and evaluation
48
of the ICT sector performance, while RIA has focused on building e-usage and e-access indices
to gauge demand at individual and household levels along with sector performance reviews
that have examined ICT supply has analyzed ICT and poverty and economic growth based on
poverty line locality criteria and from supply, demand and capacity perspectives by estimating
the deficits in basic communication needs.
The experience of these networks suggests a need for the analysis of micro, meso and
macro levels and the need to go back and forth between these and qualitative and quantitative
approaches while integrating insights from other fields such as economics and political science
and fostering linkages across different levels of analysis. Recent discussions between the three
networks reveal that building solid baseline data on the ICT sector, its demand and use and the
politics and governance of ICTs at national levels is critical to conducting meaningful research
on ICT policy-making and ICT and development. Accurate factual data on the ICT sector are
rare; where available they are either outdated or not applicable to measure ICT in development.
Data on policy and governance are generally in short supply.
Analysis of policies, policy process and performance requires first-hand data on institutional
contexts, political configuration, power relationships and incentives as well as access and usage
data to review which policy led to what level of ICT diffusion. This strand of research needs
to draw from quantitative and qualitative information, including national and cross-country
data on democracy and governance (political freedom, participation of the civil society and
political volatility), access to communication services and the quality of policy and regulation.
Subjective data are also important, particularly on the perception of stakeholders on policy and
regulation and how this can be improved. Some methodological issues pertinent to the two
strands suggested above are summarized in Table 2.6.
Table 2.6. Suggested methodological approaches in studying ICT policy-making and policy processes
Research strand
Suggested methodological approaches
Carry out systematic collection of data on the ICT sector and its growth
Improve on indicators and indices on ICT, economic growth and
competitiveness
Pro-access, poverty reduction and Draw on experiences and studies in developed (OECD) and developing
countries (e.g. Asia and Latin America)
competitiveness policies
Apply competitiveness indicators such as those developed by the World
Economic Forum and the ITU
Focus on the broader ICT sector rather than on telecommunications and
broadcasting
Gather data on governance, regulatory and policy environment
Draw on data on governance (e.g. The World Bank, University of Maryland
and ITU
Carry out ongoing qualitative surveys and mapping of
Research on policy processes,
policy-making, regulation and power relationships using insights from
outcomes, incentives, governance
other fields such as political science
and power relationships
Improve on indicators of ICT sector governance
Use qualitative and quantitative methods for simultaneous analysis at
micro, meso and macro levels of policy and regulation
Examine the impact of ICT policy on social exclusion and inclusion
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49
7. Conclusion
ICT policy-making is a moving arrow due to fast changes in technology and to globalization.
The telecommunications reform agenda is incomplete and faces new demands. African countries
have come a long way in policy formulation and implementation over the last four decades, but
important markets are still closed or barely open to competition. Some experience was gained
in countries that have consistently built the necessary technical and policy-making capacities,
but in the absence of capacity the majority of sub-Saharan African countries continued to rely
on external advice and support for ICT policy-making. The models that were advanced by
multilateral institutions in the 1990s emphasized privatization over other structural reforms
such as focused regulation and competition, resulting in limited access to fixed networks and
little impact on affordability. Convergences of new technologies and new business models have
put new demands on regulation.
Similarly the blueprint approaches to integrated policy-making were unable to realize the
expectation of great digital opportunities. Africa faces a significant infrastructure gap that
underpins its need for ICT for development. The rural access gap remains particularly high
with regard to advanced technologies such as the Internet. Access to broadband networks is
now regarded as critical. There is also a need to move from hype to replicable solutions on ICT
and development.
Africa’s research capacity is critical to stimulate informed policy-making based on insights
and to improve active participation in regional and international dialogues while redressing the
heavy reliance on external advice in policy-making. Yet research on the political economy of
the ICT sector is in the early stages and is compounded by limited data and a limited knowledge
base and the little research done in Africa in this area. Efforts by the RIA are just beginning
to scratch the surface. RIA aims to fill the research gap by consolidating and disseminating
fragments of ICT policy and economic development research, building a knowledge base
for effective decision-making. More importantly, it aims to build a knowledge network of
researchers interested in ICT policy making and ICT for development across the continent.
Such efforts need to be encouraged to improve the understanding of ICT policy-making and its
implications on poverty and economic growth.
The investigation of the political economy requires further systematic data gathering
and greater +research capability, consultation and interactions between different disciplines
(economics, sociology, social informatics, information scientists and development planning)
and existing research networks such as RIA, the African Economic Research Consortium
(AERC), the Council for the Development of Social Science Research in Africa and others
regional networks such as and DIRSI as well as networks between academic institutions and
development organizations to tackle some of the research questions discussed here and to refine
methodological issues. Support and capacity building for researchers in the diverse fields cited
is important to understand the ICT sector better, as it is becoming one of the main pillars of the
African economy, and to develop informed policies to maximize its benefits to all.
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CHAPTER 3
A Review of the Methodology for
Assessing
the Impact of ICT Development and
Economic Transformation
Prof. Samuel Wangwe Daima Associates
Dar es Salaam Tanzania
[email protected]
AFRICAN ECONOMIC RESEARCH CONSORTIUM (AERC)
Contribution to the AERC Project on The Impact of ICTs on Economic Development and
Transformation July 2007
1. Background and Context
T
he process of technological innovation in the late 20th century has led to significant
developments in new technologies, such as biotechnology, new materials and
microelectronics together with innovations in software development. The combination
of advanced microelectronics, and innovations in software development has led to systemic
technologies which have come to form a pervasive cluster of information and communication
technologies (Mansell, 1994). As information and communication technologies (ICTs) diffuse
into all branches of the economy their impact has come to be very pervasive. The pervasiveness
of the ICTs poses the challenge of assessing their impact on economic development and
transformation. The purpose of this chapter is to review the methodology for assessing this
impact.
ICTs refer to a myriad stand-alone media, including fixed line and mobile telephony,
radio, television, video, teletext, voice information systems and fax, as well as computermediated networks that link a personal computer to the Internet. ICT is an integrated system
that incorporates the technology and infrastructure required to store, manipulate, deliver and
transmit information, the legal and economic institutions required to regulate ICT access
and usage, and the social and inter-personal structures which allow information to be shared,
facilitate access to the ICT infrastructure, and through which innovation takes place.
In this report, ICTs are disaggregated into ICT production and ICT use, while ICT producing
industries are categorized into ICT manufacturing activities and ICT producing service
activities. ICT manufacturing activities are those which manufacture products intend to fulfil
52
the function of information processing and communication or must use electronic processing to
detect, measure or record physical phenomena or control of physical processes. ICT producing
services are those which produce services that are meant to enable the function of information
processing and communication by electronic means.
The degree of competitiveness is largely determined by the extent to which the economy
rests on three pillars: knowledge, information and technology. These are terms which lack
precise meanings. The framework paper by Nissanke (this publication) has addressed these
terms as follows:
• “Knowledge” refers to scientific and technical knowledge in areas such as computer
science, information technology, engineering and manufacturing.
• “Technology” refers to the means and processes used in the application of scientific
and technical knowledge to improve or modify our natural environment or to innovate
the things that we have already produced, in order to satisfy perceived materialistic
human needs, from the production of things that we need and the comforts that we take
for granted in our daily lives to taking care of our environment.
• “Information” complements “knowledge” but refers to knowledge about “attributes”
of different aspects of our material life such as the quality of a product or a service,
market information such as cost and prices, the performance of a worker or a company,
the facilities provided by a bank or a development agency, the track record of an
entrepreneur or trustworthiness of a borrower, the trustworthiness of a system, the
safety of a plant, the state of the climate, etc.
Thus, all three concepts, knowledge, information and technology, play an indispensable role
in any development effort undertaken towards a knowledge-based economy. The strengths and
weaknesses of the three concepts serve as a gauge to identify how far and in which direction
African countries are likely to move in order to transform their economies into knowledgebased ones.
A common definition of “technological capability”, as adopted in the framework paper by
Nissanke is the ability of a given country to make use of the knowledge to acquire, assimilate,
adapt and change existing technologies, and develop new products and processes to meet
development objectives. The dimensions of technological capability include:
Human resource capability, encompassing the ability of humans to understand technical
processes, acquire knowledge about them, interpret and adapt this knowledge to suit the local
conditions and apply it creatively to the solution of practical problems.
• Process and management capability (in relation to industrial plants and processes).
• Institutional infrastructure capability, implying the existence of certain specific
institutions that facilitate the integration of the technical knowledge possessed by the
society as a whole into a coherent framework and thus its application in a complementary
and productive manner for the benefit of the entire society. The concept of institutional
infrastructure implies a common purpose shared by the society and drawing its strength
from the psychological motives and political aspirations of the society.
• Technological infrastructure capability.
• Financial capability.
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53
2. The Objective of the Study and Research Questions
2.1 Objectives
The objective of this study is to investigate the impact and implications of ICTs on economic
development and transformation in Africa.
Assessing the impact of ICT will address two dimensions:
1. Identifying the impact of ICT production and use in production and growth
generating activities and specific sectors that could lead to economic development and
transformation in Africa.
2. Exploring options and possibilities of harnessing ICT to more effectively have an
impact on economic development and transformation in Africa.
The use of ICT to enhance economic development and transformation in Africa will
entail addressing several issues. These are the impact of ICT on changing the structure of the
African economy (composition of agriculture, industry and services), expanding economic and
social development opportunities, facilitating diversification, exploring options for building
competitive advantages, and the facilitating efficient functioning and responsiveness of
institutions (including markets) with a view to creating vibrant markets and institutions.
To effectively address the impact of the pervasive diffusion of ICTs, the study will explore
structural and cost factors, the influence of ICTs on growth and factor productivity and the
influence on employment and investment. The impact of ICTs on poverty reduction and on
raising the standard and quality of life of the poor will be explored, including addressing the
indirect impact on poverty through growth and productivity in activities in which the poor are
most actively engaged. The impact of ICTS on governance will be addressed including its
implications on access to public knowledge that can influence governance structures towards
more democratic and participatory processes and towards raising levels of awareness on the
way development agendas are negotiated. Related questions will be raised to determine ways
in which ICTs may have come to play an important role in mediating communication and
information relationships in business and everyday life as well as the implications of public
policy. The extent to which public policy and ICT options are balanced with other socioeconomic
objectives will be explored. In this context, the study will explore whether ICT policy exists and
if it does, explore the extent to which it is integrated into relevant socioeconomic development
policies and strategies.
2.2 Research Questions
Examples of research questions that could be asked include:
What is the impact of ICT on breaking barriers to knowledge and information and on
reducing information or knowledge gaps in production, organization and distribution? These
could be disaggregated into more specific aspects of ICT (e.g. internet, telephony) and how
they affect specific activities in different sectors, for example agriculture and tourism.
• What is the impact of ICT on governance, e.g. on participation as regards specific ICT
components and sectors?
• What is the impact of ICT on economic opportunities such as in trade, business
activities and interaction in respect of specific ICT components and sectors?
• What is the status of official statistics on ICT and the extent to which the available data
are reliable, accurate and comparable internationally?
• What is the link between ICT and development goals such as poverty reduction,
economic growth and competitiveness? Specific questions could include: What is
54
•
•
•
•
•
•
•
•
•
•
•
•
•
•
the relationship between poverty and ICTs? How is ICT actually benefiting the poor
(directly and indirectly)? What/where are the impacts of ICTs on poverty reduction
(in general or in sectors where the poor are active)? How are ICTs influencing the
organization of production processes? How is the rate of adoption of ICTs affecting
investment and total factor productivity in the economy?
What are the mechanics of policy-making, including policy processes and the political
economy (governance and power relationships, incentives and motivation of different
actors).
What has been the experience of policies for the regulation and coordination of selected
sectors that have made use of ICT in their design, implementation and monitoring?
Which are the existing coordination and regulatory structures in the selected sector
that can or should be involved in ICT? More specifically, what have been found to be
the most appropriate institutional structures for the promotion and regulation of ICT
usage?
Which are the existing coordination and regulatory structures in ICT that might have
an impact on production, processing or consumption?
What role can the national and international private sector play in the promotion of
ICT for coordination and regulation to improve production and value-added activities
at different points along the supply chain?
How can the economic and social impact of ICT on development and economic
transformation be assessed for production and distribution in Africa?
What stages of the supply chains are most likely to be affected by ICT in terms of
productivity and profitability and what are the possible consequences in terms of job
creation or loss; capital/labour ratios; and gain or loss of control over production and
distribution process?
What is the impact of using ICT on various actors and the respective stages in the
supply chain, taking account of prices, profitability, choice and quality of life? The
analysis should capture both intended and unintended consequences resulting from
ICT usage at the selected levels of analysis.
What are the costs of non-adoption of ICT at different levels (government departments,
local authorities, enterprises of different sizes, households and individuals within
households) and how is the burden of such costs distributed in society?
What is the social impact of ICT on geographic location, isolation, market integration,
education, income, wealth, gender, ethnicity and social exclusion?
What is the role of social networks in the use and diffusion of ICT usage?
What factors determine the adoption of ICTs by firms at different levels of economic
and technological development?
What is the impact of ICTs on employment generation and the transformation of the
economy or specific sectors through new skills and new technologies?
What policies influence the size and shape (demand characteristics) of the domestic
market (e.g. taxation and wages), input costs or outputs for entrepreneurs (e.g. land
prices and use), nature of competition, foreign investment, and factors that promote
local upgrading and linkages between foreign and local agents?
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3. Review of Methodological Approaches
An assessment of the impact of ICT on development and economic transformation should
take into consideration the continuous interaction between technical and social processes.
Transformations in the ICT environment are both technically and socially determined
whereby the processes of technical change interact with the institutions in which people are
differentially empowered to act. Socioeconomic and technical factors interact to shape the
innovative processes that influence ICT developments in a dynamic way. Advanced ICTs are
being constructed and constituted by a complex matrix of cultural, social, political, economic
and technical relationships that are mediated by changing institutional relationships (Freeman,
1994). Some of these institutions arise spontaneously from social and market circumstances
and others are deliberately created by the government. The methodological approaches that
have been used are categorized into those focusing on gap analysis and impact analysis. These
analyses can be further categorized into those adopting a quantitative analysis and those
adopting a qualitative analysis in respect of either engaging in the production of ICT or in its
use or both.
3.1 Gap Analysis
Gap analysis addresses the impact of ICTs on inequalities in society across countries or
within countries. Studies on the digital divide have addressed the status of the digital divide
and have conceptualized various forms of exclusion or inclusion in the world of ICT. These
studies have addressed the challenges of exclusion and how the technology could be made
more accessible and affordable.
3.1.1 Gaps Between Countries
A major concern has been expressed in literature about development gaps and more
specifically the digital divide between developed and developing countries. The digital divide
is far from closed and in most parts of the world it is still widening (van Dijk, 2005). The digital
divide is deepening where it has stopped widening. The significance of the digital divide is
manifested in ICT products and outputs such as internet access and cell phones and in ICT
inputs such as engineers and scientists.
The main aspects of African economies which have important implications for attenuating
digital inequalities are: the low level of development, low level of knowledge and physical
infrastructure and limited benefits associated with ICTs (such as employment creation and
productivity growth).
The divide between nations can be explained in terms of gaps in capital, raw materials
and human capital or in terms of gaps in ideas, represented by instructions that are needed to
combine physical resources to produce economically valuable commodities. In recent years,
the gaps in ideas as represented by knowledge generation and technological change have
gained importance as determinants of levels of development and levels of competitiveness.
Invention, innovation, discovery and technological change are activities which increase the
stock of intangible knowledge or ideas (Pohjola, 2001).
ICTs have created a world that is more interconnected than ever before. Growing
interconnectedness has permeated economic relations (e.g. trade, finance, investment and global
organization of production) and social and political interactions. Problems of marginalization
and exclusion that have been associated with globalization are due to deficiencies in the
governance of globalization, which in turn largely derive from the behaviour of nation states
(ILO, 2004).
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The employment effects of ICT have an influence on marginalization or social and
economic inclusion. Marginalization is real in the global economy and is threatening to make
whole countries, especially the least developed countries, and exclude a whole section of
people excluded from the informational networks. There are more jobs and a higher proportion
of working age people employed, including greater incorporation of women in paid work.
However, employment effects are influenced by social institutions to a greater extent than the
influence of new production systems.
It is expected that the spread of ICTs in Africa will enhance Africa’s participation in the
knowledge economy. The evidence that is coming out of recent research is demonstrating this
trend (e.g. the output from Research ICT Africa).
3.1.2 Gap Analysis Within Countries
The more ICT is immersed in society and pervades everyday life, the more it becomes
attached to all existing social divisions. Within specific economies, the ICT networks may
to a greater or lesser degree be inclusive or exclusive. Even in the advanced countries,
there is evidence of production being increasingly concentrated in the educated sections of
the population aged between 25 and 40 with the threat of creating highly segmented social
structures driven by extreme flexibilization of work and individualization of labour (Castells,
1996). The risk of this threat is likely to be higher in developing countries of Africa. The
studies that have been done in Africa have found two types of access gaps: the urban–rural
gap and the rich–poor gap. Four types of access have been identified in literature: physical
or material access, motivational access, skills access and usage access. A distinction has been
made between these four successive kinds of access that indicate the full appropriation of the
new technology. Analysis of the causes of access (e.g. distribution of resources), consequences
of the digital divide and the context of digital divide could be carried out along the lines of the
four types of access.
There is increasing evidence that access to ICTs has a direct impact on raising the standard
and quality of life of the poor and has an indirect impact on poverty through growth and
productivity. Information and knowledge enable the poor to better understand their own
circumstances and to voice their opinions and needs more effectively. ICTs are being introduced
to empower rural communities.
3.1.3 Extent and Determinants of Access
Policy implications of these studies are essentially in terms of alternative regulatory
incentives or selective financing with a view to promoting access to ICT by the otherwise
marginalized sections of society. The research findings also throw some light on the status of
distribution of ICT infrastructure and how the infrastructure could be made to facilitate and
encourage further inclusivity of ICTs. For instance, the study on “Pro-poor Opportunities and
Challenges in Liberalizing Markets” (WDR, 2005) is formulated with a view to addressing this
challenge.
ICT infrastructure is made up of three components: telecommunications, computing and
connectivity infrastructure. Connectivity infrastructure has four components: the aggregate
bandwidth of the domestic backbone(s); the aggregate bandwidth of the international Internet
Protocol (IP) links; the number and type of interconnection exchanges; and the type and
sophistication of local access methods in use. Local, national and regional telecommunications
infrastructure include server connectors, local loop telecommunication lines, inter-nodal
connections, and switching systems among others, and determine the cost and quality of access.
Users in high-bandwidth telecommunications environment are likely to have access to lower
cost connections. Most developing countries face capacity constraints, largely a result of thin-
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bandwidth and frequent power outages.
Another WDR study addresses the role of telecom regulation in influencing network
investment opportunities. The insights from this study would be useful in understanding
issues of access, spread and expansion of telecom networks. This information would be
complementary to information that would be generated by the proposed study on the impact of
ICTs on the economy.
The study has been designed to address information provision practices and communication
with a view to enhancing the participation of a wider range of stakeholders in the regulatory and
policy-making processes. The study provides useful information on the role of stakeholders or
beneficiaries of ICTs in encouraging better access and therefore expanding the benefits of ICT
in society.
The study on indicators of network use and development is designed to capture more
effectively capture developments in terms of access to and use of ICTs in developing countries.
The findings are expected to facilitate monitoring and evaluation of progress and efforts
being made in ICT deployment and adoption. Research ICT Africa (RIA) has produced a
document titled “Towards an African e-Index” indicating ICT access and usage by households
and individuals across 10 African countries (Gillwald, 2005). RIA is a network of 14 African
institutions with the vision of developing a sustainable information society and network
knowledge economy by providing data and analysis that may be required for designing ICT
policies and regulatory processes and monitoring and reviewing those policy and regulatory
developments. This is a useful source of information for understanding the status of ICT access
in Africa.
However, it should be noted that it is difficult to measure the total number of Internet users
given the large number of shared accounts, along with the relatively high and rapidly growing
use of public access services such as telecentres and cybercafés. Although the number of dialup subscriber accounts is readily available, these figures are only a partial gauge of the size
of the Internet sector and should be looked at along with other factors such as the quantity of
international traffic each country generates.
However, an enhanced understanding of the status of ICT, recent trends and challenges of
improved social inclusion are useful considerations as inputs into the analysis of impacts on the
economy and can be used to improve understanding of how positive impacts on the economy
could be enhanced through the attainment of better access to ICTs.
One of the research projects under WDR has been designed to explore innovative models
of financing ownership and management. The study addresses how alternative models of
ownership, management and financing can influence access and adoption of ICTs (Girard,
2005).
Research on e-access and usage at household level has revealed the demand side of ICT by
individuals and households and how ICTs are used across 10 African countries .These findings
have filled an important knowledge gap and will contribute to policy making. There is need for
information on the impact of ICTs on the economy in order to better appreciate the kinds of
demands that need to be satisfied first if the positive impacts of ICT are to be optimized. The
two sets of studies are complementary in that sense.
Previous work on ICT in Africa is rather scanty. For instance, a recent study done by
UNU-INTECH (Oyelaran-Oyeyinka and Lal, 2004a) used firm level data from three countries
(two of them, Nigeria and Uganda, in Africa) to analyse factors determining the adoption of
internal e-business technologies in developing countries. The study found that adoption of ICTs
was influenced by size of operations, export performance, profitability, value addition, skill
intensity, academic qualification of managing directors, learning processes and technological
collaboration with foreign firms. The study found bidirectional relationships among several
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factors although all causal relationships could not be identified due to lack of sufficient time
series data. In another study Oyelaran-Oyeyinka and Lal (2004b) found that sector-specific
factors influenced the degree of adoption of e-business technologies. They also found that
there are significant variations in the conduct and performance of firms that use lower levels of
e-business tools from those categorized as the most advanced users.
The International Development Research Centre (IDRC) studies and others which have
been cited here have provided useful insights into the status of access and adoption of ICTs.
The proposed study on the impact of ICT on the economy is complementary to these studies.
These studies have been designed to enhance the understanding of the status of access to and
adoption of ICT and have explored ways in which access could be enhanced. Knowledge of
the benefits and other impacts of ICT will complement the information on adoption and use
of ICT. Policy formulation requires adequate knowledge of both (impacts and access). The
approach to be adopted in this study will therefore be to establish the status and patterns of
access and adoption with a view to throwing light on the possible impacts in terms of economic
development and transformation.
3.2 Impact Analysis
The ICTs will be disaggregated into ICT production and ICT use. In assessing the impact of
ICT it is important to distinguish which aspect of ICT is being assessed. Productivity increase
has occurred in ICT producing sectors and in ICT using sectors1. The breakdown of total factor
productivity (TFP) aggregates into sectoral contributions has helped to show attributions to
ICT producing sectors, ICT using sectors and other sectors (Pilat et al., 2002).
The impacts in this category can be direct or indirect.
3.2.1 Assessing Impact of ICT Production
ICT producing industries are categorized into ICT manufacturing activities and ICT service
activities.
ICT producing activities include: design and research; equipment manufacturing; assembling
and CKDs and software developers. Investing in the production of ICT goods can be done with
the specific aim of entering the ICT producing market, in particular, in areas such as software
development and assembly and manufacturing of computing equipment and components.
Though initially they may be limited to meeting the internal demand, such efforts may offer, in
the longer term, opportunities for export and outsourced technological processes.
Although this path may not be associated with significant benefits to economic development
in African countries, the importance of efforts directed at the production of ICT goods has been
demonstrated by those developing counties that currently enjoy significantly higher growth
rates in ICT exports, compared to other export-oriented economic sectors. This suggests that
such efforts could offer, at least for some African countries, long-term strategic advantage in
turning their economies into modern knowledge-based economies.
Production of ICT goods can contribute to economic growth because the global demand for
ICT products is growing faster than the average of most sectors. In addition, the production
of ICT products involves the use of highly advanced manufacturing processes, the mastery of
which is likely to generate higher productivity growth than the average of other sectors. ICT
producing sectors showed important contributions to TFP in Finland (both ICT manufacturing
1 According to ISIC Rev 3 ICT manufacturing activities are those which manufacture products intended for fulfil
the function of information processing and communication or must use electronic processing to detect, measure or
record physical phenomena or control of physical process. ICT producing services are those which produce services
that are meant to enable the function of information processing and communication by electronic means.
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and ICT producing services). This reflects rapid technological progress in the ICT producing
sectors. In the case of Finland, the contribution of Nokia is clearly dominant.
The ICT sector is one of the leading sectors in the R&D effort and the returns from research
in ICT should be widespread, given their pervasive use. In addition, ICT plays a leading role
in knowledge creation, codification and transmission. International R&D spillover has been
shown to be significant, whether in terms of social rates of return, elasticities of TFP growth
or growth contributions (Mohnen, 2001). The main determinants of spillover appropriation are
the acquisition of expertise through own R&D and education, the openness to international
contacts and close collaboration with foreign researchers.
(a) ICT Manufacture of Hardware
According to SNA Rev 3, ICT manufacturing services are those which manufacture products
intended to fulfil the function of information processing and communication or must use
electronic processing to detect, measure or record physical phenomena or control of physical
process. In the context of Africa, ICT hardware may be disaggregated into telecommunications
equipment and computer hardware manufacture and assembly. Computer hardware
manufacture and assembly should cover manufacture and assembly of computers (branded or
unbranded/clones) and include clusters that are emerging in activities associated with repair of
computers. Telecommunications hardware should cover the manufacture, assembly and repair
of telecommunications-related equipment such as cell phones
(b) ICT Production Services
ICT producing services are those which produce services that are meant to enable the function
of information processing and communication by electronic means. The main categories of
products are software and services. The detailed classifications can be sought more precisely
from the System of National Accounts .
3.2.2 Assessing the Impact of Using ICT
Activities that use ICT include service providers; application developers/content
providers; intermediaries and sector specific-users; governments; and private firms. Reliance
on ICT applications for efficiency gains may occur in industry, commerce, agriculture and
public administration to result in significant efficiency, improved quality of service in areas
such as health and education, better quality of life for citizens, enhanced and new market
opportunities for entrepreneurs and so on. These may take numerous forms, benefiting,
amongst others, rural communities through marketing and financial services, and producers in
developing countries through new global markets for their business, and everyone through the
generation of new businesses and new and better employment prospects.
Users of ICT may be categorized by type of user. Applications of ICT ranges from personal
use to use in business and use in government. The types of uses can be categorized into individual
or personal use, household-level use, use in small and medium businesses/enterprises, use in
large businesses/enterprises and use in government.
An alternative categorization may be made by sectors. This kind of categorization can be
made based on the most likely users in a particular country. These may be the financial sector,
the trade sector and other services sectors to be selected after preliminary investigation has
been carried out at country level.
Uses of ICT are diverse, ranging from e-commerce and enterprise management to e-services.
It is recommended that priority be given to the use of ICT in enterprise management and
in production systems in the form of automation. Factors driving investments in the use of
ICT could be identified for policy consideration. These factors could include national wealth,
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infrastructure, human resource development, wage rates and prices.
ICTs can be customized for personal needs or local conditions. It is therefore imperative
to define the needs at various levels and explore what ICT can do to meet those needs. At the
national level, for example, it is important to define the national development objective and
strategy as a basis for posing the question of use of ICT for realizing the national objectives. In
the context of Africa, concern over growth and poverty reduction would have to be addressed
along with concerns over the transformation of the African economy towards a more dynamic
economy which can better cope with the global competitive environment.
The WDR, under a Learning Initiative on Reforms for Network Economies (LIRNE),
has produced several research reports addressing the status of various aspects of ICT and
the diversification of networks in selected countries. These studies have taken a snapshot
of selected aspects of ICT, such as telecommunications, microtelcos and community-based
networks. These studies have also addressed specific issues relating to institutional design
of regulators, mobilizing ICT for effective disaster warning and how access to ICT could be
enhanced. The thrust has been placed on the status and prospects of better access or enhanced
inclusion. For instance, the research project on replicability of the microfinance approach to
extending access to telecommunications is addressing the issue of access. These studies are
essentially designed to deepen the understanding of the status of aspects of ICT, how the status
could be better measured and how access could be enhanced or its application improved. These
studies produce outputs which throw light on the ingredients needed to analyse the impact of
ICT on the economy but they fall short of addressing that challenge directly.
Returns on investments which can make ICT adoption more widespread in the economy
can be very high to the extent that ICT reduces transaction costs in business operations. ICTs
can create positive economic and social multipliers. Economic multipliers are associated with
increasing productivity in the economy through more efficient information gathering and
reduction of transaction costs, improving the functioning of markets and accessing new markets
(e.g. e-commerce), lowering the cost of communicating and improving the management of
supply chains. Social multipliers can be manifested in enhanced social cohesion and improved
safety and survival. ICT can enhance the functioning of government in general and in public
service delivery such as health and education. The functioning of governments can be improved
through enhancing efficiency in performing administrative and planning functions, facilitating
government decision-making processes, provision of government services to its people,
promoting accessibility to the government and making it easier for people’s voices to be heard
by the government and the government’s messages to be heard by the people.
ICT is both a significant sector in the economy and a vital service to business, industry
and other users in the economy. In the information economy, the role of ICTs becomes even
more critical for economic development through its role in the systems of national innovation,
development of entrepreneurship and public service delivery.
The dynamism of ICT is expected to come from several sources including the decline in the
prices of information processing, convergence in communication and computing technologies
and the rapid growth in network computing. The communication networks and interactive
multimedia applications are providing the foundation for the transformation of existing social
and economic relations into an information society (Pohjola, 2001).
The role of ICT in economic development is expected to be manifested in increasing
productivity, enhancing the quality of life, reducing prices, creating new economic activities
and new employment activities as well as generating wealth (Pohjola, 2001). An important
revolutionary aspect of ICT is the possibility it offers to unbundle information from its physical
carrier characterized by the global movement of weightless bits at the speed of light. This is
manifested in the increasing share of all services in the gross domestic product (GDP) and the
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growing importance of ICT in particular.
Some researchers have found it more manageable to examine specific components of ICT
in order to allow more in-depth analysis of the impacts. One example of this approach has been
the analysis of the impacts of ICT by assessing the importance of the computer as a factor of
production in the economy. The decline in computer prices and improvements in quality and
performance has led to a substantial increase in the nominal share of computer and information
processing equipment in fixed capital formation. However, the capital share of computer
hardware has remained rather small because computers become obsolete quite rapidly.
The Organisation for Economic Co-operation and Development (OECD) countries that
improved performance in the 1990s were generally able to draw more people into employment,
increase investment and improve TFP (Pilat et al., 2002). ICTs contributed to this growth in
two ways. First, ICTs contributed to increasing investment and therefore to capital deepening
encouraged by the steep decline in ICT prices and the growing scope of their application.
Reviews of models of technology adoption show that decreases in prices of new capital goods
tend to increase economic growth. Second, ICTs contributed to factor productivity growth. The
evidence from OECD countries has shown that ICTs facilitate economic growth by increasing
productivity though this is a long-term outcome of ICT investment. Some studies have found
that ICT capital has greater impacts on labour productivity than on other types of capital,
suggesting that there might be spillover from ICT investment (OECD-DAC, 2004a).
ICTs have made it easier to disperse value chains both geographically and organizationally.
They have influenced the management of supply chains and the design of products and
components by facilitating enterprise resource planning, business-to-business e-commerce
markets and electronic data exchange. When combined with the Computer Aided Design
(CAD) and Computer Aided Manufacturing (CAM), firms can communicate complex product
specifications to outside suppliers permitting the creation of fully integrated computerintegrated manufacturing procedures that track product quality and inventory and design and
production cycles. The suppliers or subcontracted firms are likely to benefit from membership
in the production networks through transfer of technology gains, access to specialized technical
and marketing expertise and the impetus that demanding purchasers provide to enhance
productivity and innovation (Porter, 2000).
However, recent research on the use of ICT suggests that the benefits from the use of ICTs
are likely to outweigh the benefits from production, which are limited to just one sector of the
economy. Moreover, globalization of the production of ICT is likely to deter most developing
countries from reaping the benefits of producing ICT (Kraemer and Dedrick, 2001). The
ICT using service sectors showed considerable contribution to factor productivity growth
in Germany, Denmark and Finland. The impact of ICT use on factor productivity may be
manifested in more productive firms gaining market share, product diversification may be
facilitated, customized services may be offered, it may be possible to respond more effectively
to customer demand or it may help to reduce inefficiency in the use of factors of production.
Strong productivity growth was found in ICT-using sectors, especially retail trade in the USA
where firms like Wal-Mart used innovative practices to gain market shares and in turn forced
competitors to improve their performance.
Relevant evidence relating to the impact of ICTs on economic growth and productivity
has not yet been produced for developing countries (OECD-DAC, 2004a). ICTs and related
systems have shown the potential to contribute to economic growth and improvement in social
conditions in the developing world. However, ICT growth is expected to influence growth
through gains in labour productivity and TFP. Developing countries, and least developed
countries in particular, are less well-equipped to tap the potential of ICTs to stimulate growth
for several reasons such as economic structure (e.g. dominance of agriculture and low incomes)
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and policy issues (e.g. restrictive regulatory environments and low levels of human resource
development). This phenomenon has been termed the productivity paradox.
The productivity paradox suggest that computers are everywhere except in the productivity
data (Solow, 1987). This paradox has been explained in terms of the failure to pick it up in
statistics to the extent most improvements occur as improvements in the quality of services
which are not captured in productivity data. It has also been argued that the impacts of new
technologies take time to emerge and it takes time to adjust to new organizational arrangements
and to upgrade human resources to cope with the challenges of the new technologies (OECD,
2003). To the extent it takes time and resources to operate a new technology then even a major
technological revolution such as ICT may be associated with a decline in productivity as has
been shown by David (1990) and Greenwood (1997). This learning period is also characterized
by increasing wage inequality as skilled labour has an advantage learning.
ICTs may improve the quality of education to the extent that they make it easier to access vast
amounts of information, facilitate presentation of materials using multimedia and collaboration
with others to improve classroom experience and ultimately lead to improved cognitive skills.
However, making effective use of ICT requires additional complementary investments such as
investment in teacher training and adaptation of the curriculum to accommodate the adoption
of ICTs. Experience in other countries has shown that a major challenge here is in addressing
the question of how ICT should be integrated and how classroom conduct could be changed to
take full advantage of the new technology. ICT can also facilitate the expansion of the reach of
long distance learning, allowing people to interact with education and learning and allowing
the accommodation of larger numbers of learners from virtually all places that can be reached
by ICTs.
ICTs have been shown to affect poverty reduction by having an impact on poverty reducing
sectors such as the social sectors. For instance, ICTs can increase the volume and flow of
medical information, which can affect the health of the poor. ICTs can also be used to influence
learning and delivery of education.
ICTs affect poverty through their impact on productivity and income generation as they
give to sectors where the poor are likely to be most actively engaged. For instance, productivity
increase in the small and medium enterprises (SMEs) can have a poverty reducing effect to the
extent SMEs gain access to market information (faster and more cheaply), access to information
on input prices and output markets and to the extent they strengthen forward linkages to the
market (Pigato, 2001) and backward linkages to the domestic suppliers of inputs.
Rural-based ICTs have the potential to have an impact on agriculture through increased
revenues and diversification of agricultural production, made possible by delivering short
message service (SMS)-based price and crop information (OECD-DAC, 2004b).
ICT-based access to public knowledge is influencing governance structures towards more
democratic and participatory processes. It is influencing the way development agendas are
negotiated. Telecottages, community networks and one-stop shops for basic development
information and statistics are facilitating the access of communities to information flows
that are raising levels of awareness. For instance, telecottages in parts of Asia and Africa are
broadening access to information; community networks are being introduced with public
access points in locations like schools, libraries and community centres; one-stop shops with
basic development information and statistics are being introduced in terminals that are located
within the communities; and integrated systems are being designed to meet basic needs of rural
communities.
We must acknowledge that the impacts of ICTs are not automatic. Some prerequisites may
have to be present before the impacts can be realized. In this regard, some studies have also
suggested that the USA may have been able to benefit from spillover effects as investment
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in ICT in that country started earlier and was stronger than it was in the rest of the world.
Diffusion of ICT may help to establish networks which produce spillover effects as more
firms are connected to the network. Increased use of ICT may also lead to greater efficiency
in the creation of knowledge. Studies at firm level have been able to show spillover from
ICT capital although it has been difficult to demonstrate that impact at the aggregate level.
It has also been suggested that the USA may have been able to benefit more from ICT since
it got its fundamentals right. In particular, it has been reported that the impacts of ICT on the
US economy were facilitated by high levels of competition strengthened through regulatory
reforms combined with sound macroeconomic policies and well-functioning institutions and
markets. Studies have also suggested that a range of structural reforms in Australia have been
important in driving the strong uptake of ICT by firms and have enabled these investments to
be used in ways that generate productivity gains. This was particularly found to be evident in
wholesale and retail trade and in financial intermediation.
Experience from developed countries has shown that ICT investment can contribute
to economic growth and that in that process complementary factors such as human capital
and deregulation play an important role in accelerating the benefits of ICT investment both
for firms and for countries. However, this potential impact of ICT on growth is not realized
automatically or by simply transferring technology to the developing world. The design and
formulation of ICT policies is increasingly facing the challenge of improving their capacity to
address the specific contexts in which ICTs are managed and implemented. The importance
of context in terms of organization, sector specificity, country specificity or region specificity
deserves recognition in the process of examining the role of ICT in economic development of
Africa (Avgerou and Walsham, 2000).
The ICT sector is one of the leading sectors in R&D efforts and the returns from research
in ICT should be widespread given their pervasive use. In addition, ICT plays a leading role
in knowledge creation, codification and transmission. International R&D spillover has been
shown to be significant whether in terms of social rates of return, elasticities of TFP growth
or growth contributions (Mohnen, 2001). The main determinants of spillover appropriation
are the acquisition of expertise through own R&D and education, openness to international
contacts and close collaboration with foreign researchers.
Value chain analysis
The framework paper by McCormick and Onjala (in this volume) gives pointers to how
each of the components of ICT can be associated with a value chain that can offer benefits to
society.
A value chain is the sequence of production or value-adding activities that bring a product from
its conception to its final consumption. The term “global commodity chains” was extensively
used in economic literature in the early 1990s, while the business community often refers to
“supply chains”. Recognition of this chain of value addition encourages the investigation of
the distribution of that value among the various actors and promotes a search for upgrading or
value addition strategies. Various components of the chain may be associated with high or low
linkages to other activities which supply inputs and support services to facilitate activities in
the respective components of the chain.
Value chain analysis also highlights the issues of chain coordination or governance (control
of the chain by various actors).
Value chains may be buyer-driven (often labour intensive and low technology) or producerdriven (often capital intensive and high technology).
In addressing these impacts, value chain analysis could be used as a tool for mapping and
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making assessments of the processes and dimensions involved. Thinking in terms of value
chains helps identify the appropriate “niche” in the chain as a central part of the strategic plan.
For example, in the garment or footwear industry, the relevant criteria are to map out:
• Product quality
• Price
• Time from order to delivery
• Punctual delivery
• Flexibility
• Innovative design.
The value chain approach provides a framework for sector-specific action addressing
domestic and global linkages and helps to identify leverage points and ways to intervene. The
Indian software industry provides a good example of how developing country enterprises can
take advantage of the global trend of outsourcing of services and providing software services
tailored to the demands of global businesses.
Value chain analysis helps the researcher to find out where the bottlenecks are. Which part
of the chain holds up progress in the others? Who (government, private sector, public–private
partnership or donors) is the most appropriate to do what?
Demand-side factors
ICTs associated with knowledge products reduce the distance between consumers and
producers of knowledge products. It has been shown that demand side factors such as
consumer attitudes about sophisticated goods, training, education and skills for consumption
(rather than production) significantly influence patterns of technological development and
therefore economic growth and development. This explains the failure of the industrial
revolution to occur in technologically advanced China of the 14th Century (Quah, 2001). The
policy implication of this finding is that training and education can be important, not only in
providing skills for work and production, but also in providing a sufficiently strong demand
base. Government policies which make consumer attitudes more favourable to knowledge
products can cultivate demand which appreciates and exploits sophisticated technology thus
enhancing people’s participation in the information economy.
3.2.3 Quantitative and Qualitative Analysis of Impacts
The methodological approach needs to be specific and focused on the application of ICT on
specific activities. Qualitative and quantitative methodologies should be combined as deemed
appropriate in specific conditions. Research questions will determine what methodologies can
be used within specific constraints found in each country.
Quantitative approaches often involve the use of sample surveys with emphasis on
quantitative indicators such as income, consumption levels and access to technologies such as
teledensity. The analysis of the impact of ICTs on economic growth and competitiveness largely
rely on quantitative data as exemplified by the World Economic Forum’s Global Information
Technology Reports.
Weaknesses of quantitative indicators necessitate the use of qualitative methods to
complement quantitative data to capture non-quantifiable characteristics such as decisionmaking powers, authority and the underlying motivation of individuals in using one technology
or the other. Experience to date suggests that a decision should be made as to the level of the
analysis (micro, meso or macro) and combine quantitative and qualitative analysis in the most
appropriate ways. Insights from relevant fields (e.g. economics, political science and sociology)
should be integrated into the analysis and different levels of analysis may be invoked as deemed
appropriate.
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65
Considering the paucity of recent data on ICTs, it is advisable to carry out systematic
collection of data on the ICT sector and its growth, explore possibilities of improving on
ICT indicators and indices, and draw from experiences and studies in other countries. Where
appropriate, indicators such as those developed by the World Economic Forum and the
International Telecommunications Union should be used.
Analysis of policies, policy process and performance requires first-hand data on institutional
contexts, political configuration and power relationships, incentives access and usage to review
which policy leads to what level of ICT diffusion. This strand of research needs to draw from
quantitative and qualitative information including national and cross-country data on democracy
and governance (political freedom, participation of the civil society and political volatility),
access to communication services and the quality of policy and regulation. Subjective data are
also important, particularly on the perception of stakeholders on policy and regulation and how
this can be improved.
Where qualitative methods are adopted, researchers are expected to conduct qualitative
surveys and mapping of qualitative aspects such as policy-making, regulation, power
relationships, governance and social exclusion and inclusion using insights from other fields
such as political science. Surveys can be used to collect quantitative data while case studies can
be used to collect more in-depth qualitative insights into specific sectors or enterprises.
Micro-level studies are required at the household or enterprise level and these should, as
far as possible, adopt impact assessment methodologies that would allow for the identification
of the contribution made by a specific intervention and take account of the importance of
identifying the direction of causality. Such methodologies may adopt quantitative or qualitative
approaches, and often may include some form of randomized intervention that affects the
usage or access to a pre-identified intervention. By collecting information on the control, or
counterfactual, group and often by collecting information on initial versus post-intervention
conditions, impact assessments can improve understanding of the positive and negative impacts
that can be directly attributed to an intervention. Even when an experimental approach is not
followed, the structured research design adopted by impact assessments can be used to guide
a less rigorous assessment of the costs and benefits of a development intervention. Developing
appropriate policy for both the private and public sectors, and understanding the impact of
policy and how intervention actually takes place, are thus important research questions for ICT
use in the economy.
When addressing the impact of ICTs, two considerations should be made. First, there may
be a substantial time lag between ICT investments and their payoffs. Second, ICT is only one
of several factors that contribute to improved firm performance.
Local, regional and global policies influence the conduct and performance of firms. A
framework linking these factors and the performance of firms would be preferred. In addition
to internal factors influencing firm performance, account should be taken of determining
external factors such as entrepreneurship, infrastructure, competitive environment, human
resources, market preferences and cost of communication. These factors are also influenced by
the global and regional infrastructure as well as the e-business technological profile, trends in
foreign direct investment in telecommunications, privatization, convergence in communication
technologies and R&D incentives, and capital markets.
The impact of ICTs on specific sectors can be addressed, taking into account the level of
investment in ICT that can optimize impact in the specific sector, the role of public investments
to ensure optimum application of ICTs in the sector for purposes of transformation and how
various key actors in the sector may be affected and the distributional implications of the use
of ICT .
Within a specific sector, in-depth studies should be undertaken that examine the use, costs
66
and benefits of ICT at the micro level (l households, communities and enterprises). These studies
need to be able to distinguish the direction of causality (do ICTs improve economic well-being
or does economic well-being result in increased ICT usage?) as well as the distribution of usage
patterns, costs and benefits within the unit being examined.
In undertaking sector-level studies, both the quantitative analysis and the case studies could
be approached by specifying common building blocks of the sectoral system of innovation.
A sectoral innovation system (SIS) has its own knowledge base and learning processes, it
has specific technologies, systems boundaries, institutions and interactive activities. The basic
elements of the SIS are:
• Actors or agents: These are individuals and organizations. Individuals include
enterprise owners, and engineers/scientists; while organizations include enterprises,
universities, firms, R&D departments and financial institutions such as development
banks.
• Knowledge and learning processes: organizations and individual capabilities differ in
their scientific and technological skills and experiences. The research should therefore
carefully examine the different knowledge bases and the processes of learning.
The sector level studies are expected to cover sector timeline and evolution, sector mapping
and sector innovation policies. These might include the following:
• Sector timeline and evolution would address questions like: What are the nature and
dynamics of the sector? Who are the main players? What has been the performance of
the sector to date? What challenges does the sector face? How effective have policies
and support structures been in triggering innovation and developing a dynamic
innovation capacity?
• Sector mapping would cover issues such as: Who are the main actors and organizations
in the sector, what roles do they play and what are their skills and competencies?
Which actors and competencies are missing and how can they be promoted? What is
the role of policy in influencing the position and effectiveness of various actors? What
is the extent of linkage between actors and organizations, what is the nature of these
links and does it support interaction and learning? Which links are missing and what
types of linkage need to be encouraged?
• Innovation policies would address the role of policies in strengthening learning,
investment and linkages that constitute the bases for dynamic innovative change on
a continuous basis. Research would map policies that directly or indirectly affect
technological capacity building, learning, linkages and investment within the computer
system of innovation. It is important to define the needs at various levels and explore what ICT can do
to meet those needs. At the national level, for example, it is important to define the
national development objective and strategy as a basis for posing the question of use
of ICT for realizing the national objectives. In the context of Africa, concern over
growth and poverty reduction would have to be addressed along with concerns over
the transformation of the African economy towards a more dynamic economy which
can better cope with the global competitive environment.
Applying quantitative and qualitative analysis is possible in specific areas of ICT itself or
in any of the requisite infrastructures. The framework papers have gone into further details
regarding specific aspects of ICT. For instance, in the area of human resource development for
ICT development Nissanke (this volume) has pointed out that relevant information will need
to be gathered, synthesized and evaluated. The information will be gathered from government,
academia and industry with emphasis on the collection of human capital information on tertiary
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67
education and other forms of specialized education and to a limited extent on secondary
education. It is recommended that information be collected on both the quantitative and
qualitative indicators. The information collected should be synthesized and evaluated based
on clusters that can signify key attributes such as the quantity and quality of desired categories
of human resources, the quality of the environment for professional development and related
infrastructure. This approach can be adopted with appropriate modifications to different sectors
and country contexts.
4.0 Concluding Remarks
The review of methodology has shown that both quantitative and qualitative approaches
to the impact of ICTs on economic development and transformation may be adopted in the
analysis. The challenge is in adopting the methodologies to specific contexts with appropriate
adaptations. In any case, the assessment of the impact of ICT on economic development
and transformation should take into consideration the continuous interaction between
technical and socioeconomic processes. The respective roles of various stakeholders should
be considered allowing for some of these institutions to arise spontaneously from social and
market circumstances and others to be deliberately created by government.
The impact of ICTs on development and economic transformation can be mediated through
several channels. These include its impact on the ways and the speed of acquiring information
and knowledge (impact on education and learning) across societies and sectors; its impact
on production and the way the production process is organized whereby the technology has
an impact on the organization of the workplace resulting in an impact on productivity and
the consequent impact on wealth creation by transforming traditional production systems and
creating new production regimes; and its impact on networking with its consequences on the
way business and research is carried out.
References
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Developing Countries. Aldershot: Ashgate Publishing Ltd.
Castells, M. 1996. The Information Age: Economy, Society and Culture. Vol. I. The Rise of the Network Society.
Massachusetts and Oxford: Blackwell .
David, P.A. 1990. The dynamo and the computer: An historical perspective on the modern productivity paradox.
American Economic Review. Papers and Proceedings 80.
Framework papers for the AERC project “The Impact of ICTs on Economic Development and Transformation
in Africa” (2007) SHOULD THESE BE CITED?
Freeman, C. 1994. “The economics of technical change: A critical survey article.” Cambridge Journal of
Economics.
Gillwald, A. (ed.) 2005. “Towards an African e-Index: Household and individual ICT access and usage across
10 African countries”. The LINK Centre, Witwatesrand University School of Public and Development Management,
Johannesburg.
Greenwood, J. 1997. The Third Industrial Revolution. Washington, D.C: AEI Press.
ILO. 2004. “A fair globalization: Creating opportunities for all”. Report of World Commission on Social
Dimension of Adjustment. Geneva.
Kraemer, K.L. and J. Dedrick. 2001. “Information technology and economic development”. Results and policy
implications of cross-country studies. In M. Pohjola, eds., Information Technology, Productivity and Economic
Growth. International Evidence and Implications for Economic Development. WIDER Studies in Development
Economics. Oxford University Press.
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Mansell, R. ,eds., 1994. The Management of Information and Communication Technologies: Emerging Patterns
of Control. Science Policy Research Unit. London: The Association for Information Management.
Mohnen, P. 2001. “International R&D spillovers and economic growth. In M. Pohjola, ed., Information
Technology, Productivity and Economic Growth. International Evidence and Implications for Economic
Development. WIDER Studies in Development Economics. Oxford University Press.
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OECD-DAC. 2004a. “ICTs and economic growth in developing countries”. DAC Network on Poverty Reduction.
DCD/DAC/POVNET (2004)6/REV1, December.
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POVNET(2004)13, October.
Oyelaran-Oyeyinka, B. and L. Kaushalesh. 2004. “Determinants of e-business adoption: Evidence from firms in
India, Nigeria and Uganda”. UNU-INTECH Discussion Paper 2004-14. UNU.
Oyeyinka, B. and K. Lal. 2004. Sectoral pattern of e-business adoption in developing countries. UNU-INTECH
Discussion Paper 2004-7. UNU. DISTINGUISH BETWEEN WHICH IS A AND WHICH IS B
Pigato, M. 2001. Information and Communication Technology, Poverty and Development in Sub-Saharan
Africa and South Asia. Washington, D.C.: The World Bank.
Pilat, D., F. Lee and B. van Ark. 2002. Production and Use of ICT: A Sectoral Perspective on Productivity Growth
in the OECD Area. OECD Economic Studies No. 35. Organisation for Economic Co-operation and Development,
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Pohjola, M.i ,eds., 2000. Information Technology, Productivity and Economic Growth. International Evidence
and Implications for Economic Development. WIDER Studies in Development Economics. Oxford University Press.
Porter, M.E. 2000. “Location, competition and economic development: Local cluster in a global economy”.
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Productivity and Economic Growth. International Evidence and Implications for Economic Development. WIDER
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Methodology for Value Chain Analysis in ICT Industry
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69
CHAPTER 4
Methodology for Value Chain Analysis
in
ICT Industry
Frameworks for the Study of Africa By
Dorothy McCormick
Joseph Onjala
Institute for Development Studies University of Nairobi
Paper Prepared for a special research project by African Economic Research Consortium (Nairobi) on
ICT Policy and Economic Development in Africa.
15th August, 2007
1. Introduction
T
he world is experiencing a new industrial and technological revolution which
is bringing about a significant, fast and extensive transformation of society and
industry. The result of this revolution is that there is now a rapid increase in the
processes of production and the transmission of goods and services produced. The information
and communication technology (ICT) revolution is also encouraging new goods and services,
changing the nature and organization of work, and replacing materials, resources, energy and
land with information and knowledge as the principal factors of production. Furthermore, ICT
is blurring the former differences between the manufacturing and services sectors, between
work, education and leisure activities and between male and female work roles. ICT systems are
pervading virtually all forms of human endeavour: work, education, leisure, communication,
production, distribution and marketing. They are also changing the scale and content of
information networks, the interdependence of organizations and how people live, work, shop,
learn, communicate and play.
ICT refers to technologies that pertain to human communication processes and the information
they handle. It includes telecommunications equipment, computing hardware and software,
office machinery, electronic goods and components used to store, process, and communicate
information. It is the new science of collecting, storing, processing and transmitting information.
ICT refers more particularly today to how computers store, process and transmit information
through, for example, satellite, telephone lines, teletext and cable. It is the convergence of
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information, computing and telecommunications. The ICT sector is a gamut of industries and
services activities—internet service provision, telecommunications equipment and services,
information technology (IT) equipment and services, media and broadcasting, libraries and
documentation centres, commercial information providers, network-based information services
and other related information and communication activities. These technological components
which used to be considered separate activities have converged to characterize all aspects of
ICTs. It can be conceptualized as an innovation system whose components interact to produce
or deter innovative information and communication activities. Alternatively, it can be seen as
a value chain in which the product is either a good, such as a computer or software product, or
information communication services.
Computers are one of the three major aspects of ICT; the others are information and
telecommunications. The two main components of computers are hardware (the physical
pieces of equipment) and software (the instructions used to control the tasks of the product).
The enormous progress made by computers is largely responsible for the ICT revolution.
Whereas the role of ICT in the transforming of society is acknowledged, what has not been
explored adequately is the impact of ICTs on economic development. Efforts to relate ICT to
economic development are lowest in Africa. This project is designed to contribute to filling
this gap. Given the varied nature of the potential uses and impacts of ICT, this paper lays out
a framework for analysing various ICT value chains in Africa by focusing on ICT producing
and consuming activities. The framework will guide the investigation by African researchers
at the national level.
The paper is divided into five parts. Following this introduction, Part 2 introduces analytical
frameworks in the value chain methodology and Part 3 provides background on the status of
various segments of the ICT chain in Africa. Part 4 discusses the current ICT infrastructure
in Africa, Part 5 addresses research methodology and the data needs, while Part 6 draws
conclusions.
2. Analytical Frameworks for ICT Production and Use
The paper uses two analytical frameworks for understanding ICT production and use; the
national systems of innovation and the value chain methodology. In the following sections, we
discuss each of these approaches and examine how the two complement each other.
2.1 National System of Innovation
The concept of system of innovation is shorthand for the network of inter-organizational
linkages that apparently successful countries have built up as support systems for economic
production. In this sense, it has been explicitly recognized that economic creativity is actually
about the quality of “technology linkages” and “knowledge flows” amongst and often
between economic agents. Where the interactions are dynamic and progressive, agents take
great innovative strides. Conversely, where systemic components are compartmentalized and
isolated from each other, the result is often that relevant agent bodies are not all productive. In
extreme cases, they have ceased to provide any innovative output at all. Put another way, the
key property of a system of innovation is therefore not so much its component parts or notes,
but rather how it performs as a dynamic whole.
According to the national system of innovation (NSI) approach, the most fundamental
resource in the modern economy is knowledge and therefore it follows that the most important
process is learning, recognizing that learning is predominantly an interactive process. The NSI
approach looks at the innovation system as a crucial subsystem of an economy or society.
This approach to development is essentially evolutionary associated with three main features
71
(AERC, 2006): dynamic and process views, uncertainty and learning.
The dynamics and process views are reflected in the characterization of interactions
(especially the centrality of firms), networks and linkages among agents of innovation and
between them and the environmental factors (internal and external). NSI is a set of interrelated
institutions, the core being those which generate, diffuse and adapt new technological
knowledge. These institutions may be firms, research and development (R&D) institutes,
universities or government agencies. They may also be rules and regulations, norms and
practices or values (much like business systems). Institutions mark boundaries which have an
influence on uncertainty and influence the intensity and direction of learning. Learning is the
key dynamic mechanism for knowledge accumulation, innovation and growth. Innovation is
central to the learning process.
From the point of view of the firm, innovation includes all those processes by which firms
master and practice product designs and manufacturing processes that are new to them, if not to
the nation or even to the universe (Nelson and Rosenberg, 1993). The NSI approach defines the
nation as the appropriate level of analysis in the sense that concern is on the behaviour of actors
not necessarily at the forefront of world’s technology but on the factors influencing national
technological capabilities. National systems are postulated to differ in respect of the structure
of the production system and the institutional set-up hence the national idiosyncrasies. These
may include internal organization of firms, inter-firm relationships, the role of the public sector,
institutional arrangements in respect to specific sectors such as the financial sectors and R&D
activity.
In spite of the strong national characteristics that these institutions have today, successful
systems are increasingly distinguished by their openness and their links to regional and global
networks and collaboration arrangements.
The dynamics of ICT technological and institutional change unfold at many different levels,
and on different time scales. Individual ICT technologies change relatively rapidly, whilst
technological systems tend to change relatively slowly. Innovation is non-linear, as systems
typically show increasing returns to adoption, so that small changes in initial conditions can
result in radically different outcomes. Innovation processes are uncertain because neither future
technological and market opportunities nor policy and regulatory regimes can be accurately
predicted.
System approaches recognize that any actor individual, firm or government-has limited
ability to gather and process information for decision making the so-called “bounded
rationality”. Because the future is uncertain and firms lack perfect knowledge, what they
know and how they learn becomes central to understanding the innovation process. Finally,
innovation systems approaches emphasize the importance of institutional factors in influencing
the rate and direction of ICT innovation. These range from habits of thought and action to
policy and regulatory frameworks.
In its ultimate analysis, an economy’s ability to harness the new ICT technology for
development in a sustained manner depends to a great extent on the national system of
innovation. NSI is an interactive system of existing institutions, private (both local and foreign)
and public, universities and government agencies aiming at the generation and diffusion of
technology (Freeman, 1987; Lundvall, 1992; Nelson, 1993). The interaction among them may
be technical, commercial, legal social and financial as much as the goal of interaction may be
development, protection, financing or regulation of new S&T (Neosi et al., 1993). Promoting
the use and production of IT and also the creation of the information infrastructure, human
capital and an innovation system calls for targeted policies which inter alia include those
relating to trade and investment.
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2.2 The Value Chain Methodology
A value chain is the sequence of production, or value-adding activities leading to and
supporting end-users of a particular product. It is, in other words, the chain of activities required
to bring a product from its conception to its final consumption. Overlapping names and concepts
have been given to this sequence of activities (McCormick and Schmitz, 2001). For example,
value chains have been compared to the filière approach in economics, which involves an
assessment of the various stages of physical transformation and their inter-connectedness in
the journey of a commodity from raw materials to the consumer. The term “global commodity
chains” was extensively used in economic literature in the early 1990s, while the business
community often refers to “supply chains”. We prefer and will use “value chain” for a number
of reasons. Chief among these is that the term highlights the value addition that takes place at
every stage of the chain. Recognition of this chain of value addition encourages the investigation
of the distribution of that value among the various actors and promotes a search for upgrading
strategies, which will be discussed further later in this chapter.
Value chains have a geographic dimension. They may be national, international or global,
depending on the location of the various processes comprising them. In a national chain, all
processes, from design to distribution, take place within national boundaries. In many chains,
the processes spill over beyond national borders and become regional, international, or even
global. In global value chains, the different processes of design, supply, production, etc., take
place in different parts of the world. While international value chains operate in more than
one country, global value chains operate in two or more regional blocs. Value chains at the
scale of supranational regions operate at the level of trade blocs. The geographic dimension
is important to developing countries because they want to know which links of the chain are
within their borders, how profitable these existing links are, and what potential exists for
bringing in additional links.
The value chain provides an important construct that facilitates the understanding of the
distribution of returns from the different activities of the chain (Kaplinsky and Morris, 2001).
By breaking a chain into its constituent parts of design, supply, production and distribution,
one can better understand its structure and functioning and, perhaps more importantly, assess
its scope for systemic competitiveness. Value chain analysis therefore is an effective means of
conceptualizing the forms that functional integration takes in the production process, because
it shifts the focus from production alone to the varied set of activities that make up the chain.
Value chain analysis also highlights the issues of chain coordination or governance. The
pattern of direct and indirect control in a value chain is called its governance (McCormick and
Schmitz, 2001). Chains vary in the degree of overall control that is exerted, in the location of
control within the chain, and in how much of it is concentrated in a single firm. Overall control
can be almost non-existent, with interactions being mainly driven by market forces, or a chain
can be strongly or weakly directed by one or more of its actors. The concept of governance is
most meaningful in the latter case. In these cases some firms directly or indirectly influence
the organization of the chain’s production, logistics, and marketing systems. Through the
governance structures that they create, these firms can take decisions that have consequences
for the access of others to markets and the range of activities that they are able to undertake.
The influence can extend from defining the products to specifying the processes and standards
to be used in production.
Governance is sometimes exercised directly through the control of key resources and
decisions about entry and exit and monitoring of suppliers. Governance may also be exercised
in more subtle ways, such as providing technical support to enable producers to achieve the
73
required performance. The parameters defining what is to be done at any time are product
definition, how it is to be produced (production process), when it is to be produced and how
much is to be produced (Humphrey and Schmitz, 2001). The way a chain is governed may
determine such competitive factors as market access, fast track to acquisition of production
capabilities, distribution of gains and to funnel technology assistance.
Gereffi (1994, 2001) is credited with identifying two main types of value chains: buyerdriven and producer-driven. In the buyer-driven value chains, the buyer at the apex of the chain
plays the critical governing role. Labour-intensive industries common in least industrialized
countries are often buyer-driven. Examples include garments, processed fruits and horticultural
products. In the producer-driven chains, producers with critical technology play the main
role of coordinating the various links and take the responsibility of checking the efficiency
of their suppliers and customers. Producer driven chains often have significant foreign direct
investment and are more often capital and technology intensive industries.
A visual representation of the different stages and the connections between chain actors is
mapped in Figure 1. Chain maps can be basic flow charts or fairly complex diagrams showing
the varied interactions of a chain. The central core of the chain, represented by a series of
rectangles connected by arrows, shows the material flows from product design to raw materials,
processing, distribution, and ultimately, the final consumers. To the right and left of the diagram
are ovals that stand for other inputs into the chain. These include machinery supply, labels and
packaging, and services such as infrastructure and various producer services.
Figure 1: A Simple Value Chain
Design and
product development
Infrastructure
Raw materials
Producer services
Machinery
Labels &
packaging
Processing/
manufacturing
Distribution
Traders and other
industrial users
Final Consumers
Source: Adapted from UNIDO 2003
74
The diagram also suggests the existence of information feedback from the purchasers of the product into
its (re-)design and development.
The mapping highlights the sometimes forgotten fact that production is only one of several
value adding activities. Value chain analysis and the actual mapping that accompanies it identify
the various activities performed in partial links in the chain at different stages of the process,
the transformation of inputs into outputs, and the support services. This distinction is important
since it draws attention away from an exclusive focus on services.
2.3 The Challenge of Information and Communication Technology Leapfrogging on the Value
Chain in Africa
Much of the world has followed an incremental path of ICT technological advancement.
For example, telephone lines were used for dial-up Internet access and then cable lines were
utilized for high-speed access. African countries simply have not had the resources to make
investments along the incremental stages. This has left many of these countries in a state
of antiquated technology resources. However, because of “the lack of investment in legacy
systems, hardware and software, they can be in a good position to ‘leapfrog’ over some of the
incremental steps and to select a new position on the technology curve” (Fleming, 2003:8;
Ensley, 2005).
Technological leapfrogging offers an opportunity for developing countries to catch up with
modern ICT resources. Steinmueller defines leapfrogging as “bypassing stages in capacity
building or investment through which countries were previously required to pass during the
process of economic development” (Steinmueller, 2001:2; Ensley, 2005). In practical terms,
leapfrogging is “bypassing some of the processes of accumulation of human capabilities and
fixed investment in order to narrow the gaps in productivity and output that separate industrialized
and developing countries” (Steinmueller, 2001:2; Ensley, 2005). Several characteristics about
current technologies make it easier for developing countries to introduce ICT resources into
their regions). For example hardware is less expensive and easier to install. The “potential
for leapfrogging seems even brighter owing to the emergence of Internet technologies”
(Steinmueller, 2001:2). Internet technologies support the global flow of information and the
establishment of distance-free personal and organizational relations. With modern Internet
and ICT resources, there is hope that developing countries can enhance their economies and
improve the quality of life of their inhabitants.
Rapid advances in ICT present the late-industrializing (such as African) nations opportunities
to rapidly catch up with the more advanced nations through rapid diffusion in the use of new
ICT (Kagami and Tsuji, 2000). Late-comers may be able to exploit new ICT more efficiently
than advanced countries for two reasons:
• First, they may be able to learn from the experience of advanced countries without
having to pay the cost of initial learning and experimentation (the “fast follower”
advantage).
• Second, they may be able to leapfrog into the latest generation of technologies, thus
avoiding the legacy problems of having too much asset-specific investment sunk
into earlier generations of obsolete technologies (the “leapfrogging” advantage). The
more “disruptive” the new technological advances, the greater the new “attacker’s
advantage” can be in exploiting new technologies versus the incumbents (Foster,
1986).
• First, technological learning may require a long cumulative process of human capital
development through incremental learning-by-doing. Consequently, new technologies
75
cannot be diffused at a faster pace in the late-industrializing countries than in the
advanced countries because of the human capital bottleneck.
• Second, efficient adoption of new ICT may presuppose the existence of business
infrastructure not only in the form of “hard” physical capital (computers, network
infrastructure, etc.), but also “soft” social capital (relatively efficient factor and product
markets, well-functioning financial and regulatory institutions, etc.). Thus, while it is
possible for new individual firms to overtake established industry leaders by being
faster and more nimble in exploiting new, disruptive technological innovation, it is
more difficult for an entire nation to leapfrog other nations technologically.
• Third, the late-comer countries may lack the financial resources to invest in new
technologies as aggressively as the advanced nations, with the result that the advanced
countries will reap greater productivity and innovation benefits from new technology
than the late-comers (Jalava and Pohjola, 2001).
• Finally, given that advanced countries are able to adopt and apply new ICT faster than
the late-industrializing nations, they may be better able to overcome their factor cost
disadvantage, thus giving them the ability to re-capture much of the ICT manufacturing
that might migrate to the developing countries (Wong, 2001).
The question of whether existing inequalities in economic well-being across nations may
be accentuated or attenuated by the ICT revolution ultimately rests on how these opportunities
and threats are actually realized in practice. Will the rapid market growth and technological
disruption opportunities created by the revolution generate sufficient “digital dividends” to
African countries? Or will the weight of cumulative advantages enable more advanced countries
to better exploit the new technologies, leading to an increasing “digital divide” between the
more advanced and African countries?
2.4 Mapping the Value Chain in the ICT Industry
ICTs can be disaggregated into ICT producing activities and ICT using activities. It is
important to address both with a view to establishing their significance and drawing policy
implications on each of the two categories (AERC, 2006). In general, the chain in each of the
above activities might consist of several components. Each of the components within the ICT
industry has a value chain associated with it. We shall look at each one of them in detail to
understand what each one offers to different parts of society.
2.4.1 Applying the Value Chain Approach to ICT Producing Activities
ICT equipment producing industries can be categorized into ICT producing manufacturing
activities which include manufacturing, assembly, software production and ICT producing
service activities such as various forms of business processing, e.g. data entry, accounting,
transcription, web design and hosting etc. (see Figure 2).
76
ICT
Producing
Activities
ICT
Producing
Manufacturing
ICT
Producing
Services
Fig 2: ICT Producing Activity Chains
The ICT Manufacturing Chain
ICT producing manufacturing produces hardware and software products intended to fulfil
the function of information processing and communication or use electronic processing to
detect, measure or record physical phenomena or control of physical processes. ICT hardware
can be disaggregated into telecommunications equipment and computer hardware manufacture
and assembly. Computer hardware manufacture and assembly covers the manufacture and
assembly of computers (branded or unbranded/clones) and include clusters that are emerging
in activities associated with the repair of computers. Telecommunications hardware comprises
the manufacture, assembly and repair of telecommunications-related equipment such as cell
phones.
At the top of this chain lies design and research (see Figure 3). These are the laboratories
where cutting edge research takes place generate new product design and development. At
the next level in this chain are the manufacturers. They manufacture the chips and integrated
circuits that go into each of the components. The devices include all the switches, routers and
other telecom/computer equipment that forms the hardware component of the IT industry.
At the lowest level of the ICT value chain are assemblers. They are the players who just
assemble different components (completely knocked down kits—CKDs) and then sell the
assembled product. The assembled product could be a personal computer, a printer or any
other device. Usually, multinational organizations have a presence across the value chain. They
enter different markets and depending on the ease of doing business and availability of skilled
77
Design & Research
Manufacturing
Computers
Consumers
Assembling
CKDs
Parts
Dealers
Assemblers
Parts Users
Consumers
Figure 3: Value Chain for ICT Producing Activities
resources set up an assembling unit, a manufacturing plant or a research laboratory.
Characterizing the ICT Producing Activities
Key words in today’s ICT manufacturing sector are: increased competitive pressures, short
product life cycles, complicated production chains, high level of outsourcing, globalized
production networks, end-to-end solutions, flexibility, “global footprint”, cost reductions, and
low-cost countries. The ICT producing industry is the most globalized industry after the garment
industry. An ordinary computer now contains components manufactured and assembled all
over the world: semiconductor chips made in New Mexico, Scotland or Malaysia, a disk drive
made in the Philippines, Singapore or Thailand, a CRT (cathode ray tube) monitor made in
Japan, and circuit boards made in China and assembled in Mexico or Costa Rica (Schipper and
Haan, 2005). As a consequence countries are competing on wages, advantages and incentives
to attract foreign investments. Prices of ICT devices are in continuous decline, and profit
margins for manufacturing are thin. This is one of the reasons for the continuing shift to lowcost countries, and is used as an excuse for putting pressure on the wages of ICT workers.
The highly complicated production chain and the pressure to cut costs pose a challenge to
the sector. It requires involvement at different levels of the supply chain, both from original
equipment manufacturers (OEMs), electronic manufacturing service companies (EMS) and
original design manufacturing companies (ODMs).
The electronics industry, and information technology in particular, is actually a trendsetter
in creating globalized production networks. The key developments in the restructuring process
in the assembly of IT hardware are:
• Vertical specialization.
• Vertical disintegration of the value chain by brand name firms, also called the OEMs,
towards “fabless” manufacturing (in which firms have minimal or no manufacturing
capabilities of their own).
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• Vertical reintegration by contract manufacturers, by acquiring manufacturing assets of
the OEMs.
• The rise of the contract manufacturers: the EMS and ODM companies.
• Global production networks.
• The centralization of manufacturing/supply chain management.
Vertical specialization: In this system, the leaders in the ICT sector try to achieve marketcontrol by focusing on the design of key products in highly specialized market segments.
Their aim is to create new product markets through the development of new technologies and
their commercialization. The vertically integrated electronics manufacturers have traditionally
managed products all the way from design and development through manufacturing and
distribution. Companies such as IBM and Digital Equipment designed and produced the key
components of their computer systems in their own facilities, including computer chips and
operating software. But with the emergence of specialized technology companies such as Intel
and Microsoft, the production system of the computer industry became increasingly modular:
computers, servers and Internet routers are assembled from standard components such as chips,
disk drives, modems and displays, and assembled and configured in various ways into products
for different competitors (Schipper and Haan, 2005).
Vertical disintegration: As leaders in the industry focus on achieving market control by
product innovation, they lose their interest in the “small” profit margins of manufacturing.
Product innovation is increasingly separated from manufacturing. For companies such as IBM,
Cisco and Sun Microsystems, manufacturing is no longer where they add value. They get
paid instead for understanding customer needs, design and distribution. This increases the
pressure to get the less profitable manufacturing assets off the balance sheet. Some companies
called fabless companies have ended up with minimal or no manufacturing capacities of their
own. The first OEMs outsourced their low-margin operations to contract manufacturers in the
mid-1980s. Thus, together with the vertical specialization, we see at the same time vertical
disintegration of the computer supply chain (Schipper and Haan, 2005).
Following the development of vertical specialization and vertical disintegration, a new
model of outsourced manufacturing, contract manufacturing, emerged. There are two major
types of contract manufacturers in the electronics sector: EMS companies and ODM companies.
The EMS companies are also known as contract electronics manufacturing companies (CEM),
a slightly different name for the same group of companies. ODM companies also hold the
intellectual property for the products.
The current level of outsourcing
The level of outsourcing in the ICT producing manufacturing and services sectors is very
high and is still increasing: the dynamics of the ICT sector have been driving the industry
to increase its outsourcing to the EMS and ODM industry. OEMs outsourced 50% of the
manufacturing of notebooks in 2002, over 80% in 2004, and an estimated 85% in 2005. While
the EMS and ODM industry manufacture virtually 100% of the motherboards for desktop
personal computers (PCs), it only assembled 67% of the final desktop computers. Some OEMs
still consider final assembly to be an important interface with the customer, so this is carried
out internally by the branded OEMs. These OEMs use contract manufacturers for the largescale manufacturing of printed circuit boards or pre-assembled product kits (also called the
“bare bones”). The overall ratio of manufacturing outsourced against manufacturing in-house
in 2004 was 73% to 27% (Schipper and Haan, 2005).
Global production networks
79
Through their continuing acquisitions, contract manufacturers are striving to build a global
footprint, strategically positioning themselves in every major regional market, and offering
synchronised worldwide manufacturing that provides OEM companies with a model that
minimizes their manufacturing and material costs with advantages for the logistics because
of the presence near the market. The strategy is to build “super sites” in low-cost regions with
access to local resources and suppliers, and “high-competency centres” that specialize in hightech services for infrastructure products. The strategy of the major OEMs is to centralize their
relationships with contract manufacturers; some have started to create special accounts for
their relationships with contract manufacturers, resulting in the selection of a small number of
preferred contract manufacturers for their global operations. Recently, some OEMs have taken
back part of their outsourced supply chain management (the purchasing of components) to
counterbalance the bargaining power of the contract manufacturers. Contract manufacturers,
on their part, are also centralizing their supply chain management. Purchasing decisions are
shifted away from individual plants to a company-wide organization (Schipper and Haan,
2005).
ICT Producing Services
Also important in ICT producing are content providers/software developers. These consist
of the software part of the IT industry. This relates to software development and content
generation. Based on level of skills required, it can be classified as: IT enabled services; content
management/software development; and tech consulting. The content providers are also seen as
ICT producing services since they are meant to enable the function of information processing
and communication by electronic means.
2.4.2 The Value Chain in ICT Consuming activities
The uses of ICT are diverse, and include e-commerce, enterprise management, e-services,
etc. They comprise telecom/IT services that can be provided to individuals, and to academic
and corporate organizations, and form an important component of the telecom infrastructure.
Based on technological complexity the value chain comprises: value added services; voice–
cellular; data–ISP (Internet service provider); voice–basic, NLD (National Long Distance),
ILD (International Long Distance); and voice services–fixed line basic, national long distance
and international long distance.
ICT using/consumption activities:
• Service providers
• Application developers/content providers
• Intermediaries
• Sector specific users, government, private firms, etc.
The other users are application domains which consist of all the areas/domains/industries.
They cover the gamut of sectors, both social and business, which have been affected by the
infrastructure created by the ICTs. The Internet has metamorphosed over the years from being
a mere channel for disseminating information to being a powerful integrative force binding
disparate functional applications thus allowing the economy to work in near real time.
There are different ways in which ICT has been put to use. These are seen to be integrative,
interactive and informative (see Figure 4). Informative is the most basic form in which ICT is
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used by society. For example, the Internet is another medium for disseminating information,
just like the print media or television. However, the difference lies in the cost at which the
information is disseminated, the richness of the information and the number of people that
information can reach. These features of the Internet make it an appealing platform around
which cheap solutions to complex social and economic problems are built (Sudhanshu, 2002).
Figure 4: ICT consuming activities
Integrative
Informative
Interactive
ICT use is also interactive (see Figure 5). This implies using ICT as a medium for twoway communication of information. In this mode, not only does the Internet act as a medium
for disseminating information but also as a medium for collecting information. Thus the
medium becomes more transactional in nature. This requires more skill and technical expertise,
especially in the software development and content management domain (Sudhanshu, 2002).
Organizations today are using ICT (i.e. the Internet) to bind diverse applications and present
one common interface to the customer. The Internet in this form is being used by business
organizations to offer better services to their customers at reduced cost taking into account
the preferences and desires of each and every customer. It is this form of exploitation of the
Internet which has given rise to the oxymoron “mass customization”.
81
Figure 5: Interactive use of ICT
Sourcing/
Collecting
Information
Networking
with firm’s
branches
Firms
Interface to
Customers
Information
Dissemination
Each of the above interactive components in the ICT using activities can be analysed
separately as a value chain (see Figure 6). For example, we can examine the flow of the
information dissemination chain from the source to its application below. There are several
components in this chain, each of which is likely to be affected by a host of factors.
ICT
Design
ICT
Product
Development
ICT
Dissemination
/Distribution
Figure 6: Value chain in ICT services flows
82
Sectoral Applications Initiatives
Although ICTs are cross-cutting to many uses in different sectors, a few sectoral
applications have gained attention in Africa in recent years, based on countries priorities.
These include education, health, business and trade and governance. The agenda for ICT and
education in Africa can be strengthened through e-education initiatives, such as the African
Learning Network1 that supports school networks (e.g. SchoolNet), university networks
(e.g. VarsityNet), networks of research institutes (e.g. African Knowledge Network Forum—
AKNF2) and networks for marginalized people (e.g. Out of School Youth Network - OosyNet)
(Bounemra and Soltane, 2002).
The utilization of ICTs to improve government services in Africa is gaining momentum.
Recently, the United Nations Economic Commission for Africa (UNECA) launched an
electronic dialogue on e-governance3 that aimed at providing insights into trends in e-governance
programmes on the continent. African governments should try to explore possibilities of using
the Internet to provide better services to society. In countries with low penetration, this could
start by simply posting more information on the Internet. This would lead to more transparency
in the functioning of government and improve the awareness levels of people, creating a more
mature society. Moving forward, attempts should be made to create databases of people and use
them for better governance. Some of the benefits from such databases could be:
•Better statistics about different segments of society on different variables such as
education health, income, etc. and to enable the government to frame policies accordingly. One example could be structuring subsidies to target specific segments of society.
• Improving law and order by keeping criminal records accessible to all in real time.
• Faster issuance of government-related documents such as Acts, application forms for
various services, and tax return forms.
2.5 Complementarities between the Value Chain Approach and the Innovation Systems
Approach
Value chain analysis incorporates both vertical and horizontal relations between different
sectors, underlining the necessity to approach the concept of competitiveness not solely on
the basis of a single economic sector, but more broadly focusing on the whole set of relations
this sector has with other economic domains. These interrelations determine the position and
competitiveness of an entire cluster. The idea of a value chain becomes useful for analytical and
policy purposes once we include three further features:
• First, the activities are often carried out in different parts of the world, hence the global
value chain.
• Second, some activities add more value and are more lucrative than others (the concern
of policy -makers is to help local enterprises move into the lucrative activities).
• Third, some actors in the chain have power over the others.
However, systems are characterized by networks of strongly interdependent firms linked to
each other in a value adding production chain. According to systems logic, interaction between
different units departs more and more from the vertical structure, with horizontal relations
gaining ever-increasing importance. Thus, this approach can complement the value chain
analysis the following ways:
1 http://www.uneca.org/adf99/adf99education&youth.htm.
2. http://www.uneca.org/aknf/.
3. http://www.bellanet.org/lyris/helper/index.cfm?fuseaction=Visit&listname=aisi-l.
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• Analysing economic competitiveness as its scope is not limited to isolated intra ICTindustry relations alone, but also pays attention to relations with other sectors.
• Analysing innovation possibilities, as innovation is typically generated in a system
of comprehensive networks. Frequently, these networks have far-reaching access to
a number of actors across different sectors. The systems approach, by identifying the
support connections, helps establish sources for action without identifying priorities.
3.0 The Status of Various Segments of the ICT Value Chain in Africa
In this section, we re-examine the status of different components of the ICT producing
activities and consuming services in Africa.
3.1 ICT Producing Activities
3.1.1 ICT Producing Manufacturing
Africa’s ICT manufacturing is still in its infancy. Telecoms and computer markets are
relatively small, and indeed, ICT manufacturers in the developing world tend to be found
in Asia or in “offshore platforms” like Mexico. Africa has small-scale assembly operations
but their product tends to go to regional markets. Manufacturing requires large amounts of
“brainpower” and skills at depths which are mostly lacking or less organized in Africa.
A few firms have led the way in local production of what can be regarded as locally branded
computers in Africa. An example is Sahara (India and South Africa), The Zinox Technologies
Ltd. (jointly owned by Stan Tech, Nigeria, Mustek, South Africa, and Alhema, France) which
had the WHQL (Windows Hardware Quality Lab) certificate for its range of products—
desktops, notebooks and servers—branded in October 2000. The Zinox Computers assembly
plant, located in Lagos, currently has a daily operational capacity of 200 to 350 computers. The
firm’s computers have a number of components and parts—power circuits, casing, keyboards
and packaging—fabricated abroad to the company’s design. Following the launch of Zinox,
other efforts such as the United Information Technologies (UNITEC), Omatek Computers and
Beta Computers have entered the Nigerian market with different products (Oyelaran-Oyeyinka,
2006).
3.1.2 ICT Producing Services
Africa has slightly more capacity in this area. There are a small number of regional companies
producing original branded software: Soft (Ghana), Software Technologies (Kenya) and Pastel
(South Africa). And there is even the occasional software contractor: Zimbabwe’s Cyberplex
Africa does 80% of its business outside of its country base. The cost advantage alone should
make this possible. Its programme work for Deloitte in the USA cost them US$10,000 against
the US$90,000 it would have cost them in North America. Buying local and selling in dollars
is a strategy that seems to work.
R&D, and Software Development
Software development (and R&D) needs low-cost, high-quality engineers. Even a country
as large as South Africa, which produces hundreds of thousands of graduates only has 3,000
in maths and science subjects. In many of Africa’s mid-scale countries, the pool of software
engineers numbers in the hundreds and inevitably a proportion have outdated skills. In its
competitor countries, people with these skills number in the thousands and many have current
or near current skills. With the small exception of South Africa, sub-Saharan Africa has no
84
R&D capacity. Zimbabwe’s SIRDC has ambitious plans, but these are in the future. There are
few or no project management skills and no developed business culture to provide an easy
common ground for international partners or buyers. Knowledge of English—the business
lingua franca—is very variable. For example, Tanzania’s decision to make Swahili its main
language means that its ICT community will probably be less proficient at accumulating the
knowledge it requires in a second language.
Business Process Outsourcing (BPO)
Business Process Outsourcing (BPO) is the lowest end of the value-chain and ranges from
simple data input to transcription (voice to text), and specialized services. Africa has barely
entered the market. Ghana and Kenya have several examples. There are plans to set up a
company in Uganda to do offshore accountancy processing. Africa’s competitive edge would
be to target the banks and insurance companies of the developed world who are looking to cut
“back-room” costs. Other specializations include medical and legal transcriptions. Higher level
services require higher skills.
3.2 ICT Consuming Activities in Africa
The use of ICTs has grown relatively rapidly in most urban areas in Africa. The ICT
consuming landscape in Africa has changed dramatically over the last few years and within the
continent there are many pockets of significant developments (Jensen, 2002):
• One of the early, and still most important, impacts has been in the use of email to reduce
the cost and to increase the speed and duration of international communications. This
has allowed many people and organizations to improve management, obtain resources
and generally achieve much better communications with their family, friends,
colleagues and partners around the world.
• In 2005, Africa had the highest growth rates in terms of numbers of Internet users,
since many countries start from very low levels, but it had the lowest penetration rate
after Oceania. South Africa, Egypt and Nigeria account for approximately 14% of
African users. South Africa and Egypt have above average penetration rates in Africa
(UNCTAD, 2006). At the global level, Africa has very high growth rates (66%), but
many African countries start from rather low levels. The highest growth in the number
of Internet users has been in Eritrea, Sudan, Morocco, Congo, Libya, Lesotho and
Nigeria. Egypt, with 3.9 million users, has caught up with South Africa and is now the
country with the second largest number of Internet users in Africa (UNCTAD, 2006).
Africa is catching up in telephone use, but one-fourth of the subscribers are in South Africa.
The top four countries (South Africa, Morocco, Nigeria and Egypt) account for 57% of all
subscribers in the region. Very high subscriber growth rates can be observed in many countries,
such as Algeria, Nigeria, Ghana and Sudan, to name the larger ones (UNCTAD, 2006). The
number of mobile phone subscribers in Africa increased from 15 million in 2000 to over 80
million in 2004, an increase of 433% (UNCTAD, 2006). Mobile phones are the only ICT
in which developing countries have surpassed developed countries in terms of users. Among
African countries, South Africa, Nigeria, Egypt and Morocco continue to be the leaders in terms
of the region’s number of subscribers. In Africa, mobile phones have proved so successful that
in many cases they have replaced fixed lines. An important consideration here is that a single
mobile phone is frequently shared by several people, particularly in poor, rural communities,
and people at all income levels are able to access mobile services either through owning a
phone or using someone else’s (UNCTAD, 2006).
85
Despite progress in ICT consumption in Africa, sub-Saharan Africa, along with South Asia
remain at the bottom of the list of developing regions in Internet usage (see Table 4.1).
Table 4.1: Internet, mobile subscribers and penetration by region, 2006
M o b i l e
subscribers
%
change
20042005
%
M o b i l e Change
penetration 2 0 0 4 2005
23.5
World
2,171,179,091
Developed
economies
809,906,208
Europe
N o r t h
America
22.0
33.6
9.5
A s i a
developed
102,545,000
463,582,325
8.9
3.9
221,828,884
96.1
9.4
Developing
economies
31.3
1,174,964,724
Africa
134,941,820
67.4
A s i a
developing
799,936,437
25.2
L a t i n
America
and
the
Caribbean
239,588,382
37.0
Oceania
developing
498,085
58.8
South-East
Europe and
CIS
186,308,159
49.6
32.4
205,412,718
10.6
30.6
23.7
22.1
3.6
89,135,132
24.9
37.5
15.5
12.1
374,557
49.9
10.3
3.5
32.1
48,193,346
49.3
8.7
39.3
56.2
56.8
52.5
26.4
35.2
4.6
28.8
8.5
316,233,484
41.8
9.2
70.1
441,132,301
35,389,128
7.0
5.7
65.7
16,944,000
63.9
42.5
10.4
29.5
14.1
7.4
219,758,649
22.8
32.1
66.1
6.7
11.5
90.8
10.1
54.4
89,173,852
66.3
12.7
10.7
3.7
11.6
18.1
15.6
531,289,219
76.1
Oceania
developed
21,950,000
19.5
1,020,614,866
83
9.7
Internet users
%
%
change
I n t e r n e t change
2 0 0 4 - penetration
20042005
2005
32.5
14.6
Source: UNCTAD calculations based on the ITU World Telecommunication Database, 2006.
Note: mobile, Internet users—persons; mobile, Internet penetration—per 100 persons.
Furthermore, the success in ICT consumption remains skewed in many parts of Africa as:
• The divide between urban and rural areas is even greater. Most of the services and
users are concentrated in the towns, while the majority of Africans are scattered in
small communities spread out across the vast rural areas. Very limited diffusion of
the telecommunication networks into rural areas (often over 75% of the country’s
telephone lines are concentrated in the capital city) and irregular or non-existent
electricity supplies are a common feature and a major barrier to the use of ICTs,
especially outside the major towns.
• Most tax regimes still treat computers and cell phones as luxury items, which makes
these almost exclusively imported items all the more expensive, and even less
86
obtainable by the majority. Although there have been notable efforts in some countries
to reduce duties on computers, however, communications equipment and peripherals
are still often charged at higher rates.
• Although there are a few notable official general government websites, such as those
of Angola, Egypt, Gabon, Lesotho, Mauritius, Morocco, Mozambique, Senegal, South
Africa, Togo, Tunisia and Zambia, there is as yet little discernible government use
of the Internet for existing administrative purposes. Web presence is higher in some
sectors, particularly those involved in tourism and foreign investment, and these often
have more mature sites that are aimed at developing an international market presence.
However, these are of little interest for most potential users.
Especially in Africa, the number of broadband subscribers in most countries is extremely
small, and penetration rates are less than 1% even in countries that are more advanced in ICT,
such as South Africa, Mauritius, Egypt and Tunisia (UNCTAD, 2006).
Computers are still by far the most important gateway to the Internet even though it is
increasingly being accessed through a variety of devices. Computers are indispensable for
the development of the information economy and in particular for the application of ICT in
e-business processes. An in-depth presentation of the presence of computers in developing
countries is limited by the available data. Estimates on the number of PCs in countries are
usually based on shipments (i.e. computers sold) or, if this information is not available, imports,
coupled with a realistic replacement rate. The latter obviously differs among countries, with
many developing countries having significantly lower rates. The number of Internet users by
country is shown in Annex I, while the penetration of PCs by region and level of country
development is shown in Annex 2 (UNCTAD, 2006).
Some African countries have very few computers: for example, Malawi reported 15,800
computers for 2003. Similarly, computer penetration rates are lowest for Africa (1.4%),
compared with 66.8% for North America (UNCTAD, 2006).
Second-Hand Systems
Second-hand branded systems, especially notebooks, have become increasingly popular
due to their relatively low cost and reasonable period of good service. The importance of
second-hand computers (although currently being blamed as a form of e-waste dumping by
the developed countries) is an important starting point for a large number of entrepreneurs who
import these systems to be serviced and sold in Africa. The business is sustained largely by
the comparatively low cost of such systems which are sought by those who cannot afford new
systems and do not necessarily look for the latest brand in the market.
3.3 Environmental and Health issues in Wireless Technology
As wireless technologies become available in Africa, we need to consider a number of
pertinent issues:
• The very countries enjoying new benefits from the rapid spread of low-cost cell
phones are the same ones with few or un-enforced laws and regulations related to the
environment.
• A recent report from INFORM, “Waste in the Wireless World: The Challenges of Cell
Phones”, calls attention to the hazardous materials used in the phones and batteries,
including arsenic, antimony, beryllium, cadmium and lead.
• The health of consumers is affected both by the applications of wireless technology
and by the impact of the devices on the body. And proliferation of the devices in
hospital environments can result in interactions and interference.
87
• The increased use of different devices that make use of radio transmitters has resulted
in interference problems. In some hospitals in Scandinavia, cell phones are banned
because they have caused ventilators, defibrillators and dialysis machines to fail. Other
studies have shown these failures to be very rare.
• Studies of the effects of wireless devices on humans have shown that the devices can
cause genetic damage in human blood.
• Africa needs to come to terms with these problems before it suffers the effects of
environmental degradation as the dangerous materials leach into soil and water.
Nevertheless, there are positive aspects that need consolidation:
• It is suggested that telecommunications can help empower rural people to voice their
concerns and defend their interests. Many individuals and groups are exploring how
electronic mail and other computer mediated communications can help empower those
concerned with social justice, environmental preservation and other causes.
• Clearly though, cell phones are popular in Africa because of the predominance of oral
cultures and the relatively low literacy rate. People simply want to talk with friends
and relatives; cell phones in villages have cut down on travel time for users who had
previously gone to regional towns in order to make a call.
• Most media, such as radio, television and newspapers, have been developed for oneway broadcasts of information. In contrast to the hierarchical patterns of broadcast
technologies and exclusive private networks, decentralized networks of communication
through the public telephone network have strengthened civil society.
• Telephones provide interactive two-way communications. Telephones can help
empower people to talk back, ask questions, make deals and maintain social networks.
The implications for Africa and non-democracies are more serious. Cellular phones are
a challenge to authoritarian governments whose means of survival is the suppression
of information in order to subdue the population.
3.4 The Current ICT Infrastructure and Regulatory Challenges in Africa
The production and use of ICT, stand on the pillars of information infrastructure, human
capital and an innovative system. The central pillar is an appropriate policy regime which inter
alia includes policies relating to trade and investment that not only promote the production
and use of ICTs but also facilitate the creation of the needed human capital base, information
infrastructure and innovation system. The availability and quality of basic ICT-related
infrastructure are very important for determining the location of globalized services activities.
Economy-wide framework conditions are important factors in decisions about where to
locate production activities. These include the cost and ease of setting up a business, and the
procedures for enforcing contracts. Most African countries have a large catch-up potential, so
their competitiveness, which also resides in other inputs, such as relatively lower costs for the
factors of production (land, capital and labour), different time zones, pool of skilled labour,
language skills, etc. need to increase substantially. In addition to economic indicators, factors
such as the social and political context are also important and are equally wanting.
The quantity and quality of infrastructure and their prices vary greatly across African
countries. Some countries have large absolute stocks of infrastructure, which is one indication
of national capacity for supplying ICT-enabled offshore services (OECD, 2006). Overall, the
stock of ICT-related infrastructure in Africa suggests there is still a long way to go before it
can match developed countries in terms of the intensity and quality of infrastructure. The ICT
sector is one of the sectors more amenable to private sector participation. Although private
sector participation has increased, the depth of this is limited.
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There are several reasons for the low level of ICT technology in Africa (Butcher, 2003:68).
Major constraints and challenges for the development of the ICTs in Africa also include:
• Weak telecommunications infrastructure to support the rapid development of ICT on
the continent.
• Restrictive institutional structures which are ill-adapted to facilitate these developments
to meet the huge demand for ICT services.
• Inadequate regulatory systems and frameworks to guide the development of the sector
and rapid diffusion of ICTs.
• Weak and non-existent regional links to help create economies of scale and drive the
cost of capital equipment down.
• The general low level of economic activity often makes technology unaffordable.
• Many African countries still have irregular or non-existent electricity supplies, which
makes ICT use problematic.
• Lack of related infrastructures (electricity, etc.). Rail, road, and air transport is limited
and this infrastructure is needed to implement and support ICT infrastructure and the
increased social and economic activity that this technology should stimulate.
• Many tax regimes define computers and cellular phones as luxury items which adds to
the price of these goods, especially as the vast majority must be imported.
• Lack of human resources to support rollout, design and exploitation of ICTs. Lack of
skills coupled with the problem of the brain drain contribute to making the widespread
adoption of new technology difficult.
• Concentration of such investments in the more profitable areas of the economy.
• Poor local capital markets to facilitate the mobilization of funds to support these
developments.
• Poor commitment and leadership within African countries to drive this evolution.
• The perception of Africa as a high risk continent with weak governance structures and
systems.
Although a number of African countries have embarked on (regulatory) reforms, the
effectiveness of this is still hampered by:
• The low capacity of regulatory authorities.
• Poor institutional authorities.
• Disparate institutional/regulatory frameworks across the continent and within the
different regions.
In the short-term, ICT infrastructure deployment and rollout are targeted at sub-regional
connectivity and inter-connectivity projects and initiatives directed at building and rolling out
the physical telecommunications and communication network.
The general business climate for increased investment in Africa, acutely needed for the
ICT sector, has suffered from the well-known problems of small markets divided by arbitrary
borders, non-transparent and time-consuming procedures, limited opportunities (due largely
to the historic pattern of monopolies and high levels of state control), scarce local capital,
currency instability, exchange controls and inflation.
By 2003, 16 African countries had ICT policies, while 21 were in the process of preparing
an ICT policy. However, 16 countries had not yet begun the process of developing an ICT
policy. The International Telecommunications Union (ITU) also identified promising trends
in competition and the regulatory environment for African telecommunication markets. Since
1994, 41 African countries have opened their mobile markets up to competition, with more
than one mobile operator. Forty countries have now established independent regulators,
setting the foundations for further expansion in telecoms services. However, generic policy
recommendations of greater competition and independent regulation are usually specific to
89
each market and must be tailored to their individual needs and characteristics.
Perhaps the most interesting developments in African telecoms are the innovative
programmes and new institutional mechanisms being tried out to provide wider access to more
affordable ICTs and to find practical ways of bridging gaps in access to telecommunications.
In actual fact, ICT policy-making is not that new; policy-making has been around since the
introduction of computers to Africa. Most recently, African countries were engaged in the
formulation of either their telecom or broad-based ICT policies. According to UNECA, by
2004, half the countries in Africa had completed their e-strategies in an effort to enhance social
welfare and economic development. Another quarter of African nations (about 14 countries)
were in the process of developing their ICT strategies. The rest have yet to start the process.
While there are a variety of efforts underway to restructure national telecom operations and
build better national and international infrastructure, many of these lack a cohesive approach
built on a clear understanding of the dynamics and impact of the fast-paced and constantly
changing environment of communications technologies. Models of infrastructure provision are
likely to be quite different to those used in developed countries because of the generally low
income levels, limited formal business activity and the much greater importance of the rural
population, where up to 80% of the people may live outside urban areas. In addressing the lowincome factor, innovative models which focus on shared infrastructure, public access facilities
and the use of intermediaries to interact with the public who may not even have functional
literacy, let alone computer literacy, may be necessary.
African countries face severe constraints in their ability to develop the much needed human
capital base, hence the role of appropriate investment policies that attract investment for human
capital formation cannot be over-emphasized.
Regulatory problems are anticipated in taxing ICTs, given the growth of the mobile phone
industry. When the so-called information revolution started, communication infrastructure was
largely state-owned and communication was regarded as a partly public good and a natural
monopoly because of network externalities and high sunk costs. As content flows globally,
taxation of the uptake from the mobile content has become a real challenge for many African
countries. One area of growing concern for both regulators and policy-makers is how to deal
with technologies like Voice over Internet Protocol (VoIP), which challenge existing business
models.
Developments in mobile handset technology and the use of mobile devices by consumers
have made the mobile commerce market more consumer-oriented, more global in scope and
more device-dependent. As a result, consumers can reap the benefits of their handsets or other
mobile devices at any time, anywhere. However, mobile commerce also raises some serious
consumer policy and regulatory issues such as the limited information available on screens and
the security of payments made via mobile devices.
4.0 Towards a Methodology for Value Chain Analysis of ICT in Africa
There are several challenges to using value chain analysis. First, traditional production and
consumption systems are not designed for classifying costs by value activities. Furthermore,
some activities may have very complex value chains, a fact that makes the analysis difficult.
Value chain analysis is an important tool for strategic management, and when competition
is intense, companies must manage activities and costs strategically, or they will lose their
competitive advantage. Value chain analysis can be used to determine at what point costs can
be reduced or value added in an organization’s value chain. Critical steps in the ICT value chain
approach in Africa entail having the appropriate research questions, mapping the different ICT
chains, i.e. ICT producing and consuming activities, and finally analysing the segments (or
sub-value chains and systems).
90
4.1 Framing the Research Questions
4.1.1 ICT Producing Activities
Given our earlier discussion of the poor performance of ICT manufacturing and service
producing activities in Africa, it is pertinent to consider in the analysis:
• What is the extent of production and trade in ICT products and services, i.e. hardware
and software?
• What are the bottlenecks to the production of these activities, i.e. infrastructure and
regulatory frameworks?
• What are the possible interventions to address these constraints?
• What are the possible outcomes of these developments?
Box 1: Important Steps in Value Chain
Methodology
•
•
•
•
•
4.1.2 ICT Consuming Activities
Identify the activity producing or using sector.
Identify the particular product and market that
define the chain.
Formulate research questions.
Map the value chain.
o Mapping a value chain entails making a
visual representation of its different stages
and the connections between chain actors.
Value chain analysis; identify:
o Who governs the chain?
o What is the geographical spread of the
chain?
o What issues affect each segment?
o What issues affect the linkages in the
chain?
There are two steps in analysing ICT consuming activities. In Step 1, map the basic chain,
i.e. if ICT is to be used in the production of wildlife safaris for business travellers, first you
need to map the safari value chain. In Step 2, indicate where and how ICT will be used in this
chain: Internet searches and surveys of travel agencies at the design stage; links into reservation
systems, weather forecasting, mobile phone networks, and satellite maps at the production
stage; and websites, Internet advertising, and use of email distribution lists at the distribution
stage.
Firms and individuals use ICT as a weapon to respond to competitive threats or to seek
new opportunities by offering new services. Firms will use ICT for activities ranging from
automating existing practices to changing business models. They will use ICT, for example, to:
• Reduce the costs of information exchange.
91
• Collect data to better understand their customers’ behaviour.
• Offer new products or services.
• Improve their performance.
Rapid advances in ICT have increased the tradability of many service activities and
created new kinds of tradable services. In particular, “knowledge work” such as data entry and
information processing services and research and consultancy services can be easily carried out
via the Internet and email, and through tele- and video-conferencing.
The development of global value chains offers new opportunities to small and medium
enterprises (SMEs) by enabling them to expand their business opportunities across borders,
although reaching international markets is often a difficult step for SMEs. The increased
opportunities for SMEs come along with important challenges in terms of management, finance
and the ability to upgrade and protect in-house technology. Suppliers can often be given more
responsibility in the value chain to undertake more and more complex tasks.
Basic thematic questions for ICT consuming activities are:
• Has ICT broken barriers to knowledge or information? How has ICT eliminated
information or knowledge gaps in production? Through what channels has this been
achieved, in other words, internet, telephony, and how is this linked to activities in
different sectors, i.e. agriculture, tourism?
• Has ICT broken barriers to participation? How has ICT promoted participation, i.e.
in different sectors, by gender etc.? Through what channels has this been achieved,
in other words, internet, telephony, and how is this linked to activities in different
sectors?
• Has ICT broken barriers to economic opportunity? Has it enhanced rrade, business
activities and interaction?
• How has ICT catapulted economic activities? Through what channels has this been
achieved in other words, internet, telephony, and how is this linked to activities in
different sectors? What are the possible impacts?
For example, in the different segments of ICT consumption, the relevant criteria to map
out are:
• Service quality
• Price of services
• Time from order to delivery
• Punctual delivery of services
• Flexibility
• Innovative design.
Value chain analysis should help the researcher determine where the bottlenecks are:
• Which part of the chain functions (informative, interactive) holds up progress to
service delivery, in other words infrastructural factors, business environment, attitudes
of consumers? Which is contributing to costs escalation, i.e. is it some government
policy?
• Which bottlenecks deserve the priority attention of government? Which can be expected
to be resolved by the private sector and which require public-private partnership?
Where can the donor agencies help?
4.2 Mapping the Chain and Analysing the Segments
The value chain perspective ensures that this action plan does not stop with domestic
linkages. It highlights the importance of facilitating linkages with the global economy.
This includes improvements in infrastructure, customs and visa procedures, which enable
enterprises to move goods and people quickly in out of a country. Mapping the relevant value
92
chain helps these departments to identify where there are weak links. Knock-on effects up and
down the chain become more apparent and complex interdependencies can be visualized and
communicated more easily. Thus, the value chain approach provides a framework for sectorspecific action. Understanding the centrality of relationships helps to identify leverage points
and ways to intervene. The general point to be made here is that grasping the big picture
is important, not just for the researchers and entrepreneurs, but also for the policy-makers.
Should they help local enterprises to find a niche in global value chains coordinated by outside
enterprises? Or should they provide support for local enterprises so that they can produce and
market their own product overseas?
The main general point is that the value chain approach, by tracing the connections from the
buyers to the producers, helps establish priorities for action. It can also be used to draw national
and foreign support agencies into a common strategy.
4.2.1 ICT Producing Activities
A map indicating the different stages of the ICT producing value chain is discussed earlier
under the section on “Mapping the value chain in the ICT industry”. The basic structure of the
chain given in Figure 3 suggests three components: design, raw materials, and processing and
assembling. Since ICT production has not taken off in Africa, issues pertinent to ICT analysis
might focus on the analysis of economic and infrastructural causes of this. What essential
components are missing in Africa? These may be issues of skilled manpower, investment
climate, market size, etc. critical to the process.
4.2.2 ICT Consuming Activities
Again, the discussion of the map for ICT consuming activities is provided earlier in this
paper, with an illustration of the map in Figure 4. The range of services available in the ICT
consumption chain is given in Figure 7.
ISP Providers
Internet Infrastructure:
Computers access.
Electricity,
Policy environment
Application
Developers/Cont
ent providers
Internet
Shops/Outlets
Impact of
Internet use
Figure 7: Range of services in ICT consumption chain
Many people use the Internet mainly for communication and information purposes. However,
business transactions via the Internet (or e-commerce) are on the rise.
Business to Consumer (B2C)—online consumerism: B2C e-commerce occurs when a
company sells its goods or services to the consumer over the Internet.
93
Business to Business (B2B) e-commerce—online transactions among companiesand government related e-transactions: B2B e-commerce involves companies using the
Internet to make transactions with suppliers and services providers. This kind of transaction
used to take place using electronic data interchange (EDI) over proprietary networks before
migrating to the Web. The transactions usually involve standard commodity trading such as
steel, sourcing activities or supply chain management.
Internet Service Providers (ISPs): Not all licensees operate an active business and the
ISP market is dominated by a few major players. Broadband access technologies such as
Asymmetric Digital Subscriber Line (ADSL), Fibre to the Building (FTTB), Local Multipoint
Distribution Service (LMDS), Asynchronous Transfer Mode (ATM) and cable modem are
becoming more popular.
Internet Content Providers (ICPs) and Portal Sites: In a broad sense, all websites are
ICPs. The success of a commercial ICPs depends on whether its content is interesting enough
to attract high hit rates (eyeballs), which would then be translated into revenue by getting online
advertisement. Moreover, some commercial ICPs also facilitate online transactions (usually of
the B2C type) to generate revenue.
Some ICPs specialize in one single topic and provide one-stop information search services.
This kind of portal sites (including vertical portals) is a natural development in managing
infinite information on the Internet.
Application Services Providers (ASPs): ASPs deliver and manage applications and
computer services from remote data centres to multiple users via the Internet or a private
network. In other words, ASPs assist companies to outsource their IT functions, allowing them
to concentrate their resources on their core business.
Most higher value-added service activities require a high level of educational attainment
within the labour force. Thus, the ability to generate these activities requires time, significant
inputs of public funds, and a social and cultural framework that supports the development of
these kinds of skills. Lower value-added service activities are often strong complements to
higher value-added service activities. Retail service clerks are often required for the generation
of value addition from product design engineers.
4.3 Challenges of Data Requirements
One important area of our research concerns how to measure ICTs. This is a challenge, but
there are others. Many African countries have no reliable industrial statistics of any kind. Many
African firms are unwilling to give data to researchers. How should the researcher proceed in
such situations to estimate value addition at firm level?
In February 2006, UNCTAD organized the WSIS Thematic Meeting on Measuring the
Information Society. The meeting produced a core list of internationally comparable ICT
indicators on Internet use, infrastructure and access (see Table A3). These indicators were
agreed on by the national statistical offices of developing countries. The agreed indicators on
infrastructure cover such factors as mobile phone tariffs, international Internet bandwidth per
inhabitant and community Internet access. Where individuals and households use the Internet,
the activities they undertake—such as acquiring information, communicating, purchasing or
ordering goods and services, learning, dealing with public authorities and engaging in leisure
activities—are also monitored. For businesses, the indicators cover areas like buying and
selling over the Internet. The challenge is still on capacity building and training activities, and
on creating regional and international databases on ICT indicators.
The list of core indicators provides useful guidance for countries wishing to start collecting
ICT indicators, and constitutes the basis for developing internationally comparable statistics on
the information society. There is plenty of scope for further developing the core list, which can
94
be amended or expanded with new policy-relevant statistical indicators as experience is gained.
This work continued throughout 2005 and was scheduled to be presented at the WSIS Tunis
parallel event organized by the Partnership (UNCTAD, 2005).
Equally important is the data on NIS which would be complementary to value chain
analysis. Some statistical offices have started compiling figures on ICT use by enterprises and
on e-business, but much remains to be done to bring out systems information. In many countries
where ICT services are a growing economic sector, data on international trade in those services
do not even exist. New initiatives should be supported to collect ICT data and increase their
consistency and comparability. This will not only make the statistician’s task easier, it will help
economists to monitor the digital divide between developed and developing countries.
Currently, very little internationally comparable data are available on the ICT sector in
developing countries. Similarly, comparable data on international trade in ICT services suffer
from a lack of an internationally agreed upon definition of ICT trade in services. By contrast,
data on international trade in goods are collected at national borders by most countries and
compiled in the UN Comtrade database (UNCTAD, 2006b).
4.4 Selection of Countries for the Pilot ICT Study
It is proposed that the study be carried out in five regions in Africa (Anglophone West
Africa, Francophone West Africa, East Africa, Central Africa and Southern Africa) (see Table
4.2). In each region, at least two leading countries in terms of depth and history of ICTs have
been selected for in-depth study. This will permit the envisaged analysis of the impact of ICT
on economic development at the sectoral and macro levels (AERC, 2006:16).
Table 4.2: Countries proposed for the pilot study
Region
Country
Internet penetration ratio, 2005
Anglophone West Africa
Nigeria
3.8
Ghana
1.8
Francophone West Africa
Benin
5.0
Senegal
4.6
Eastern Africa
Sudan
7.7
Kenya
3.2
Uganda
1.7
Gabon
4.8
Cameroon
1.5
Zimbabwe
7.7
South Africa
10.8
Central Africa
Southern Africa
95
4.5 Drawing Conclusions
A great deal of empirical research is needed to gain a clear picture of the role of ICT in
development in Africa. ICT manufacturing has not yet taken off in Africa and empirical
analysis needs to focus on the factors (infrastructural and regulatory) that may be responsible
for this state of affairs. On ICT consuming and ICT producing services, an increasing volume
of research and case studies on estimating the impact of ICTs on social and economic
development, including firm productivity, national growth in gross domestic product (GDP),
trade, labour markets and income inequality, can be undertaken. Some studies exist, but most
appear to be fairly narrow since the ICT sector is still new and undergoing evolution. The short
experiences do not yet provide the sort of overview required for the development of improved
national policies for development.
Value chain analysis would be very effective in tracing product flows, showing the value
adding stages, identifying key actors and the relationships with other actors in the chain. Value
chain studies with detailed value-added analyses on ICT producing, consuming and services
would be invaluable, especially if these studies also incorporate data on national and/or local
innovation systems. The methodological approach presented in this paper suggests approaches
tailored to the specific ICT producing and/or ICT using activities. Qualitative and quantitative
methodologies should be combined as far as possible. Surveys can be used to collect quantitative
data, but such surveys will have to be very carefully designed and implemented to ensure that
the information collected is of the highest quality. Case studies of workers, enterprises, and
even sectors can be carried out using a variety of methods to gather in-depth information.
Finally, policies need to be assessed for their effectiveness, not only in achieving particular ICT
goals, but also in ensuring that desired impacts can be achieved in the specific sectors.
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Table A1: Internet use by country
2005
Internet
users
2005
Internet
penetration
Mobile phone
subscribers
2005
M o b i l e Broadband
subscribers
penetration
2005
2005
ALGERIA
1,920,000
5.8
13,661,000
41.6
ANGOLA
176,000
1.1
1,094,115
6.9
Country
Africa
BENIN
425,000
5.0
75,063
1.0
BOTSWANA
80,000
3.4
823,070
46.6
BURKINA FASO
64,600
0.5
572,200
4.3
BURUNDI
40,000
0.5
153,000
2.0
CAMEROON
250,000
1.5
2,259,000
13.8
CAPE VERDE
25,000
4.9
81,721
16.1
C E N T R A L
A F R I C A N
REPUBLIC
11,000
0.3
77,000
CHAD
40,000
0.4
210,000
2.2
COMOROS
20,000
2.5
16,065
2.0
CONGO
50,000
1.3
490,000
12.3
CÔTE D’IVOIRE
200,000
1.1
2,190,000
12.1
0.9
D.R CONGO
140,625
0.2
2,746,000
DJIBOUTI
10,000
1.3
53,000
195,000
196
260
937
4
1,500
42
EGYPT
5,000,000
6.8
13,629,602
18.4
E. GUINEA
7,000
1.4
96,900
19.3
ERITREA
70,000
1.6
40,438
0.9
113,526
ETHIOPIA
164,000
0.2
236,000
GABON
67,000
4.8
649,807
247,478
16.3
71
1,765,000
8.0
1,904
47.0
GAMBIA
65,000
GHANA
401,310
1.8
0.5
189,000
2.4
31,000
2.0
67,000
5.0
KENYA
1,111,000
3.2
LESOTHO
60,000
GUINEA
GUINEA-BISSAU
LIBERIA
LIBYAN
ARAB
JAMAHIRIYA
400,000
MADAGASCAR
100,000
4,611,970
13.5
245,052
13.7
160,000
4.9
1,515
45
410,000
0.5
504,660
2.7
MALAWI
525,00
0.4
429,305
3.3
MALI
60,000
0.4
869,576
7.7
MAURITANIA
20,000
0.7
MAURITIUS
300,000
745,615
24.3
713,300
57.3
404
164
98
MOROCCO
4,600,000
MOZAMBIQUE
300,000
NAMIBIA
150,000
NIGER
29,000
14.1
0.2
12,392,805
39.4
1,220,000
6.2
495,000
24.4
299,899
2.1
212
14.1
500
0.6
NIGERIA
5,000,000
3.8
18,600,000
REUNION
220,000
28
1,500,691
RWANDA
SAO TOME
PRINCIPE
SENEGAL
249,138
50,000
290,000
3.2
40,000
12,000
7.6
1,730,106
14.8
&
540,000
4.6
SEYCHELLES
21,000
26.0
SIERRA LEONE
20,000
57,003
18,396
575
329,000
SOMALIA
90,000
1.1
500,000
4.2
SOUTH AFRICA
5,100,000
10.8
31,000,000
65.4
165,290
7.7
1,986,000
5.5
1,800
200,000
19.4
SUDAN
2,800,000
SWAZILAND
52,000
TANZANIA
460,000
TOGO
300,000
4.9
443,635
7.2
TUNISIA
953,770
9.4
5,680,726
56.3
1.7
UGANDA
500,000
ZAMBIA
320,000
ZIMBABWE
1,000,000
Source: UNCTAD (2006).
2,500,000
7.7
16,491
1,525,125
5.3
735,000
6.3
250
699,000
5.9
10,185
99
100
Table A3: List of core ICT indicators
No.
Indicators
Basic infrastructure and access
1.
Main telephone lines per 100 inhabitants
2.
Mobile cellular subscribers per 100 inhabitants
3.
Radio per 100 inhabitants
4.
Television sets per 100 inhabitants
5.
Number of PCs per 100 inhabitants
6.
Number of internet subscribers per 100 inhabitants
7.
International internet bandwidth per inhabitant
8.
Broadband internet subscribers per 100 inhabitants
9.
Internet access tariff (20 hours per month) as a percentage of per capita income
10.
Percentage of localities with Public Internet Access Centres (PIACs) by number of inhabitants (rural/
urban)
11.
Percentage of population with access to PIACs by type of PIAC (governmental/private)
12.
Percentage of population covered by mobile telephony
ICT sector
13.
Percentage of total workforce involved in ICT sector (by gender)
14.
ICT imports and exports as percentage of total imports and exports
15.
Value added in the ICT sector (as a percentage of total value-added)
Households
16.
Percentage of households with radio
17.
Percentage of households with a television
18.
Percentage of households with a telephone (fixed only, mobile only, fixed and mobile)
19.
Percentage of households with a personal computer
20.
Percentage of households with Internet access (from the home)
Individuals (by age, gender, including the disabled)
21.
Percentage of population that use a computer
22.
Percentage of population with access to the Internet (by type of access, purpose, location of use)
Business
23.
Percentage of businesses with computers
24.
Percentage of businesses with Internet access
25.
Percentage of businesses with a website
26.
Percentage of employees using PCs
27.
Percentage of employees using the Internet
28.
Percentage of businesses receiving orders over internet
29.
Percentage of businesses placing orders over internet
- McCormick & Onjala 30.
Percentage of businesses with an intranet
31.
Value of orders received over the Internet (as a percentage of total value of orders)
101
Education
32.
Percentage of primary and secondary schools having Internet access for students for study purposes
33.
Percentage of students enrolled in tertiary education having Internet access for students for study
purposes
34.
Enrolled student to PC ratio (in primary, secondary schools and tertiary education)
35.
Percentage of students enrolled in tertiary education in an ICT field or an ICT-dominated field (of the
total number of students) (by gender)
36.
Percentage of ICT-qualified teachers in primary and secondary schools (of the total number of teachers)
37.
Percentage of tertiary education institutions with e-learning courses (of the total number of tertiary
education institutions)
38.
For what purpose do students/teachers use computers/Internet (% for email, research, employment
opportunities, application software, etc.)
Government
39.
Ratio of availability of PCs to number of staff
40.
Percentage of government offices with internet access
41.
Percentage of government offices and agencies with a website
42.
Percentage of government employees with Internet access from the office
43.
% of government workers that use ICTs
44.
Purpose of use: (%) for e-mail, research, database work, geomatics, application software, etc
Agriculture
45.
% of agricultural population and extension workers involved in the exploitation and deployment of
ICTs to the sector
46.
Typology of usage of ICTs in the agricultural sector (% in R&D, business, weather, prices, etc.)
47.
Number of local web-sites and data bases with agricultural information and content
Health
48.
% of health institutions using ICTs (by type of health institution: private clinic, government, university
hospital, pharmacy, etc.)
49.
Geographic distribution of health institutions with computers, telephone and Internet connectivity
50.
% of health professionals that use ICTs for medical purposes
51.
Purpose of usage and % in tele-medicine, email, research (health information, continuing medical
education or distance learning, health promotion (including health information systems), database,
software applications, etc
52.
% of local websites and databases with medical information
102
Supplementary indicators
53.
Total resident population
54.
Total number of households
55.
Percentage of households with electricity
56.
Total number of sub-regional and regional backbones and exchange points to which the country has
access
ICT investment and expenditures
57.
% of ICT investments and expenditures (% vis-à-vis GDP and vis-à-vis general government
expenditures)
Content issues and local languages
58.
% of software developed in local language
59.
% of websites developed in local languages
Security issues
60.
% of networks and websites which are attacked, and nature of attacks
National Information and Communication Infrastructure (NICI) Plans and legislation
61.
Existence of national or sectoral ICT policies and strategies and their implementation status
62.
Existence of national ICT legislations and regulatory frameworks and their effective implementation.
Information And Communication Technologies And Agricultural Development
- May, Karugia & Ndokweni -
103
CHAPTER 5
Information And Communication
Technologies and Agricultural
Development in Sub-Saharan Africa
TRANSFORMATION AND EMPLOYMENT GENERATION
Julian May, Joseph Karugia
Mimi Ndokweni1
Final Framework Paper prepared for the African Economic Research Consortium (AERC)
Revised 25 May, 2007
1 Introduction
I
n an era of globalization and rapid technology change, a country’s competitiveness and
relevance in the global economy is increasingly determined by its capacity to effectively
use information for design, production and marketing (Dzidonu, 2002). A growing mode
of delivery in this environment is through information and communication technology (ICT)
that captures and stores digitally encoded data, manipulates and transforms these data, and
then transmits and shares the results. The importance of ICT for innovation and economic
growth has been widely recognized, prompting the Economic Intelligence Unit of the wellknown Economist magazine to introduce an annual ‘e-Readiness’ ranking in 2000 to guide
governments and investors (EIU, 2006).
This paper deals with the impact of ICT on development, transformation and employment
creation in the agricultural sector in sub-Saharan Africa. For policy makers who must prioritize
the allocation of public resources, the following questions are of concern:
1. What is the critical level of investment in ICT to optimize impact in the agricultural
sector?
2. What is the role of public investments to ensure optimum application of ICT in the
agricultural sector and agrarian economy more broadly?
3. How can those actors in the sector who would be disadvantaged be compensated,
given the distributional implications of the use of ICT?
1 Associate Professor, Researcher, African Economic Research Consortium (AERC) and Research Fellow, School
of Development Studies, University of KwaZulu-Natal, respectively.
104
These issues are particularly relevant in sub-Saharan Africa, where the uptake of mobile
telephony and the attendant investment in ICT has been the most rapid in the world since
2000 (Coyle, 2005; MIT, 2007). As a result of this, the number of mobile subscribers in subSaharan Africa had already exceeded the number of fixed lines by 2001. To begin to answer
the questions that arise from this spectacular growth, and the broader issue of the impact of
ICTs on the agricultural sector in sub-Saharan Africa, this paper uses secondary information
to give an overview of applications of ICT for economic change in the agricultural sector, as
well as for the socio-economic transformation of the wider agrarian economy. The objective
is to identify the elements of an appropriate framework for assessing the impact of ICT on
agricultural development, transformation and employment generation. The paper reviews
international experience with emphasis on sub-Saharan Africa. The link between ICT and
development is discussed more generally before describing the components of the ICT system,
providing examples from the agricultural sector where ICT has been adopted. The challenges
encountered with policy for ICT application in agriculture in sub-Saharan Africa are identified
along with key research questions. The paper concludes by proposing a research project that
will make use of a commodity chain approach to explore nine sector-based case studies to
be undertaken in 12 sub-Saharan African countries. In addition, two cross-cutting studies are
proposed that will synthesize this information, providing answers to the three policy questions
listed.
2 ICT and Development
There has been rapid development of information technologies internationally in the last
two decades. Studies from newly industrialized countries (NICs) and the developed world have
shown that ICT can positively contribute to economic growth and development (Hamelink,
1997).2 It is further argued that ICT has the potential to reduce poverty and improve
livelihoods by empowering users with timely knowledge, and appropriate skills for increasing
productivity, and reducing transaction costs, (Kenny, 2000). The dynamism of ICT is thought
to promise fundamental change in all aspects of life, including knowledge dissemination, social
networking, economic and business practices, political engagement, education, health, leisure
and entertainment. It is also believed that ICT is useful either as a tangible good in its own
right or as a value-adding service and it therefore assists the development efforts made by
governments (Stiglitz, 1989; World Bank, 1998; Marker et al, 2001).
Research designed to provide empirical evidence of this relationship has most often
adopted a broad macro approach in its analysis. As a result, such studies have tended to make
rather general statements drawing attention to the high correlations between higher levels of
economic output and intensities of ICT access (UNDP, 2003). Other research has studied the
correlation between the level of socio-economic development and use of information or the
size of the information sector (Jeong, 1990). Reference is often made to the contribution of
information to development at a global, national or regional level. In the context of developing
countries, ICT is sometimes identified as being central to efforts to escape poverty arising from
the potential benefits for increasing incomes of the poor and enhancing overall national social
and economic growth (Kenny, 2000; Adhikari, 2002; UNDP, 2005a). Attempting to quantify
this aspect, UNDP (2005b) examined the role accorded to ICT in the poverty reduction strategy
2 Slater and Tacchi (2004) see ICT as encompassing “…a full range of information and communication technologies,
which include radio, television, the press, physical notice boards, computers and the Internet.” In addition to this
illustrative list, this paper specifically includes technology and software for bar-coding, wireless technologies and
internet-based software.
105
paper (PRSP) process being followed in many countries.3 In 13 of the 21 countries surveyed,
ICT was mentioned as being of specific importance to rural and agrarian development, and in
4 additional countries, as being central to wider poverty reduction efforts.
A shortcoming of much of this research is that it avoids discussion of the potential benefits,
costs, trade-offs and conflicts that arise at the level of individuals, households, enterprises and
communities. Torero’s (2000) household study of the effects of access to telephone services
on poverty in Peru is an early exception to this and gives some insight into how these hoped
for benefits might actually take place. He argues that such services are pre-conditions to
information and telecommunication technologies and are the basis for the development of the
full range of information technologies. However, his econometric analysis of household data
shows that while access to a telephone does explain why some households remain in a poor or
non-poor category, and is positively associated with transitions from poor to non-poor status
(and negatively associated with the reverse), the latter results are not significant (Torero, 2000).
As a result, the study concludes that changes in human capital status, other assets and family
size are more important causes of pathways into or out of poverty than is access to telephony.
The implication is that increased access to and usage of ICT may be an outcome, rather than a
determinant, of poverty reduction initiatives in developing countries
In an enterprise level study, Matambalya and Wolf (2001), noting the paucity of studies
analysing the effect of ICT on small and medium enterprises (SMEs), used a sample of 300
SMEs in Kenya and Tanzania to explore whether the use of ICT can enable SMEs to improve
their competitiveness and performance. This survey finds a positive correlation between
average enterprise size and use of advanced ICT, which is rising over time. Besides lowering
transactions costs, reducing uncertainties and other positive effects well-addressed by most
information-theoretic analyses, the paper concluded that the use of ICT can additionally increase
the competitiveness of SMEs by facilitating information flows and reducing transaction costs.
The authors also offered some important caveats to understanding the relationship between ICT
and firm productivity, which was found not to be significant. They noted firstly, that there may
be a substantial time lag between ICT investments and their payoffs. Secondly, they argued
that ICT should not be regarded in isolation because it is at best one factor among others that
contribute to improved firm performance.
From this, it is evident that more detailed sectoral studies are required that examine the use,
costs and benefits of ICT at the level of households, communities and enterprises. These studies
need to be able to distinguish the direction of causality (does ICT improve economic wellbeing, or does economic well-being result in increased ICT usage?) as well as the distribution
of usage patterns, and costs and benefits within the unit being examined. Given its diversity
and specificity, in-depth research will be required for specific activities within the agricultural
sector and it is recommended that a commodity- or value-chain approach be adopted.
3 Conceptualizing Agriculture and ICT
Before proceeding to the specific case of ICT usage in agriculture, it is first useful to present
an overview of agricultural production in Africa and then a conceptual framework through
which agriculture can be analysed.
3 In September 1999, the World Bank and the International Monetary Fund (IMF) introduced the PRSPs as a new
approach designed to focus loan operations on poverty reduction. The approach emphasizes the preparation of a
planning document that describes the macroeconomic, structural and social policies and programmes of affected
countries expected to promote growth and poverty reduction over a multi-year time horizon.
106
3.1 Agricultural Production in Africa
Although the contribution of agriculture to the gross domestic product (GDP) of sub-Saharan
Africa has been declining over the past two decades, this sector continues to be a major
source of employment in most of the countries in the region. The importance of agricultural
production, excluding agri-processing, is evident from Table 5.1, which shows the population,
gross national income (GNI) of the region’s countries, the percentage of GDP that is
contributed by agricultural production and the average contribution of agriculture to total
exports.
Table 5.1: Population, economy and contribution of agriculture in sub-Saharan Africa
Country
P o p u l a t i o n GNI per capita,
(2007 est.)
(2005 US$)
Agric as % of Agric as % of
GDP (2005)
exports (19992004 average)
Angola
13,313,553
1,410
7.2
..
Benin
7,714,766
510
32.2
73.4
Botswana
1,893,526
5,590
2.3
3.4
Burkina Faso
12,318,213
400
30.6
80
Burundi
8,075,188
100
34.9
77.2
Cameroon
17,775,743
1,000
41.1
44.2
Cape Verde
494,034
1,930
..
5.6
Central African Republic
3,307,622
350
53.9
29.4
Chad
8,915,381
400
22.7
..
Comoros
681,800
650
51
73.6
Congo, Democratic Republic
60,226,717
120
46
9.3
Congo, Republic
3,774,537
950
5.6
..
Côte d’Ivoire
20,169,352
870
22.8
67.9
Equatorial Guinea
1,120,061
..
..
..
Eritrea
4,254,498
170
22.6
70.9
Ethiopia
73,872,056
160
47.7
87
Gabon
1,461,679
5,010
7.7
16.3
Gambia, The
1,508,727
290
32.7
74.5
Ghana
21,801,662
450
37.5
51.2
Guinea
8,171,096
420
24.7
4.6
Guinea-Bissau
1,492,189
180
60.3
99.8
Kenya
35,062,192
540
27
60.8
Lesotho
2,513,076
950
17.3
11.4
Liberia
3,146,406
130
63.6
..
Madagascar
18,996,075
290
27.9
58.8
Malawi
11,553,163
160
34.7
88.6
Mali
10,914,989
380
36.6
50.8
Mauritania
2,959,592
580
23.7
52.4
Mauritius
1,292,309
5,250
6.1
26.2
- May, Karugia & Ndokweni Mozambique
20,356,242
310
22.3
35.4
Namibia
2,083,405
2,990
9.9
38.1
Niger
12,533,242
240
..
36.2
Nigeria
162,082,868
560
23.4
0.7
Rwanda
8,959,095
230
42.3
68.8
Sao Tome and Principe
173,942
440
14.9
97.1
Senegal
11,069,755
700
17.9
29.3
Seychelles
84,927
8,180
2.7
60.9
Sierra Leone
5,159,619
220
46.1
92.4
Somalia
12,448,179
..
..
..
South Africa
49,660,502
4,770
2.6
12.5
Sudan
36,618,745
640
33.7
35.2
Swaziland
1,173,758
2,280
11.5
39.4
Tanzania
38,870,348
340
44.5
62.6
Togo
5,527,332
350
41.8
40.3
Uganda
28,574,909
280
32.7
80.9
Zambia
11,486,812
500
18.5
12.1
Zimbabwe
12,398,897
350
18.1
54.1
107
Source: World Development Indicators database, http://devdata.worldbank.org/data-query/, accessed
21 May, 2007;http://stats.unctad.org/Handbook/, accessed 23 May, 2007.
In 2007, there were some 778 million people in sub-Saharan Africa, of whom 152 million
were mobile phone users and 20 million were internet users (Internet World Statistics, 2007;
MIT, 2007). However, with a few outliers, the majority of the economies in sub-Saharan Africa
have per capita GNI below US$1000 per annum, with Burundi, the Democratic Republic of
Congo (DRC) and Liberia being the least wealthy. South Africa, Gabon, Mauritius, Botswana
and the Seychelles all have per capita GNIs more than 50 times higher than that of the poorest
economy in the region.4 The economic contribution made by agriculture also varies by country,
with that of Botswana, South Africa and the Seychelles being below 3% while that of Comoros,
Central African Republic, Guinea-Bissau and Liberia is over 50%. Overall, some 17% of the
GDP of the region is directly attributable to agricultural production.
However, this statistic underestimates the potential of agriculture in the region’s development
in a number of ways.Firstly, trade in agricultural commodities has expanded at a faster rate than
overall agricultural output, while the value of agricultural exports grew throughout the 1990s
and after a brief decline, appears to be expanding once again (FAO, 2005). In particular, after
declining for almost four decades before the mid 1990s, the share of agricultural exports from
developing countries has begun to grow once more. This can be seen in the figures for the
average contribution of agriculture to exports which generally exceed those of the contribution
to GDP. For sub-Saharan Africa, of particular importance has been the increasing tendency for
regional trade with 20% of the region’s agricultural exports being traded within sub-Saharan
Africa in 2003 compared with 8% in 1985 (FAO, 2005).
4 GNI equals the total value of goods and services produced within a country (GDP) plus income received from
other countries less payments made to other countries. Such income or payments include interest, dividends and
remittances.
108
Related to this, a substantial component of manufacturing income is derived from
downstream agri-processing. Estimates of this contribution are not yet available for the
region as a whole, although Wilkinson and Rocha (2006) showed that the contribution of food
processing increases with per capita income, reaching an average of 2.4% of GDP for upper
middle income countries which would include South Africa compared with 1.9% for low
income countries such as Ethiopia. Upstream agri-inputs (fertilizers, pesticides and packaging)
will further increase the value of agricultural production in an economy.
Finally, besides representing an important source of revenue for producers and processors in
developing countries, agriculture remains an important source of livelihood for both the rural
and urban populations, especially for women, and as such, represents an important option for
the reduction of poverty. Unfortunately, no-region wide statistics are available to estimate the
number of people employed in agriculture, with the limited data that do exist suggesting that
about 12% of South Africa’s economically active population are employed in this sector, 20%
in Kenya and 22% in Botswana (UNDP, 2006). These figures are likely to underestimate such
employment by excluding self-employment in subsistence agriculture and represent countries
with a comparatively well-developed non-agricultural sector.
This brief review suggests that improvements in the productivity of agriculture and agriprocessing represent a significant opportunity for economic growth and poverty reduction.
Conceptualizing agricultural production in a broader way requires that analysis extends beyond
simply the activity of crop production or the raising of livestock to include the inputs that are
used, the processing of the commodities that are produced, and eventually the marketing and
end use of the commodity. An appropriate framework for analysis is thus required.
3.2 Agriculture as a Commodity Chain
This paper makes use of the notion of agriculture as a commodity chain. Also referred to
as supply chains, pipelines, value chains or filières, this approach examines commodities and
the routes that they take moving from production through to consumption.5 The approach is
especially relevant to agricultural production in which the items being produced are usually
spatially and economically distant from the end consumer. Indeed, this is increasingly so,
with production taking place in the developing countries of “the South”, and then following
a route that is often challenging in terms of logistics and regulations to reach consumers in
the developed countries of “the North”. There is case for also considering domestic markets.
Indeed, for many African countries, where small-scale agriculture dominates, domestic markets
might be more important and, as has already been mentioned, in sub-Saharan Africa, regional
trade in agricultural produce appears to be growing. The case is even stronger given the many
trade barriers faced by African agricultural products into markets in the North. In these chains,
commodity brokers, supermarket corporations, international financiers and brand managers
are often stronger determinants of the operation of the chain than the farmers who grow the
vegetables, fruit and other crops, or raise the livestock being consumed; they are also stronger
determinants than the national government of the countries in which production is occurring.
The literature on commodity chains goes on to distinguish “producer-driven” from “buyerdriven” types of chain governance. Producer-driven chains are found usually in sectors with
high technological and capital requirements, where capital and proprietary know-how constitute
the main barriers to entry. In these chains, producers tend to keep control of capital-intensive
operations and sub-contract labour-intensive functions. Buyer-driven chains are found in more
5 See Bernstein and Campling (2006a; 2006b) for a detailed review of the analytical frameworks adopted by what
they and others refer to as commodity studies.
109
labour-intensive sectors, where market information, product design and marketing/advertising
costs form the major barriers to entry. In these chains, production functions are usually outsourced and key actors concentrate on branding, design and marketing functions.6
As Gibbon and Ponte (2005) pointed out, recognizing the production and consumption of
agricultural commodities as a chain takes account of the numerous and powerful institutions
that influence production decisions, and includes international bodies such as the World Trade
Organization (WTO) the European Union’s Lomé Convention, and a plethora of preferential
trade agreements (PTAs) as well as the multinational corporations who eventually sell the
commodities being produced. In addition to direct regulation, these institutions also govern other
activities that have become part of the agricultural chain: agreements on intellectual property
rights; trade in services and the regulation of sanitary and phytosanitary (SPS) measures. Each
of these places new demands on producers if they are to remain competitive. Access to ICT in
this environment becomes a critical way in which producers can remain part of this globalized
production chain and on what terms.
ICT provides a mechanism through which information (and instructions) can be obtained
on markets, opportunities, regulations and constraints. In addition, ICT is potentially a way in
which producers in developing countries can improve their share of the value being generated
by the production and consumption of agricultural commodities through what Gibbon and
Ponte (2005:92) call “upgrading”: “…improving what they are doing and or how they are doing
it”. Examples might be moving into niche specializations such as organic produce, fair-trade,
packaging (e.g. stir-fry or salad mix; baby vegetables; and peeled, podded or sliced vegetables)
and use of improved production methods (e.g. genetically modified; water-wise; free-range;
and grain-fed). Equally though, ICT is a way in which the costs of production can be reduced,
potentially reducing the share captured by producers, reducing their numbers by concentrating
production into larger, more capital intensive enterprises or reducing their capacity for
independent action. A commodity chain approach to the use of ICT in agricultural production
would need to take account of both the positive and negative outcomes and consider who might
be the winners and losers from technology change and the reasons for this. As an example,
the adoption of ICT may well squeeze out smaller scale producers reliant upon local markets
through competition from larger producers marketed by supermarket chains. Alternatively, ICT
may assist small producers by providing access to market prices, strengthening their ability to
negotiate with wholesalers.
3.3 ICT as a System
Moving on to how best to conceptualize ICT, the term itself pertains to a myriad of standalone media, including telephone and mobile telephony, radio, television, video, tele-text,
voice information systems and fax, as well as computer-mediated networks that link a personal
computer though a modem to the Internet (Warren, 2002). ICT can be thought of as an integrated
system that incorporates the technology and infrastructure required to store, manipulate, deliver
and transmit information, the legal and economic institutions required to regulate ICT access
and usage, and the social and inter-personal structures which allow information to be shared,
facilitate access to the ICT infrastructure, and through which innovation takes place. Thus, the
resources needed to deploy and exploit ICT in the economy and society together make up the
ICT landscape, opening (and closing off) opportunities for their use. Identifying what these are
and how they interact highlights the research questions that require our attention (Dzidonu,
2002).
6 Agricultural commodities are likely to fall into the last group.
110
As already mentioned, three broad sub-systems make up the ICT system, each of which
comprise further sub-systems: technology and infrastructure; institutions; and social structures.
Thus while ICT might be constrained by bandwidth (meaning the amount and speed with which
information is transmitted), data processing technologies might be constrained by storage
capacity and the speed with which information can be processed, and both will be subject to
the constraints of economic and legal institutions and social and inter-personal processes. The
discussion below examines these sub-systems in more detail, providing specific examples from
the agricultural sector.
3.4 Technology and Infrastructure
This sub-system comprises two components, each with distinct technologies and
infrastructural requirements: communication and data processing. Communication technologies
include the equipment required for encoding the message (microphones, keyboards, bar code
readers, scanners and digital cameras), decoding the message (screens, earphones and printers)
and for transmitting it (fibre-optic and other cables, broad-casters and satellites). Data processing
technologies include the memory and processing chips inside (or outside) computers, personal
digital assistants (PDA) and similar equipment, and the software needed to actually transform
and manipulate the data. These technologies can be brought together through a modem-equipped
computer, telephones equipped with memory chips or digital interactive television. For rural
areas, an ever expanding range of technological advances are providing new opportunities to
expand ICT infrastructure. Examples include low-cost very small aperture terminals (VSAT)
that provide data and voice at a fixed cost and other innovative “last mile solutions” such as
wi-fi and wireless local loop (WLL) linked to tele-centres and community radio.
However, the technology and infrastructure component of the ICT system does not only
concern hardware, transmitters and cabling. A host of supporting equipment and concepts
enable the effective usage of this component, including the text, graphic, audio, video and
animation files in which information is communicated. For example, an important element of
an ICT system is the way in which items or events can be tagged, traced and identified. Simple
forms of identification can include cards with magnetic strips or micro-chips that identify the
holder/operator. Bar codes have become one of the most common ways in which this is done
and have had a significant impact on the agricultural sector in many countries.
3.5 Institutions
As with technology and infrastructure, there are two components to the institutional subsystem of ICT: the legal and the economic. Governments and the attendant judicial system are
central stakeholders in the legal sphere, although obviously the private sector is also important.
Governments are active in terms of their regulatory roles as providers, licensers, monitors of
content, costs and mode of delivery, and through the judiciary in terms of protecting rights and
enforcing responsibilities. Government can also hold back ICT usage through inappropriate
pricing policies and by directly limiting access. An example is Laos in which a “one gateway
system” controlled and maintained by the government may hinder competition and uptake
(Song, 2003). Different levels of government are also important, as providers of basic services to
farmers (water, electricity and roads), and as providers of specialist services such as agricultural
extension and research, regulation and safety assurance. However, governments also provide
specific technical infrastructure, resources and investments necessary for ICT, and undertake
research and develop public policy affecting the use to which ICT is put. This role requires
capacity and commitment from the appropriate agency of the state (such as the ministries of
111
communication) charged with advancing and protecting the appropriate ICT policy goals. Clear
and public commitment has been identified as an important part of national telecommunications
regulatory bodies whereby policy goals may be induced by the rules of engagement in each
domestic market. Linked to government, educational and research institutions play an important
role in undertaking research and disseminating results and ultimately contributing towards
increases in the economic and social benefits of ICT. Legal institutions are also important
for the protection of intellectual property rights, license agreements of various kinds and for
providing oversight for leasing and maintenance obligations.
Economic institutions can include concrete structures such as user and producer groups,
financial institutions that provide capital and financial services that facilitate e-commerce. 7
Billing systems through which usage is charged and paid for and payment systems such as prepayment, service contracts and vouchers are examples of this component of the institutional
system. International institutions and structures are frequently important stakeholders in this
sub-system. Multinational service providers are by far the most influential in this respect,
providing foreign direct investment, equipment and expertise. Bilateral and multilateral
assistance, and international development agencies (IDAs) have been somewhat less involved
in ICT development, and some developing countries have initiated services with little or no
external advisory support. However, most developing countries have engaged with IDAs and
international non-governmental organizations (NGOs) to strengthen local ICT services and
infrastructure.
In addition to those just listed, economic institutions also include the planning structures used
by government and the private sector when introducing ICT. The importance of these structures
is illustrated by Braathen (2004) who found that appropriate planning structures facilitate
the speed with which new technologies are assimilated and used by beneficiaries, whether
these are enterprises or households. Comparing telecommunication sectors in Mozambique
and Zimbabwe, he found that “managerial-engineering” experience was a significant factor
in determining both the speed of the digital roll-out, and its effectiveness, and noted that this
applies both to the public and private sectors.
3.6 Social Structures
The third component of the ICT system is the social structures and processes that influence
ICT usage and the inter-personal links that facilitate the transfer of information. These are
occupied and used by the stakeholders that are providers and beneficiaries of ICT access
and who include individual users and the communities in which they live, and the private
sector including international business and the finance sector; officials in local, national and
international governments; and finally, civil society, social movements and NGOs.
Illustrating this using the agricultural sector as an example, central to ICT-led development
in agriculture are farmers and the rural communities in which they live. Of equal importance, but
often overlooked, are the urban consumers of agricultural produce. Both require information:
the farmers on production and marketing opportunities, consumers on availability, price and
safety. Consumers might also require information on other dimensions of the commodity that
they wish to consume, which might include ethical considerations (organic, fair-trade, freerange, etc.) and taste (corn-fed, heirloom and single vineyard). Standing between the farmer
and the urban consumer are the private sector enterprises that provide inputs to the farmer,
transport, package and process the output, and distribute and market to the consumer. In some
7 In this paper, e-commerce encompasses all electronically facilitated business processes, including data transfer
among buyers, sellers and various supply chain entities. E-commerce can be business to business (B2B) or business
to consumer (B2C).
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cases, these enterprises may be vertically integrated multinationals, in others, horizontally
integrated commodity chains. In many cases, “middle-men” are seen as potential exploiters
of farming communities who conceal or manipulate prices, and are a favourite target of ICT
programmes.
Farmers are a social group that is especially prone to the costs associated with information
asymmetries, lacking data on prices, market conditions, regulations and new opportunities
(Greenwald and Stiglitz, 1986). The same is true for urban consumers and the agribusiness
sector that may also lack information with which to make decisions. Farmers who are the direct
sources of this information are often located in relatively remote communities, resulting in delays
in the transmission of important data in both directions. This information is potentially useful
to farmers themselves, their organizations and communities, and to various other stakeholders
interested in the improvement of farmers’ well-being. For example, the role played by farmers
who agree to cooperate in agricultural development via the provision of information can be
crucial in modernizing the agricultural sector using ICTs. It should also be recalled that many
farmers in developing countries are women, and ICT access can potentially fulfil an important
gender-empowerment role through providing female farmers access to communication and
information on issues beyond agriculture (Hafkin and Odame, 2003).
Officials in the different levels of government are also part of the social structure and
have the potential to significantly influence the rate at which ICTs are adopted and the way in
which these are used. The accountability of officials can be strengthened through ICT usage
and there is ample evidence linking ICT usage to improved governance. Related to this are
the civil society organizations that work with farmers and have an important role to play in
sustained debate, substantial advocacy and continued grassroots work to promote an ICT and
agricultural development agenda and playing a watchdog role. Furthermore, the civil society
could play an important role in helping farmers with information systems development by
linking farmers to other stakeholders such as academics. Other options include establishing the
extent to which electronic networking takes place, identifying agricultural information network
systems through which agricultural research can be executed, and promoting community
development programmes, communication and partnerships with government, the private
sector and with international organizations. Overall, through the use of ICT, accountability and
citizen input can be strengthened as a way of ensuring that national regulatory commissions are
beholden to their clients, the carriers and their associated portal players. Along with the larger
agencies working in this field, there are several NGOs, research organizations, governments
and educational institutions that specialize in providing ICT media and associated technical
services in developing and developed countries. These NGOs and their roles are discussed
further in the section on expanding telecommunications in Africa.
4 ICT and Agriculture
Having outlined and described the components of the ICT system, we can now turn to a
more detailed analysis of the agricultural sector, building on the examples already provided. As
with other economic sectors, effective agricultural development requires access to information
on all aspects of agricultural production, processing and marketing and it seems likely that if
anything this need is increasing (Jones, 1997). ICT is already showing the potential to play
an important role in the delivery of this information to this sector in both developed and
developing countries (Zijp, 1994). In most cases the base technology is universal, rather than
being specific to agriculture (Warren, 2002), and hence usage evolves from existing designs and
practices. The Food and Agriculture Organization of the United Nations (FAO) distinguishes
five broad categories through which ICTs are used in the agricultural sector. These are technical
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and economic development for agricultural producers; community development; research and
education; small and medium enterprise (SME) development; and media networks (FAO,
2006).
4.1 Technical and Economic Development for Agricultural Producers
As with any change in technology, the economic impact of ICT occurs through
improvements in efficiency and increasing productivity. This can take place in different ways
including improving efficiency in resource allocation, reducing transaction costs, and technical
improvements that result in an outward shifting of the production function (Wolf, 2001). In
particular, through the provision of information from a source that is relatively affordable,
accessible and broadly available, ICT can contribute to the reduction of uncertainty in activities
and transactions, reduce the extent to which markets are thin, missing or incomplete, and reduce
the extent to which information asymmetries can be exploited by the relatively informed to
extract rent when transacting with the relatively uninformed.
There are numerous instances where improved production and market information is
important to farmers who are often a particularly vulnerable group. These might include
extension and research on the adoption of new crop varieties, mechanization, pests and weed
control, processing and the care of livestock. As the FAO (2006) observed, technology and
what can be accomplished with it has implications for rural communities and producers of all
sizes, whether these are larger commercial producers who need to understand global market
situations that affect them or subsistence producers concerned with local input markets.
This is particularly relevant in the agricultural sector which is an activity that is often highly
dependent on externally determined requirements. Governments, parastatals and private sector
agribusinesses frequently regulate commercial agricultural production by placing requirements
on quality, safety, logistical arrangements and even quotas. Inputs to the agricultural sector may
be similarly affected, including seed, fertilizers, pesticides and herbicides, livestock feed and
veterinary services.
ICT systems can potentially facilitate the delivery of business and government services and
assist with adherence to quality and other requirements. Institutional structures and procedures
needed for this infrastructural development might include the regulation of grades and
standards, packaging and marketing, logistical planning, information availability, transparency
in local governance, public rural finance, adherence to taxes and tariffs, and the establishment
and operation of farmer organizations. An interesting example is provided by IICD (2006) for
the certification of produce as being organic in Bolivia and Zambia. This requires the timely
filing of detailed information on production methods and land use that has been facilitated by
ICT, including the use of global positioning systems (GPS).
An example of how the development of agricultural producers can be enhanced by using
ICT is through what is known as site-specific management, also called precision agriculture.
This refers to a knowledge intensive management strategy that involves the application of
information technology to crop production. The literature provides many examples of ICT
applications in this domain, including uses in the application of chemical samples, fertilizers,
herbicides, liquid fertilizers, pesticides, etc., as well as activities for efficient resource
management such as livestock movement regulations (Bouma et al., 1999; FAO, 2006).
Pathways of development can include crop expansion and increased production where basic
crop production is the dominant activity, and similar management strategies can be used in
livestock farming. The use of feed supplements, specialized veterinary services and breeding
services are other examples. A key aspect of precision farming relates to what Sonka (nd)
describes as a move from just in case (JIC) procurement and utilization of agricultural inputs to
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production based on just what is needed (JWN).
As a mechanism for data collection, the benefits of having information that is readily
accessible to small farmers include being able to obtain location-specific weather, crop and
livestock disease forecasts and the flexibility to “…quickly change crop choices, obtaining
information on current market prices and develop products for small niche markets and even
market directly to the consumer or commodity brokers in distant areas, so called e-commerce”
(FAO, 2006). Furthermore, unlike most other sources of information, ICT allows information
to be accessed at any time during the week or day. At the level of agribusiness, the value to
of having access to ICT is potentially immeasurable. Warren (2003b) cites as some of the
possible benefits to small farmers and those in agribusiness arising from adoption of ICT. These
include faster, easier access to records and accounts; help with complex decisions through
decision-support systems; cheaper (in running costs) communication with others via the swift
transmission of information in electronic form; and rapid access to a vast store of information
through decision-support systems. Indeed Neven (2005) includes a cellular phone in a list
of assets owned by farmers who supply supermarket chains in Kenya along with more usual
assets such as an irrigation system, refrigerator trucks and a packing shed.
4.2 Community Development
In addition to ICT usage that might be of direct use to agricultural production, rural
communities in developing countries frequently need more broad-based development than
the interventions just described. Such areas are often removed from important services and
resources and hence have urgent infrastructural investment priorities, as well as a need for
community-based institutions to deliver services. Confirming the need for appropriate ICT
intervention, one common finding from a four-country study of Albania, Mexico, Nepal and
South Africa is that, controlling for income level, expenditure on communication is consistently
lower in rural areas (Ureta, 2005) although anecdotal evidence suggests that network supplies
have been surprised that the uptake of mobile telephony in rural areas has been more rapid than
anticipated.
Some of the priority areas for ICT and rural community development include lowering the
cost of communication, universal access, and the development of human resources, including
health and education. ICTs have the potential to encourage greater inclusion of individuals
within the network due to their immediacy and reach, which promote faster and more efficient
data transfer, thereby overcoming the barriers of physical distance (Torero and von Braun,
2005). An example cited by Warnock (2001) is of women’s clubs in rural Zambia that were able
to negotiate for a range of community resources with local politicians through the call-in radio
stations. In addition to services such as water and improved health care, in this example, these
benefits included productive infrastructure in the form of a grain shed and an oil press. More
direct forms of ICT usage for human development include the use of PDAs in the provision of
health services whereby confidential information can be collected, stored and processed using
special by designed software packages such as Epi-Handy.
The close linkages between the use of information and communication technology and
community driven development and community empowerment has been established in a number
of studies (cf. Premkumar and Roberts, 1999). Torero and von Braun, (2005:1) argue that: “…
the development and proliferation of ICT has accelerated economic and social change across
all areas of human activity”, and go on to specifically note the opportunities for distributing
information on farming technologies. This need not be only through conventional trainer-farmer
mechanisms, and through the encouragement of collaborative initiatives between farmers, ICT
can be used to set up a system of information exchange that facilitates communication between
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different communities regarding such issues as agricultural production and commercialization.
Media centres are an important innovation in this regard and provide a central place where
the public can receive and make use of information. This can include information on the services
that government, the private sector, civil society and others provide and how to access this
support. This might include assistance for small businesses, how to access social grants, advice
on health or education, employment opportunities and even constitutional rights. These centres
are equipped with ICT such as telephones, fax and computers with access to various kinds of
information (Falch and Anyimadu, 2003). Two kinds of media centres have been commonly
implemented: multi-purpose community centres that are usually organized by governments; and
tele-centres. Tele-centres, which initially were subsidized, offer internet connection 24 hours
a-day, usually take on the form of small businesses and are supposed function independently,
owned by the local community and are then supposed to be self-sustainable. Tele-centres are
important not only because they are a way of empowering communities but also as a way of
facilitating the expansion of ICT to more areas, promoting greater awareness of ICT and their
use, and thereby empowering local communities. Such centres offer a way to assist people
at all levels of society who need to be able to access information and to communicate. This
communication and information access can be crucial in the socio-economic development
of communities and participatory development fully depends upon this information and
communication sharing process.
However, getting agricultural sector participants to computer networking and becoming
users of ICT requires some minimum level of expertise, and this has often been cited as one
of the major constraints to the uptake of ICTs in this sector (Warren 2003a). There is also a
need to assess the effectiveness of multi-purpose community centres and the tele-centres which
have been set up by governments in giving people access to ICT. This requires some level of
investigation via proper research methods and education in ICT for agricultural development.
As another form of community development, ICTs can have an impact through enhancing
participation and knowledge sharing among the poor. ICTs have been argued to have empowered
poor communities, overcoming social and economic exclusion, and making commerce,
knowledge and information more accessible. Other processes that are also important include
promoting the culture of human rights, the rule of law, gender equality and open electoral
processes (UNHCR, 2002). Checking enrolment on voters’ rolls is a practical example provided
by Dossani et al. (2005) who also report that e-governance was the most commonly used
service at nine ICT projects in rural India that they investigated. Interestingly, and perhaps not
surprisingly, they also report resistance by government officials to e-governance as a potential
problem (Dossani et al., 2005)
Although not analysed in sufficient detail, ICTs, including radio, also offer an opportunity
for more effective disaster management (Kenny et al, 2000). Poor communities, and rural
communities in general, are susceptible to many natural and human made disasters. These
might be widespread, such as drought or flooding, or household-specific such as death or stock
loss, but in each case, improved communication may be a way in which assistance can be
obtained, whether from the government or from family. Reducing the susceptibility of rural
communities to disaster and improving their ability to recover from disasters once these occur
represents a particularly effective policy for poverty reduction. The resources required can be
extremely modest, especially when compared to those that must be deployed when disasters
do take place. Hafkin and Odame (2002) noted that the Self-Employed Women’s Association
(SEWA) in India includes this activity in their promotion of ICT usage for women along with
the more conventional micro-enterprise and training activities.
Finally, activism is perhaps an unanticipated but significant use of ICT. Kelles-Viitanen
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(2003) documented the example of small-scale fisherman in Honduras who recorded the
destruction of mangrove swamps by commercial farmers and disseminated this information
internationally. Johansson (2006) documented the fascinating account of farmers and fishers
in the Niger delta who, faced with oil spills and gas flaring, have resorted to a mix of digital
video, the Internet and a short message service (SMS) gateway to expose their situation and the
negligence of oil companies and the Nigerian Government. The eighth largest oil producing
area in the world, weak government structures and powerful oil companies have resulted in this
region also becoming one of the most polluted regions in the world. Oil spills, toxic gases and
acid rain have combined to destroy crops and marine resources. Using an approach described as
participatory video, film clips have been recorded of the impact of this pollution as experienced
by the farmers and fishers who have been affected. Once edited, the video material is uploaded
onto the Internet using a free video hosting website such as YouTube.com and integrates an
SMS gateway to the Internet site. Through these ICT systems, the hope is that international
NGOs can put pressure on the multi-nationals while dialogue can be simultaneously opened
with the national government. In Bolivia, IICD (2006) documented how the Confederation of
Indigenous People of Bolivia make use of ICT in their struggle to establish land rights, both as
a way of gathering information, and to raise public awareness of their situation. Examining the
emergence of ethical trade, Dolan (2005) documented how the Internet and television have been
used to expose poor labour practices in agriculture in the USA, Chile, Kenya and Zimbabwe.
However, there is a risk that this potential role played by ICTs may be muted by government
intervention since there is some evidence that the Internet is used less where political and civil
freedom is lower (ILO, 2001).
4.3 Research and Education
The third use of ICT relates to its potential to bring about transformation in agricultural
development through the enhancement of education and research though the Agricultural
Science and Technology Innovation (ASTI) System. Perhaps the most straightforward way
in which this can occur is through the conventional agricultural extension system. Traditional
training and visit extension is a comparatively costly approach requiring the preparation,
printing and dissemination of training material, large numbers of trained extension officers
who carry the messages to be conveyed, and the risk that messages may become distorted
when they are eventually conveyed. Extension officers who are connected through ICT will
be better able to update their knowledge on a continuous basis than in the past, avoiding the
criticism that the information provided by these services is often irrelevant or out-of-date. This
approach does not require any ICT capacity on the part of the farmer and, as a result, may be
relatively simple to implement in many countries. However, when farmers are digitally literate
a range of new opportunities become available. For example, email conference systems are a
way in which new agricultural technologies can be disseminated, as is cyber-extension using
exciting new developments such as internet telephone/Voice Over Internet Protocol (VOIP)
which would permit live question and answer sessions. In the rural context, ICT research and
education range from enterprise management information systems to text message census and
survey data in remote areas. In this way, ICT can be used for agricultural research surveys and
censuses, completing a “virtuous circle” of information exchange. ICT can also be used to
build what have been termed as knowledge digital libraries, which can include the collection of
indigenous knowledge about crops and cultivation practices specific to local contexts. Hafkin
and Odame (2002) recorded a project in Kenya where this has been done using voice and video
recordings to capture the information and the Internet to disseminate the final results. In India,
they described the Honey Bee Network which has been collecting information on indigenous
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innovations on pest control, livestock care and farm implements. In Bolivia, Agrecol Andes
assisted local communities to use presentation software. This means that digital pictures,
graphs, text and oral testimonies can be collected and used to document traditional practices.
These presentations can then be used to disseminate information to other communities as a
farmer-to-farmer exchange that is the preferred medium of learning as it is compatible with an
oral tradition of information generation and communication (IIDC, 2006). A similar approach
is being followed by the Ndere Troupe in Uganda, a theatre organization that uses ICT assisted
drama to transmit development messages to rural communities (IICD, 2006). As Meera et al.
(2004) commented, these examples show that ICT can actually facilitate a bridge between
modern and traditional knowledge systems.
Much as in the tele-centres model, research into ICT that aims to bridge the contrasts in
agricultural prosperity as ICT adoption has been correlated with variables such as per capita
income and geographic concentration, has to be user-oriented. This means that bottom-up
participatory research approaches play an important role in ICT development that focus on the
end-user rather than the data and information from organizations that have a vested interest
in promoting ICT. Such research should assess community readiness for ICT and also assess
the developments and prospects for e-commerce in the agricultural sector. In an interesting
illustration of this, in a case study in Busoga, Uganda, ICTs are effectively used to complement
and transmit local knowledge garnered though participatory research techniques demonstrating
the importance of the social systems associated with ICT (Akiiki, 2006). Through participatory
research strategies that place farmers and rural residents at the centre of the research process,
a network for small-scale development projects can foster the exchange of information,
experiences, expertise and solutions to technical problems and adapt the often generic nature of
information accessed by ICT to local conditions. Such appropriately supported ICT strategies
have the potential to enhance access to ICTs as well as access to channels and other modes of
communication.
4.4 Media Networks
Marketing systems absorb surpluses through e-commerce, improving the efficiency of
agricultural products in circulation. Through agricultural e-commerce, the transactional
capabilities of this innovation include allowing customers to submit and modify orders and
pay online, and receive automatic notification of order status. Companies can also provide
useful information to suppliers on their own websites, such as customer feedback, inventory
information, production schedules and product demand information (actual and forecasted).
An example of a similar model is provided by a South West England project that links rural
business people via a personal computer and an ISDN8 line with a central information hub. In
Africa, Kenny et al. (2000) gave an example of a handicraft enterprise, the Naushad Trading
Company, that experienced a 200% growth in turnover over the first two years after using
online marketing. This kind of electronic networking uses media networks and consists of
information exchange between two or more computers through any of several methods of
interconnection (Warren, 2002). These require critical mass, in other words, that large enough
numbers of consumers adopt the technology to make the investment financially viable and
technically feasible. The Internet in this instance can be used to purchase goods and services,
to sell, and to help diagnose health problems.
At a less direct level, simply being able to pool knowledge with other producers through
8. ISDN stands for Integrated Services Digital Network and is a way to move data over conventional phone lines.
As with a telephone call, ISDN can be used to connect to many different locations, one at a time, as long as the other
location also has ISDN.
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email correspondence could be an invaluable route for the transmission of information and
innovation. In a similar vein, in several countries in Africa, radio listening clubs have emerged
as a new form of association for women with the double benefit of receiving information
and building supportive linkages (Hafkin and Odame, 2002). In recent literature, such forms
of interaction have become known as a component of social capital and are regarded as an
important asset in the development process (Knack and Keefer, 1997; Wall et al., 1998). This
interaction can itself become commoditized through the resale of information. Neven (2005)
provided an example of the Kenya Agricultural Commodity Exchange (KACE), which is a
private sector company that facilitates the exchange of information between sellers and buyers
of agricultural commodities. KACE generates revenue by selling market price information,
using SMS text as one avenue through which this information is delivered.
5. International Experience
Having described the components of the ICT system, and reviewed a categorization of
the uses to which ICT can be put in the agricultural sector, in this section we review ICT and
agricultural initiatives in the developed countries, South America, Asia and sub-Saharan Africa.
5.1 e-Commerce in the Developed World
ICTs stand out as the leading source of information in most of the developed world, and
high levels of adoption and ICT use are evident in agribusiness in crop-producing and livestock
-raising farms. Unlike in sub-Saharan Africa, e-literacy is not a barrier to users in most of these
countries from either the supply or demand sides. The high adoption rates among producers are
reported by Warren (2003) (Table 5.2).
Table 5.2: Computer usage in farm enterprises in developed countries
Country
Using computer for business
With Internet access
USA
30
48
Canada (Ottawa)
43
33
New Zealand
61
49
Germany
56
46
Finland
76
69
UK*
33
27
Source: Warren (2003).
It emerges from literature that the personal computer along with the Internet is a major force
in agricultural development processes in the developed world, particularly in agribusiness.
Computers are used in agribusiness by 43% of farms in Ottawa, Canada, and 33% of farmers
use the Internet in the UK (Warren 2003) (Table 1). There are high adoption rates in the USA
as well, as might be expected, with 30% of the farmers utilizing this technology for their
farm businesses. Communication technologies are also used by English farming businesses for
information (e.g. browsing), sales/purchases online, other financial information (e.g. banking),
completion of government forms, surveys online, completion of other forms, and marketing
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(e.g. own website). The same is also apparent on the demand side for agricultural produce.
Kupiec and Revell (1998), reporting on the results of a survey of those who visit and purchase
from speciality foods sites on the Internet, showed that consumers are in the middle age range
(median age 37), comparatively wealthy (median income $58,000) and well educated.
In most of these developed countries, multi-lingual portals function as a way to enable
farmers, field officers, policy-makers and governments to communicate and access relevant
and useful agricultural information through their agricultural information networks. However,
in some cases, farmers prefer to use familiar media to conduct their farming activities and
business, perceiving these to be more reliable than digital methods. In the United Kingdom,
for example, in another survey of media use in agribusiness, (Warren, 2002) found that farmers
felt more comfortable and confident using ICT media such as fax machines where the proof of
a transaction is a physical entity, as opposed to the virtual, “unreal” nature of cyberspace.
An important channel through which ICT has an impact on agriculture is by enhancing
the efficiency of the different enterprises involved in agricultural production, processing
and marketing. The use of computers and computers with an Internet connection has long
since been the order of the agribusiness day for farmers in developed economies in the USA,
Canada, Germany, Finland and New Zealand (Warren, 2003). In North America, rural food
producers use the Internet to sell a wide variety of products, including perishables, while in
England, the producers use fax, mobile telephony and SMS text to seek and relay information.
Agricultural e-commerce is emerging as an opportunity that can be used by many small-scale
farm businesses and ICTs are viewed as a way in which entrepreneurship can be stimulated
(World Bank, 1999; Warren 2003; FAO 2006). Indeed, farm businesses have much to gain from
the use of ICT, especially given their spatial dispersion and remote geographic location, as well
as their typical small-scale nature.
Discussing the future of quality food in Europe, Gilg and Battershill (1998) were enthusiastic
about the possible consequences of ICT for agricultural markets. They suggested that ICTs
allow consumers and farmers to be more easily linked than systems based on advertising and
mail-order. This would facilitate matching demand more closely with supply, thus making
markets more efficient. Examples that they provide on the demand side are consumers who
are concerned with animal welfare, the environment, labour practices and so forth who could
identify producers who can provide information on how crops or livestock are raised or how
food is treated when processed. Examples that they provide on the supply side include farmers
who analyse market trends from the patterns of consumer demand and diversify or add value in
order to satisfy new demands. Finally, they note that transaction costs could be reduced through
the travel and energy use that is reduced when food travels to customers more directly.
Finally, the extensive usage made of ICT in developed countries has meant that there is
more research available on the impact of ICT, some of which is of concern to ICT policy for
developing countries. Examining non-farm enterprises, Pilat (2004) described a “productivity
paradox” whereby firm level ICT usage is found to be beneficial to firm performance, but only
in specific circumstances. These vary from sector to sector, and are most affected by the context
within which production is occurring.
5.2 Communication for Development in South America
ICTs for agricultural development have a comparatively long history in South America
and have been used for a wide range of developmental purposes. In Chile, an initiative using
computers with Internet and electronic email was established through the Communication for
Development in Latin America project of FAO. The objective of this project was to conduct
participatory research into the development of internet information and communication
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networks. This project works with farmer organizations of small-scale producers throughout
the country in an effort to establish a computer-based communication system for both
horizontal and vertical communication. ICT media usage for the network includes the use
of Internet and email to provide farmer organizations with data on crops and international
crop status. This network also provides information on market timing, prices and regional,
national and international market conditions. The network further provides small-scale farmers
organizations with weather and technical information, information about technical training
information, and information about the various organizations that support their work.
The Chilean network was established through first conducting a needs assessment on the
information required by farmers to be used in the network. Through participatory research
approaches, farmers and their organizations were surveyed to determine what they wanted in
terms of the communication system, i.e. their information needs, and how the system was to
be managed and a strategy proposed by the farmers themselves on how this was to take shape,
particularly for an Internet - based communication system. This was done with the intention of
helping farmers understand the value of the system and its applications, and to lead farmers’
decision to take ownership of the infrastructure and network development (Kenny et al., 2000;
FAO 2006). Furthermore, most of equipment used for the project was purchased and owned by
the farmers’ organizations.
The project methodology was structured such that a local private technical university
provided preliminary technical support to the farmers. This institution was identified since
it had already been engaged in offering commercial and non-profit Internet services in the
region. Moreover, for the first couple of months of the project, a communication development
expert provided initial logistical coordination and technical backstopping (FAO, 2006). Other
facilities provided in the network were a computer network server that was installed at the
university. This provided each of the farmer organizations with technical support by way of
issuing an account for dial-in access to modems connected to the server, thereby connecting
farmers to use the system for their own identified needs as well as through making several Web
information services available to them. Research undertaken by FAO concludes that: “…It was
estimated that transmitting price and market information this way cost 40% less than using
traditional methods. In addition, the information was timelier, reaching farmers much faster
while prior to ICT access, the publication and distribution of a printed bulletin took 45 days”
(Balit 1998:4).
Although the project is ongoing, the results of this initiative have been positive in meeting
their developmental ends, with farmers making use of email on a daily basis, submitting daily
reports on irrigation quotas and providing the local irrigation water authority with their planning
activities. Farmers also post their organizations’ newsletters on the homepage to provide easy
access to locally relevant market and weather information. Other links also expand access to
the communication network’s market information bulletin and places this bulletin information
on a server for access throughout Chile and the world.
In other ICT-led developments and communication technologies in South America, Mexico
has launched similar initiatives that pertain to Internet services for farm organizations. This is
in an endeavour to create a system which helps with developing an electronic trading system
for agricultural products and services that farmers and their organizations have to offer, as well
as fostering communication for development (FAO, 2006). In much the same way as in the
Chilean networking system, the Mexican initiative uses Internet based communication systems
using email and several Web information services. In some of the applications, farmers use
the services to submit daily reports and planning activities to the local responsible authority,
and this has reduced the need for publications in hard copy. In turn, farmers can obtain a
directory of each farmer organization on the network, its membership, its agricultural activities
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and production figures, and information about local conditions (FAO, 2006). ICT media used
for this initiative are not solely restricted to computers with Internet services, however; phones,
faxes and radio are also used. Other examples include the Lilec-Tant network of Bolivia and
the Infodons initiative in Peru.
Also in Bolivia, the IICD (2006) provided an interesting case study in which mixed mode
ICT are used to disseminate price information to farmers. In this example, a researcher visits
the markets each morning to obtain the going prices for various commodities. These are then
sent by email to a rural information centre some 500km away where they are broadcast on a
community radio to reach an estimated 60,000 producers. The information received can then be
used when negotiating with middlemen. At a more complex level, the export promotion centre
of Bolivia (CEPROBOL) provides a platform from which small and medium producers can
enter the export market (IICD, 2006). The South American experience reveals how ICT have
made the geographic location and distances of small businesses in rural communities largely
irrelevant (Premkumar and Roberts, 1999), as new markets open up and rural businesses
compete with their urban counterparts in the same market. IICD (2006) reported a case study
from Bolivia in which ICT access has enabled small-scale milk producers to identify tender
opportunities, prepare bids and win tenders to supply milk consumers, including government
institutions in rural communities.
5.3 Innovation and Entrepreneurship in Asia
Outside the developed countries, ICT usage in the agricultural sector has perhaps advanced
most in Asia and this brief review cannot do justice to the numerous examples of innovation.
However, some examples have been selected that seem particularly pertinent to ICT and
agricultural production in Africa. Supported by government, development agencies, the private
sector and research institutions such as the M.S. Swaminathan Research Foundation, some
interesting cases are noteworthy, with experience in Asia showing that ICT can be a costeffective way of providing extension. In India for example, Sasidhar and Sharma (2006)
reported that over 20 pilot projects have specifically targeted rural communities and agricultural
producers and propose the establishment of a Rs3,600 million national agricultural extension
project based on ICT that will build on the lessons learnt.
The potential to deliver information on a large scale is an important advantage of ICT for
Asia. As an example, India’s considerable livestock extension infrastructure comprises some
36,000 professional staff and 70,000 “para-veterinarians” operating from 51,000 veterinary
institutions (Sasidhar and Sharma, 2006). However, the size of the bovine population of
India means that each institution serves an average of 10,000 cattle and buffalo while milk
production is second only after rice in terms of its importance in the agricultural sector. Several
experiments have shown the potential of ICTs in assisting the delivery of messages in the form
of cyber-extension. As an illustration, Parghi (2005) described an ICT-based milk automation
process that reaches some 1.5 million producers in 1,000 locations. The system tests the milk
for butter fat content, transmits and stores the results, and displays the results for the farmer’s
information as a way of promoting transparency and eliminates potential fraud. A similar
project has seen an increase in the productivity and milk yield of cattle through the provision of
information on the care of both the cattle and the milk during transportation (Digital Partners,
2002). In addition, Sasidhar and Sharma (2006) reported that a similar system has reduced that
time for payment to farmers from 10 days to five minutes.
In Madhya Pradesh in India, Kelles-Viitanen (2003) recorded that in addition to market
information, information on land records is important and useful data that can be accessed
via ICT. She noted that the absence of land records can prevent farmers from obtaining loans
122
or support from government agencies. Also in India, Meera et al. (2004) described three
projects in three different states that all offered farmer support through an ICT kiosk. Operated
variously by community volunteers, entrepreneurs and project staff, these kiosks could be used
by farmers to access and transmit information, for “Ask the Expert” cyber-extension, to obtain
market prices, access information on weather, inputs and even bus and train time-tables and
access and complete online applications forms for a variety of government and private sector
programmes or products. The study reports favourable usage of this kiosk system by farmers
in all areas, and that there was reasonable representation of poorer farmers. However, men
dominate this system: just 10% to 15% of the users were women (Meera et al., 2004). The
study concluded by noting that the farmers in each of the areas are quite differentiated and
groups may have different ICT needs. This extends beyond having different capacities to use
ICT; different enterprises bring with them diverse information needs.
Looking at experience in other parts of Asia with radio, Sasidhar and Sharma (2006)
commented that useful lessons for improving extension outreach can be learnt from rural
radio services promoted by the Grameen Bank in Bangladesh, the community radio towers
in Philippines and Nepal and the local radio networks of Indonesia. Using evidence from an
impact assessment of a rural telephony and text messaging service rolled out in Laos, Song
(2003) found that telephone usage improves the economic performance of the rural users
who are able to earn higher incomes as a result. These benefits are not confined to improved
agricultural production, but also from the potential to improve the attractiveness of rural
areas for non-farm investment, thereby contributing towards a broader notion of the agrarian
economy. In Bangladesh, for example, the ITU (1999) reported that access to ICT reduces
management travel time and the direct costs associated with travel, a cost reduction that was
equivalent to 13 times the investment that was made. Also in Bangladesh, the well-known
example of Grameen Phone has had a significant impact by providing low-income women
entrepreneurs in rural areas with loans with which to offer payphone services based on cellular
technology. By creating a “phone culture” this intervention has been able to provide especially
women with access to ICT. Kenny et al. (2000) reported that the introduction of the service
has allowed farmers to compare agricultural prices, challenging the power that landowners
and intermediaries have held over the agrarian economy. Indeed, they noted that the ICTs
have become an important new business sector in their own right. However, Cecchini and
Scott (2003) found that mixed mode ICTs are important if poorer producers are to benefit, and
that the social dimension of the ICT system is particularly important. They recommended that
participatory approaches be used to ensure this.
Finally ICT has also been incorporated into national policy for poverty reduction. In
Cambodia, for example, the UNDP (2005) reported that ICTs will be included into the PRSP
as a way of developing an agricultural statistics system, while in both Cambodia and Laos,
an Internet-based marketing information system is seen as a way of better linking producers,
wholesales and retailers. This is especially noteworthy since Laos only legalized the Internet
in 1998 (Song, 2003).
5.4 Expanding ICT Networks in Africa
With the infusion of communication technologies a fairly recent development,
notwithstanding the barriers associated with its diffusion and adoption, ICT take-up in
agriculture in Africa has been off to a sluggish start in comparison to Asia and South America.
In most of these developing countries, ICTs are not only focused on the use of computers and
computers with internet, however; a myriad of communication equipment technologies are used
in conjunction, such as radio, television sets, phones, fax machines, scanners, digital cameras
123
and copiers. (See Akiiki 2006 reporting on the use of radio for information dissemination in
Uganda.) To their credit, many African countries are developing Internet-based information
tools that may be of direct benefit to small-scale producers and rural and remote communities.
One example is Pride Africa, a Kenyan-based NGO that has launched a new project, DrumNet,
which provides information, marketing and financial services for small-scale farmers in East
Africa. DrumNet includes a credit guarantee fund and an electronic databank on the financial
status of the farmers. This facilitates these farmers access to financial facilities. Pride Africa
itself has 60 branches in five countries in East Africa offering similar ICT-linked support
to the agricultural sector (UNCTAD, 2003). Another example can be found in an initiative
similar to that already described in India; the Government of Mozambique has launched a
Computerized Land Register. This project is being executed by the Ministry of Agriculture
and Rural Development and will establish an integrated system for the administration and
management of land, accessible through the Internet, which will assist with the processing
of requests related to land usage (Republic of Mozambique, 2002). Other projects include
a market price initiative in Ghana, similar to that already described for Bolivia; a project in
Burkina Faso that also collects price information which is disseminated through television; and
a project that combines warehousing, logistical planning and ICT communication to ensure that
higher prices can be received for coffee producers in Uganda (IICD, 2006).
Sometimes referred to as community and/or media centres, several African countries are
experimenting with tele-centres as a means to decentralize communications infrastructure;
the centres are created using satellite or local ISP Internet connections (Falch and Anyimadu,
2003).9 The objective of the centres is to expand telecommunications networks to previously
disadvantaged people whilst recognizing some of the challenges associated with ICT media
use. An interesting variation of this concept is proposed by the Mozambique ICT policy which
involves mobile ICT units which are expected to widen the reach of fixed tele-centres, and
which will provide computers, telephone access, a CD/DVD library and a low cost bidirectional
satellite link. The centres are also seen as a way of providing training in more remote rural
communities (Republic of Mozambique, 2002).
There are several challenges to setting up an agricultural communication network. These
challenges are more pronounced in the developing world and particularly in rural communities
in Africa with their remoteness, and include poor telephone lines (which are also required for
full Internet connectivity), high communication costs associated with Internet connections, fax,
telephone and other conventional systems, and difficulty in securing licenses and appropriate
hardware needed for a well-functioning communications network. In an interesting example of
how to overcome some of the problems, Hafkin and Odame (2002) suggested a mixed mode
of ICT usage whereby information collected from the Internet through tele-centres is broadcast
through local radio stations in order to reach those unable to access the Internet.
In Kenya, barcoding has been shown to facilitate the export of fresh fruit and vegetables
to Europe by enhancing the tracking of perishable goods during their transportation, thereby
certifying their freshness. Barcoding, and a related technology, Radio Frequency Identity
(RFID), are also useful for stock control. The expansion of the fresh fruit and vegetables sector in
domestic retail markets has benefited from such stock control, which is of particular importance
when retailing through large supermarkets which make use of centralized procurement systems.
Again in Kenya, the penetration of supermarket chains into the domestic market has been
assisted by an elaborate ITC system which links stores through satellite communication, which
facilitates the centralized tracking of all products including fresh fruit and vegetables (Neven
9 ISP stands for Internet Service Provider, which is an institutions that provides access to the Internet in some form,
usually for a subscription fee.
124
et al., 2005). Although this is of greater importance in the retail sector, improved stock control
can also enhance the management of inputs during agri-processing, and the shipment of the
finished product. IICD (2006) reported a case study of soybean oil production in Ghana which
has benefited from more efficient organization of supply and transportation resulting from
information exchange facilitated by ICT. Other technologies related to both communications
and data processing technologies include computer-assisted design (CAD) to improve product
design, GPS for surveying and planning activities, and audio-visual equipment for training and
marketing.
As there is a minimum level of ICT literacy required to be able to engage with this technology,
and as a service and technology infrastructure provided usually by governments, media centres
are a model initiative that has been adopted in several African countries, including Ghana, South
Africa, Senegal, Malawi, Zambia and Zimbabwe. Whilst these are not necessarily restricted to
Africa, these centres are a strategy that realizes that ICT does not mean that everybody owns
a computer; the initiatives give people access to the information that they want. This therefore
assists in achieving universal connectivity and access and helps (particularly rural) farmers
to engage with the global market systems that affect their livelihoods (Falch and Anyimadu,
2003).
Currently, technology advances, adoption and diffusion are skewed towards the computer,
the Internet and phones, with the decrease in the number of fixed lines, there has been a high
penetration of cell phones into the rural areas. While Senegal is trying to establish a reliable
modern digital network, in Zambia and Zimbabwe, Internet-based market information tools,
household food security information systems, famine early warning systems and other tools
to assist decision-makers are now being developed as part of a New Partnership for African
Development (NEPAD) initiative on ICT infrastructure rollout project to connect Africa.
Among other uses, in South Africa tele-centres have been identified as providing access and
links to employment opportunities through their connectivity and access to information and
communication media. However, in Zambia, where other forms of ICT media have been used
for communication in agriculture, the radio has been used in a project which focuses on how
rural women could use radio to record their voices and then take the audio tape to a radio
producer who will then put it out on air. This in itself demystifies the technology of radio and
the women feel empowered to produce their own programmes and create their own meanings.
In an approach where ICT influences and information sources do not only include the
extension worker, another farmer or a trade journal but also the farmer’s child, several other
African governments are participating in a NEPAD e-schools project in the hope that this will
facilitate bridging the digital divide. This project endeavours to promote ICT literacy in schools
and has already been launched in several countries, such as Kenya, Rwanda and Lesotho. The
project aims to make access to ICT in schools cheaper by having several countries that would
be procuring services, resources and infrastructure and planning together so that it makes it
much cheaper to provide ICT in schools. Furthermore, South Africa, Mozambique, Ethiopia,
Mauritius, Uganda, Mali and Cameroon, among others, recently signed onto the e-schools
initiative and these countries also aim to equip their national primary and secondary schools
with ICT apparatus such as computers, radio and television sets, phones and fax machines,
communication equipment, scanners, digital cameras and copiers, and connect them to the
Internet.
South Africa provides an example of the value of ICT where agribusiness has become
big business since their structures have changed, with primary agricultural cooperatives and
agribusinesses throughout the country transforming themselves into private companies. Global
companies like Microsoft have also begun advocating for people to begin to learn how to use
the computer in high school and other schools because of the ever increasing necessity for
125
people to be computer literate in order to benefit from various developmental goals. In rural
areas, people have embarked on this process and the government is ensuring that people are
computer literate and able to communicate with people all over the world. South Africa is one
of several countries that have signed a protocol with countries from the west coast of Africa
towards this endeavour.
This review shows that the ICT landscape in Africa consists of diverse role players which
include NGOs that specialize in the application of Internet tools and which assist in providing
technical support, training and awareness building. Examples include SangoNet, the Internet
Society, Volunteers in Technical Assistance (VITA), and the Pan African Development
Information System (PADIS) (Richardson, 1998). Bilateral financial organizations such as the
World Bank and the International Fund for Agricultural Development (IFAD) also assist in the
development of locally relevant market information systems, and provide financial packages to
support the development of ICT services for (rural) communities. Other agencies also assist in
coordinating and executing ICT activities for rural and agricultural development (Richardson,
1998).
In Africa, ICT adoption in agricultural development in many countries does not take on
a “one-size-fits-all” approach to technical assistance and information is devolved through
decision-support systems. Small- and medium-scale farming has been identified as a major
growth area where overall employment has been on the decline because of increasing
productivity, and the development of e-commerce in the farm sector is directly linked to the
adoption of ICT by farmers in micro-business. However, modern farming requires knowledge
of new developments in agriculture, and marketing farm products through ICT adoption of
various media can be of benefit for advertising farm products.
As in most of the developing world, a multitude of organizations that work with farmers
in agricultural development devote much time and effort to the adoption of ICT. In some
countries, independent organizations work as country partners with various stakeholders in
those countries to realize the goal of agricultural development. As mentioned above, bilateral
financial organizations such as the World Bank and IFAD have provided assistance as have
other agencies. Examples of these others include the International Food Policy Research
Institute (IFPRI), which undertakes and supports research and the International Institute for
Communication and Development (IICD), which specializes in ICT as a tool for development
via programmes that train their project partners in areas that include facilitation in technical
seminars, project formulation and prototyping workshops, technology-based training and ICT
expertise development (IICD Research Brief, 2006). Both these organizations follow their
unique but similar format of information dissemination in their engagement with their country
partners. The IICD format takes on the project process cycle which has six stages: preparation,
formulation, pilot, implementation, completion and evaluation, whereas IFPRI’s approach
follows a farmer-centred model in their research on markets, technology, the environment and
infrastructure that engages directly with farmers.
Notwithstanding relative weaknesses in human and technical infrastructure, some African
countries have also adopted agricultural information support systems that are anchored on
ICT. In Zambia, Zimbabwe, Senegal and Ghana for example, the benefits of adopting ICT via
these media networks include access to knowledge and services, and an opportunity to increase
trade and cut costs where the Internet represents a global storefront for SMEs, particularly for
rural and remote businesses (Falch and Anyimadu, 2003; Kalusopa, 2005). In Senegal, mobile
telephones linked to the Internet via a tele-centre are used to enable women producers to obtain
market prices (Hafkin and Odame, 2002).
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6 ICT Challenges and Policy Issues
A number of specific policy areas need to be addressed by ICT policies seeking to promote
agricultural development. These pertain to poverty and end-user competencies, levels of
access to ICT in agriculture, knowledge management and information generation, research
and development, the price of technology and the cohesion between government departments
directly affecting ICT initiatives.
6.1 Poverty and the Digital Divide
Even if subsidized, ICT may be beyond the reach of many potential beneficiaries, especially
in rural communities in which poverty tends to be most prevalent. The issue of connectivity
for universal access comes with affordability and cost issues, especially with reference to
computers with Internet. Certain factors inhibit sectors of the agricultural industry, such as
farm businesses, from adopting ICT services and innovations. Geographic remoteness and
sparseness of communities, especially in rural areas, and Internet access (or lack thereof)
are economic circumstances affecting both service providers in the agricultural industry and
members. This said, it is necessary to separate technology limitations from cases where the
end-users face capacity constraints that inhibit them from engaging in the technology (such
as lack of skills, confidence and motivation). As well as providing low cost (or donated)
equipment, private sector bodies can assist in developing appropriate technologies to provide
agricultural communities with ICT services to assist with project initiatives. ICTs provide
both opportunities and threats to small businesses located in rural communities (Premkumar
and Roberts, 1999). Knowledge that was not accessible 10 years ago is now more widely
available and this affords the small-scale producer a competitive footing that comes along
with information and communication access. At the same time, conventional mechanisms
for obtaining information may be declining, squeezed out by new technologies and perhaps
opening a “digital divide” between those that have access to technology and those that do not
(Sasidhar and Sharma, 2006). Indeed, Barrentes (2005) has used the notion of “digital poverty”
to distinguish barriers to ICT usage arising from resource and skills constraints, infrastructure
and unrealized demand.
The use of this concept encompasses the lack of means with which to access ICT, the lack
of skills to use the ICT and inadequate information about the usefulness of ICT. Harris (2003)
usefully identified 14 dimensions of the digital divide which have been added to and adapted in
Table 5.3 to represent a scale of attainment rather than the rights based approach as suggested
by Harris.
127
Table 5.3: Measuring digital poverty
Infrastructure and service The extent to which ICT infrastructure and the services made available
availability
through the use of ICT are available to those who might wish to make use
of them.
Financial accessibility
The extent to which the population can afford the full costs of ICT access and
ICT services, including transportation and time.
Awareness
The extent to which the population is aware of how they might be able to use
ICT for their own benefit.
Opportunity to learn and use The extent to which the population has the opportunity to attain (and maintain)
new media
computer literacy.
Mastery of new technologies
The extent to which the population understands which ICT tools are best suited
to which tasks.
Experience
The extent to which the population is able to accumulate sufficient experience
with the use of ICT to enable them to fully exploit their potential.
Skills
The extent to which the population has the right skills (and is able to develop
new skills as required) for performing ICT-related tasks.
Support
The extent to which the population can access appropriate assistance when
needed to help them make good use of ICT.
Attitudes (motivation)
The extent to which the population is encouraged to participate in the sharing of
benefits available from equal access to ICT.
Content
The extent to which the content available is sufficient to enable the population
to gain benefits from ICT
Cultural
The extent to which other dimensions are adapted, as required, to the cultures
of all potential users.
Disability
The extent to which other dimensions are adapted, as required, so that disability
is not a barrier to equal enjoyment of the benefits of ICT.
Linguistic
The extent to which other dimensions are adapted, as required, so that language
is not a barrier to equal enjoyment of the benefits of ICT.
Gender
The extent to which other dimensions are adapted, as required, so that gender is
not a barrier to equal enjoyment of the benefits of ICT.
Empowerment of civil society
The extent to which structural, political and governance factors facilitate equal
enjoyment of the benefits of ICT.
Sources: Adapted from Barrentes (2005) and (Harris (2003).
The different dimensions of digital poverty certainly do appear to prevail among agricultural
producers. Kalusopa (2005) reported that less than 20% of his sample of farmers reported that
they did not have access to a television, while only 38% reported that the extension officers
with whom they engaged made use of any form of ICT. An important reason given for the low
usage of ICT was high tariffs. In their review of ICT projects in rural India, Dossani et al. (2005)
found that the lack of knowledge about the usefulness of ICT is widespread and is an important
reason for the low usage of ICT facilities provided by the projects that they investigated.
As a result, as much as e-commerce provides the small-scale farmer with the business
opportunity to gain entrance to a global economy, there is also an accompanying threat of nonadoption of ICT. The non-adopters are at a relative disadvantage and become disenfranchised
as they cannot gain access to services. This can result in their business becoming less profitable
128
and less competitive (Warren, 2003). These concerns are not confined to developing countries:
the Social Exclusion Unit of the Government of the United Kingdom has recently identified
a “digital challenge” (Government of the United Kingdom, 2005). These concerns are also
not confined only to small-scale farmers or poor communities. Reporting on a workshop held
to discuss ICT and national agricultural research systems, Maru (2002) noted the concerns
of agricultural scientists in developing countries which included the high costs of accessing
research reports in prestigious journals, the costs of joining electronic libraries, and their own
lack of capacity to make full use of ICTs.
Furthermore, while inadequate skills may pose a barrier to the effective utilization of
ICT, being aware of ICTs does not necessarily lead to their application as there are personal
characteristics, such as age or culture, that influence the decision to adopt. As an example,
younger people are more likely to be technology literate and this can result in generational
differences. However, Hafkin and Odame (2002) observed that the inclusion of an ICT
component into an agricultural project can increase the likelihood of participation by the
youth, while ICT also allows people who may be legal minors to access a range of services for
entrepreneurial activities that would otherwise be denied to them.
Premkumar and Roberts (1999) argued that the decision to adopt unfolds in five stages,
namely awareness, persuasion, decision, implementation and confirmation, while Warren
(2002) argued that ICT usage stems from three factors: motivation, access and competence.
Building e-literacy thus requires sector policies that take these motivations into account and
that are demand-driven and which build up community nodes so they can have farmer support.
Another concern is the potential for bias towards technologically advanced and well resourced
large agri-businesses to the neglect of small farmers.
Integrated strategies for expanding farmer access to electronic information services related
to marketing and the development of national and international trading links need to be
explored with the participation of all stakeholders and pillars of ICT, including farmers and their
organizations, the government (and their national departments of agriculture, and other relevant
government departments), academic institutions that provide technical support to farmers and
conduct research on the impacts of various strategies, and civil society organizations that work
with farmers.
Where electronic communication is adopted as the default knowledge transfer mechanism
by governments, corporations and public agencies, this further exacerbates the digital divide.
Non-adopters run the risk of becoming disenfranchised resulting in sizable pockets of relative,
if not absolute, disadvantage, more so if the barriers that are inhibiting adoption in these
areas are unidentified and hence not eliminated. The result may be areas, especially in rural
communities, which are trapped in a “low-use equilibrium” (Grace et al., 2001).
6.2 Barriers to Accessing and Using ICT in Agriculture
ICTs face a number of unique barriers in rural communities that will have to be overcome.
As Kenny et al. (2000) observed, geography plays a very strong part in the determination
of communications costs and functionality. In rural communities, where a sparse population
implies that potential users live in areas of low demand density, communications costs will be
higher and services will be less well developed. This is due to what is known as the economics
of networks. Thus ICT in rural areas cost more per line both because each connection is further
from the next, and because it is not possible to achieve economies of scale in switching. The
result of this can be seen in the penetration of ICT into rural areas. While not a complete
indicator, tele-densities (the number of main lines per 1,000 people) give some idea of the
extent to which this will be a problem for farmers in rural Africa when used in combination
129
with mobile phone densities (mobile phones per ,1000 people). As Table 5.4 shows, Teledensities are far higher in the main urban areas than in the rest of the countries in all those for
which data are available (Table 4). The percentage of households with access to a radio and
television, Internet access per 1,000 people and a relative rural ICT score are also shown in
Table 5.4.
While radios are more accessible to the populations of most countries than are telephones,
of the 44 countries for which data are available, only in nine do more than three-quarters of
the population have access to a radio, while in 11, less than half the population have access to
a radio. In the case of television, in only three countries do more than 50% of the households
have access to a television, and in 16, less than 10% have access a television. Mobile phone
access is highest in Seychelles, South Africa and Reunion at more than 700 users per 1,000
people, and lowest in Ethiopia and Eritrea at less than 10 users per 1,000. While there are
26.25 internet users per 1,000 people in sub-Saharan Africa as whole, this varies from over 100
per 1,000 for South Africa and the Seychelles to below 3 per 1,000 for Niger, Ethiopia, DRC
and the Central African Republic. Finally, in terms of the rural ICT score, Cape Verde, Côte
d’Ivoire, Gabon, Kenya, Namibia, Senegal, South Africa and Sudan were ranked as having
relatively high rural ICT access. 10
Table 5.4: ICT access in sub-Saharan Africa
Tele-density Tele-density R a d i o TV access
per
1000 per 1000 all a c c e s s ( % )
largest city other (2000) ( % ) (2000)
(2000)
(2000)
Mobile
density
per 1000
(2005)
Internet R u r a l
u s e r s ICT score
per 1000
(2007)
Angola
21.3
0.8
16
9
69
6
Low
Benin
41.1
4.1
84
18
100
55
Medium
Botswana
..
..
82
..
466
32
Medium
Burkina Faso
40.9
1.7
63
7
43
5
Low
Burundi
50.8
0.8
57
11
20
5
Low
Cameroon
35.5
3.2
53
17
138
14
Medium
Cape Verde
160.4
115.5
66
40
161
59
High
Central African Rep. ..
..
56
2
25
3
na
Chad
7.7
0.3
40
2
22
4
Low
Comoros
..
..
55
10
20
29
Congo
..
..
30
6
123
13
na
Côte d’Ivoire
63.9
6.6
74
32
38
10
na
DRC
..
..
16
1
151
2
High
Equatorial Guinea
67.8
5.1
..
..
193
6
Low
Eritrea
43.1
2.3
55
11
9
19
Low
10 While access to a telephone, mobile phone, computer and internet would have provided a complete set of ICT
indicators, these data are not available from a consistent information source or reference period for the majority of
countries. The scoring system is a simple relative score whereby countries were ranked in terms of the percentage of
the population with access to radios and televisions, tele-density outside the largest city and mobile phone densities.
These scores were summed and again ranked into three groups: low, medium and high rural ICT access. Thus a
country in the bottom quartile in terms of radio and television access, tele-density and mobile density would receive
a score of 3 and be placed in the low rural ICT category. This ranking is relative to the countries contained in the
table and not to a global best practice.
130
Ethiopia
51.9
1.6
20
2
5
2
Low
Gabon
84.6
13.2
73
51
470
46
High
Gambia
77.9
13.8
71
12
163
32
Medium
Ghana
83.3
2.7
53
22
129
18
Medium
Guinea
..
..
56
9
24
6
na
Guinea-Bissau
112.7
2.7
27
20
50
21
Medium
Kenya
76.2
4.1
91
15
135
32
High
Lesotho
65
5.7
..
..
137
17
Medium
Liberia
..
..
..
..
49
0.3
na
Madagascar
8.7
1.3
39
7
27
5
Low
Malawi
39.8
2.6
55
1
33
5
Low
Mali
24.5
1.2
65
13
77
5
Low
Mauritania
19.6
3.6
51
19
243
7
Medium
Mauritius
375
218.6
87
87
573
232
High
Mozambique
..
..
39
4
62
7
na
Namibia
156.4
44.5
85
37
244
36
High
Niger
22.8
0.6
34
5
21
2
Low
Nigeria
11.7
3.9
62
26
141
31
Medium
43.7
1.1
35
2
32
6
Low
54.8
14.9
40
24
77
115
Medium
Senegal
64.5
9.7
68
26
148
49
High
Seychelles
..
..
94
86
707
247
na
Sierra Leone
17.6
1.1
46
4
20
2
Low
Somalia
10.2
2.1
..
..
61
7
na
South Africa
415.2
81.8
75
55
716
103
High
Sudan
79.8
6
76
45
50
76
Medium
Swaziland
111.1
24.8
53
18
194
31
Medium
Tanzania
33.5
2.9
50
9
51
9
Low
Togo
35
2.5
80
17
72
54
Medium
Uganda
34.2
0.9
49
..
53
17
Low
Zambia
22.6
5.1
56
23
81
20
Medium
Zimbabwe
73.8
12.2
60
25
59
97
Medium
Rwanada
Sao
Tome
Principe
and
Source: ITU (2006); World Development Indicators data base, http://devdata.worldbank.org/dataquery/, accessed 21/05/07; Internet World Statistics, http://www.internetworldstats.com/stats1.
htm#africaand, accessed 25/05/07 and own calculations.
In many parts of Africa, an additional access issue may be the language gap, both in terms
of the nature of information access through ICT and the medium. Dossani (2005) reported
that much of the information provided through ICT can be seen as lacking relevance to local
conditions since it is generic in content, resulting in low usage. This is also commented on by
IICD (2006), which refers to earlier research on agricultural information systems that found a
131
disjunction between the information needs of farmers and that which is provided. In addition,
English is still the dominant language used on the Internet, although it is not the home language
of the majority of users. While access to ICTs should not be bound by language, culture or
distance, it is likely that the ICT access of those who are poor and of women in general, may
be affected by this.
6.3 Improving Knowledge Management and Information Generation
Establishing the information needs and skills of farmers is a priority challenge when
contemplating ICT policy for agricultural development. Meera et al. (2004), reporting on ICT
usage from three projects in India, found that marketing information was a priority need for
many farmers. More specifically, farmers wanted to know the prices of the commodities that
they were expecting to sell in places other than the villages in which they lived. Information
on land records was also seen as important, along with the ability to register plots of land
(presumably when transfers are made or leases entered into). A question-and-answer service
was valued, though this appreciation was enhanced when the service was linked to the ability to
then be able to apply for support, subsidies and other forms of government assistance. Weather
forecasts were valued, although almost half of the respondents in their survey did not regard
this type of information as being appropriate, perhaps a result of the extended drought that some
of the regions had been experiencing at the time of the study. Other information needs listed by
the study include post-harvest technology, information on crop insurance, and accounting and
payment systems. Also in India, Hafkin and Odame (2002) mentioned that ICT also facilitated
reporting grievances and obtaining routine official documents such as income and domicile
certificates, which had previously required paying bribes to local officials. In addition, Wolf
(2001) noted that government department websites can improve the access of entrepreneurs to
information regarding regulations and applications; she commented that South Africa has made
significant progress in this regard. Finally, as Maru (2002) observed, ICT itself can be used as
a way of establishing the needs of farmers.
The transformation from the hardcopy style of dealing with transactions and markets and
trade to sophisticated and technologically advanced digital methods and standards presents its
own complexities. Although ICT may provide enormous opportunities to access information,
the management of this and the generation of new information is an important concern. A starting
point is the digitization of relevant literature on agriculture and the integration of searchable
databases which can then be accessed by producers. Facilitating the sharing of information
will also require a minimum form of standardization for national agricultural research systems.
Maru (2002) suggested that revitalizing the Current Agricultural Research Information System
(CARIS) project of FAO might be a useful starting point with which to achieve this. Improving
the skills and ICT literacy of farmers is another requirement, which likely also necessitates a
more general improvement in the education levels of farmers. In Ethiopia, Weir (1999) found
that cognitive skills improve the ability of farmers to access and use productivity-enhancing
information, and to be more willing to engage in activities that might involve higher levels of
risk.
Problems can arise throughout the process of creating a new knowledge economy, and as
one example, Akiiki (2006) mentioned information hoarding and overload as difficulties facing
a farmer support project in Uganda. Differential capacity for innovation and adaptation is also
an issue that can exacerbate digital poverty. Wolf’s (2001:20) study of small and medium
enterprises in Kenya and Tanzania which includes the food processing sector concluded that,
“…access to credit, managerial and other skills, infrastructure, rule of law etc. are at least as
important as information and ICT (Wolf, 2001:20).”
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Apart from promotion of e-literacy for its intrinsic values of bridging the digital divide
and getting everybody to participate and engage in global systems that affect them, in a sector
such as agriculture that engages frequently and structurally with government, expanding ICT
adoption is also of instrumental benefit. This is through the potential of ICT to encourage the
diffusion of new ideas and information, the innovation that might result from the use of ICT,
improved productivity, and hopefully the improved profitability that would follow.
Maru (2002) presented a useful way to classify countries in terms of their usage of ICT for
agricultural research and development (ARD). She uses four codes: A- advanced users of ICT
in ARD; B- less advanced users of ICT in ARD; C- rapidly developing ICT use in ARD; and,
D- slow development in ICT use in ARD. A similar exercise for African countries would be
informative and could build on the data provided above. This would serve as a useful point of
departure for further research on agricultural production and ICT usage.
In addition, the withdrawal of publications in hard copy and discontinuation of extension
services using conventional communications such as paper application forms, face-to-face
or telephonic-based trading may further disadvantage those without ICT access or skills.
Managing these problems implies that a number of prerequisites are in place with regard
to developing an information society and economy. The establishment of an agricultural
communication network that includes consumers and the private sector, as well as national
agricultural information and research systems, is one prerequisite. Examples can be found
in a number of countries in SSA including Ghana and Zambia (IICD, 2006). Another issue
is the improvement of rural infrastructure, including cabling and cellular coverage. Securing
licences and appropriate hardware and the reduction of communication costs associated with
fax, telephone and other conventional systems are also important. Training for the effective
utilization of ICT is a basic requirement, especially in the developing country context. Further
effective network management practices are required, including ensuring the interactivity of
networks and compatibility of technologies to local conditions. Finally, an overarching concern
is improved information on the agricultural sector.
6.4 Women and ICT
A final concern relates to the implications of ICT for women. Although the potential for
ICT to serve as an empowering force for women is real, the results of Meera et al. (2004)
are quite worrying. The very low participation of women at the ICT kiosks that they studied
suggests that women may be further disadvantaged if ICT development does not consciously
embody a gendered approach. Earlier research examining other technological innovation has
found that the introduction of new technology may increase women’s work, and that when
new technologies led to improved livelihoods, these may be taken over by men (Paris et al.,
2001). ICT interventions themselves run the risk of being perceived as a desirable “modern”
activity that becomes appropriated by men generally, and by the relatively wealthy or relatively
literate. In addition, as Hafkin and Odame (2002) observed, the work undertaken by women
is frequently overlooked by development agencies. They cited two examples of projects in
Senegal and Peru in which ICT access was improved by making services available to male
fishers and male farmers without recognition of the roles played by women fish sellers and
women farmers in each of the countries. This both limits the potential impact of the intervention
and further marginalizes the women involved.
6.5 Increased Control and Penetration of Markets
Finally, while much has been made of the potential of ICTs to the improve access of
agricultural produce in developing countries to larger markets, the reverse may be equally
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true. As Wolf (2001) pointed out, ICT may well enable the penetration of larger producers
into markets previously served by small and medium enterprises. If these enterprises
cannot improve their competitiveness, it is likely that they would eventually close down,
potentially resulting in the loss of jobs and livelihoods in rural communities. The example of
the expansion of supermarkets documented by Neven et al. (2005) may well have had such
negative consequences. In addition, the spread of ICT will also strengthen the relative power
of what Gereffi (2001) termed “ınfomediary-driven” commodity chains where Internet-based
“informediaries” are able to control e-commerce. Examples might be PayPal, American OnLine and Yahoo!. Two other possibilities are suggested by Gereffi (2001), both of which may
result in still further erosion of the power held by producers: firstly, ICT and e-commerce
may accelerate the tendency to make commodity chains more buyer-driven and secondly, that
e-commerce is simply captured by already established leaders in both producer-driven and
buyer-driven chains.
7 Research for Agricultural Development and Agrarian Change
The country case studies reviewed above illustrate how farmers and the organizations that
they form make use of ICTs. This has illustrated the need to assess the impact of ICT so as
to make a case for public and/or private investments in the technology. Those countries that
do not support development and use of ICT may not appreciate the benefits and costs of such
investments, especially when weighed against other urgent/priority investments whose benefits
are easily identified and, perhaps, have hidden costs. Further, those countries that do support
such development may be underestimating the negative impact that ICT might have on some
sectors of their economy. The positive results found in most case studies suggest that ICTs
have the net potential to expand the choice of farmers and to improve the productivity and
profitability of the agricultural sector in Africa. However, there are important challenges that
have to be overcome if these benefits are to be fully achieved. Of these, the potential for a digital
divide, and the wider social consequences of such a divide, is perhaps the most important. For
countries already characterized by high levels of inequality, such as is the case for most of subSaharan Africa, the introduction of a relatively costly and relatively highly skilled technology
has the potential to widen social and economic gaps. The “digitally wealthy” are better placed
to take advantage of the new opportunities offered by ICT while the “digitally poor” fall
further behind, perhaps experiencing new forms of social exclusion as a consequence. This
is particularly relevant to the agricultural sector. In the best of conditions, rural communities
often face an intrinsic “urban bias” in terms of policy and investment and are often politically
and economically marginalized with relatively low human capacity, poor infrastructure and
comparatively costly services. Agriculture itself has tended to experience declining terms of
trade relative to other sectors and is subject to extensive regulation by national and international
governments, as well as by the private sector.
As set out in the introduction, three policy issues present themselves for investigation:
1.What are the critical priorities and level of investment required in ICT in order to
optimize its impact in the agricultural sector in Africa?
2.What is the role of public investments to ensure optimum application of ICT in the
agricultural sector and agrarian economy more broadly?
3.How can those actors in the sector who would be disadvantaged be compensated,
given the distributional implications of the use of ICT?
To answer these policy issues, research is needed to better describe and analyse the nature
of ICT application in agriculture. These are:
1. Coordination and regulation by government and the private sector.
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2. Managing the costs and benefits of technology change.
3. Enhancing innovation, productivity and profitability in agriculture.
4. Agrarian change and community development.
In each case, it is evident that despite the plethora of case studies of ICT usage, rigorous
micro-level studies are required at the level of the household, enterprise or farm unit and placing
this enterprise in the context of the commodity chain in which it is operating. Furthermore,
since most of the case studies that are reported tend to be descriptive, where possible, impact
assessment methodologies should be followed which allow for the identification of causality.
These methodologies provide a useful framework for this purpose since they permit the more
precise identification of the contribution made by a specific intervention and take account of
the importance of identifying the direction of causality (Ezemenari et al., 1999; Baker, 2000).
Such methodologies may adopt quantitative or qualitative approaches, and often may include
some form of randomized intervention that affects the usage or access to a pre-identified
intervention. By collecting information on the control, or counterfactual group, and often by
collecting information on initial versus post-intervention conditions, impact assessments can
improve understanding of the benefits, or costs for that matter, that can be directly attributed to
an intervention. Even when an experimental approach is not followed, the structured research
design adopted by impact assessments can be used to guide a less rigorous assessment of the
costs and benefits of a development intervention.
With this in mind, a research project is proposed that will make use of a commodity chain
approach to explore nine sector-based case studies to be undertaken in 11 African countries
(Table 5.5).
Table 5.5: Proposed research projects on ICT and agriculture
#
Issue
Focus
Sector
Country
1
Coordination
Export, buyer driven, high ICT
Horticulture
Kenya
2
Coordination
Export, buyer driven, low ICT
Coffee
Côte d’Ivoire
3
Coordination
Export, producer driven, high ICT
Sugar
South Africa
4
Coordination
Export, producer driven, low ICT
Sugar
Mozambique
5
Costs
Mixed, buyer driven, high ICT
Palm oil
Cameroon
6
Costs
Export, buyer driven, medium ICT
Cocoa
Ghana
7
Costs
Mixed, processor driven, high ICT
Milk products
South Africa
8
Costs
Mixed, producer driven, medium ICT
Milk products
Uganda
9
Innovation
Export, buyer driven, medium ICT
Vanilla
Uganda
10
Innovation
Export, buyer driven, low ICT
Vanilla
Madagascar
11
Innovation
Domestic, producer driven, medium ICT
Plantain
Rwanda
12
Innovation
Domestic, producer driven, low ICT
Cassava
Mozambique
13
Agrarian
Rural development
Community
Nigeria
14
Agrarian
Rural development
Community
Uganda
15
Agrarian
Poverty Reduction
PRSP
Zambia
16
Agrarian
Poverty Reduction
PRSP
Ghana
In addition to these sector studies, two cross-cutting projects are proposed. The first of these
is a pilot project to assess the uptake of ICT in rural areas and analyse the determinants and
impact of ICT roll out. The study should make use of data on the roll out and usage of ICT in
135
rural communities to be obtained from government regulators and the private sector. These
data should be matched with appropriately geo-referenced socio-economic and infrastructure
data from censuses, geographic information systems and other sources. It is suggested that this
pilot study be undertaken in Kenya to help develop methodologies for the compilation of the
database, analysis and interpretation. Once established, these methodologies could be applied
to other countries as required. The second cross-cutting project is the preparation of a synthesis
report based on the sectoral studies. This should draw the material into a single document that
addresses the policy questions already identified.
Each case study would initially comprise a desktop review followed by in-depth key
informant interviews along the commodity chain, including regulators. These interviews should
identify and assess ICT adoption in the sector. Wherever possible, local researchers should be
drawn into the study as country experts.
7.1 Coordination and Regulation
7.1.1 Problem Statement
In view of the complex relationships specifically associated with ICT usage in the agricultural
sector, it seems likely that all levels of government will increasingly find themselves under
pressure to create an enabling environment for small-scale farmers to access markets and
services. To some extent, as Kenny et al. (2000) pointed out, this may be no more than public
sector support to promote ICT development in rural areas that would otherwise be unattractive
to private sector investors. However, the development of appropriate policy, regulations and
coordination is equally important. Indeed in a seven-country assessment of ICT usage and
management, Zachmann et al. (2004) concluded that the absence of appropriate regulatory
policies was the key factor limiting the impact of ICTs on agricultural research. A similar
finding was reported by Kenny et al. (2000) for India where an ICT project to improve access
to land records through the Ministry of Agriculture was found to have minimal impact due to
the failure to address the prerequisite administrative changes that were required.
Government intervention is thus required to coordinate and regulate the efforts of the private
sector, both in ICT provision and in the agricultural commodity chain. The private sector
itself plays a significant role in regulating the activities of farmers through quality and supply
requirements which are also affected by, and affect ICT usage. In many countries, international
and local agricultural development agencies are working with the different levels of government
and with ICT users and their organizations to address this question of appropriate coordination.
A model adopted by the IICD is to work with country partners in developing ICT strategies
for the agricultural sector. There are many other international agencies that work with country
partners in mostly the developing world in their quest to bring about agricultural development
and help bridge the digital divide in ICTs, following much the same format as the IICD in its
engagement with its country partners.
Developing appropriate policy for both the private and public sectors, and understanding
the impact of policy and how intervention actually takes place are thus important research
questions for ICT usages in the agricultural sector.
7.1.2 Research Questions
The primary research question is: what has been the experience of policies for the
regulation and coordination of the agricultural sector that have made use of ICT in their design,
implementation and monitoring?
Detailed research questions include:
• Which are the existing coordination and regulatory structures in agricultural
136
production, processing and marketing that can or should be involved in ICT? More
specifically, what have been found to be the most appropriate institutional structures
for the promotion and regulation of agricultural production for ICT usage? What are
the current initiatives in agricultural production, processing and consumption among
such institutions and what best practice can be identified?
• Which are the existing coordination and regulatory structures in ICT that might
have an impact upon agricultural production, processing or consumption? More
specifically, what have been found to be the most appropriate institutional structures
for the promotion and regulation of ICT usage for agricultural production? What are
the current initiatives in ICT usage among such institutions and what best practice can
be identified?
• What role can the national and international private sector play in the promotion of
ICT for coordination and regulation that improve agricultural production and valueadded activities at different points along the agricultural commodity chain?
• Are there examples of regulation or coordination which has helped to strengthen the
economic hand of agricultural producers vis-à-vis other interests in the agricultural
commodity chain? To what extent have these/can these be enhanced by ICT?
7.1.3 Research Design
Two case studies are proposed. The first is to explore regulation in complex buyer-driven
commodity chains with strong export potential. This study will examine ICT usage in the
Kenyan horticulture sector and the coffee sector in Côte d’Ivoire. Both are important sectors in
the countries being investigated, and both sectors involve substantial regulation by government
and the private sector. While horticulture in Kenya has witnessed a sustained boom that
preliminary investigation suggests has been encouraged by ICT usage, coffee production in
Côte d’Ivoire has been experiencing a serious slump. In addition, while Kenya has generally
experienced a rapid expansion in ICT usage, uptake in Côte d’Ivoire has been comparatively
sluggish (ITU, 2006).
The second case study will look at complex export orientated commodity chains in which
producers have substantially more influence. This study will examine sugar production in
South Africa and Mozambique. While South Africa has a long established ICT sector with very
high usage, ICT usage in Mozambique has only recently expanded.
7.2 Managing the Costs and Benefits of ICT
As this review has shown, there are many potential benefits associated with ICT usage.
However, effective usage of ICT media carries developmental, infrastructural and access costs.
While some of these can be carried by governments, and by implication by their revenue base,
a substantial portion of the costs are carried by the private sector and by users. This presents
the need for the analysis of an emerging political economy of information and its usage. Pricing
policy and competition between service providers is an example of the areas of concern that
this might involve. An example is South Africa’s Telkom in which pricing structures are
higher than international standards in telecommunications and broadband, which has huge
cost implications to the economy. As Kiiski and Pohjola (2001) observed, telecommunications
pricing and infrastructure and Internet access are complementary factors in determining ICT
use and impact. Lowering the costs to communicate therefore seems a useful policy direction,
whether these deal with unbundling, access to international ICT services, cable or broadband
wireless.
137
The costs associated with ICT may well extend beyond the direct expenses associated
with the provision of infrastructure and user charges. As also discussed, ICT may be used to
restructure the agricultural commodity chain in a way that there are winners and losers, the
smaller producers being a potentially vulnerable group. There is also evidence to suggest that
specific groups may negatively affected; women are of particular concern. Specific research
questions for investigation thus include those discussed below.
• How can the economic and social impact of ICTs in agricultural development be
assessed for important crops grown in Africa and in Africa more generally?
• What is the impact on agricultural producers, processors and consumers of using ICT
in terms of prices, profitability, choice and quality of life? Does this differ between
different groups within developing countries in Africa, and if so, how and with what
consequences?
• What unintended consequences result from ICT usage, either to individual businesses
or to society as a whole? This should include issues concerning empowerment/
marginalization and gender specifically.
• What are the costs of non-adoption at different levels (government departments,
local authorities, agri-processing enterprises, farm producers of different sizes and
individuals within households) and who carries these costs? Are there examples where
non-adoption has been beneficial, and if so, for whom?
• What are the costs and benefits to ICT service providers, regulators and other
stakeholders including the private sector and the ICT commodity chain itself?
• What has been the macroeconomic impact of ICT adoption, and how can this impact
be built into national and agricultural statistics systems?
• What are the digitally dividing barriers (such as geographic concentration and urban–
rural, gender, low income and age) that result in non-adoption of ICT (such as electronic
communication) and how can these be reduced and/or eliminated?
• What transaction costs could potentially be reduced by ICT adoption and through what
mechanism and with what government support?
Two sector studies are proposed: the first will examine palm oil production in Cameroon
and compare this to cocoa in Ghana. Both are buyer-driven commodity chains: while palm oil
has both export and domestic consumers, cocoa is an export crop. The second sector study is
milk production in Uganda and South Africa. While Uganda remains relatively protected from
international investment and competition, the dairy industry in South Africa has undergone
substantial restructuring in the last decade. All these countries have seen comparatively rapid
expansion of ICT usage although South Africa has experienced the longest growth.
7.3 Enhancing Innovation and Productivity
For some governments, the limited resources available for the use of ICT have been justified
as a less pressing investment priority relative to other development agendas (Torero and von
Braun, 2005). As such, research that sheds light more into the direct and indirect links and/
or benefits between ICT and the expansion of the agricultural sector, and the macroeconomic
consequences that result, is an important information gap. Research is also required that is
designed around the needs of the target population, rather than those of the providers of ICT
138
and hence it is important to engage farmers on the data and information to collect. As discussed
earlier, changes to productivity and profitability can occur throughout the agricultural commodity
chain through facilitating more efficient allocation of resources, by reducing the transaction
costs involved in production and consumption, and by shifting outward the production function
of the different enterprises on the commodity chain. To capture this, research would need to
be directed at each of these elements, and at key commodity chains rather than at specific case
studies. Finally, since few studies have included a time dimension, and/or have given a fully
comprehensive and representative picture of the whole range of agricultural businesses in any
country, little is known about the parameters of the ICT adoption curve (Warren, 2002).
Questions include:
• What are the agricultural commodity chains most likely to be affected by ICT in terms
of productivity and profitability and at what point in the chain would this occur? What
are the possible consequences of this (job creation or loss; higher capital/labour ratios;
gain or loss of control over production process)?
• What is the impact in terms of productivity and profitability of the ICT change, and
what complementary changes have facilitated this such as training or other forms of
investment?
• What new farm technology and innovation have improved output, productivity, safety
or value added generally, for important crops grown in African, and in Africa more
specifically?
• Who is, and who could assist farmers to innovate and to exploit the benefits of
ICT generally and electronic commerce in particular and who can offer ICT-linked
agricultural research, training and skills enhancement?
• What is the percentage of farmers that have adopted or have been affected by the
adoption of particular technologies?
• What is the rate of growth (measured over time) in the use of ICT such as personal
computers and Internet technologies as a management aid? What types of farmers use
these the most, e.g. crop (arable) or livestock (such as dairy)? What size farms? What
are the demographics like between laggards and innovators?
• Do ICTs assist emerging farmers through diversification by opening up opportunities
for marketing, or are they increasingly excluded from such commodities and markets?
Two case studies are proposed. The first is an examination of a high value export crop that
is strongly buyer-determined. The case study of the vanilla sector in Uganda and Madagascar is
recommended. Currently, the Coca-Cola Corporation is the world’s largest customer of natural
vanilla extract to the extent that changes in production have had a direct impact on the economy
of Madagascar. Prices have been volatile since the disbanding of the Madagascar/Reunion-led
Vanilla Alliance in the 1980s, which resulted in a substantial decline in prices that subsequently
rose after typhoon Huddah damaged production in Madagascar in 2000 (De Melo et al., 2000).
This event is said to have encouraged the expansion of vanilla production in Uganda (www.
ugandavanilla.com/). Uganda and Madagascar have also experienced different trajectories in
terms of ICT uptake, with this sector expanding rapidly in Uganda, while uptake in Madagascar
has been comparatively slow.
The second case study is of producer-driven domestic food crops. As before, two country
studies are proposed. The first is the plantain sector in Rwanda, a country that has experience
rapid and innovative ICT uptake, and the second is cassava in Mozambique.
139
7.4 Agrarian Change and Rural Empowerment
7.4.1 Research Problem
So far, the analysis has emphasized the market production aspect of agricultural activity.
However, in many parts of Africa, agriculture serves multiple purposes that extend beyond this
to include the production of food for subsistence, a source of employment and a social role that
provides, especially women, with an independent livelihood. Agricultural is also not carried out
in isolation from non-farm production, including handicrafts, retail activities and other formal
and informal employment. As mentioned earlier, broad-based community development is an
important concern of rural populations which indirectly impact upon the capacity of farmers to
successfully engage in production through their improved health, education and participation.
A number of civil society organizations are working in the ICT sector which can affect how
communities access and make use of technology. In the case of the Internet, existing Internet
policy and action groups include the African Networking Initiative (ANI), the International
Development Research Centre (IDRC) and Bellanet, Capacity Building for Electronic
Communication in Africa (CABECA), the UN Secretary General’s Special Initiative on Africa
(Proposal for Harnessing Information Technology for Development), and the Africa Internet
Forum (Richardson, 1998). Other challenges with ICT pertain to setting up systems that later
become vulnerable to theft, including the cables themselves. Moreover, training needs to be
provided on a continuous basis given the rapid technological developments. Finally, economies
of scale may not be realized due to the lack of necessary critical mass required for electronic
networks.
Potential research questions include:
• What is the social impact of ICT: does digital networking reduce isolation and social
exclusion?
• What is the role of social networks in the use and diffusion of ICT usage? Who is
excluded and included, for what reason and on what terms?
• What is the extent to which the digital divide manifests itself in terms of access to ICT
and geographic location, education, income and wealth?
• What is the extent to which the digital divide manifests itself in terms of access to ICT
and gender, ethnicity, disability and class?
• Who uses ICT for community development and community empowerment, for what
purpose, and with what impact and with what constraints?
• Who uses rural or community tele-centres, for what purpose and with what impact?
• In impact assessment evaluations using country case studies, what have been found
to be the main positive impacts of ICT in most countries in the area of agricultural
development and agrarian change? What potential impact assessments can be identified
that provide opportunities for a satisfactory counter-factual?
Two case studies are proposed. The first will compare rural community development using
ICT in Nigeria and Uganda, while the second will examine poverty reduction and ICT adoption
more broadly with case studies of Zambia and Ghana.
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8 Conclusion
Improving the productivity of agriculture, whether for commercial production or for
subsistence, is a priority for Africa. Experience elsewhere suggests that ICTs can make a
contribution to this and perhaps reverse the somewhat bleak picture of declining per capita
production of food and increasing food insecurity that has been suggested by organizations
such as IFAD (2002). A substantial body of research suggests that people at all levels of society,
and especially the organizations that serve and represent them, need to be able to access critical
information and communicate. In line with many other innovations, ideal ICT features and
principles should be those that are owned by countries (governments) and driven (engaged in) by
farmers, agribusiness, civil society and the private sector to facilitate agricultural development
and employment creation. The intermediary agencies serve farmers and their communities in
all their ICT initiatives with development assistance, advice, research, extension, education and
training. These are the crucial elements of the networks created for information sharing which
in turn promote efficiency of data collection (censuses and surveys) and ultimately result in the
highly desirable situation of individual and community development and empowerment.
The role of ICT to support agricultural development has been varied in many countries,
with developed countries being relatively more advanced in their technological developments
and developing countries generally lagging behind. If it is said that ICTs are not only of
instrumental value but also have intrinsic benefit, this technological gap, also referred to as
a digital divide, is something that needs to be addressed if only as a matter of best practices
(United Nations, 2005). The manner in which ICTs have revolutionized the field of agricultural
development in many countries are felt in a number of ways, including the area of e-commerce
e-government and predictably e-agriculture, which includes cyber-extension. In sub-Saharan
Africa, some countries have a framework for national ICT policy making that includes support
for the agricultural sector, for example Ghana and Lesotho, while others have adopted ICT
policies that specifically target rural communities, such as Mozambique.
Rapid developments in technology infrastructure is such that some countries, usually in the
West, now have open cities while others, usually in the South, still lag behind. The value of
technology, however, has both intrinsic and instrumental benefits. The instrumental value of
these technological developments, particularly in the field of agriculture, have implications for
agricultural productivity and poverty. On the intrinsic value front, ICT literacy is something that
is a must in the information society and this is something that governments should be taking up
with the ICT industry. Governments must provide an enabling environment by providing the
necessary resources, infrastructure and policy framework. The communications departments
of governments can also work together with agricultural departments and allocate costs and
invest in ICT to bridge the technology divide. The effects of globalization and the impact of the
emerging information revolution cannot be ignored.
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144
CHAPTER 6
ICTs and Industrial Development:
Transformation and Employment
Generation
By Banji Oyelaran-Oyeyinka, PhD
Professor of Innovation and Development
UNU-MERIT, Maastricht, The Netherlands
A Framework Paper Submitted to the African economic Research Consortium (AERC)
Revised March 2007
1 Introduction
T
his framework paper presents a state-of-the-art review of the role of information
and communications technology (ICT) on industrial development, structural
transformation and employment generation. The paper focuses on how ICTs influence
the nexus of economic development and industrial structure. There is increasing evidence of
the connection of structural characteristics and industry-specific factors on the intensity of
adoption of ICTs in business applications (OECD, 2002; Oyelaran-Oyeyinka and Lal, 2004;).
The rate and ease with which ICTs are adopted is influenced not only by industry-specific
factors but also by the level of a country’s economic development. The reason countries at
different levels of technological and economic development access and participate in the ICT
revolution differentially is determined by three sets of factors, namely: the nature of institutions
(formal and informal rules that provide incentives), the policies of the government including
and particularly telecommunication regulation and the nature and knowledge base of key actors
(individuals and organizations that populate sector and countries). For instance, universities are
key actors that have traditionally been the “gate keepers” of technological knowledge and in
most countries have been at the vanguard of ICT adoption. Another set of agents is industrial
enterprises, although these are a highly segregated group separated in terms of size structure
(small, medium and large), ownership (multinationals and locally owned), and sector specificity
(traditional and the so-called “hi-tech”).
In addition to macro factors reflected in national ICT infrastructure, we review the factors
that influence the adoption of “internal” information technology (IT), that is firm-level ICT
variables. Clearly, there are considerable differences in the types and levels of technologies
utilized in firms and across countries even after controlling for sectoral differences (OyelaranOyeyinka and Lal, 2004).
This paper therefore answers and examines the following set of issues:
1. What factors determine the adoption of ICTs by firms at different levels of economic
ICTs and Industrial Development
- Oyeyinka -
145
and technological development? There is increasing evidence in the literature that
adoption and complexity of ICT use depends on economic and technological structural
factors.
2. How do the structure of industry and sector-specific factors affect the rate and nature
of ICT adoption in Africa? Institutions that promote information dissemination and
reduce transaction costs tend to foster adoption and diffusion of technologies.
3. What is the nature and quality of physical and technological infrastructure available
to industrial actors and how do these have an impact on the adoption of ICT tools at
different levels of industrial development?
4. What is the impact of ICTs on employment generation and industrial transformation
through new skills and new technologies?
5. How do industrial policies affect the adoption of ICTs and how do these policies affect
industrial transformation and employment generation?
6. The paper concludes with a proposed methodological approach, including instruments
for data collection and analysis.
The paper is organized as follows: in the section that follows, we provide a brief background
on the status of ICTs in Africa, albeit partially. Africa is largely disconnected from global
markets due in large part to the digital inequality that affects Africa more than other regions
of the world. To this end, we present a short discussion of digital inequality in the section
that follows because this has implications for industrial development. This is followed by the
impact of ICTs on industrial production and the way sectoral differences are marked by ICTs.
We then take up the issue of ICT infrastructure followed by the skills, employment, and export
impacts of ICTs. The final two sections take up the role of national policies and conclude with
a proposed methodology.
1.1 The African ICT picture
ICTs, best represented by the Internet, have diffused rapidly but their spread has been
highly asymmetrical across regions and countries and within regions and countries. Although
the Internet as a commercial technology has only been around for less than two decades, its
diffusion across all societies has been phenomenal; the member countries of the Organisation
for Economic Co-operation and Development (OECD) have witnessed the fastest spread.
Current estimates show that, not surprisingly, the most industrialized countries have benefited
the most riding on superior infrastructure on which the internet thrives. In the first quarter of
2002, worldwide users of the Internet reached 580.78 million with only 6.31 million in Africa,
only about 1% of the world total (Table 1). By 2006, this figure had doubled for Africa, although
in quantitative terms the number of Internet users have increased five-fold in Africa, making
it the area with the biggest gain although, apart from the Middle East, it is still the region with
the smallest number of users. In accounting for the growth of the Internet, the most crucial
infrastructural spending has been the growth of investment in telephone services. Information
infrastructure in developing and transition economies—represented by main line telephones
plus mobile phones per 100 inhabitants—is less than 15% the size of those in OECD countries,
with only 19% of the world’s population. What has most deepened the so-called digital divide
is the historical poor infrastructure that characterizes the poor areas of the world. However,
digital inequality is not just about investment in telephone but a combination of factors. This is
discussed in the next section.
146
Table 6.1: Regional distribution of Internet users (millions)
Region
2002
2006
Region
Africa
6.31
1.09%
32.8
3.0%
Africa
Asia/Pacific
167.86
28.9%
394.9
36.4%
Asia
Europe
185.83
31.9%
308.7
28.4%
Europe
Middle East
5.12
0.9%
19.0
1.8%
Middle East
Canada & USA
182.67
31.5%
229.1
21.1%
North America
Latin America
32.99
5.7%
83.4
7.7%
Latin
America/
Carribean
NA
NA
NA
18.4
1.7%
Oceania/Australia
World Total
580.78
100%
1,086.3
100%
World Total
Source: www.internetworldstats.com Nov15-2006 and Bridges.org (2002), Spanning the Digital Divide,
www.bridges.org.
1.2 Digital Inequality Breeds Income Inequality
DiMaggio et al. (2001) defined the digital divide as the “inequalities in access to the
Internet, extent of use, knowledge of search strategies, quality of technical connections and
social support, ability to evaluate the quality of information, and diversity of uses”. The current
picture in sub-Saharan Africa has improved somewhat from the dismal figures of the late 1990s.
Of all the regions, only East Asia seems to be keeping up with the developed nations while
others tend to be falling behind or barely keeping up. What best explains the substantial growth
differentials are the close association of investment in knowledge and physical infrastructure.
The rich countries invest alot of in knowledge infrastructure compared to developing
countries. Regional and cross-country comparisons reveal basic and fundamental scientific and
technological divides. A look at global research and development (R&D) spending shows that
overall global R&D spending was US$729 billion in 2005. Half of this spending was accounted
for by the USA and Japan alone. Notably, 95% of global R&D is performed in North America,
Asia and Europe; even here, only a few countries carry out the bulk of R&D. R&D spending is
highly correlated with national wealth; notably, the highest spending is found within the OECD
countries although a number of Asian countries are beginning to spend substantial amounts on
R&D.1
In effect digital inequality seems to correlate with income inequality which has also
exacerbated with time as predictions of historical income convergence prove to be incorrect.
In addition, per capita income between the rich and poor countries remains extremely wide.
Studies have shown some association between ICTs and income gaps, with research in the
United States showing that ICT adoption leads to inequality among social classes, races and
educational divides (DiMaggio et al., 2004). There are also qualitative differences in the
requirements for continuing access to the Internet depending on the quality of use sought by
the user. ICT applications for everyday tasks such as word processing and electronic mail may
require no more than basic literacy. Progressing to higher levels of usage—such as software
design—demands a qualitative move to higher academic training. The limits set by lack of the
1 In 2000, Brazil spent $13.6 billion, what was spent by the UK, India ($20.0 billion) was seventh in the world.
China was fourth with $48.9 billion, and in 2002, it spent $72.0 billion to move to third largest behind USA and
Japan. For details, see NSF (2006).
- Oyeyinka -
147
most basic education are self-perpetuating. For instance, a country with poor investment at
the primary education level opens up gaps at the secondary and tertiary levels, a situation that
tends to foster inequality. While wealth has been established as being linked to ICT access, the
direction of causality is more complex to establish.
Causality may well flow both ways but other findings show that superior technical education
is strongly associated with certain kinds of inequality and among a certain community of
users. First, individuals with superior education are the likely beneficiaries of the ICT-related
opportunities that tend to command higher levels of wages. Second, the computer may well
substitute work ordinarily carried by skilled craftsmen, however, this is not a settled matter.
The point of the ICT-inequality nexus is that “when a new technology is introduced into a
social setting where the scarce resources and opportunities are distributed asymmetrically, the
greater likelihood is that those with more resources will employ them to gain additional ones,
including ICTs”. Without clear action, most appropriately by the state, it is not unlikely that
patterns of skewed distribution of ICT adoption and use will be reinforced in much the same way
as patterns of educational inequality have persisted. In as much as diffusion of technologies are
dynamic, it is the changes in the configuration of technologies and the social use to which they
are put that over time may well prove the most challenging for theory and policy. As DiMaggio
et al. (2004) put it, “Patterns of inequality are likely to reflect such changing factors as public
connection availability, private subscription price, services available, and the technology
necessary to access them effectively, as well as the diffusion of knowledge and the evolution of
informal technical-support networks.”
Access to the Internet and to other forms of ICTs is therefore mediated at complex
multidimensional levels. Conceptualization of access as a binary divide of users and non-users
is only one dimension, which cannot fully explain the nature of access. Inequality at the level of
the individual and the artefact, the personal computer (PC) and modems is equally not adequate.
Beyond the device is the network of electrical power, the telephone and communication facilities
without which the Internet does not exist. Hargittai (1999), suggested that digital inequality be
considered at five different levels: differences in technical apparatus people use to access the
Internet, location of access (i.e. autonomy of use), the extent of one’s social support networks,
the types of use to which one puts the medium, and one’s level of skill. In effect, ICTs possess
the character of use and user differentiation that depend on the intensity of utilization and the
qualitative user demand. Given that inequality of income and education is more pronounced in
poorer countries and more poignantly between the poor and rich countries, this paper examines
the impact of ICTs on the industrial development in the context of this equally asymmetric
evolution of this technology.
For example, many of the countries in Africa have a fraction of the per capita income of
East Asian countries. The low levels of per capita income reflect the underdeveloped structures
of these economies compared to other developing countries, and their meagre stock of capital.
On average, more than two-thirds of the population and labour force live in the countryside
and work in the agricultural sector. The share of agriculture in gross domestic product (GDP) is
more than double the average for other developing countries. The low level of industrialization
is also reflected in the extremely low levels of modern sources of hydrocarbon-based energy
use, compared to other developing countries. The per capita consumption of combined coal,
oil, gas and electricity is one-tenth the prevailing levels in developing countries. In contrast,
fuel-wood sources of energy still constitute the bulk of energy consumption in much of subSaharan Africa.
African countries lag behind other developing countries in educational attainment and other
aspects of human capital development required in an increasingly knowledge-based global
economy. Unequal educational attainment translates to a significant industrial divide (see
148
Table 6.2). Available data indicate that the adult literacy rate is on average 49% compared
with 81% for other developing countries. Primary and secondary school enrolment rates are
respectively on average about 30 and 50 percentage points below those of other developing
countries, and tertiary enrolment rates are a tenth of those of other countries. The indicators
suggest that African countries are fast falling behind other developing countries with respect
to human capital formation in spite of the significant progress made since independence. The
vast majority of the population is either rural-based or are recent migrants to urban areas. The
lag between these countries and other developing countries in terms of the stock of human
capital is likely to widen in the face of the rapid advances in science and technology in the more
developed societies.
Sub-Saharan Africa lags far behind in terms of global industrial output and not much has
changed in the last decade despite the somewhat considerable progress made by African
countries in adopting ICTs. Impact takes time to manifest into real outputs and we might
have to wait several years of consistent investment for a real transformation to take place.
The superior performance of East and South-East Asia accounts for more than 60% of the
developing world’s share in global industrial production (Table 6.2).
Table 6.2: Industrial output, by region (1990 and 2002)
Share in world output
(percent)
1990
2002
Industrialized economies
78.17
73.25
Transition economies
6.10
3.18
Developing economies
15.73
23.58
Sub-Saharan Africa
0.79
0.74
excluding South Africa
0.24
0.25
Latin America and Caribbean
5.26
4.95
excluding Mexico
4.29
3.85
Middle East and North Africa
1.46
1.91
excluding Turkey
1.00
1.37
South Asia
1.01
1.51
East and South-East Asia
7.17
14.42
excluding China
4.99
7.84
Other countries
0.05
0.05
Least Developed Countries
0.18
0.24
World
100.0
100.0
Source: UNIDO Scoreboard database.
Note: Industrial output is measured by real value added (in 1995 US$) in the manufacturing sector
(MVA)
Source: UNIDO Industrial Development Report, 2005.
The vehicle of rapid ICT progress is a composite of infrastructure but African countries
have a comparably weak physical and knowledge infrastructure base, exemplified in the poor
telecommunications and transport facilities. For example, the number of telephone lines per
thousand people is about five, one-twentieth of the average for other developing countries
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although the introduction of the Global System for Mobile communications (GSM) system
has changed the picture significantly in many countries. A composite of ICT infrastructure
variables compared with levels of income (Oyelaran-Oyeyinka and Lal, 2004) are shown in
Table 6.3. The relationship between telephone density and Internet User Index (IUI) in two
groups of countries is also presented in Figure 6.1. It is evident that the range of telephone
density in relatively low-income sub-Saharan African countries varies from 1.46 to 10.88 per
thousand persons while in the relatively high-income African countries the range is 7.17 to
257.85. It is clear that there is a substantial difference in the telephone density in the two groups
of countries and not surprisingly, IUI is significantly different in these countries. The impact
of the telephone as a key infrastructure is quite significant and suggests that African countries
should focus on making it an investment priority.
Due to the poor supply of telephone services, the cost of local telephone calls is 100%
higher than the average for telephone-rich countries. The considerable lag in the development
of telecommunication infrastructure within African countries and between sub-Saharan Africa
and other developing countries is likely to lead to their increasing exclusion from the global
economy.
In sum, the foregoing discussion highlights three broad aspects of African economies, which
have important implications for attenuating digital inequalities. First, a majority of Africa’s
population lives in countries with very low per capita incomes and underdeveloped production
structures. Second, extremely low levels of knowledge and physical infrastructure constrain
efficient use of productive resources and subsequently industrial progress in these countries.
And third, largely as a consequence of the first two characteristics, sub-Saharan African
countries have not experienced the benefits associated with digitally-induced employment
generation.
Table 6.3: Economic wealth and other determinants of Internet use in sub-Saharan Africa (2000)
Country
GDP (USD)
at 1995
IU density
(per 10,000)
IU
Index
IH density
(per 10,000)
PC density Tele density (per
(per 1,000) 1,000)
0.01
0.945
Relatively Low Income
Ethiopia
115.88
1.58
0.001
Burundi
140.70
7.47
0.009
Sierra Leone
147.39
Eritrea
155.05
13.05
0.017
3.23
..
0.05
1.608
8.09
Malawi
168.63
14.51
0.019
0.01
1.161
3.86
Tanzania
190.49
32.75
0.044
0.23
2.847
4.87
Niger
202.80
3.73
0.004
0.16
0.466
1.86
Guinea-Bissau
209.76
24.97
0.033
0.17
..
Chad
217.84
3.92
0.005
0.01
1.341
Rwanda
241.77
6.47
0.008
0.47
..
Madagascar
245.80
18.82
0.025
0.34
2.195
3.43
Burkina Faso
252.05
8.38
0.011
0.32
1.257
4.35
Nigeria
253.60
17.57
0.023
0.07
6.587
3.84
Mali
287.74
16.74
0.022
0.08
1.157
3.36
Sudan
319.08
9.65
0.012
0.21
3.216
11.15
1.46
150
Togo
326.61
86.41
0.118
0.34
21.603
9.22
Kenya
328.20
65.21
0.089
0.53
4.891
10.88
Central African
Republic
338.57
4.15
0.005
0.02
1.660
2.80
Uganda
18.01
0.024
0.08
2.701
2.87
347.95
Relatively Higher Income
Gambia, The
370.48
92.11
0.126
0.12
11.514
24.42
Zambia
392.38
19.19
0.026
0.86
6.717
9.20
Ghana
413.25
14.84
0.020
0.01
2.969
9.93
Benin
414.17
24.6
0.033
0.415
1.640
8.05
Comoros
435.79
21.61
0.029
0.58
4.323
10.27
Mauritania
495.68
18.87
0.025
0.45
9.434
7.17
Angola
506.07
22.84
0.031
0.01
1.142
8.39
Guinea
603.40
10.12
0.013
0.25
3.669
8.16
Senegal
609.24
42
0.057
1.93
16.800
20.71
Zimbabwe
620.70
37.08
0.050
2.16
11.867
27.08
Cote d’Ivoire
742.52
27.05
0.036
0.41
6.087
17.01
Djibouti
783.07
21.94
0.029
0.064
10.188
14.09
Congo, Rep.
841.42
1.75
0.002
0.02
3.492
7.68
Equatorial
Guinea
1598.60
15.45
0.020
0.13
2.264
Namibia
2407.60
170.78
0.234
18.51
34.157
68.35
Botswana
3951.10
154.13
0.211
14.53
36.991
89.93
South Africa
3985.10
549.38
0.754
42.95
61.805
133.63
Gabon
4378.00
122.35
0.167
0.28
9.788
32.28
Mauritius
4429.00
728.91
1.000
27.44
100.539
257.85
IUI = Internet User Index = {X j,i - Min (Xj,i)}/
{Max (Xj,i) - Min (Xj,i)}, Xi refers to the Internet user per capita and I, and j refer to the number of
countries reporting data.
Data Source: World Bank (2002) and ITU (2002).
Figure1:1: Internet
Internet users
andand
telephone
density
in sub-Saharan
Africa (2000)
Figure
users
telephone
density
in sub-Saharan
Africa (2000)
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In the same manner, PC ownership correlates with income levels (Table 6.4). Ownership of
PCs is as high as 74% in the OECD countries compared with 5.6% among the lowest-income
countries, an evident impact of the nexus of income-digital inequality.
Table 6.4: PC ownership by income level, 2001, 2002 and 2004
Units per 100 households
2001
2002
2004
Lowest-income households
3.2
2.8
5.6
Low-income households
6.3
5.5
10.0
Middle-income households
12.5
17.8
30.0
High-income households
22.1
37.2
55.1
Highest-income households
26.0
53.8
74.3
Source: China Statistical Yearbook 2002-2005 in OECD Information Technology Outlook 2006
1.3 The Pervasive Impacts of ICTs
ICTs have exerted a pervasive impact on all aspects of society, sectors and technologies.
In this paper, we call attention to the variety of ways in which this technology has an impact
on social and economic development, but we focus on industrial transformational effect and
the ways this might influence economic growth and reduce poverty. In other words, the paper
draws attention to both the short-term and strategic dimensions of ICTs. Analysts have pointed
to both the opportunities and the challenges of ICTs but then all technological revolutions
carry with them promises and dangers, as with the uncertain nature of all innovations. How
and what trajectory ICT development follows in national development depends as much on
policy choices as it does on historical forces and institutional contexts. What we now know is
that ICTs have emerged as a revolutionary technology (a technology comparable in impact to
the invention of the dynamo and the birth of the age of electricity) whose impact has been felt
across all societies, poor and rich alike. In fashioning policies and strategies for ICT therefore,
it helps not to limit the possibilities of the technology but to see it as an embedding force of
change that is changing all areas of life and work.
For this reason, we examine the industrial and employment impact of ICTs at three different
levels, taking as contexts different levels of economic development, which are:
• The role of ICT in changing the ways and the speed of acquiring information and
knowledge, and the impact on education and learning across societies and sectors. At this
level of impact, ICT in form of the internet, PCs and different modes of communication
(the GSMs) is relatively accessible to all people in society, although as we noted earlier
this is differentiated across income groups.
• The manufacturing and production impact of ICTs, which is the subject of this
paper, by which the technology changes the organization of the work place much
in the same way that electricity brought about different modes of production. The
productivity impact has been a subject of much controversy but the visible impact of
ICTs is undeniable. At this level of impact, some countries, particularly in East Asia
(China notably the most recent), have used electronics as a basis for significant wealth
creation. ICTs have not only been a significant inclusion in traditional sectors but a
basis of new production regimes.
• The network impact relates to the role of ICTs in linking people, places and events all
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over the globe. In industry, ICTs have revolutionalized the way enterprises relate to
other enterprises and how firms reach customers, suppliers and buyers.
In what follows, we will review selectively the industrial and employment impacts of ICTs.
2. ICTs and the New Information Economy
ICTs are defined as technologies used to “store, receive, transmit, and algorithmically
transform any type of information that can be digitized—numbers, text, video, music, speech,
programs, and engineering drawings, to name but a few” (Brynjolfsson and Hitt, 1996: 2).
The term “ICT” is used to describe electronic information processing technologies such as
computers and the Internet. The emergence of ICTs represents the most profound change to our
mode of processing, information transmission and industrial production.
However, the “new” information revolution is not all about digital hardware and electrons
and processors. The newness in the ICT is also relative because, as Arrow (1962) pointed
out, information processing has underlined the organization and coordination of economies
for all time. What has changed fundamentally is the manner of exchange and production and
the unprecedented change in the cost structure of obtaining vast amounts of information. For
instance, one can download whole books, journal articles and industrial manuals at the cost of
no more than that of making a phone call or photocopying an article. Firms are able to reach
long distance customers through electronic website advertisement formats.
However, we need to make a distinction between processing information and reproducing
knowledge because the latter requires vastly more skills and resources. Essentially, greater
cognitive capabilities are required to use information productively and to turn it into useful
knowledge.
ICTs have facilitated the emergence of the “network society” and has profoundly altered the
way business and research are done by fostering long distance exchanges and revolutionizing
otherwise traditional modes of production. In addition to creating new processes and new
service modes, ICTs have also created entirely new markets and products due largely to the
high speed of delivery and low costs of transactions.
The real information revolution is not that information is suddenly becoming important.
Information has always been important. The revolutionary aspect of the information age is the
treatment of information in ways that would have been unimaginable only a few decades ago.
In the next section we present recent empirical evidence, much of which relates to developed
countries, that shows substantial and increasing rise of returns to IT investment, contrary to
much earlier inconclusive findings. The stylized facts are as set out below (Oyelaran-Oyeyinka
and Lal, 2004):
• At the level of the firm, there is “strong evidence of excess returns” to IT systems,
equipment and labour investments (Lichtenberg, 1995).
• There is a strong relationship between IT and improvements in economic performance
of the USA and the impact of IT on aggregate economic performance has increased
over time .
• However, externalities are equally important, that is the complementary effects of
investments made in R&D, computers and human capital in other areas of the industry
and sectors reinforce, and could in fact be indispensable to, the observed positive
impact on productivity in a particular sector. In other words, ICTs should be seen in the
category of what some economists conceptualize as a “general purpose technology”
(GPT). A GPT exerts widespread and productivity-raising effects in all parts of the
economy and sector.
• There is a time dimension to IT investment because of the learning effect of
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technological investment within which firms master techniques and by which “network
effects” begin to be felt. Policy-makers should therefore plan for lags in investment.
For instance, adoption of advanced manufacturing practices may require significant
changes in work organization that may sometime be disruptive while making a positive
impact on productivity (Siegel et al., 1997).
While the rate of technological change has accelerated in the last three decades, the role of
ICTs has been central to this phenomenal growth of information and three separate network
laws have been formulated to explain the new economics of information2 .
While Metcalfe’s Law has been applied to the Internet, it is also true of telephone systems.
Gordon Moore first formulated Moore’s Law in the early 1970s. There can be no doubt that the
cycle of technology development and implementation is accelerating and that we are moving
inexorably onward, out of the Industrial Age and into the Information Age.
2.1 ICTs, Knowledge Convergence and Industrial Applications
The emergence of ICTs and other new technologies has led to the convergence of several
technological techniques to provide wider applications in industry and society (Figure 6.2).
The term “convergence technologies” (CT) has been used to describe this phenomenon defined
as “the synergistic combination of nanotechnology, biotechnology, information technology and
cognitive sciences”. The benefits attending convergence include new organizational production
ICT and Industrial Development: Transformation and Employment Generation
-2structures and gains in communication.
Figure 2: Fields of applications of converging technologies
Healthcare
Robotics
Neuro-prosthetics
– e.g. the bionic hand or an
adaptive retina implant
Emotional-intelligent agent
technology
Home care robots
Nanoscale machines for medical
intervention
New imaging techniques
Biochips
Biosensors
Biomaterials
Pharmaceutical genomics
Regenerative medicine
Targeted drug delivery and release
ICT infrastructure
Environmental monitoring through
ambient devices (e.g. hazard alert,
alert of pollutants)
Mobile devices with integrated
medical services
Software for multiphenomena and
multiscale simulations
Education
Military
Learning support through Environment and energy
converging technologies
Addressing problems at a
system level
Development of new technologies
for the response to biological,
chemical and explosive threats
Development of new technologies
for the generation, storage,
transport and use of energy
War fighting systems
Source: OECD based on Nordmann (2005); Roco and Bainbridge (2003) in OECD Information
2 According to Moore’s Law the maximum processing power of a microchip at a given price doubles roughly
every 18 months. This means that while computers become faster, the price of a given level of computing power
halves. Gilder’s Law states that the total bandwidth of communication systems will triple every 12 months, again a
description of declining unit cost of the net. Metcalfe’s Law says that the value of a network is proportional to the
square of the number of nodes. In other words, the growth of a network results in the exponential rise in the value
of its connections, while the cost per user remains the same or even reduces.
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Technology Outlook 2006.
In transforming codified generic digital knowledge to local use, only a portion can be
transferred by formal technology transfer mechanisms, while the rest often require a long
heuristic process of imitation, reverse engineering, learning-by-doing and apprenticeship.
Stiglitz (1999) termed these processes of learning “horizontal methods of knowledge transfer,”
while the formal, codified storable mode is called “vertical transfer.” These largely practical
informal methods can take several forms.3 Despite the increasing propensity to codify
technical functions, tacit knowledge remains an important component not only in the context
of traditional sectors and small firms, but also as a necessary cognitive basis for interpreting
codified knowledge, including digital and mathematical functions.
One such important development is in the pattern of knowledge change related to the
increasing convergence of the different areas of science and technology. For instance, if we take
the biological sciences and biotechnologies knowledge base, there is a convergence of techniques
and practice that encompass genomics, molecular biotechnologies, agricultural and industrial
biotechnology. Material sciences and technologies include advances in nanotechnology, smart
materials, high-performance materials and advanced catalyst materials. The observed scientific
and technological convergence has brought about fruitful complementarity to the different
fields of science but, more importantly for developing countries, these technologies are being
applied in traditional sectors in ways that could not be imagined a decade ago. Relatively
technologically backward countries have gained a foothold in regulated and competitive
markets and are realizing significant export revenues from traditional sectors such as fish, cut
flower and fruits. DNA techniques are being applied to convert oil palm, once known only
as a consumption item, to produce bio-diesel; molasses from sugar-cane is used to produce
ethanol and methanol all of which have great potential to reduce reliance to replace petroleum
based fuels.4 These new and emergent distributed knowledge bases 5 will translate into new
forms of industrial organization in developing countries as well as into new institutional
arrangements. The distributed knowledge base for aquaculture illustrates the ways in which the
above technological convergence is leading to completely new ways of organizing production
(Table 6.4). For instance, the fish farming sector, a notably low-tech6 activity presently uses
new materials, design concepts employed in satellite communications, and sonar technologies
among others.
Another area of significant change is the inclusion of advanced digital techniques in what
used to be purely mechanical instruments. While scientific instruments may have become
costly in certain respects, they provide opportunities for transforming traditional sectors in
which developing countries have comparative advantage.7
Table 6.4: Activities, technologies, and scientific knowledge bases in aquaculture
3 Among these are: study tours to other countries, cross-training which is a form of “learning-by-observing” in other
countries, an implicit knowledge acquisition process that is different from explicit training on how to do things,
twinning or seconding which pair together institutions in a horizontal knowledge exchange process (Stiglitz, 1999).
4 This study provides extensive case studies.
5 A distributed knowledge base is “a systematically coherent set of knowledge, maintained across an economically
and/or socially integrated set of agents and institutions” (Smith 2002:19.
6 Other sectors considered low tech use scientific and technological knowledge extensively and in many respects
including food processing, printing, and wood processing, etc.
7 Mechatronics, the integration of mechanical devises with electronics components has for instance had a major
impact on the manufacture of precision machines, automobile, among others and has led to greater efficiency and
pollution reduction in industry both in developed and developing countries.
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Activity
155
Technology
Construction of ponds, moorings, Materials technology, wave analysis,
cranes, lifting-equipment boats
hydrodynamics , surface technology, construction and welding technology,
information technology, CAD, CAM,
Monitoring
Health,
laboratory
vaccines, chemicals
Sonars, information technology, computer imaging, electronics, advanced
mathematical algorithms, acoustics, optics
services, Nutrition technology, biotechnology, electromicroscopy, gas technology,
thermodynamics, marine biology, chemistry, hydrodynamics
Feed
Process control, industrial processes, chemistry, marine biology,
hydrodynamics, extrusion technology, monitoring technologies, information
technology, nutrition technology
Feeding machines
Materials technology, information technology, telecommunication,
electronics, cybernetics, high pressured air technologies, robotics,
welding technology
Measurements and manipulation Nutrition technologies, biotechnology, spectrophotometer, biophysics,
of colour and fat
computer tomograghy, NIT, NIR, NMR spectrography, 3D measurements,
visions and camera technology, marine biology
Measurements and manipulation High pressured liquids, chromatography, magnetic resonance, biophysics,
of stress before slaughtering
marine biology
Slaughtering and
filleting
Mechanical industry, mechanics, information technology, acoustics, optics
Sorting, counting and weighing Mechanical industry, information technology, electronics, laser technology,
of fish
mathematical algorithms, optics
Fish processing, refinement
Mechanical industry, freezing technology, information
programmable logical systems, robotics, optics, acoustics
technology,
Conservation and
cold storage
Materials technology, refrigeration technology, gas technology, NMR
spectroscopy, thermodynamics, transport theory, biology, electronics
Trading of fish
Information technology, telecommunication, signal processing, electronics
Transport and
transport equipment
Material technology, mechanical industry, welding technology, refrigeration
technology, gas technology, telecommunication, signal processing,
thermodynamics
CAD, Computer Aided Design; CAM, Computer Aided Manufacturing; NIT; NIR; NMR.
Source: Smith (2002).
2.2 Industrial Applications of ICTs
In the 1980s, mainstream firms began to use in-house ICTs such as Computer Aided Design/
Computer Aided Manufacturing (CAD/CAM), and CAE, but by the 1990s, firms began to adopt
new advances in ICTs, particularly the use of network technologies for intra-firm coordinating
activities. Large corporations connect distant production facilities in order to create greater
networks and reduce transaction costs. Traditional sectors such as the garment industry adopted
industry-specific ICT techniques.8 By the beginning of the 21st century, the adoption of ICTs
8 In the garment-manufacturing sector, companies such as Gerber Garment Technology and Laser Lectra developed
156
for inter-firm commercial and non-commercial transactions was widespread.
While many manufacturing technologies have been industry-specific, business organizations
and other institutions have applied networking technologies, including the Internet, on a general
basis. Due to the unprecedented developments in communication and Internet technology, new
trajectories of network technologies have emerged, varying from the simplest forms, such as
e-mail, to more complex forms, such as portal-based technologies. Although these technologies
are not activity-, firm- or industry-specific, their adoption is influenced by firm- and industryspecific factors. Currently, there is relatively widespread use of ICTs by firms in both developing
and developed countries in all business activities.
There is a difference between electronic commerce (e-commerce) and electronic business
(e-business) technologies. An OECD (2002) study, examining the application of ICTs in
commercial activities, defines e-commerce as “… the sale or purchase of goods or services,
whether between business, households, individuals, governments, and other public or private
organizations, conducted over computer mediated networks. The goods and services are ordered
over those networks, but the payment and the ultimate delivery of the good or service may be
conducted on or off-line” (pp. 89). This differs from e-business, a term that encompasses the
application of ICTs in all business processes from office automation, production processes,
coordination with other plants, customer relation management, supply chain management, and
to the management of distribution networks (Lal, 2004).
Broadly speaking, there are three modes of e-business transactions. These are offline, online
and e-business using shared or individual portals. Offline e-business is enabled by electronic
messaging systems, which are comparatively less effective than other forms of e-business
tools. Offline e-business is normally done through e-mail systems while online e-business
transactions take place with company websites, although having a website does not necessarily
mean that an enterprise is able to process online e-business transactions. Websites must be
dynamic and should have online transaction facilities such as Active Server Pages (ASPs)
that allow online transactions. The most effective way of doing e-business is through portals.
Portals are the essential additions in network technologies and they fulfil the important role
of aggregating contents, services and information on the Internet. Broadly speaking, their
function on the Internet is to mediate between users (buyers) and web content. This unique
position enables portals to leverage marketing and referrals, as they are intermediaries between
web users and companies.
A number of empirical studies of ICT in industry show widespread impact and numerous
benefits of ICT adoption. Industrial application of ICTs leads to a reduction in coordination
costs and promotes efficient electronic markets (Lee and Clark, 1997; Damaskopoulos and
Evgeniou, 2003). A study of East European and Cyprus small and medium-size enterprises
(SMEs) showed that firms establish websites to reduce cost, ease the search for new markets,
and to augment competitiveness (Damaskopoulos and Evgeniou, 2003). The study concluded
that “….e-business affects first the boundaries of the firm with the market in which it operates”.
A number of studies have examined the impact of web-enabled technologies on the export
market development (Hodgkinson and McPhee, 2002). A study by Teltscher (2002) dealt with the
fiscal implications of e-business, while Drew (2003) investigated the causes and consequences
of the adoption of e-business by SMEs in the east of England. Following an analysis of the total
value of transactions conducted through electronic means and its implication on fiscal policies
of developing and developed countries, Teltscher (2002) observed that “…an increasing number
of e-commerce businesses are small entrepreneurs…” and “… the fiscal impact of international
e-commerce is likely to be felt more strongly in the developing countries….”. The findings of
specific tools for marker making, fabric cutting and computerized embroidery.
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Drew (2003) suggest that SMEs are placing e-business at the centre of their technology strategy.
A majority of the sample firms reported that the driving force behind e-business adoption has
been opportunities for growth and the need to remain competitive. Hodgkinson and McPhee
(2002) concluded that international networking by SMEs brought knowledge to the region that
facilitates intra-firm learning. The study further suggests that adoption of the Internet by SMEs
is higher, albeit marginally (68.8%) than that of large firms (66.7%).
In the context of developing countries, several studies (Goldstein, 2002; Goldstein and
O’Connor, 2002; Moodley, 2002a; Moodley, 2002b) have examined the adoption of e-business
by manufacturing firms. Moodley (2002a) did not find sufficient evidence to support the argument
that export-oriented apparel firms in South Africa gain more in adopting e-business due to its
promise of improved market penetration and its direct link to international competitiveness.
Moodley’s (2002b) findings on the South African automobile industry are similar.
Goldstein and O’Connor (2002) summarized the findings of several studies and concluded
“…as multinational corporations integrate the Internet into their cross-border business
operations, firms from developing countries run the risk of exclusion from global value chains
if they cannot establish electronic ties with their major business partners.” They also argued
that, despite these general remarks, an evident need persists for detailed sectoral analysis of
the adoption of e-business. A case study of one of the top automobile firms (Fiat) by Goldstein
(2002) suggested that while the company has been very successful in optimizing supply-chain
management in Brazil, it has not been able to do so in India. The study further revealed that
the use of the internet by the company in India (Fiat India) has been limited to knowledge
management, R&D and marketing. In other words, ICTs are differentially adopted depending
on context - specificity.
In Africa, a number of studies have been carried out in recent times that focus on industrial
and sectoral determinants of ICTs adoption and applications in Africa (Moodley, 2002;
Oyelaran-Oyeyinka and Adeya, 2004; Oyelaran-Oyeyinka and Lal, 2005, 2006; OyelaranOyeyinka et al. 2006). According to these studies, the adoption of ICTs is likely to promote
greater productivity within the enterprises. However, the effective use of e-business tools at
the enterprise level is strongly conditioned not by a single factor, but by the availability and
interaction of a host of external elements such as access (broadly defined), a diverse range of
skills, the telecommunications network, and good physical infrastructure.
3. Industry Structure and Sectoral Differences
Results of different country-level studies across sectors suggest there are industry-specific
factors that influence the degree of the adoption of ICTs. The intensity of adoption in the skill
and knowledge sectors, such as the electrical and electronic goods sector, was found to be higher
than in labour-intensive sectors such as garment, auto-component manufacturing, and food and
beverages. Another factor derived from the skill-intensity of a sector, that is, the knowledge
and academic qualifications of managing director/owner is another factor that appears to have
played an important role in influencing the intensity of new technologies adoption.
According to Oyelaran-Oyeyinka and Lal (2004), the intensity of ICT tools adoption was
not affected by factors such as profitability, size of operation, age of firm, and per capital
investment at the industry level. However, there are significant variations in the conduct
and performance of firms that employed the lowest levels of e-business tools from the more
advanced users of new technologies within an industry.
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3.1 External and Internal E-business Technologies
Certain factors have been identified as major determinants of the intensity of internal
e-business technology adoption. In this paper we make a distinction between external
technologies (those that are needed for e-business but are beyond the control of individual
firms) and internal e-business technologies (tools that are acquired, implemented and managed
by firms).
Quantitative and qualitative analyses show that the considerable country differences in the
variables that emerged were significant in influencing the intensity of e-business technology.
For example in India, with its superior network and telecommunication facilities, the key
determinants of e-business adoption in firms were size of operation, export performance,
profitability, value addition, skill intensity, and academic qualifications of the managing directors.
However, skill intensity, size, profitability, learning processes and technological collaboration
with foreign firms influenced e-business adoption by Ugandan firms. Comparatively, the
factors that emerged as significant for Nigerian firms are the knowledge base and academic
qualifications of the managing directors, skill intensity, internal competition, and learning
opportunities.
What these differences mean is that what tends to influence the propensity of firms to adopt
e-business at any historical period reflects the country’s technological infrastructure, human
skills and capabilities. One of the major implications of the comparative African study is the
required emphasis on formal training in addition to on-the-job training. India recognized this
need and over the last two decades established a network of training institutions in the various
economic zones to provide the requisite skills to build a bridge between formal knowledge
and informal factory level skills. In both Nigeria and Uganda, a vibrant private ICTs business
services sector has emerged and although Nigeria seems to be far further ahead, it is less
advanced and much less organized than the training culture in India. The role of the state
has certainly proved beneficial and points the way to the potential for private-government
partnerships. In this model, the governments provide logistical support to private institutions to
establish training centres in industrial clusters. There is now considerable empirical evidence
that close proximity of manufacturing firms to training institutions in such cluster settings has
the advantage of facilitating practical training to trainees.
Another recommendation of the study is that the provision of technological and marketing
support to firms in developing countries would enhance their ability to compete in international
markets. This can be achieved by setting up separate export promotion councils at the sectoral
level. These councils perform functions such as assisting small firms in exhibiting their products,
providing information on markets trend, and tendering legal services in case of disputes. Export
promotion councils can also play a major role in augmenting export performance by assisting
in the acquisition and implementation of the latest manufacturing technologies. In addition,
measures need to be taken to encourage competition in domestic markets as strengthening
competitiveness in the domestic market is expected to have a positive impact on a firm’s global
competitiveness.
There remain many gaps in our understanding of the network determinants of enterprise
performance as a result of adoption of new technologies. More importantly, there are bidirectional relationships among several factors that could emerge as significant determinants
of ICT adoption although no study will be able to identify all the causal relationships. The
different studies cited identified the factors that influenced only one component of e-business
technologies. For these reasons, further research is needed to identify and analyse the
determinants of external e-business technologies in different contexts.
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4. ICTs and Skills Impact
In a number of developed and developing countries, empirical literature shows evidence
of continuous development of skilled workers, particularly those with tertiary education, over
time. However, contrary to conventional wisdom, underpinned by the demand and supply
argument that wage inequality will be attenuated by an increase of skilled workers, the wage
inequality between skilled and unskilled workers seems to be growing (Piva et al.,2003).
This assumption draws on the historical evidence dating from the industrial revolution when
machines and low-skilled labour replaced the artisan. Underlying this change is the emergence,
diffusion and use of knowledge, particularly scientific and technological knowledge that has
reached its full manifestation in the new technologies of ICTs and biotechnology.
The form (i.e. digitally coded information), content and the way we use different forms
of technological knowledge has been transformed by rapid changes brought about by new
technologies, while the mechanisms of skills transfer have been altered significantly by
advances in microelectronics. The new competition and the changes in the economic contexts
particularly the liberal regimes of trade and production, are equally significant factors (Lundvall
and Johnson, 1994; Ducatel, 1998; Johnson et al. 2002). There is renewed debate on the
most appropriate mix of skills and the most important sources of knowledge accumulation in a
new knowledge-driven economic context. Discussions are likely to continue on how to assign
relative weights to formal and non-formal knowledge in firms, and the underlying conceptual
dichotomy of tacit and codified knowledge.
Despite the burgeoning empirical evidence from the highly advanced countries, we are far
from a full understanding of the most important determinants of the “skill bias effect” often
associated with both technological and organizational changes. According to the notion of “skill
bias effect”, the reason for the rising skill content of the labour force is the accelerating rate of
technological change; wherein technological change induces the demand for a better-educated
and skilled work force (Arrow, 1962; Nelson and Phelps, 1966). 9 Sectors that experience rapid
technological progress would be inclined to hire workers that are more educated because this
group has far less need for training in basic skills and constitutes a ready innovation asset within
firms. The corollary is that technological change will in turn stimulate the demand for more
knowledge-intensive and skilled labour. There is a preponderance of evidence of a positive
association between the rate of technological progress and the demand for an educated work
force. Berman et al., (1994) working at the sectoral level, found a positive correlation between
R&D and skilled labour in the United States. Bartel and Lichtenberg (1987) also showed, using
industry level data, that manufacturing industries in the 1960–1980 period exhibited greater
relative demand for an educated work force in sectors with newer vintages of capital.
In addition to the technology-induced skill effect, organizational change also seems to
underlie the changing skill composition of firms. Introducing ICTs, for example, tends to
change the ways decisions are made within organizations by “flattening” hierarchies and
promoting greater involvement of the workers in management (Caroli, 2001). Facilitation of
greater interaction and information exchange at the factory level would tend to promote worker
productivity. However, while the evidence is mixed regarding the productivity-enhancing
impact of ICTs, there is greater evidence of the nexus of new technologies and the emergence
of new forms of organization 10 (Brynjolfsson and Hitt, 1998). What this implies is that firms
9 According to these authors, experience gained in the process of operating a given technology or new technology
results in increased efficiencies and as such an educated work force will be more amenable to learning complex
technologies.
10 According to (Piva et al.., 2003)) new forms of organization include decentralization and delayering (“lean
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have to manage technological and organizational changes simultaneously, putting a demand
on the resources required for technical, skill and organizational upgrading. As Guellec (1996)
observed, “human capital and technology are two faces of the same coin, two inseparable
aspects of knowledge accumulation. To some extent, the same can be said for physical capital.
Accumulation of these factors goes hand in hand with innovation: one does not accumulate
billion dollars of wheelbarrows or train millions of people as stonecutters. Only the appearance
of new devices makes it worthwhile to invest and train.”
Developing countries are not insulated from, and indeed have much more to lose if they do
not engage in, the debate to find ways to survive in the new environment of rapid technological
and organizational changes. There are two reasons for this. The first is that all societies,
regardless of their level of development, need to process and use knowledge. As Metcalfe
(2003) observed, “every economy, always and everywhere, is a knowledge economy; for social
systems and economies as social systems, could not be arranged otherwise”. The second reason
stems from the well-debated notion that the growth, validation and transfer of knowledge is
a socially distributed process mediated by institutions (Lundvall and Johnson, 1994; Ducatel,
1998; Metcalfe, 2003). However, institutions of knowledge in poorer developing countries are
weak and in most cases absent. Small firms often lack the resources for innovation and tend
instead, to concentrate on achieving the nominal production capacity with which daily routine
is ordinarily concerned.
The most significant lessons of the new economics of information in relation to formal and
informal education are:
• Lack of investment in human capital, not a lack of investment in physical capital,
prevents poor countries from catching up with rich ones. Educational attainment and
public spending on education are correlated positively to economic growth (Benhabib
and Spiegel, 1994; Barro and Sala-i-Martin, 1995).
• School quality measured, for example, by teacher pay, student-teacher ratio, and
teacher education, is positively correlated to future earnings of the students.
• Education is important in explaining the growth of national income. Life-long learning
is an important part of this.
• On all these three, developing countries have to invest substantially to raise the level of
formal human capital to match the wide ranging changes brought about by ICTs (see
Box 1 for the emerging definition of ICT-related skills).
production”), examples including just-in-time management; collective work such as “quality circles”; and
multitasking which requires workers to master and perform a wider variety of tasks.
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Box 6.1 Defining ICT specialists and ICT users
Three categories of ICT competencies are distinguished:
ICT specialists, who have the ability to develop, operate and maintain ICT systems. ICTs
constitute the main part of their job.
Advanced users: competent users of advanced, and often sector-specific, software tools.
ICTs are not the main job but a tool..
Basic users: competent users of generic tools (e.g. Microsoft WordTM, ExcelTM, OutlookTM,
PowerPointTM) needed of the information society, e-government and working life. Here too,
ICTs are a tool, not the main job.
Thus, the first category covers those who supply ICT tools (hardware and software), and
the second and third categories those who use them. This paper uses the first category for the
narrow measure of ICT-skilled employment, and the sum of all three categories for the broad
measure of ICT-skilled employment.
It appears that, increasingly, ICT specialists are expected to have ICT specialist and other
skills, including “business” skills. Similarly, non-ICT related professions increasingly require
at least basic ICT user skills.
Source: OECD (2006).
One important conclusion that was systematically thrown up in the various studies is the
differentiated effects of wider sets of firm level skill on the learning processes in SMEs in three
developing countries, namely, India, Nigeria and Uganda. Studies by (Oyelaran-Oyeyinka
and Lal, 2004, 2005) identified a pattern of adoption that shows clear relationships between
internal firm variables and external infrastructure features that influence both the technological
trajectories and firm-level performance. There is a certain gradation of adoption that displays
skill-technology complementarity. There is net correlation between firms using advanced
technologies and the education level of owners and a consistent correlation between learning
modes and complexity of ICTs in use. New types of SMEs, called networked enterprises, have
emerged during the last decade (Raymond et al., 1999). These firms conduct their production
and marketing businesses relying to considerable degrees on Internet-mediated technologies.
However, the above set of studies suggests that this phenomenon is not automatic; there is
a strong association between the complexity of firm-level e-technologies and the level of
national technological capability. There is considerable scope for institutional learning support
for SMEs suggesting new and additional challenges for developing countries that, for now,
have relatively weak institutions.
Regression results show the relationship between the learning processes adopted by the
sample firms and technological trajectories followed by them. Several modes of learning such as
in-house training, learning-by-doing, internet searching, learning-by-interaction, and overseas
training were used by firms depending on their level of development. The results of the study
suggest that across countries and sectors, SMEs rely largely on learning-by-doing as the most
effective first-order mode of knowledge and skills acquisition. However, the second choice of
learning mode differs among sample countries. Managing directors of Indian firms used internet
searching as the second best mode of learning, while in-house training is preferred in Nigeria
and Uganda. This was traced to the fact that communication network facilities in Nigeria and
Uganda are inadequate for effective use of the internet and a reliable communication network
significantly determines the adoption of new technologies. The study’s findings also suggest
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that firms that adopted complex technologies had to utilize relatively more skilled workers and
overseas training for effective use of such technologies.
Learning processes have also significantly influenced the technological trajectories of the
firms, demonstrated in the ways firms in India adopted ICT-led technologies in production
processes. For instance, several firms conducted transactions through web-enabled and portalbased technologies while there was not a single firm that adopted such advanced technologies
in Nigeria and Uganda. Two factors tend to shape the adoption of advanced technologies by
Indian SMEs: first, the accessibility of stable internet connectivity and second, the availability
of requisite technological infrastructure in clusters. Reliable access to the Internet might have
encouraged Indian SMEs in the sample to use internet searching as the second best mode of
learning. In contrast, firms in Nigeria and Uganda adopted technologies that do not require
online connectivity such as MIS, e-mail, CAD/CAM, CNC machines, and FMS to minimize
their dependence on an external communication network. We therefore conclude that learning
processes significantly influence the technological profile of firms. To this end, the choice of
learning processes depends on other external factors that are beyond control of individual firms.
5. The Network Impact: Technological and Physical Infrastructure11
In this paper, we conceptualize ICT infrastructure as being made up of three components:
telecommunications, computing and connectivity infrastructure.
Connectivity infrastructure has four components: (a) the aggregate bandwidth of the
domestic backbone(s); (b) the aggregate bandwidth of the international IP links; (c) the number
and type of interconnection exchanges; and (d) the type and sophistication of local access
methods in use. Internet penetration, defined as pervasiveness, represents the number of users
per capita, which proxies either the Internet hosts counts or individual users. The pervasiveness
of Internet use is a function among others of access to services, perceived value to users,
acceptable costs to users, and ease of usage, which depend crucially on content language.
Finally, the structure of the Internaet service providers’ (ISPs) market is an important factor
influencing access. The presence of, and the institutional regimes in which ISPs operate, is also
important to market competitiveness and as such, it is also a cost to end-users. For instance,
internet diffusion may be slow where state policies have barriers to ISPs entry or where cultural
limitation leads to persistent disparity in girl-boy education, or where security concerns create a
regime hostile to competition. Access at the individual level is achieved using modems during
the early stages of development, while more sophisticated infrastructure, such as leased lines,
is used in later stages of development.
National, local and regional telecommunications infrastructure includes server connectors,
local loop telecommunication lines, inter-nodal connections, and switching systems
among others, and determines the cost and quality of access. Users in high-bandwidth
telecommunications environments are likely to have access to lower-cost connections. Most
developing countries face capacity constraints, largely a result of thin-bandwidth and frequent
power outages. At the very basic level, developing countries exhibit highly differentiated
access to telephone and electricity services, which in developed countries are taken as a given.
The quality of physical and technological infrastructure is important for the simple reason that
information, coded in files, travels through a series of linked nodes within the ICT network.
The slowest link in the network node becomes the rate-determining step and thereby defines
11 This section cites a study reported in a paper by Oyelaran-Oyeyinka and Lal (2005), ‘Internet Diffusion in SubSaharan Africa: A Cross-Country Analysis’, Telecommunications Policy, 29(7): 507–27.
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the overall speed of data transmission.
Supply side factors significantly affect the adoption of new technologies in SMEs. Evidently,
availability of physical infrastructure has been a severe constraint to the adoption of e-business
technologies in all the three countries. However, there are significant differences with regard
to technological infrastructure as represented by availability of Internet connectivity and speed
of communication. Human knowledge and skills represented by availability of a computer
literate work force, abundant in India, emerged as an important impediment in the adoption of
information and communication-led technologies in Nigeria and Uganda.
Six factors, namely: availability of Internet connection, speed of the internet, availability
of a skilled work force, utilities, communication cost, and Internet subscription cost were
included in the analysis. Results of multivariate analysis applied to sample firms suggest that
all the factors, except the availability of a trained work force, have significantly influenced
the diffusion of e-business technologies in India. Country-specific factors exert profound
influences on the degrees of adoption of new technologies. For example Nigerian firms using
telephone and fax found internet subscription a severe constraint while 30% of firms using
similar communication technology in Uganda reported that it was not a constraint.
Results regarding communication cost and the diffusion of e-business technology in
Nigeria and Uganda are very different. Many of the sample firms in Nigeria did not find cost
of communication a major constraint while it has been an impediment in Uganda. In Nigeria,
firms were so desperate for communication that access rather than cost had become the primary
concern for them. Again, there are substantial differences in the supply of high-level labour,
with Nigeria having considerably large numbers of scientists and engineers despite their being
poorly organized for industrial purposes.
One of the major policy implications of the findings is that developing countries need to focus
on institutions that support more efficient physical and technological infrastructure. In turn,
efficient physical and technological infrastructure should reduce the cost of communication,
which has been identified as a major bottleneck in the diffusion of e-business technologies.
Privatization and deregulation of the communication sector might be an option to achieve this
objective.
6. Industrial Transformation and Employment Generation
Concern about the employment effects of ICTs has been apparent since the early stage in
the development of ICTs and its adoption in various economic activities. While many view
ICTs as a major cause of mass unemployment, others believe that ICTs create many new jobs
and give rise to new industries and services (Talero and Gaudette, 1995). In the early stages
of ICT adoption, there was considerable apprehension that the adoption of these technologies
might result in reduced levels of employment, particularly of semi- or unskilled workers. This
view underlined the programmability feature of ICTs and their capability in handling multiple
tasks with a single ICT tool. Therefore, the perception emerged that the adoption of ICTs had
a negative effect on employment. It is still believed that ICT tools replace certain categories of
workers and lead to a significant rise in unemployment levels. The reasoning has some validity,
particularly at the enterprise level, with respect to existing manufacturing processes.
The adoption of ICTs in labour-intensive activities is expected to result in the displacement
of labour while creating a few jobs for the skilled workers needed to maintain the ICT tools. The
adoption of ICTs may be labour-neutral if there is a possibility of market expansion for existing
products or the possibility of creation of markets for new products manufactured on the same
assembly lines due to the extensive use of ICTs. This may apply at the enterprise level, but its
application at higher levels of aggregation is even greater. In the presence of possible market
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expansion, the adoption of ICTs could lead to creation of employment for skilled workers;
if the market expands fast enough, there may not be a loss of jobs for unskilled workers.
However, in order to use ICT tools effectively, firms may need to effect organizational changes
and workers may require training to upgrade their skills. The findings of several studies that
deal with employment aspect of ICTs are presented below.
Rada (1982) and Kuwahara (1984) found that the adoption of IT at the enterprise level from
a static perspective leads to the creation of new jobs in some production processes and a loss of
work places in other activities. The authors also found evidence of the emergence of firms with
new activities, which usually fall within the sector, but outside the enterprises. For instance,
several new consultancy firms have emerged in the garment sector to provide technical input
and technological support to garment manufacturing firms. Although they provide consultancy
services in other manufacturing technologies in the garments sector, their main activities are to
provide training and consultancy services in the new ICT-based technologies.
Freeman and Soete (1985) found no evidence of an adverse relationship between employment
and the adoption of IT. Their conclusions are based on several other studies (Leontief and
Duchin, 1983; Kuwahara, 1984; Lawrence, 1984) carried out in developed countries (the USA,
Canada and Japan). The study by Leontief and Duchin (1983) is a very comprehensive one
analysing 89 individual sectors, comprising almost the entire industrial spectrum of the US
economy. They concluded that there will be no overall labour surplus due to the adoption of
IT at the industry level, even though employment in some individual enterprises may suffer.
However, the study predicted that the structure of the labour force, in terms of skills and sectoral
distribution, might have to undergo some fundamental changes. A study by Lawrence (1984)
found a positive correlation between the industrial adoption of IT and employment growth in
Japan.
Peitchinis (1984) studied the employment effects of the introduction of computer equipment
and office automation in a number of Canadian manufacturing sectors, ranging from food to oil
companies. The author rejected the prediction of mass unemployment as a result of IT adoption.
On the contrary, his case studies, based on firm-level data, suggest that the employment effects
of IT adoption have generally been positive. The results were found more relevant for firms
where the demand for their products was not saturated and there was a possibility of production
capacity expansion. Firms could generate employment by increasing production capacity
and by the adoption of IT. The author, however, observed that in matured industries, there
could be employment displacement because of IT adoption. Although the firms covered by
Peitchinis (1984) were engaged in manufacturing of goods, the study concentrated mainly on
the introduction of computer equipment in office automation. Therefore, the results cannot be
interpreted as representative effects of IT adoption in manufacturing.
A study by Kuwahara (1984) emphasised the positive employment-generating effects of a
range of new technologies in the Japanese economy. Although these new technologies include
biotechnology and aerospace, the main emphasis is on IT. The study views microelectronicsbased technologies (technologies used to manufacture hardware of information systems,
communication equipment, audio/visual devices, and other electronic products) and IT
as having creative multiplier effects in other industries and services. The study presents
detailed estimates of job creation effects in high technology industries in Japan and presents
the estimates categorized into various skills levels. The findings suggest that engineers are
likely to be in greater demand than are non-technical workers in high-technology industries.
Several other studies (Rada, 1982; James, 1994; Rahim and Pennings, 1987) proposed the
possibility of structural change in employment. Rada (1982) found evidence of a reduction
of jobs at the supervisory level. At the same time, IT tools require a highly skilled work force
for the implementation and use of microelectronic-based systems (Ayres, 1991; James, 1994).
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Developing countries have experienced similar employment effects of IT. Acero (1995) reported
changes in employment structure in a study of the Brazilian textile industry. Acero (1995)
found that industrial automation and new organizational technologies are seen as contributing
to higher employment levels in the technical and managerial category, while the number of
occupational categories and labour-intensive tasks is decreasing with the introduction of IT.
Doms et al. (1997) examined the correlation between the shares of non-production workers
with the use of advanced technology. The authors found a positive correlation between two
variables consistent with the complementarity of skill intensity of advanced technology
use. A study of 402 plants in Britain by Kramarz (1998) suggested that the introduction of
computers in plants is associated with an increase in the share of white-collar workers at the
expense of unskilled workers. Card et al. (1997) investigated the effect of computer use on
the employment rates of various age and education groups. Based on their knowledge of the
institutional environment of three countries (USA, Canada France), they expected the greatest
negative impact of IT on employment in France. Their hypothesis was that if a similar negative
demand shock affects less skilled workers in all three countries, then given the labour market
flexibility in the US, the shock should result primarily in a decline in the relative wages of less
skilled workers. In France, where labour markets are relatively inflexible, the shock should
largely result in a decline in the relative employment of less skilled workers. However, the
results do not seem to show this pattern. In the case of the USA, results show that groups,
categorized by age and education, that use computers most intensively record an increase
in group-employment rates. In the case of France (female workers) and Canada, there is no
significant relationship between computer use and employment. The US results are based on
data extracted from the Current Population Survey of 1979 and 1989, while the Labour Force
Survey (conducted in 1982 and 1989) data were used for France. The data for the Canadian
sample was from the Survey of Work History, 1981 and the Labour Market Activity Survey,
1988.
In the study by Oyelaran-Oyeyinka and Lal (2004), the impact of ICTs on employment
was analysed using a qualitative case study approach to examine the pattern of e-business
technologies adoption in large Indian firms. The issues related to the use of e-business
technologies in three sectors, namely ICT producing firms; consumer electronics; and the
garment manufacturing industry. The firms that formed the basis of the case studies were
considered the top firms in their respective sectors.
Oyelaran-Oyeyinka and Lal (2004) found that the pattern of adoption of e-business
technologies is not uniform across industries but the adoption within sectors was fairly similar.
The consumer electronics sector firms adopted these technologies in almost all business
activities, including production, marketing, coordination, supply chain management, and
customer relation management. The garment manufacturing firms adopted e-mail and Internet
for interacting with buyers and CAD/CAM technologies in manufacturing processes. Common
to both the sectors was the adoption of business-to-business (B2B) e-business models. However,
the business-to-commerce (B2C) model has been neglected by all the sample firms, surprisingly
even by those in the consumer electronics sector. The firms attributed socioeconomic factors
and lack of institutional infrastructure as the rationale for not adopting the B2C model.
Their analyses of the performance of firms suggest that the adoption of these technologies has
enabled the firms to survive in both the domestic and international markets and has contributed
to better performance irrespective of the measure. The firms started adopting new technologies
after the liberalization of the Indian economy in 1991, possibly due to competitive pressures
from the multinational corporations (MNCs) that were allowed to enter into the Indian market
during the same period. In addition to achieving a high growth rate, employment opportunities
increased significantly. The adoption of these technologies created varying levels of indirect
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employment corresponding to the size and industry of the firms. The findings of this study
suggest that concepts of resource-based theory and the role of competition can contribute to
understanding the adoption of e-business technologies.
However, Oyelaran-Oyeyinka and Lal (2004) provided no evidence to suggest that the
use of new technologies affects a firm adversely. Nevertheless, the adoption of ICTs could
lead to changes in the employment structure as ICTs create skill-biased technological change.
The impressive growth rate of sales turnover and employment of sample firms may not be
solely attributed to the adoption of e-business technologies. Other measures taken since 1991,
such as simplified procedures for the import of raw material and machinery, might have also
contributed. Hence, the findings of the study need to be interpreted against the backdrop of other
economic policies. Another limitation of the study, due to the small sample size, has been the
lack of a statistical test of the significance of factors that influenced the adoption of e-business
technologies. Further research is needed to examine the impact of e-business technologies on
firm-specific factors such as, productivity, quality improvement and conduct of firms.
6.2 ICTs and Industrial Export Performance
Manufactured export performance has been linked in the literature to strong domestic
production capabilities. In this section we explain how ICT infrastructure influences industrial
performance through export activities of firms. The review is limited to the Indian sample.
The data on e-business and export, like the one on employment, is exclusively based on Indian
data which analyses factors that influence export performance of firms. The study concluded
that the type of technology used for e-business and the profit margins were significant factors
found to influence the export performance of firms. The scale of operations also emerged as a
significant determinant of this performance. The study reveals that the labour productivity of
export-oriented firms was higher than that of non-exporting units. These findings corroborate
those of earlier studies.
The study captures the important role played by the type of technology used for e-business
by the sample firms in influencing their export performance, although identification of the
various factors that influence the adoption of e-business technologies is beyond the scope of this
paper. It also became evident that a good communication technology network is a driving force
behind the diffusion of e-business and export success. This is confirmed by the study’s finding
that diffusion of e-business is strongly associated with available bandwidth. The study points
to the imperative to create a strong network environment for greater diffusion of e-business
technologies that in turn could augment the export performance of firms.
There are two implications of the focus on e-business and export performance. The first
is that an appropriate environment for the effective adoption of e-business has to be in place.
The limited use of e-business will have serious repercussions on the performance of firms
in international markets. If firms that deal in international markets are unable to strengthen
their e-business applications in areas such as online financial transactions and monitoring the
status of consignments, they are likely to lose foreign partners. Although governments in all
the countries have taken some measures to encourage greater diffusion of ICTs, reliable access
to high-speed communication networks at competitive price should be a major objective.
This factor enhances the diffusion of e-business technologies, which in turn promotes export
performance. The formulation and enactment of communication technology convergence
regulations can facilitate access to a broad range of communication networks. For instance,
if last mile connectivity is allowed through the cable network, which is primarily meant for
video communication, it could trigger an explosive adoption of e-business. Governments can
also encourage the adoption of this new technology among export-oriented firms by continuing
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export incentives such as tax holidays on the value of goods and services traded electronically.
The second implication relates to policies on collective learning and training facilities
aimed at SMEs. The study has shown that the incorporation of e-business practices, coupled
with a highly skilled work force, enable firms to perform better in export markets. Hence,
policy makers need to target learning and training facilities for SMEs. Providing logistical
support to industry associations located in SME clusters is one means of achieving this
objective. In turn, industry associations can take advantage of linkage programmes such as the
“Industry-University link” programme initiated by the Government of India to produce skilled
labour for SMEs. It was concluded that it is imperative for governments to provide proper
institutional support to export-oriented firms for the effective use of e-business, which would
strengthen export performance. Based on the findings of this study, countries are advised to
take proactive measures to speed up the adoption of e-business or risk losing their export share
in the international markets.
7. National Policies in an ICT-driven Industrial Context
The various studies cited in this paper suggest several policy implications. First, industry
and enterprises, particularly SMEs, need institutional support for their survival in the era of
globalization. Second, human development policies aimed at firms need to emphasize both
general and specific knowledge types and training; the adoption of advanced e-business
technologies by Indian firms is proof of this point. For instance, the Government of India
and the private sector shared the burden and the risk as the government encouraged private
sector participation in the development of the technological infrastructure in industrial clusters.
Consequently, SMEs in India have better access to web-enabled and portal-based e-business
technologies relative to the Nigeria and Uganda. In Africa, the study found that SMEs need much
greater infrastructural support in order to reap the benefits of ICTs and develop the capabilities
to contribute to economic development. Policies and programmes aimed at providing required
infrastructure need to be initiated in developing countries in order to make SMEs in these
countries more competitive in the domestic and international markets. One of such policies is
the provision of collective services.
7.1 Collective Services and Competitiveness
Due to the well-known resource constraints faced by small firms, the provision of collective
service is an alternative way of promoting enterprise-level growth and innovation. The role of
collective services differs at different levels of development and as such the roles of ICTs are
to be differentiated. Oyelaran-Oyeyinka and Lal (2004) identified and analysed the factors that
discriminate three groups of firms, namely: low level of ICT users, moderate ICT using firms, and
users of advanced ICT tools. Firm-specific factors included in the analysis fall into three broad
categories: driving forces, collective actions, and sources of competitiveness. The variables
in the analysis included management information systems benefit, reduction in production
costs, abilities of ICTs in increasing sales turnover, potential to strengthen competitiveness of
firms, efficiency in production process due to adoption of ICTs, learning opportunities within
industrial clusters, size of operation, technological collaboration, innovativeness, low overhead
costs and wages, flexibility in product design, and product quality.
The variables that discriminated different levels of ICT using firms were: the contribution
of ICTs in reducing production costs, augmentation of sales turnover due to adoption of ICTs,
and internal competitive pressures. Among the sources of competitiveness that emerged as
significant were size of operation, technological collaboration, and the contribution of ICTs
in manufacturing modular and high quality products, innovativeness, and ability of ICTs in
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reducing overhead costs. For instance, wages emerged as an important factor in the Ugandan
sample firms. The significant variables for Nigerian firms were: reduction in production costs,
availability of learning and upgrading opportunities within industrial cluster, size of operation
and delivery schedule. The factors that emerged as significant discriminants of the varying
degrees of firms using ICT in India were similar to those of Uganda. An additional factor,
the contribution of ICTs in inducing efficiency in production processes, emerged as the most
important discriminant of three types of firms. Among the sources of competitiveness, the
ability of ICTs in strengthening the market network also discriminated firms using advanced
ICTs from the others.
Ownership (shown in the opinion of managing directors) is important in determining
what kinds of e-business tools are adopted, as is technical collaboration. This was poignantly
illustrated in the way technological collaboration has been fostered with foreign firms in the
Indian sample firms since the liberalization of the country’s industrial policies in 1991. With
liberalization, Indian firms no longer require any license for collaboration. The market network
emerged as a significant discriminant in Indian sample firms but not in firms in the other
two countries due to the availability of a relatively reliable communication network in India
compared to the other two countries. The significance of low wages and low overhead costs as
important discriminants in Ugandan firms suggest that, apart from quality competition, price
remains a dominant mode of competition.
A number of policy measures to be taken by governments in developing countries to improve
the competitiveness of SMEs are evident. First, state policy should encourage greater private
sector participation in setting up training and information service centres within industrial
clusters. These institutions could provide need-based skills for better usage of new technologies.
Second, owners of small firms should be given incentives to upgrade the skill levels of their
work forces. This could be done by organizing orientation programmes to raise awareness
of managing directors on new technologies. In addtion, there is need to subsidize the cost of
new technology equipment so that new technologies become economically affordable to small
firms. New technologies can be put within reach of small firms by setting up technology service
organizations to provide, for instance, e-mail and Internet services. Setting up technological
support institutions has many advantages in SME clusters. These institutions could be useful
in searching function- and job-specific ICT tools that are expected to be efficient and cost
effective. Such collective cluster initiatives should result in better cluster performance.
Finally, the findings in this study suggest a need to create proper local, national and global
information infrastructure in order for SMEs to derive the maximum benefit from the ICT
revolution. Privatization and deregulation of the communications sector could improve local
and national infrastructure, while allowing private and public sector organizations to own
international gateways could significantly improve the global information infrastructure.
However, in underdeveloped areas, governments will have to take the lead in stimulating
service provision; see Boxes 6.2 and 6.3 for training and education programmes in advanced
industrial countries.
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Box 2: Promoting IT education
Most responding countries have programmes for promoting IT education. The programmes mentioned all aim at
improving quality and spreading skills more widely, but are diverse, and each country has its own specific focus.
Initiatives include:
•
•
•
•
•
•
•
•
Basic IT education for the population. The Czech National Programme for Computer Literacy consists of
practical, two-hour courses to teach participants the fundamentals of computer work, Internet access, the
basics of searching via the Internet and work with e-mail.
IT education in schools and universities. The Spanish Avanza Plan covers education in the digital era, with a
specific focus on integrating ICT technologies in the educational process. The initiative includes measures to
increase the use of the internet by those engaged in the field of education and to improve trust in technology.
Training for specific groups such as the unemployed, women or the elderly. Korea has IT training initiatives
that target the disabled, the elderly, low-income earners, North Korean defectors and the illiterate.
Training for government workers. The Italian CNIPA Programme for e-learning in the public administration
includes a series of e-learning projects divided into three categories: top managers, middle managers and
clerks. The ultimate goal is to create a virtual public administration school.
Teacher training and the use of ICT for broader education. Hungary promotes the development of basic ICT
skills, competencies and abilities in pre-school and school education by supporting in-service training of
teachers and experts, thereby enabling the delivery of competency-based education and training.
Distance learning. Belgium has an initiative for distance learning, focusing on just-in-time courses that are
relevant for specific job requirements.
Setting IT skill standards. Japan’s METI published “IT Skill Standards” to indicate the abilities required
to provide IT services. The Skill Framework summarizes 11 careers and 38 job categories related to the
information service industry. It classifies seven levels based on the abilities and experience of individuals in
each career and job category.
Promoting awareness for career development. In the ICT sector, Canada’s Department of Human Resources
and Skills Development (HRSDC) is financing a number of programmes with the Software Human Resource
Council (SHRC). SHRC also addresses career awareness and skills development with the goal of providing
lifelong career development and quality education and training for Canadians active in the IT sector.
Source: OECD Information Technology Outlook 2006.
Box 3: General content initiatives
Austria: Austria provides financial aid to SMEs for preparation costs for participation in eContentPlus projects.
The initiative Multimedia Business Austria also supports the Austrian content industry, with a goal of increased
participation in international expert networks and the formation of a national cluster.
Denmark: Denmark has many initiatives for digital content for literature, music, research, museums and cultural
heritage.
Netherlands: Content development is primarily market-driven (commercial), but in specific areas, such as
education, digital heritage and e-culture, the government supports production and distribution.
New Zealand: The One Digital Strategy initiative aims to achieve better online content by developing an online
cultural portal.
Singapore: Under the iN2015 plan the interactive and digital media sector will receive special R&D support.
Singapore will continue to support the Games Exchange Alliance to accelerate commercialization, a digital media
and entertainment hub for technology creation and commercialization that provides storage, trade and distribution
services for digital assets, and infrastructure for processing, management and delivery of content services.
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Source: Responses to the OECD IT Policy Questionnaire, 2005 in OECD Information Technology
Outlook 2006.
8. Proposed Methodology
In the recent past, the debate about the different factors that influence the innovation strategy
of firms did not take much account of the role of ICTs. However, the need for faster integration
of dynamic SMEs into the global economy and the concerns for the relatively slower process of
globalization of small producers in poorer developing countries have broadened the debate on
the possible roles of ICTs. Although they do so with different internal technological and other
assets, both poor and rich countries, large and small firms face substantially similar technological
and external economic conditions. In addition, local, regional, and global policies influence the
conduct and performance of firms. A framework linking these factors and the performance of
SMEs is depicted in Figure 6.3. Since the objective of the programme might be to understand
industrial and employment transformation and the institutional infrastructure factors affecting
the adoption of ICTs—importantly by telecommunication policies—the analytical framework
provides a number of related variables that might be worth examining.
Figure 6.3: An analytical framework
Source: Author.
A number of factors should be considered in designing national and sectoral level
research, including foreign direct investment (FDI) in telecommunications, infrastructure,
and human resources (Figure 6.3). For instance, the ability of a country to attract FDI in the
telecommunications sector coupled with a liberalized economic regime might be expected to
bring drastic changes in a country’s communication network. Although several other issues,
such as technology convergence and R&D incentives, are included in the framework, they are
not discussed here in detail, and other national specific variables could be included.
Apart from communication technology policies, other factors also influence the adoption of
new technologies. They include:
• The competitive environment (Pratten, 1991)
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• Skill composition of the workforce (Doms et al., 1997)
• Market preferences (Lal, 2004)
• Cost of communication (Mehta, 2000)
• Entrepreneurship (Drew, 2003).
The above point to the factors that are external to firms, namely, technological infrastructure,
human resources, and physical infrastructure available to firms. These are the supply side factors
that influence the adoption of e-business technologies, which differ from other innovations
in many respects (Pohjola, 2001). For instance, its economy-wide pervasiveness means that
it involves a wide array of actors and as such exerts profound systemic impact on national
economies. These actors include communication technology providers, Internet service
providers, and information providers. The costs associated with communication network,
Internet services, and availability of information in the public domain are some of the other
factors that influence the diffusion of e-business technologies.
Another significant aspect of ICT is the network speed. This has two main components:
first, the speed with which signals can travel along the communication network and second,
the speed of information processing systems (servers subsequently). Although, the capabilities
of the information processing servers installed at local, regional and national level determine
the network speed, the major factor is the processing speed of the immediate Internet service
provider. For these reasons, the adoption of e-business technologies encompasses several factors,
including a reliable high bandwidth communication network, competitive telecommunication
services, and an available quantity of quality Internet service providers. In addition, as the
force of competition tends to shape the attitude of enterprises to the adoption of innovations,
the level of competitiveness of firms operating in the same product market is another factor
influencing the e-business technologies adoption. Although much has been written about the
broad impact of physical infrastructure and human resources on innovation, they are likely to
affect the adoption of e-business technologies in very specific ways. National and global data
are relatively easy to obtain and should form an important set of variables.
In sum, there is a wide array of issues to choose from, many of which have been highlighted
in this paper. However, we still require considerable firm and industry level studies to understand
the dynamic impact of ICTs on industry and employment in Africa.
A Research Framework for a Sectoral Innovation System
Both the quantitative analysis and the case studies could be approached by specifying
common building blocks of the sectoral system of innovation. A Sectoral Innovation System
(SIS) has its own knowledge base and learning processes, it has specific technologies, systems
boundaries, institutions and interactive activities.
The basic elements of the SIS are:
• Actors or agents: include individuals and organizations. Individuals include enterprise
owners, and engineers/scientists, while organizations include enterprises universities
and firms, R&D departments, financial institutions such as development banks.
Special attention should be paid to ownership structures (whether firms are owned by
multinationals or local entrepreneurs). Ownership structures create different sorts of
incentives with regard to innovation. The size of enterprise is equally important for its
relationship to choices of products, techniques of production and ability to generate
capital for investment, and is usually also related to the level of education of owners
and the opportunities available to them for learning on their own if a good extension
system is not in place.
• Knowledge and learning processes: One of the reasons for the persistent differences
172
in the innovative capacities of sectors and industries is the gap in the knowledge bases.
Organizations and individual capabilities differ in their scientific and technological
skills and experiences. The habits and practices of the actors regarding how and what
they learn for instance, diversification into new peripherals clones, services and so on.
The research should therefore carefully examine the different knowledge bases and the
processes of learning.
Suggested Outline for the Background and Case Studies
The earlier section explained how the framework can help identify the types of actors and
the types of interaction needed to bring about innovation; and that it can identify and design
the types of habits, institutions, policies and other interventions that can create this pattern
of interaction and linkage in dynamic environments. This section suggests an outline of the
key elements to be explored in individual case studies. The approach combines the use of
secondary sources of information and interviews to develop an understanding of historical
patterns of development in order to provide context to an assessment of the current situation
and the challenges being faced. The scope of this approach would include a systemic survey of
actors in the sector, and the construction of detailed case studies.
The following main section headings could form the section in the case study report that
complements the detailed systematic survey report.
1. Sector timeline and evolution
What is the nature and dynamics of the sector? Who are the main players? What has been
the performance of the sector to date? What challenges does the sector face? How effective
have policies and support structures been in triggering innovation and developing a dynamic
innovation capacity?
Rationale
One or a combination of things usually triggers new sectors or clusters of activity. This may
be policy or market changes or it may be the result of the intervention of MNCs. There are
many different types of triggers and these present different contexts, which policies supporting
innovation have to deal with. It is therefore important to understand these triggers. There
may also have been a series of turning points in the life cycle of the sector. It is important to
understand this historical pattern of development since current patterns of activities, roles and
relationships usually develop incrementally over time and cannot be fully understood without
a historical perspective and an understanding of the local policy and institutional context that
has shaped this. It is also important to highlight that these are evolving dynamic sectors and
that innovation capacities must be able to support that evolution. It is important to understand
why sectoral changes occur where they do and why firms switch to different activities and what
were the resources, linkages and capabilities that allowed then to do this and how this response
related to local contextual conditions, particularly the institutional and policy setting.
Key questions for this section will include:
• When did the sector start to develop?
• What were the factors that triggered its emergence?
• Were these technical, policy, market or other triggers, for example changes in trade rule
or the opening up of new markets,?
• Who were the main players who initiated this and what were their characteristics—
public, private, elite groups of farmers, local or foreign companies, or international
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•
•
•
173
development agencies?
How has the sector grown and evolved over time? Have there been any major market,
technology or policy changes that have caused it to evolve in new ways? What were the
turning points along the way, for example the switch from one set of computer products
to another or the switch from domestic to international markets?
What other dynamics took place in the sector, for example declining world product
prices, or the entry of new competing countries? Were there changing patterns of
linkage or capability in the sector to cope with these dynamics? Or where there features
of dynamics in the sector that set up distortion that organizations could not cope with
leading to exit, decline or alternative paths.
What are the sector statistics,including value, size, growth rate, employment potential,
nature of domestic and international market,?
2. Sector mapping
Central message and diagnosis from this section:
• Who are the main actors and organizations in the sector, what role do they play and
what are their skills and competencies?
• Which actors and competencies are missing and are policies required to change the
role of the public sector or to encourage others to play different roles or play existing
roles more effectively?
• What is the extent of linkage between actors and organizations, what is the nature of
these links and does it support interaction and learning?
• Which links are missing and what types of linkage need to be encouraged?
3.Innovation Policies
The role of policies in strengthening learning, investment and linkages that constitute the
bases for dynamic innovative change on a continuous basis. Research would map policies that
directly or indirectly affect technological capacity-building, learning, linkages and investment
within the computer system of innovation. These might include:
• Policies affecting size and shape (demand characteristics) of the domestic market, e.g.
taxation and wages.
• Policies that affect input costs or outputs for entrepreneurs, for example land prices
and use.
• Policies that change the nature of competition, foreign investment and those that
promote local upgrading and linkages between foreign and local agents.
• Policies that change or make possible access to training for vendors and manufacturers.
• International rules that affect learning and innovation.
• Local capabilities and the ability to bargain in global markets and sustain
competitiveness, for instance, how well each country is able to diversify into new
markets; the development of substitutes. Innovation policy instruments are summarized
in Box 6.4.
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Box 6.4: Innovation policy instruments
Supply side: (a) Support for knowledge infrastructure, particularly R&D in public and
private domains, promote research and professional associations, use of competitive research
grants; (b) general and technical education, support university research, apprenticeship
programmes; and (c) information networks, library and database services.
Macroeconomic conditions: (a) Loans, subsidies to private provision of innovation,
financial services, export credits; (b) taxation: company, personal, indirect and payroll
taxation and tax allowances; and (c) Legal regulatory patents, health and environmental
regulations and monopoly regulations and competition policy.
Demand conditions: (a) Procurement policy: central and municipal government
purchases and contracts, R&D contracts, purchases; and (b) commercial instruments: trade
agreements, tariffs, currency regulation.
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The Vision and Challenges of ICT Production in Africa
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CHAPTER 7
The Vision and Challenges of ICT
Production in Africa: Software
Production
and Services
A Framework Paper Draft By Prof. O. A. Bamiro
Vice-Chancellor University of Ibadan Ibadan, Nigeria February 2007
African Economic Research Consortium (AERC)
1
I
Background and Context
nformation and communication technology (ICT) is a convergence of various
technologies and applications which can be disaggregated into three interlocking
elements: telecommunication, computer hardware and computer software. Such
disaggregation is particularly important in this project aimed at determining the level of ICT
deployment to economic development of developing countries of Africa toward the evolution
of relevant policies and programmes that can ensure participation in both local and global
markets for ICT and ICT-enabled businesses. Worldwide, spending on ICT and related services
crossed US$1.5 trillion in 2006, growing at 7.7% during 2005 (NASSCOM, 2007). Developed
and developing countries have been paying attention to the development of ICT capacities to
capture both local and global ICT markets where outsourcing has continued to be the primary
growth engine with global delivery forming an integral part of most sourcing strategies.
This framework paper has as its focus areas in which African countries have potential for
ICT production as distinct from ICT use. The identified areas of promising potential for ICT
production in developing economies of Africa are computer hardware production, and computer
software development and services. These are the areas most developing economies target for
development through the evolution of appropriate policies and programmes. India provides
a good example of a nation that has developed her software industry to capture both local
and global markets. The Indian IT business process outsourcing (BPO) sector (including the
domestic and exports segments) grew at an estimated 28% in 2007. According to the National
Association of Software and Services Companies (NASSCOM) projection, total revenue
aggregate for the sector is expected to exceed US$47.8 billion, a nearly ten-fold increase over
the aggregate revenue of US$4.8 billion reported in 1998; direct employment is likely to cross
the 1.6 million mark. As a proportion of national gross domestic product (GDP), the revenue
aggregate of the Indian technology sector grew from 1.2% in 1998 to an estimated 5.4% in
2007. Net value-added by this sector, to the economy, is estimated at 3.0–3.5% for 2007 (www.
178
nasscom.org/report).
The literature shows that there are marked differences between the computer hardware
production and services industry and the software and services industry in terms of industry
structure and characteristics as well as policies and programmes for their promotion. The
framework paper developed for the country-level study of computer hardware production
showed clearly the dependence of such activity on the environment and specific government
policies which may promote or hinder development. The software industry also exhibits
characteristics which are distinctly different from those of hardware production, but this
industry is also dependent on specific policies and programmes that have been shown to aid the
development of the sector.
Software is the brain of the hardware. But unlike the physical device that it may lend
functionality to, software is a coded embodiment of ideas and knowledge. Advances in
computer hardware are outstripping the ability of software to keep up. In other words, software
is already the bottleneck to exploiting the full benefits of the new technologies (Hosalkar et al.,
2000). A number of studies have identified the following attributes of the sector, among others:
• Software and secured Internet transactions are at the heart of electronic commerce.
• Not only does software form the backbone of such industries as banking, finance,
airlines and publishing, it is also an increasingly important value adding component of
most consumer products including television, cameras, mobile phones, etc.
• Smart products emerging today like smart cards, smart phones, smart sensors, smart
buildings, smart cars, etc., generally need embedded software.
• The knowledge economy centres on software as it is the integrating element linking
machines, human interfaces and machine intelligence.
• Computer-aided design, robotics, machine vision and zero defect inspection systems
are achieved through increasingly sophisticated software.
• Entertainment, health services and education are becoming software intensive services.
Consequently, software developers are scrambling to cope with the pressures of systems that
are not only a couple of orders of magnitude larger and more complex than those developed a
few years ago but also to meet the ever increasing demands for quality and performance. Little
wonder that the growth of software firms is higher than that of hardware resulting in “shift in
balance of power” (Hosalkar et al., 2000). But of particular interest in this study is the fact
that the software industry provides great opportunities for different categories of operators
ranging from micro or individual operators to small, medium and large players responding
to the varying demands of the different sectors of an economy for software and softwarebased services. Most importantly, although it requires a certain skills set, the barrier to entry is
relatively low. As discussed under the literature review section, several countries, particularly
India, have evolved policies and programmes that have promoted their software industry to a
level in which they are now global players.
2.0 Software Production and Services
There are many software products in the world markets today to the extent that it will require
additional software to keep track of developments in the industry which holds the key to all the
ICT-based transformations of economies. Consequently, in this study, it is helpful to categorize
the broad range of software in use globally so as to facilitate the identification of the market
segments that hold promise for countries or individuals venturing into software production and
services. It is also pertinent to identify the basic process involved in the development of typical
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179
software as a prelude to the appreciation of the skills set required.
There are three main categories of software in the market (Figure 7.1).
• System software, consisting mainly of operating systems (OS), which control the
activities of the computer, including some basic routine functions. Examples of OS are
MS-DOS, PC-DOS, UNIX, Microsoft Windows NT, etc.
• Proprietary software, which is a collection of software packages developed to
accomplish specific tasks. Typical examples are off-the-shelf software packages for
word processing (Microsoft Word, Word Perfect, etc.), spreadsheets (Lotus, Excel,
Quattro, etc.), database management (Dbase, Access, FoxPro, Oracle, etc.), desktop
publishing (Pagemaker), and software development platforms (Fortran, Cobol, C, C++,
Visual Basic, SQL, Java, etc.) that are used as platforms to develop other software,
particularly applications software.
• Applications software (AS) is the class of software developed to satisfy the varied needs
of users in the different sectors of the economy. AS are, by and large, either tailor-made
for individual users or standard packages that can be customized to meet the needs of
different groups of users. Such packages can be classified on a functional basis, such as
payroll, finance, human resources, accounting packages, enterprise resource planning,
etc. There is an almost limitless variation of requirements for software in each class
by different users. They are solutions that work particularly in the business realm to
satisfy the specific requirements of the end-user(s), creating at the same time a myriad
of business opportunities for software developers.
Software development activities in Africa are expected to centre on the applications
software category to meet the varying needs in the different sectors of our economies. The
other categories of software—OS and proprietary software—are within the capability of the
software giants such as Microsoft with the capability—human and financial—to invest in
their development. Consequently, such software packages are expected to be imported into
our countries to provide platforms for the development of the various applications software
packages. In a world increasingly committed to the protection of intellectual property, such
software packages may be too expensive for the anticipated small players in Africa. This
underscores the burning issue of piracy in the industry and the role of government policies in
dealing with it. However, as discussed below, the open source software (OSS) development
platform is set to change the dynamics of the industry.
Software development is a highly intellectual enterprise with the different classes of software
projects and the basic process involved in the development of typical software articulated in
Appendix A. Software projects are, generally, in four classes: conversion projects, client-specific
projects, packaged software and enterprise system software (Appendix A). The execution of
each class varies in complexity and process of development, which has as its basic elements:
survey of market needs; articulation of needs to be met by the software; software system
design; programming and coding; selected testing; modification; packaging and launching;
sales and installation; and feedback from users. There is a globally established system of quality
assurance of the software development process (Appendix A). Quality certification, while not
necessarily a measure of productivity, comes into play in the global market of outsourcing to
assure clients of the effective process capabilities of a firm.
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Fig. 1:
Software Categorisation
SOFTWARE CATEGORIES
SYSTEM SOFTWARE
§
§
§
§
Operating
System
Utilities
Language
Translators
Others
PROPRIETARY SOFTWARE
PACKAGES
§
§
§
§
§
§
§
Word Processing
Spreadsheet
Database
Statistical
Graphical
Data Transfer
Protocol etc.
Others
APPLICATIONS SOFTWARE
§
§
§
§
§
§
§
§
§
§
§
Payroll
Human resources
Management
Accounting
Inventory
Management
Banking & Finance
Insurance
Manufacturing
Transportation
Healthcare
Enterprise
Resource Planning
Others
Software project implementation involves different levels of skills working for a few weeks
to several months and even years, depending on the complexity of the application. As expected,
financing varies from little or no finance for certain categories to heavy financing for others,
especially the development of branded applications software products. During the development
period of a typical branded package, a company spends a considerable amount of money on
programmers/researchers, procurement of software development tools, training, etc. It is
therefore a period during which the company relies on other sources of income as the software
being developed cannot generate income until much later, and that is if it successfully penetrates
the market. It is at the sales and support phase of software development that a company starts
recouping the cost of its development with positive returns on investment taking two to three
years in successful cases. Moreover, part of such income must be ploughed back to support
software upgrading activities if the software is to be able to withstand competition and achieve
continual customer loyalty. This underscores the risky nature of investment in the software
development business. Consequently, forces in the financial markets must be considered by
software development outfits in a country that is contemplating growth.
In developing the software industry in the developing countries of Africa, it is pertinent to
note the following remarks by Mark Blumling et al. (2002), based on their experience of the
software industry in digitally advanced economies:
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The volatility of share prices in the software sector tends to reflect the cyclical nature of
demand for information technology and, more important, the intangible nature of assets such as
employees, customer relationships and technology. The importance of these intangible assets the essential drivers of economic value for software companies - is magnified by their scalable
character and the winner-takes-all dynamic of the business. But it is notoriously difficult to
price them, so investors must rely on revenue and earnings streams as proxies for their value.
Software companies benefit when their performance is rising, as their return on invested
capital can exceed 50% and grows extremely quickly. During a downturn, however, they are
hit twice—once for their actual financial performance and again for what it implies about the
value of their assets. If insolvency looms, investors flee because there are few residual assets
to divide. Finally, labour market forces contribute to the spiral. In most software companies,
stock options form a large part of the employees’ compensation. Once a company starts to
fail, it can suffer a massive attrition of its workforce as options lose their appeal. The most
valuable employees tend to leave first, diluting the company’s intangible-asset base at the time
of greatest need. If the company tries to hang on to this talent by increasing pay, net income
suffers, thus further reinforcing the vicious cycle.
A critical departure from the above conception of software development and products
scenario is the growing phenomenon of the OSS system. This type of software is typically
developed by several (mostly geographically separated) committed programmers collaborating
via the Internet. The resulting product is made available to anyone, usually at little or no cost.
Thus, it does not require proprietary licence fees as it may be freely re-distributed. In contrast to
the commercial software packages referred to earlier, users have access to the human readable
version of the software, the “source code”, revealing the inner workings of the software
and allowing its modification, hence the term “open source”. Access to the source code has
the potential to empower people in ways that proprietary software simply does not allow. It
offers people the freedom to probe, modify, learn from and customize the software to suit
their needs. Examples of OSS projects are Linux (with its accompanying software tools which
are powering many systems at minimal cost all over the world), and the most basic Internet
applications such as e-mail, file transfer protocol (FTP), Gopher and the World Wide Web.
The OSS Apache powers about 60% of the world’s web servers today. This is about twice the
share of Microsoft’s Internet Information Server (IIS). Furthermore, the OSS database server,
MySQL, is being used in millions of installations to power websites, data warehouses, business
applications, etc. (Bernhard, 2003).
This study concentrates more on the proprietary or commercial software packages because
they currently dominate the applications software market. However, we must not overlook the
potential of OSS in developing nations of Africa. A growing number of countries and public
institutions are already following or considering an OSS policy. As observed by Bernhard
(2003),
It is this open feature of the OSS development process that creates opportunities for
developing countries to participate in the technological developments in this area. This is in
contrast to commercial software, which is mainly developed in industrial countries and then
sold to developing countries. Thus, OSS can be considered as one means of bridging the digital
divide between the developing and the developed world.
The identified major benefits of OSS and standards include (NACI, 2002):
• Reduced costs and lowered dependency on imported technology and skills.
• Affordable software for individuals, enterprise and government.
• Universal access through mass software rollout without costly licensing implications.
• Access to government data without the barrier of proprietary software and data formats.
• Ability to customize software to local languages and cultures.
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• Lowered barriers to entry into the software businesses.
• Participation in a global network of software development.
There are several OSS projects, even in Africa such as the South African initiative involving
the translation of Linux into 11 official languages; projects on radio e-mail in Guinea; thin-client
solutions in Nigeria; and the Linux wireless router in Ghana, to name but a few (Coetze, 2002).
All these have been achieved because Linux comes with a complete development environment
(C+, C++, Fortran compilers, toolkits, script language like perl, awk) free of charge. However,
the experience from OSS operation shows that although the source code comes for free, the real
benefit can only be gained if a country actively participates in these projects. Towards this end,
governments must provide the necessary technological, educational and social infrastructure.
Programmers must have cheap access to the Internet, sufficient technological knowledge to be
able to contribute, and a certain financial security to spend part of their time in “non-directprofit” OSS projects. Since financial security is a real issue in our countries, publicly funded
OSS projects might be the only way to go. South Africa leads the way in Africa with several
private sector companies providing OSS-based solutions with total cost of ownership (TCO)
being up to 15 times lower than with the use of other commercial software solutions (Coetzee,
2002). Moreover, in promoting OSS, the South African government noted (NACI, 2002):
Whether or not the Rand enjoys an upswing in future, it makes sense to minimise risk
through avoidance, where possible, of dollar-based software license fees and through vigorous
encouragement and support of local software development efforts open software may be freely
probed, customised and modified. This is the cheapest way of generating software suited to
the country’s needs. It is also an ideal jumpstart for entering the software development arena.
Like governments in many countries (developed and developing), it is time for South Africa to
promote open software and open standards.
To promote OSS, the South African government directed the Government IT Officers
Council (GITOC) to examine the potential use of OSS in government in South Africa. The
National Advisory Council on Innovation (NACI) also carried out a study on the use of OSS
at national level, i.e., in government and non-government sectors. Arising from these efforts,
the South African government has been evolving strategies to promote the use of OSS in all
sectors in the country.
3.0 The Software Market
The degree of software usage and the level of its development in an economy are dictated
largely by the information intensity of economic activities coupled with the existence of an
enabling environment for the generation, analysis and use of information. The sharp contrast
between the global development and usage of informatics in industrialized economies and
the rather slow pace of its development and usage in developing economies, has led to the
classification of the latter in the “information poverty” category. Information poverty takes many
forms: planning without facts; poor information support to top decision-makers; inadequate
financial control and cumbersome reporting and monitoring systems; scarce information to
knowledge workers; under-utilized indigenous knowledge; poor access to timely information
on national and international markets; insufficient information on natural resources, etc.
However, the level of information poverty in a country also varies considerably from sector to
sector. The banking and financial services sector in most countries is relatively “information
rich” while most public-sector entities and different arms of government and the educational
system are still to wake up to the reality of informatics in their operations in most countries in
Africa.
However, one of the major barriers to the penetration of information technology—even
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in the service sector—is that commercially available software packages for various business
applications are usually not adapted to local conditions, which differ in accounting rules,
business culture and language. The same applies to most foreign databases used for businesssupport services. Consequently, the nurturing of local capability, not only to adapt imported
software applications to the local operational environment, but also to develop software and
generate databases driven by local requirements, is the kernel of IT growth in our countries on
the platform of software development.
3.1 Illustrative Structure Of The Software Market In Africa: The Case Of Nigeria.
The level of deployment of ICT into the economies of African countries is expected to
vary from country to country. The selection of the Nigerian case emanating from an extensive
study by the author is to serve as an illustrative example of the structure of the market. This
is required as a precursor to the development of the framework for the conduct of this study.
The structure of the market for applications software in terms of activities in the supply and
demand sides is shown in Figure 7.2. The supply side refers to the various firms marketing
application software packages in Nigeria. These firms can be grouped into three categories:
direct foreign representatives, value-adding resellers (VARs), and the direct developers.
Fig. 2: Structure of Applications Software 'Demand' and 'Supply' in Nigeria
Fig 7.2. Structure of Applications Software ‘Demand’ and ‘Supply’ in Nigeria
DEMAND SIDE
SUPPLY SIDE
DIRECT FOREIGN
REPRESENTATIVES
VALUE-ADDING
RESELLERS (VARs)
DIRECT DEVELOPERS
•
•
•
•
•
•
•
•
•
•
•
•
BANKING & FINANCE
HUMAN RESOURCES MANAGEMENT
ACCOUNTING
INSURANCE
ENTERPRISE RESOURCE PLANNING
MATERIALS REQUIREMENTS PLANNING
EDUCATIONAL INSTRUCTIONAL TOOLS
EDUCATION MANAGEMENT TOOLS
COMPUTER-AIDED DESIGN
COMPUTER-AIDED MANUFACTURE
MANAGEMENT INFORMATION SYSTEMS
OTHERS
Supply Side
Direct Foreign Representatives
These are software outfits established in Nigeria by foreign software developers to market
their software products directly in the Nigerian market. Typical examples are SAP (Systems
Applications Products) Nigeria Ltd. (established by SAP AG, based in Germany), Microsoft
Nigeria (office of Microsoft, the global software giant) and a similar office established by
Oracle in Nigeria. The distinctive characteristic of these outfits is the fact that they are under the
direct control of the parent companies as regards software sales, implementation and support
services. Such outfits also have offices in several African countries to market their software.
184
Value-Adding Resellers (VARs)
These are local software outfits that are representatives of foreign software developers and
are responsible for the marketing, sales, implementation and support services of the imported
software. Income to a VAR comes from fixed commission on licence fees coupled with direct
charges by the VAR for software implementation, support services and training. VARs are
allowed to carry out value-adding activities in terms of local development of software modules
that may enhance the main software or even be standalones that they sell directly in the market.
This route of entry into the sector is the most cost-effective because the financial outlay for
the development of the application software, which is generally high, is born by the foreign
software developer. However, a VAR needs to have the capability to provide support service,
a condition required for obtaining the licence and for the effective marketing of the software.
There are several VARs supporting different categories of software in the Nigerian market.
A typical example is SystemSpecs. The firm started as a VAR for SunSystems, an accounting
package developed by Systems Union of UK. After about five years into the relationship,
SystemSpecs was able to launch its own home-grown product—the HumanManager—which
today dominates the human resources management software market in Nigeria. The company
has already started to extend its services to other countries in the Economic Community of
West African States (ECOWAS) sub-region.
Direct Developers
These are software outfits with the capability to develop, market and support their own
software. While some companies are pure direct developers (e.g. Labyet Polaris, Future
Technology Systems, Progenics, Programos Software Ltd.) with products enjoying varying
degrees of patronage in the local market, most of the other developers combine value-added
resale of foreign software with marketing, sales and support of their own locally-developed
software.
It would seem that most software companies in Nigeria have tended to start as agents of
foreign software firms, acquire experience from the foreign developers, translate the experience
to software sales, implementation and value-adding activities, and then scan the environment
for a window of opportunity to create a niche for themselves in an unsatisfied area of the
market. Even those referred to above as pure direct software developers—Labyet Polaris and
Future Technology Systems—have come from the background of successful sales of imported
branded computer hardware for several years in the Nigerian market.
A pseudo measure of the intensity of competition or level of activities in each software
category is provided in Figure 7.3 showing the number of actors with branded software
packages. There are locally developed software packages in each category in use in different
sectors of the economy. Furthermore, there has been an increasing rate of entry of local firms
into the software business in the past five years.
Demand Side
The demand for information technology (IT) solutions is largely driven by the rate at which
actors in major sectors of an economy use IT to compete or to improve their operational efficiency.
Thus, banking and finance, oil and gas, manufacturing, government/public institutions and
professional consultancy outfits are the driving force for the penetration of application software
in Nigeria. The range and intensity of software usage vary considerably from sector to sector.
For example, the competitive pressures in the banking sector dictate the continual deployment
of emerging IT solutions to develop and quickly launch new banking and finance products
to achieve market differentiation for product standardization and convergence in the sector.
Commission-on-Transfer (COT)-free banking, erosion of arbitrage opportunities in forex, and
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stringent regulation and supervision of banks are putting margins under severe pressure in the
country. In manufacturing, companies seeking to reduce production costs and improve overall
business efficiency are increasingly embracing IT solutions. Under e-government, the diverse
activities of government are to be efficiently and promptly delivered through ICT.
Consequently, in what follows, attention is given to the main categories of application
software in use in several sectors of the economy:
Fig. 3: MEASURE OF PSEUDO-INTENSITY OF COMPETITION BY THE NUMBER OF
BRANDED PRODUCTS IN EACH SOFTWARE CATEGORY
35
33
30
No. of Actors
25
24
20
17
15
13
10
9
7
5
0
3
Human
Resources
Manegement
Banking and
Finance
Accounting
Enterprise
Resources
Planning
Insurance
Educational
Others
Software Category
• Banking and finance: comprising the array of software and software modules in use in
the banking and finance sectors.
• Human resources management: the range of software possessing varying capabilities
to handle payroll, human resources management, etc.
• Enterprise resource planning (ERP): the class of software that attempts to integrate
all departments and functions across a company onto a single computer system that
can manage product planning, purchasing and logistics, inventory management,
production, vendor management, customer service, finance, human resources and
many other basic business activities.
• Accounting: suites of software dealing with accounting and accounting practice in the
different sectors of the economy.
• Insurance: software packages dealing with the diverse functions of a firm in the
industry—client management, policy management, claims administration, insurance
accounting, reinsurance, etc.
• Education: the diverse software dealing with planning and statistics, management,
computer-aided instruction (CAI), computer-aided-learning (CAL), distance education,
examinations and results handling, etc.
• Others: a collection of function-specific, tailor-made software packages that are often
developed to meet the specific, usually restricted, needs of clients. Such software are
often classified as bespoke software packages. They are on the sidelines of the major
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proprietary software packages to be found in the above categories. Examples are
software to enable individuals to manage their finances as perceived by them; software
to manage a fleet of vehicles for an operator, etc.
3.1.1 The Banking and Finance Sector
The banking and finance sector has undoubtedly been leading other sectors in terms of
investment in procurement and implementation of applications software. Several factors
contribute to the deployment of IT in the sector:
•
•
•
•
•
A competitive environment in which the use of IT is becoming the industry standard.
The need to improve operational efficiency by automating back office operations.
A constant drive for quality improvement, convenience and speed of service.
The use of IT as a marketing tool.
Drawing the benefits of IT to innovate products and services.
From the survey of the sector carried out in 2003 in Nigeria, 87 banking and finance
institutions were using about 10 different application software packages, namely: Future Bank,
Tara Bank, Globus, BankMaster, Kapiti, Flexcube, Equinox, Basis, Finnacle and SAP. The first
two packages—Future Bank and Tara Bank—were developed by local software development
firms and were being used by seven banking and financial institutions, including the Central
Bank of Nigeria. The remaining eight products were foreign software, marketed and supported
by local value-adding representatives and being used by 80 banks, including first tier banks.
Some local software developers (e.g. Connect Technologies) were actively involved with the
development of software for the less sophisticated activities of community banks in the country.
Overall, the supply side is dominated by foreign products, which are used by almost 90% of
the banks. It is predicted that foreign application software packages will continue to dominate
the sector, since banks and financial institutions are joining the global market and will preferably
use global software.
The various banking software products aim at providing a full set of functionalities to meet
real and perceived customer needs in a sector that is increasingly becoming customer-centric.
In other words, the software packages are developed to provide IT solutions in contrast to
proprietary product selling.
The market for banking applications software is large, with banks investing heavily
in procurement and support services. Omega Bank, for example, uses Globus for its core
corporate, retail and investment banking with interface to other financial applications and
claimed to have invested US$2.5 million since 2000 in the implementation of an Internetdriven e-banking system. FSB International Bank has committed close to $1.0 million (product
licence: $700,000; maintenance 15% to 18% per year; and implementation $140,000 to
$150,000) towards the purchase, installation and training on Flexcube, the banking software
platform adopted by the bank. Some other banks spent between $1.5 million to $2.0 million on
software implementation. Added to this is the cost of annual maintenance of the software which
is, on average, about 18% of the procurement cost.
Nigeria imported ICT products worth US$27.83 million from India in 2006. This comprised
$11.37 million for hardware and $16.46 million for software. The India-based banking and
finance software such as Flexcube and Finnacle have been dominating software exports to
Nigeria.
Although foreign software packages appear to dominate the banking sector in the country,
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there still exist opportunities for new entrants. Foreign software developers gaining acceptance
in the global market, who are not yet present in the local banking sector, may enter the
market through a Nigerian VAR. Since the software industry is a very dynamic one, there
are also opportunities for direct development of value-adding modules to the existing major
software platforms, particularly value-adding software packages that extend the capability of
the existing core packages to attain the overall standard system of distributed operations and
diverse services illustrated in Figure 7.4.
There has also been an emergence of local developers of software products for e-banking,
internet-banking, etc. tailored to the Nigerian environment. For example there is local software
with multi-lingual facility, which allows customers to switch from the default English language
to any of the three major Nigerian languages—Yoruba, Hausa, Ibo—for business transactions.
There are still basic functionalities to be addressed in the banking and finance sector, as
remarked by a professional in the field:
The various banking software in use are very good in handling front-office (customers’
side) operations but are generally poor in handling back-office operations (internal inventory/
consumables stock management, internal accounting, supplier relationship management,
human capital management, assets, etc.). Attempts by some software developers to integrate
both operations failed woefully1 . Also, these software packages have their core strengths in
particular areas. Attempts by some developers to incorporate other areas have also tended to
end in abysmal failure. However, most banks are investing heavily in the implementation of
software for front-office activities while their back-office operations are suffering from noncomputerization.
The need for effective software for back-office operations shows that there are still great
prospects for the development of value-adding software packages to take care of activities such
as:
• Fixed asset management
• Personnel and payroll
• Expense management and reconciliation system
• Inventory management
• Customer relationship management (CRM)
1 The United Bank of Africa (UBA) invested in the SAP package to integrate all operations—front-end and backend. Implementation became so complex that the project had to be abandoned after rather heavy investment.
188
Fig. 4:
Emerging Hardware- and Software-driven IT Solutions for
the Banking and Finance Sector
Financial
Transactions
Payment
Network
Telephone
Banking
Branch
Server
Switch
Data
Wareheouse
Private Network
Web Server
Firewall
In-lobby
Banking
Internet
POS
Terminal
ATM
Internet
Service
Provider
SMS
Gateway
Windows-CE
Device
SMS
over cell
Phone
PC
Full-function
Teller
WAP
Gateway
WAP Access
Devices
3.1.2 The Human Resources Management (HRM) Group of Software
The human resources management (HRM) software is used in virtually every sector of the
economy—oil and gas sector, manufacturing, banking and finance, public institutions, etc. It
is an application that is currently dominated by local direct developers because of the need
to reflect the specific realities of the Nigerian employment, incentives and taxation system.
With the increasing penetration of these packages in the government and its parastatals, the
market for this application software is predicted to grow fast while providing opportunities for
software development.
HRM packages handle the basic functions in human resource management, such as
payroll (involving administration and operations aspects of staff remuneration computations:
end-month pay, mid-month, special payments, loans, allowances, deductions and all tax
computations), human resources (administrative functions relating to staff recruitment,
personnel management, training career, job history, skills and career planning, leave,
appraisals, medical and service history, etc.) and pensions (all payments to staff members who
have left the service of the organization, final entitlements such as gratuities, and eventual
monthly pensions). SystemSpecs, a local software firm, developed HumanManager, an HRM
package. SystemSpecs is the success story of a graduate of computer science who started off
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as a VAR of a foreign software and later started his own outfit to address the identified gaps in
the offerings of foreign software in the Nigerian market for HRM. HumanManager is a top-end
HRM software product in the country today being used by over 200 companies in all sectors of
the economy. SystemSpecs, with an annual turnover now running into several million dollars
and the market leader with 40% share of the Nigerian market, is set to capture the ECOWAS
market. HRM software is already making an impact in the different sectors of the economy,
both public and private. A human resources officer of a public outfit summarized his experience
from the deployment of HumanManager:
There were about 48 members of staff in the old HR section. Under the old system of
operation, involving manual storage of information in files, messengers had to take ageing
files from table to table, secretaries and typists were busy typing one thing or the other and
administrative officers sought information from files to handle diverse issues. But after the
implementation of the HR module, operationally, the Unit does not need more than three people!
The cost implementation of full-fledged HRM module varied from about $60,000 for
organizations having up to 1,000 staff/pensioners to above $2.0 million for organizations with
up to 100,000 staff/pensioners.
Nigerian software developers will continue to dominate the supply in this market-based
sector on the inherent advantage and ability to develop packages that reflect the specific
realities of the Nigerian employment, incentives and taxation system. There are therefore
ample opportunities for investment in the sector. Opportunities arise in different forms: one,
further developing the capacity of the existing packages; two, value-adding by third parties to
an existing main package possessing the necessary open architecture and flexibility; and three,
development of new packages taking advantage of existing gaps in available packages.
3.1.3 The Enterprise Resource Planning (ERP) Group of Software
The ERP market is still in its formative stage in Nigeria. It is, however, growing, with users
to be found in a few sectors of the economy. However, ERP is beset by certain myths and
realities—complexity of implementation, cost, appropriateness, etc.—that probably account
for its rather slow penetration of the Nigerian market. ERP software serves to coordinate
functional activities in the process of production of goods and services, from finance and
planning to warehousing and sales 2 (Appendix A). This underlies the complexity of authentic
ERP software packages. ERP was originally designed for manufacturing companies to enable
them manage the myriad tasks involved in manufacturing processes. It was the success in
applying the package to manufacturing that fuelled its present roll out into other sectors. There
are, however, several challenges to the implementation of ERP in companies, among which
are: security, availability, flexibility, scalability, speed, performance, cost, implementation time,
data quality and, finally, integrating information from the various source systems. There are also
huge costs associated with training and re-training of employees. Implementation of an ERP
package runs into several million dollars ordinarily. Furthermore, ERP implementation also
requires a change in work processes, which in turn leads to additional costs for the company.
As noted by an expert in the field, “The change issue is a hard nut to crack. The transformation
in work processes is oftentimes met with a lot of resistance as employees are usually set in
their old ways of carrying out certain tasks. Yet, they must adapt to new ways of doing things,
imposed by the system.”
The top-tier ERP vendors in the world market are PeopleSoft, Systems Applications Products
(SAP) AG, Oracle, Siebel, JD Edwards and Microsoft. The SAP ERP tool, from SAP AG of
2 For a bank, it seeks to combine both the ‘front-end’ and the ‘back-end’ operations in a single integrated platform.
190
Germany 3—formed by a group of former IBM personnel—is one of the industry leaders in the
supply of ERP packages. SAP AG’s interest in the Nigerian market is directly represented by
SAP Nigeria Limited. JD Edwards (JDE) is another world-class ERP tool. JDE’s ERP tool is
extensively used in the oil industry in Nigeria. Oracle (particularly the “Oracle Financials”) is
also coming strongly into the Nigerian market. The Nigerian oil and gas industry, by virtue of
its size, financial muscle and global visibility, is a major user of ERP software. SAP and JDE are
the tools of choice for many of the larger oil and gas companies. ExxonMobil is implementing
mySAP.com of the SAP software package as the primary backbone for its “Global Business
Infrastructure”. Chevron Nigeria, part of the ChevronTexaco Group, went the JDE route in
their implementation of an ERP tool. Shell’s investment in SAP is regarded as the biggest ERP
project in Nigeria. But most interesting is the deployment of ERP solutions in the public sector
in Nigeria. Two notable projects in this respect are the e-Delta by the Delta State Government
and the e-Governance by the Lagos State Government. The e-Delta is being implemented
by SAP Nigeria Limited. The Delta State Government chose mySAP.com to handle budget
allocation, financial management, funds management, procurement and inventory management
within its Ministry of Finance and Economic Planning.
A critical analysis of the ERP software market shows that there are three possible directions
of investment in the sector: one, market expansion; two, value-adding or development of addons to enhance functionalities; and three, development of simpler ERP systems.
One of the areas of potential growth of ERP applications is in the public sector, particularly
at the state government level, where there is an increasing commitment to e-governance or
e-government. E-government or e-governance has been characterized as an ABC project—A
(administration), B (business) and C (citizen). A-A project involves the deployment of ERP
to achieve better internal communication and interactions within the government machinery.
This is undoubtedly the starting point. The A-B (administration to business) is the second step
where the administration enables businesses to reach it by electronic means—Internet, dial-up,
etc.—to achieve online business transactions. Finally, in A-C (administration to the citizens),
citizens can interact with the government by electronic means. This definitely opens a vista
of opportunities, which are enabled by commitments of governments to improved and more
transparent conduct of their functions and also the provision of necessary ICT infrastructural
backup.
3.1.4 Accounting Packages
There are several accounting packages (both local and foreign) in use in the different sectors
of the Nigerian economy. Most of the packages exhibit similar functionalities although with
different styles of implementation. Local presence in accounting software development is
indeed significant. The Sunsystems, developed by Systems Union of UK, is used in about 180
countries by about 18,000 organizations and is available in 27 language variants. Sunsystems is
marketed and supported in Nigeria by SystemSpecs. The Sunsystems undoubtedly commanded
a leading position in the Nigerian market, with about 80 companies using different modules
of the software and a 40% share of the market in this applications sector. Other imported
software in the market are ACCPAC, SAGE, AccountingMate and BusinessVision, SCALA (a
Swedish software), NAVISION (a Danish software), and GREAT PLAINS. Microsoft bought
NAVISION and GREAT PLAINS in its effort to enter the Nigerian applications software
market.
There are also locally developed software for accounting and finance that are gaining
3 SAP AG, with headquarters in Walldorf, Germany, is today a $5.0 billion company with 21,000 employees in
1999. The company had an annual turnover of Euro1.78 billion ($1.63 billion) in 2002.
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acceptance in the market. Notable among them are:
• LabSoft Chartered Accounting (Labyet Polaris)
• Pastel Accounting (AlliedSoft Consulting Ltd.)
• XpertAccountant (SystemTech)
• Expresbook (Information Research Ltd.)
• CashMaster (Eresoft)
• ProgenFinancials (Progenics)
The market for accounting software is expected to grow. The main growth drivers are:
• The quoted companies in the stock exchange. Out of the estimated 120 companies in
the 1st Tier and 20 in the 2nd Tier, only 40% of them are using any serious accounting
package. The need for transparent financial reporting will be the source of pressure on
all quoted companies to invest in an accounting package.
• Chief executive officers (CEOs) who are seasoned entrepreneurs and exposed to
structured, transparent and forward looking modes of operation are likely to invest in
accounting software. The number of these CEOs is estimated to be several hundreds
in the country.
• The federal and state governments and their parastatals are considered to be the biggest
segment of the market in terms of the number of actors involved and their accounting
requirements.
Opportunities for investment exist in the sector for the different categories of software
developers, both big and small. This is dictated by the fact there is a growing market for
accounting packages ranging from the simple ones to take care of small private establishments
with a small budget for IT, to the big ones requiring top-end integrated accounting modules with
implementation cost running to several millions. The local developers are currently concentrated
in the lower end of the market while the VARs dominate the big market, particularly those
involving the multinationals.
3.1.5 Insurance Packages
Although the insurance sector is not as technology-driven as the banking and finance sector,
it is, however, gradually joining the train of establishments using technology to improve
operational efficiency and service delivery. The software requirements for the insurance industry
are apparently not as complex as those for banking and finance. Consequently, the sector is
currently dominated by a few locally developed packages. But this is predicted to change with
the recent entry of Glosure, a more sophisticated foreign package, into the domestic market.
However, the General Systems Technology, a local developer, with 15 clients for its Perfect
Series insurance package in Nigeria and Ghana, is currently the market leader in terms of
number of users.
The market for insurance software packages is relatively closed based on the highly
specialized nature of such software and the fact that users are indeed limited. There are about
13 insurance companies listed in the Nigerian Stock Exchange, complemented by a few that
are not listed. Added to this are some banks that have now started to add insurance functions
to their normal banking and finance functions. Market growth is therefore predicated on the
growth of the insurance industry and its commitment to meeting local and global challenges
using IT tools.
3.1.6 Education Software Packages
Informatics has yet to make an impact on the quality of teaching and instructional infrastructure
in the national educational system. The possibilities are enormous, from digitalizing libraries
to providing Internet connectivity for teachers and students, to computerizing and networking
192
and improving general administration. The application of informatics in the education sector,
with implications for software development, is in two broad categories: first, the development
of a range of educational tools; and second, putting in place education management systems.
However, there are now emerging locally developed software products to support, in the
various educational institutions, processes such as: students’ admission procedures; students’
registration process; students’ accounts and billing; result processing and transcript generation;
accommodation processes; staff records including payroll; and general accounts.
Realizing the need for IT in the management of the federal universities, the National
Universities Commission (NUC), funded the development of the Management Information
System for the universities. Unfortunately, the software component of the project was not well
conceived leading to its collapse; the universities therefore developed their own IT solutions.
The development of most educational packages is informed by the specific needs of the endusers. Developers target the local audience and almost invariably reflect their cultural values.
Hence, the characteristic pitfalls of imported packages—limited educational value, narrow
audience, cultural bias, etc. There is no doubt that there is a good market for user-controlled,
multipurpose software to produce educational tools for the different levels of education in
the country—primary, secondary, and tertiary. Computer-assisted instruction can complement
traditional teaching by providing individualized, self-based instruction or by teaching subjects
to students who do not have access to other means of instruction in these subjects. The latter
will be used in the ongoing Federal Government project on distance learning.
There are opportunities for the development of software, particularly the OSS type, that
are content specific and culturally relevant. There are also promising applications for remedial
instruction and for simulation in several areas of applied science and vocational training.
3.1.7 Other software packages
In the above presentation on the applications software market in the country, an attempt has
been made to cover the major packages in use in the different sectors of the economy. There
are, however, several other packages that are mainly function-specific. In this paper, they are
categorized as “others”. The market for other software is by no means small as it involves
hundreds of small players developing tailor-made and unbranded packages for different endusers. Also within the category of other packages is the array of bespoke software packages
that have potential markets in government and the public sector. There exists a wide set of
function-specific software in use in the economy. Cases abound of small to medium and even
some large enterprises commissioning the development of software that is almost invariably
tailored to their (clients) requirements. There are also several IT-enabled services (IT-ES) such
as revenue accounting, data-entry conversion, maintenance scheduling and support system,
medical transcription/insurance claim processing, database services, and content development.
4.0 Literature Review
The software industry is deemed an ideal target for a developing country to integrate
into the world ICT market. The industry is labour intensive and developing countries have a
large labour surplus; and it is a worldwide trend for developed countries to outsource a vast
amount of low-end, software-related tasks to the low-cost countries and regions. The global
outsourcing has been described as a win-win proposition as emphatically demonstrated in the
significant gains achieved by both developed and developing countries that have participated
in the growth of ICT-related trade (NASSCOM, 2007).
The software industry holds great potential for the developing countries of Africa if concerted
efforts are made to formulate relevant policies and strategies to develop the industry not only
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to meet the growing domestic markets but the growing world market for software products
and various IT-enabled services. Internet-driven service delivery coupled with the networking
mode of computing opened the world market for IT-business process outsourcing (IT-BPO).
Outsourcing has continued to be the primary growth engine with global delivery forming an
integral part of most sourcing strategies.
India has often been cited as the role model for a developing country to tap into the world
software market due to her continuous success in the software export sector. The Indian software
industry provides useful lessons for a developing country seeking to develop its software
industry to enhance economic development. For example, the Indian IT-BPO sector (including
the domestic and exports segments) is predicted to grow at an estimated 28% in 2007?. Total
revenue aggregate for the sector is expected to exceed $47.8 billion, nearly a 10-fold increase
over the aggregate revenue of $4.8 billion, reported in 1998, and direct employment is likely to
exceed 1.6 million (NASSCOM, 2007). As a proportion of national GDP, the revenue aggregate
of the Indian technology sector has grown from 1.2% in 1998 to an estimated 5.4% in 2007.
Net value-added by this sector, to the economy, is estimated at 3.0–3.5% for the 2007 financial
year.
However, to understand the importance of the software industry to a developing country,
Mingzhi and Gao (2003) noted that we need to look at this issue from both the demand and
the supply sides. On the demand side, the most obvious reason for developing countries to see
India as a role model is because of her success in the export of software services. The hard
currency earned on the international markets contributes to the macroeconomic leverage of the
country, but as noted by Arora and Athreye (2002), a more important and under-appreciated
contribution of the software industry is its exemplar of good entrepreneurship and corporate
governance as a source of productivity improvement for all industries. Software is more
than just another industry—it improves the productivity of the user. Productivity and quality
improvements from domestic software production may then be transmitted to other sectors of
the domestic economy through various input–output links. In this sense, software is a central
intermediate good in the new digital economy, and it thus occupies a special role in the process
of “informatization” and economic development of a country.
On the supply side, it is generally believed that developing countries have a comparative
advantage in developing the software industry relative to the hardware industry. Software is a
labour-intensive industry, and there is a relatively low level of entry barriers and little effects of
economies of scale (Heeks, 1999:2). The labour costs account for 70% to 80% of the total costs
in software development, and this proportion is expected to continue to grow as increasing
demand pushes up salaries around the world. “Computer science graduates need only PCs and
some business orders to become part of the local information economy. With a modem they can
even become global ‘infopreneurs’” (Heeks, 1999:2). Abundant in well-educated and relatively
inexpensive labour, the software sector is easily becoming a target for developing countries to
enter the ICT industry.
Little wonder that the phenomenal growth of the Indian software industry has been the
subject of much study and research. Several factors have been identified to account for the
apparent success of the export-oriented Indian software industry. In this section, we draw upon
existing studies to interpret the factors underlying the growth of the software industry not only
in India but also in other countries with significant software industry development such as
Ireland and Israel.
The underlying key factors of interest in this paper are: human capital, key business
infrastructure, business policy and regulatory environment, and quality and information
security. Each of these factors is elaborated upon in what follows.
194
4.1 Human Capital
Human capital, imbued with entrepreneurial skill, is indeed one of the major drivers of
success of the software industry in a country. For example, with over half the population of India
aged less than 25; India’s young demographic profile is a unique and inherent advantage. This,
complemented by a vast network of academic infrastructure and the legacy effects of British
colonization, has contributed to an unmatched mix and scale of educated, English-speaking
talent (NASSCOM, 2007). Notwithstanding the strong fundamentals (of a disproportionately
large talent pool), there has been growing concern about parts of the available pool being
unsuitable for employment. The Indian IT-BPO sector has taken the lead in ensuring that
requisite remedial actions are undertaken—well in time—to avoid any form of a talent crisis.
Training has become a regular and significant component in the induction process of all ITBPO firms. Several firms have also established dedicated facilities and teams for employee
skill enhancement initiatives. In addition to firm level efforts that are more focused on the
immediate requirements, the industry is also driving a series of concerted efforts to structurally
address the talent concerns.
NASSCOM of India has, on behalf of the industry, led the development of a comprehensive
skills assessment and certification programme for entry-level talent and executives (low,
middle-level management) and is organizing an image enhancement programme to build greater
awareness about the career opportunities in the BPO segment. The industry is also working
with the University Grants Commission and the All India Council for Technical Education, to
encourage and facilitate greater industry interaction, thus helping them share relevant feedback
and stay updated on developments in the industry, and giving them an opportunity to incorporate
positive changes to their curriculum and pedagogy. Furthermore, it is proposed that a chain
of “finishing schools” be established to supplement the graduate education attained by the
next layer of candidates—considered unsuitable for direct employment in the IT sector. These
initiatives are believed to be sufficient to address any potential supply gaps in the mediumterm. However, as noted in the NASSCOM 2007 Report, a sustainable solution of the talent
suitability issue requires a quantum increase in capacity and improvement in quality of the
education system, which is being actively discussed at the highest levels of policy formulation
in the country.
Thus, education and training to produce the right calibre of professionals is sine qua non
to the growth of the software industry. In this context, however, it is important to note with
caution the dominance of engineering graduates in the Indian software industry. This has
been predicated on the notion that an engineering education imparts a set of problem solving
skills, methods of thinking logically and learning tools that help quick adaptation to changes in
technology, domains and tasks. Since Indian firms provide services across a range of platforms
and domains, this is considered an important asset.
However, some have sounded a note of warning on the consequences of engineering
graduates deserting other fields for the IT sector, and even more, of preferring software jobs
(which have a very significant fraction of the work involving developing and refining business
applications, databases and the like) to pursuing postgraduate education. There were a number
of instances of engineers with highly specialized training (such as VLSI design or satellite
systems) working on tasks such as database design or development of business application
software. Quite a few senior level engineers were drawn from a variety of public sector research
and development institutions. All this may in the long run hurt the indigenous technology
development capability of the country. As noted by Arora et al. (2002) this is certainly an
inefficient allocation of resources. A more rational allocation would have firms substituting
intelligent and hardworking non-engineers trained in the use of software development tools
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for engineers where possible. Engineers would be used where their substantive knowledge
or design ability was of value. According to Arora et al. (2000), an Indian CEO of a software
company had this to say:
“Take somebody from a good college (any of the top 20 colleges in India), give him three
months of orientation and they are ready to take up a programming assignment. I don’t need all
these engineers…. But I don’t want to be branded by my customers as a guy who hires NIIT
graduates.”
The Indian private sector reponded to the market opportunity provided by the demand for
training in specialized skills. The country witnessed a rapid growth of private training outfits
in the software industry. Private training institutions train individuals specifically for work in
software development. For instance NIIT, one of the largest such training institutions had around
10,000 students (in 1999) in its GNIIT (Graduate NIIT) programme, a three-year programme
for software developers including one year of internship (professional practice) with a software
development firm. Similarly, Aptech, which claims to be the world’s largest software training
organization in terms of number of students (it has 1,200+ franchisees and a presence in 40
countries including the US, Europe, Australia and Africa), has an arm, Asset International, that
specializes in training software developers. Asset International currently trains both software
developers with work experience and recent graduates in certification course such as Microsoft
Certified Systems Engineers (MCSE) 4 and Microsoft Certified Systems Developer.
NIIT and Aptech dominate software training in Nigeria, with several centres established in
the country. They have been the major source of capacity building in software development in
the country.
4.2 Enabling Business Policy and Regulatory Environment
The impact of national policy in shaping the strategic direction of development of the
software industry can not be overemphasized. While India’s software industry has adopted an
export-oriented approach, there has been no clearly formulated national vision for the strategic
direction of software development in China. In contrast, national efforts in China were skewed
toward the hardware sector in the ICT industry. The evolution of policy initiatives in the Indian
software industry is highly instructive as can be discerned from the work of Athreye (2003)and
Arora et al. (2000). Four distinct phases have been identified as presented below.
1974–1984
The major thrust of government policy was towards achieving self-reliance in hardware
capability. During this period, firms were allowed to import hardware in exchange for export of
software. Tata Consultancy Services (TCS) was the first firm (in 1974) that exported software
in lieu of importing hardware (Heeks, 1996) through their collaboration with TCS-Burroughs
and Tata Unisys. Most of the projects during this early period were data conversion projects
4 Certification for most of the software development firms such as Microsoft, Oracle and Lotus is conducted by
Sylvan Prometric, an Australian firm that makes available online the tests required for certification for a certain fee.
The results are collected and transmitted to the various development firms, such as IBM and Oracle, for evaluation.
These certifications are globally valid and apart from giving a pass/fail status also give the marks obtained in the
test as an indication of the aptitude of the student. This certification is typically restricted to the specific version of
the software on which the student is tested. Whenever a newer version of the product is released, the development
firm usually gives a period of six months within which professionals need to upgrade their skills and obtain a recertification of their skills in that software by undergoing another certification exam. Thus, for example, the initial
Oracle certification involves being tested in five modules or five independent tests and the re-certification involves
giving an additional skills upgrade test.
196
or application maintenance for legacy mainframe computers. These projects were carried out
on the premises (referred to as on-site models) of the foreign firms (customers). The principal
reasons for the on-site model were the lack of credibility (on quality) of Indian manufacturers
abroad and the lack of the necessary communication infrastructure. It was also referred to
as body shopping in the literature (UNU publication). The exit of IBM due to the Foreign
Exchange & Regulation Act in 1978 also led to hundreds of ex-IBM employees starting their
own software development firms.
1985–1991
There was a worldwide crash in hardware prices coupled with a substantial reduction in
import duties on personal computers in the Indian market. This, coupled with lower taxes, led to
lower setup costs for software firms during the period. The number of personal computers went
up from 3,500 to 26,560 between 1983 and 1987. Favourable technology factors also came into
play with the change from computing from mainframes to network computing globally. This
led to a significant demand for software programming services as large multinational firms
moved from mainframe to client-server systems. From 1986, to promote the software industry,
software policy was de-linked and made independent of policy directed at the indigenous
hardware sector.
Many multinational companies (MNC) such as Texas Instruments India and Citicorp
Overseas Services Limited entered the market either as subsidiaries or as joint ventures. This
period also saw an entry of product-based firms like Sonata and Mastek. Although, the product
ventures of these firms did not last long, most of them converged to the dominant on-site model
pioneered by TCS. The basic capabilities of on-site software development were developed by
Indian software firms during this period. There was a marked increase in the revenue from both
domestic software and exports.
1992–1999
In 1991, there was full financial liberalization in India with the depreciation of the rupee and
liberalization of the financial flows. It meant that foreign capital flowed into the country more
easily than before. The liberalized economy coupled with a phenomenal increase in global
demand for software services and the low cost of software development in India, saw the largescale entry by MNCs in the period. The entry of MNC firms led to intense competition between
domestic and foreign firms for both software labour and projects. This led to a change in the
way software firms were delivering services. In the ensuing competition, most of the domestic
firms, which were earlier using the on-site model, also adopted the off-shore/on-site model.
This required firms to develop or augment their on-site capabilities with off-shore. It meant
developing effective process capabilities to deliver the solution effectively and efficiently. The
period witnessed the growth of firms with high level CMM and ISO certifications. The rise in
software exports was helped by government incentives like setting up of export processing
zones (EPZs) and improvements in the communication infrastructure. Domestic firms started
developing specialized products such as financial services and insurance by Infosys and TCS,
telecom and research and development (R&D) by Wipro, and transport and manufacturing by
Satyam.
2000 Onwards
The year 2000 was a watershed year for the Indian software industry, which saw a slowdown
in the demand for software services, forcing some consolidation in the industry. There was a
marked transition from on-site to off-site model. The absolute cost advantage of the Indian
software industry coupled with Indian brand image of effectively delivering software projects
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helped the transition from the on-site to off-shore. The on-site/off-shore model permitted
Indian firms to use or hire both high quality engineers for on-site work and engineers from less
renowned universities and other institutions for undertaking off-shore work (Basant and Rani,
2004).
The product and service offerings in the software sector have changed significantly over
the past few years with an increasing focus on domains like banking, financial services and
insurance (BFSI), manufacturing, telecom, retail, utilities and health care. BFSI, manufacturing
and telecommunication are the three most important domains in both domestic and export
markets. There are also emerging areas such as IT consulting, product development, embedded
and IT-ES. Embedded software contributed in 2002–03 around 11% of the software export
revenues of the country (Table 7.1). During the period, the revenue from software products was
5% of the total software exports, whereas that of IT-ES was 25% of the total software exports.
IT consulting contribution increased from 0.65% in 2001–02 to 0.83% in 2002–03 of the total
software revenues. This was evidence of diversification from custom software or application
development by software firms to other areas. The revenue from custom software development
decreased to 31.68% in 2002–03 from 34.64% in 2001–02 (NASSCOM, 2004).
Besides the services market, the most important growth area in the IT industry over the last
few years is outsourcing or IT-ES segment. The IT-ES segment has grown from 14% in 1999–
2000 to 24% in 2002–03 (NASSCOM, 2004). The number of IT-ES professionals employed
in India changed from 42,000 in 1999–2000 to an estimated 245,500 in 2003–04 (NASSCOM,
2004). This shift to the IT-ES segment may have helped employ labour from other disciplines
in the IT sector, which was earlier considered to be a preserve of engineers (Basant and Rani,
2004).
Table 7.1: Revenue comparison for various streams in 2001–02 and 2002–03
Activity
Revenue
2001–02 (Rs. 2 0 0 1 – 0 2 2 0 0 2 – 0 3 2002–03 (%)
in billion)
(%)
(Rs.
in
billion)
Software and services
4.95
64.70
5.53
58.02
IT consulting
0.05
0.65
0.08
0.83
System integration
0.15
1.9
0.1
1.04
Custom
application 2.65
development and maintenance
34.64
3.02
31.68
Network
integration
& -
-
0.03
0.31
-
-
-
-
Hardware support & installation -
-
0.02
0.20
Packaged software support & 0.30
installation
3.92
0.35
3.67
Processing services
-
-
-
-
IS outsourcing
-
-
0.01
0.10
Application outsourcing
1.75
22.8
1.85
19.41
infrastructure 0.05
0.65
0.08
0.84
consulting
IT training & education
Network
management
198
IT enabled services
1.49
19.47
2.34
24.54
R&D services
1.21
15.81
1.66
17.41
Product development & design
0.30
3.92
0.56
5.88
Embedded software
0.91
11.89
1.10
11.55
Total
7.65
100.00
9.53
100.00
Source: NASSCOM (2004).
The enabling business policy and regulatory environment has played a critical role in the
rapid growth of the Indian software industry. Policy-makers in India have laid special emphasis
on encouraging foreign participation in the IT-BPO sector, recognizing its importance not only
as a source of financial capital but also as a facilitator of knowledge and technology transfer.
Consequently, IT-BPO firms enjoy minimal regulatory and policy restrictions along with a
broad range of fiscal and procedural incentives offered by the central and individual state
governments. These measures have earned wide appreciation, best exemplified by several other
nations trying to emulate the policy environment that has helped develop the IT-BPO sector in
India (NASSCOM, 2007). The Software Technology Parks of India (STPI) scheme has played
a pivotal role in catalysing the growth of this sector and supporting its rapid proliferation across
the country. The tax holiday has helped attract much needed investments (MNC and Indian)
in the sector. Although the existing term of the STPI scheme is nearing its end (in 2009), the
government intends to continue the benefits offered by introducing similar provisions in the
special economic zones (SEZ) policy and further relaxing the minimum area requirements (to
qualify for SEZ status).
Other aspects of continuing policy reform targeted at the growth of this sector include the
rationalization of international taxation policies, mutual trade agreements with partner nations,
and a proactive and positive stance on international free trade.
4.3 Key Business Infrastructure
Infrastructure that is of importance in the software sector includes the availability of power
and the quality of the telecommunications infrastructure (bandwidth and telecommunication
penetration). According to Arora and Athreye (2002), costs for power are the second highest
expenditure in this sector, and many software firms generate their own power. Infosys, a leading
software firm headquartered in Bangalore, maintained a stock of back-up batteries together
with electric power generators for self generation during power outages. Electric power supply
is a major problem in most African countries. For example, in Nigeria it is the source of high
costs of business since public power supply is at best erratic, with firms having to invest heavily
in self generation.
With the software development delivery model increasingly moving toward outsourcing
and off-shore services, a robust and reliable telecommunications infrastructure has become
a priority. Issues such as teledensity are important for enhancing Internet penetration in a
country, which in turn will spur the growth of the domestic software and services market, and
other industry segments such as e-commerce. Policies should be targeted at a decline in pricing
and increased affordability and at increasing access, penetration and usage. This will result in
strong growth and reduced cost of business operations.
4.4 Quality and Information Security
Demonstrated process quality and expertise in service delivery has been a key factor driving
India’s sustained leadership in global service delivery (NASSCOM, 2007). Since the inception
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of the industry in India, players within the country have been focusing on quality initiatives,
to align themselves with international standards. Over the years, the industry has built robust
processes and procedures to offer world-class IT software and technology-related services.
Today, India-based centres (both Indian firms and MNC-owned captives) constitute the largest
number of quality certifications achieved by any single country. As of December 2006, over
440 Indian companies had acquired quality certifications, with 90 companies certified at SEI
CMM Level 5—higher than any other country in the world.
Information security is another key issue in the software industry. Vulnerability of information
is a global problem and efforts towards minimizing these risks need to be continuous and
constantly improved. India is working on a four-pronged programme to deal with information
security matters. This comprises:
• Engaging key stakeholders (policy-makers, industry players, enforcement agencies,
etc.) to build a common understanding of the key issues relating to information security
in the context of global service delivery.
• Educating industry constituents on developments in information security policies and
practices.
• Enactment of policy reform required to ensure compliance.
• Assisting in the effective enforcement of policy frameworks by encouraging the
practice of periodic security audits and certification, developing and maintaining
an incident response database and facilitating greater cooperation with enforcement
agencies.
These efforts have been endorsed by customer organizations committed to the establishment
of a self-regulatory organization that will identify a basic set of security and privacy standards
that they will be expected to adhere to.
5. Conceptual Framework
5.1 Preamble
Industry analysis is central to this study. It helps to define the forces that determine industry
competition and to search for a favourable competitive position in the industry. Competition is
the core of success or failure of firms, therefore the choice of a competitive strategy establishes
their long-term profitability and sustainability.
Two central questions underlie the choice of competitive strategy. The first is the
attractiveness of the industry for long-term profitability and the factors that determine it. The
second is the determinants of industry structure and the relative competitive position within an
industry. Both questions are important, bearing in mind the changing level of competition in the
different sectors of the software industry in most countries. Existing local practitioners and new
entrants will have to compete with global players in most of the sectors as exemplified by the
Nigerian software market. Consequently, this approach was used with success in analysing the
Nigerian software industry to identify the intensity of competition in each product and service
segment of the industry towards helping software development firms position themselves for
long-term sustainability.
The analysis makes use of Porter’s five forces model, which has been adapted to reflect
the realities in most developing countries in which the role of government and the national
innovation system in shaping the nature of competition cannot be ignored. Towards this end,
we have adopted the environment-focused approach of industry structure analysis involving
200
what Porter (1980) referred to as “competitive forces”. The five competitive forces model, as
proposed by Porter, is encapsulated in Figure 7.5, as consisting of:
• Rivalry among existing firms
• New entrants or barriers to entry
• Bargaining powers of suppliers
• Bargaining power of buyers
• Threat from substitute products.
Substitute
Products or
Services
Threat
Rivalry
among
existing
firms
Bargaining Power
Suppliers
Bargaining Power
Fig. 5: PORTER'S FIVE FORCES MODEL
Buyers
Threat
Potential Entrants
These forces are the major determinants of industry competition and are also salient to the
formulation of strategy by a company in order to develop opportunities in its environment
and protect itself against competition and threats. The central competitive force, i.e. rivalry
between existing competitors, essentially refers to the intensity of competitiveness in the way
the firms already in the industry approach their businesses (Utomi, 1998). This five-force model
of industry analysis will, however, be incomplete in developing economies of Africa where
government influences the environment of business by its management of macroeconomic
fundamentals, e.g. rate of inflation, exchange rate, tariffs, custom duties, patronage, etc.
Furthermore, as noted by Utomi (1998), in much of the post-colonial developing world, most
business association activity has been directed at getting governments to create a more enabling
environment for business and sometimes to make policies that either protect the members of
the association from foreign competition or give them an advantage in project contracts or
access to a scarce resource for manpower training. NASSCOM is the umbrella association of
software developers in India; it has an excellent track record of addressing issues relevant to the
development of the software industry in India (see the previous section). Business associations
have also been a lever trying to effect the evolution of institutions which can serve to modulate
the debilitating government interference in the environment of business.
Consequently, Porter’s five-force model of industry structure is moderated by three key
elements: government, business associations, and institutions (Figure 7.6). Utomi (1998)
referred to these three interacting elements as megafactors which “unless decision-makers in
a firm recognize their import to being effective and, therefore, manage by developing capacity
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201
to align their decisions to shifts in these elements, they may be unable to sustain long-term
superior performance over rivals”. The analysis of the software industry at national level is to
be carried out within the framework of the extended Porter model (Figure7.6).
In what follows, we consider each of these forces, as they apply to the software industry.
5.2 Rivalry Among Existing Firms
The central competitive force, i.e. rivalry between existing competitors, essentially refers
to the intensity of competitiveness in the way the firms already in the industry approach their
businesses. Several factors come into play when determining the intensity of rivalry among
firms in the industry. The most important ones are the market size, industry growth and the
demand/supply relationship.
When the market is large and there are few players, the intensity of competition is low.
Conversely, if supply exceeds demand, the intensity of rivalry is very high. In highly competitive
markets, companies engage in regular and extensive monitoring of key competitors. For
example, they watch price changes and try to match any significant difference immediately;
they analyse any rival product change in great detail and regularly attempt new initiatives
themselves; and they poach key employees from their rivals.
For example, in Nigeria the most competitive of the product segments in the software
industry is the banking and finance applications software. The market size is large, as banking
activities depend heavily on the deployment of information technology and banks make heavy
investments in new products and upgrades of existing ones. The market is expected to exhibit
sustained growth over the years. Experts in the field have projected about 20% growth rate.
Competition among the supplier firms is keen and dominated by both global and local players.
Switching costs, however, are very high, which means suppliers strive to capture clients for
long-term business relationships. There was the case of a Nigerian bank that migrated from
one software platform to another only to come back to the updated version of the first software.
The cost of switching was about $800,000. The lesson in this, according to the bank involved,
was “the need for people to be painstaking in choosing software and also exercising patience in
drilling down on chosen software before contemplating any switching, if at all”.
The technical characteristics of software become a primary source of competitive advantage.
Software needs to be friendly, easy to use and able to meet the particular needs of the customer.
A facility for the training and re-training of users in the different aspects of the software serves
to provide the much-needed technical backup for users. This has the effect of raising the barrier
to entry for new entrants.
5.3 Threat Of Potential New Entrants Or Barrier To Entry
New entrants come into a marketplace when profit margins are attractive and the barriers to
entry are low. The allure of high profitability is clear and so the major issue is that of barriers
to entry into a market. In this respect, Porter (1980) identified the following major barriers to
entry:
• Economies of scale. Unit costs of production may be reduced as the absolute volume
per period is increased. Such cost reductions occur in many industries and present
barriers because they mean that any new entrant has to come in on a large scale to
achieve the low cost levels of those already present. Such a scale is risky.
• Product differentiation. Branding, customer knowledge, special levels of service and
many other factors may create barriers by forcing new entrants to spend extra funds or
simply take longer to become established in the market. (This is very much applicable
202
to the software products segment of the software industry.)
• Capital requirements. Entry into some markets may involve major investment in
technology, plant, distribution, service outlets and other areas. The ability to raise
such finances and the risks associated with such outlays of capital will deter some
companies. These cash requirements are too high for many technology companies,
hence the use of the term “cash burn” to measure how long they can stay in business
before financial problems emerge. (Capital outlay varies considerably in the software
industry depending on the level of operation and the market segment being targeted.)
• Switching costs. When a buyer is satisfied with an existing product or service, it is
naturally difficult to switch that buyer to a new entrant. The cost of making the switch
would naturally fall to the new entrant and will represent a barrier to entry. (Switching
costs can be quite high in the software industry, not only in monetary terms but most
importantly in the high degree of reluctance to change from fairly successful software
package to one that may be superior in performance. This is because software is
expensive to integrate into corporate IT systems; once a network has been configured
around a new software package and employees have been trained to use it, the company
is not likely to switch.)
• Access to distribution channels. It is not enough to produce a quality product; it must
be distributed to the customer through channels that may be controlled by companies
already in the market. The widespread use of the Internet has made distribution a
relatively simple exercise for technology-related companies.
• Cost disadvantages independent of scale. Where an established company knows the
market well, has the confidence of major buyers, has invested heavily in infrastructure
to service the market and has specialist expertise, it becomes a daunting task for new
entrants to gain a foothold in the market. Whether or not these are effective barriers to
entry in the technology sector is an unresolved question, particularly given the legal
actions that Microsoft has been faced with. (However, as shown in the Nigerian study,
the banking software sub-sector is becoming saturated by foreign and local packages,
making it difficult for new entrants to gain any foothold.)
5.4 The Threat Of Substitutes
Occasionally, substitutes render a product in an industry redundant. But more often,
substitutes do not entirely replace existing products but introduce new technology or reduce the
costs of producing the same product. Effectively, substitutes may limit the profits in an industry
by keeping prices down. In the AS industry, the key factors that come into play are:
• The possible threat of obsolescence of the software vis-à-vis customer satisfaction.
• The ability of customers to switch to the substitute.
• The costs of providing some extra aspect of the service that will prevent switching.
This is related to investment in software development and upgrading to continually satisfy
and, as much as possible, keep well ahead of customer requirements. There is potential for
OSS to change the rules of the game as its development advances into the applications software
market.
5.5 The Bargaining Power Of Suppliers
Virtually every organization has suppliers of raw materials or services, which are used to
produce the final goods or services. In the case of the software industry, suppliers can be equated
to foreign software developers supplying their branded software to local technical VARs. Porter
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203
(1980) suggested that such foreign suppliers are more powerful under the following conditions:
• If there are only a few suppliers. This means that it is difficult to switch from one to
another if a supplier starts to exert its power.
• If there are no substitutes for the supplies they offer. This is especially the case if the
supplies are important for technical reasons—perhaps they form a crucial ingredient in
a production process or the service they offer is vital to smooth production.
• If suppliers’ prices form a large part of the total costs of the organization. Any increase
in price would hit the value added unless the organization was able to raise its own
prices in compensation.
• If a supplier can potentially undertake the value-added process of the organization.
Occasionally a supplier will have power if it is able to integrate forward and undertake
the value-added process undertaken by the organization; this could pose a real threat
to the survival of the organization. (In the case of a VAR, this may mean the foreign
supplier coming to establish in the country and directly entering the local market. A
good example is SAP AG, based in Germany that is established in Nigeria as SAP
Nigeria Ltd. to directly handle all sales and implementation of the SAP software in the
country.)
5.6 The Bargaining Power Of Buyers
In his model, Porter (1980) used the term “buyers” to describe what might also be called
the customers of the organization. Buyers have more bargaining power under the following
conditions:
• If buyers are concentrated and there are a few of them. When the organization has little
option but to negotiate with a buyer because there are few alternative buyers around,
the organization is clearly in a weak position. (This is indeed applicable in the software
industry with sellers having to undergo competitive bidding to make sales to generally
few buyers. In such situations buyers can, in theory at least, drive a hard bargain
with organizations. The arrival of the Internet also enables the buyer to access other
suppliers who may offer better conditions for the same product, thereby increasing the
buyer’s bargaining power.)
• If the product from the organization is undifferentiated. If an organization’s product
is much the same as that of other organizations, the buyer can easily switch from one
to another without problems. The buyer is even more likely to make such a shift if the
quality of the buyer’s product is unaffected by such a change.
• If backward integration is possible. As with suppliers above, the buyer’s bargaining
power is increased if the buyer is able to backward integrate and take over the role
of the organization. (This can happen in the software industry if a software buyer
company possesses the capability to embark on the development of its application
software in-house instead of outright purchase from an external source.)
5.7 The Modified Porter’s Model of Industry Analysis
As already mentioned, Porter’s Five-Force Model of industry analysis is moderated by
government, business associations and institutions (Figure 6).
204
Fig. 6 A PARADIGM FOR THE SOFTWARE
INDUSTRY ANALYSIS
GOVERNMENT
POLICIES AND
ACTIONS
Substitute
Products
Threat
Existing
Rivalry
PORTER'S MODEL
Threat
Bargaining Power
Suppliers
Bargaining Power
PORTER'S MODEL
Buyers
Potential
Entrants
BUSINESS
ASSOCIATIONS
INSTITUTIONS
REGULATORY &
POLICY
IMPLEMENTATION
EDUCATIONAL &
TRAINING
INTERNATIONAL
COPYRIGHTS
RESEARCH &
DEVELOPMENT
Government policies have been shown to affect the direction and intensity of the development
of the software industry as illustrated in the case of India. Of particular importance are
policies geared toward human development, trade, demand creation through patronage, ICT
infrastructure development, etc.
Suffice it to note that there may be associations playing significant roles in influencing
relevant government policies in ICT while also championing the interests of the actors in the
software industry. It is important to identify such associations and their specific activities at the
national level.
The relevant institutions in this study are those:
• Performing regulatory functions.
• Involved with education and training.
• Implementing copyright laws to protect intellectual property rights.
• Carrying out research and development.
These are components of the national innovation system (NIS) with key roles to play in
enhancing the capabilities of the actors in any sector to face the challenges of competition and
globalization.
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205
6. Objectives and Research Questions
The software market is a highly globalized market with basically unrestricted entry of
products and services into our countries. The intensity of competition, however, varies from
one product line to the other, with potential for local participation where such does not exist
in our countries. A matrix of local and foreign participation is anticipated, with the dynamics
moderated by the entrepreneurial spirit of the people and range of government policies to
support their efforts.
6.1 Research Objectives
General Objective
The overall objectives of this study are: to determine the industry characteristics of the
software industry in a few selected countries in Africa; evaluate the level of participation of
local enterprises; and design micro- and macro-policy interventions that can help the growth
of the sector.
Specific Objectives
The specific objectives are:
1. To identify the key players, both national and foreign, in the software industry sector.
2. To determine the operational characteristics of the different product segments of the
industry.
3. To articulate the competitive environment within which the actors operate.
4. To identify and evaluate government policies, associations and institutions that impact
on the performances of the sector.
5. To analyse the findings of the study and come up with the micro- and macro-policy
interventions that can promote the growth of the sector.
6.2
Research Questions
This study will address the research questions indicated below:
1. What is the range of software product categories existing in the country?
2. Who are the key players in each product category?
3. What are the market shares in each product category?
4. What is the nature of competition in each of the product categories?
5. What is the degree to which the software industry is integrated into the domestic
economy and local capability created?
6. In what ways do the relevant government policies impact on the operations in each
segment?
7. What are the operational constraints (institutional, attitudinal, structural or whatever)
that have limited the performances of actors in each product segment?
8. What micro- and macro-policy interventions can we put in place to promote the growth
of the sector?
206
7. Research Methodology
The research is to be carried out through in-depth analysis of the industry coupled with
carefully selected case studies. It is envisaged to be in three modules as indicated below.
Module 1: Industrial Analysis
This is aimed at providing the global picture of the industry as a precursor to identifying
the issues to be addressed in greater depth in the proposed case studies. Consequently,
the activities are geared towards:
•
•
•
•
•
Establishing the nature and characteristics of the software industry.
Identifying the major players in the industry.
Establishing the nature of competition in the industry.
Identifying the nature of barriers to and opportunities for entry.
Identifying the major users of software.
This will be carried out through desk research, selected administration of questionnaires,
and visits to some key actors in the private and public sectors of the economy.
Case Studies Modules
Whilst the industrial analysis provides a panoramic view of the industry, case studies
are expected to be an in-depth study of identified issues affecting both the “supply” and the
“demand” sides of the industry. Consequently, the case studies will involve establishments that
are engaged in the supply side of the industry (i.e. those who are supplying software to the
different categories of users) and those on the demand side (the users of the different categories
of software in the market).
Module 2: Case Studies of Software Developers/Suppliers
The main thrust of the case studies on this platform is to identify key players that demonstrate the
fundamental features of the market for software. From the surveyed players, at least one or two in two or
three major product categories are to be identified for more detailed case studies.
Module 3: Case Studies of Software Users
Our main interest is the identification of the different categories of users followed by detailed case studies of at
least two or three outfits that illustrate the dynamics of: software acquisition decision-making; implementation;
business process re-engineering and attendant change management; impacts on key performance indicators.
Potential candidates in the manufacturing and financial sectors are to be identified for this purpose.
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207
Focus On The Activities Of The National Research And Innovation Systems
This will entail a critical evaluation of: the educational and training systems for the production
of software development skills; business associations; the national R&D system; government
establishments (ministries of trade, industry, science and technology); and a coordinating
agency, if any, concerned with the formulation and implementation of the national IT policy
implementation agency. The body of data and information collected will serve to determine the
environment within which the actors in the software industry operate.
Preliminary Data Collection
The first port of call in the execution of this project will be the key players in the different
market segments of the software industry. Those considered as the market leaders will have to
be identified. Such key players will have to be sensitized on the objectives of the study while
helping to shape the proposed plan for study implementation. It will be a good platform for
reaching out to the main actors in the sector and also for later dissemination of study findings.
Data Analysis
The bulk of the data obtained from the study is envisaged to be quantitative and qualitative
as well as static and dynamic in nature. Computer-based data handling is proposed. This is to
facilitate data processing towards answering the basic questions asked above and much more.
8. Expected Results And Impacts
The following are the expected results and impacts of the study:
• The study should provide information about the characteristics of the software industry
in the country.
• It should provide insight into the forces driving competition in the sector and the
possible role of the environment in sustaining and enhancing the competitive capability
of the enterprises.
• It should be able to identify the existing policy instruments and their impacts, if any,
on the sector.
• The study should come up with broad and specific policies to promote the growth of
the sector.
9.0 Scope and Tentative Work Plan
9.1 Scope
The AERC is proposing embarking on the project that will identify “The Vision and
Challenges of ICT Production in Africa” under the umbrella of the main study geared towards
evaluating the impact of ICT on the economies of African countries. This paper has been
devoted to a study of the computer software production and services industry in selected African
countries. It is proposed that the study be carried out in five regions in Africa (Anglophone
West Africa, Francophone West Africa, East Africa, Central African and Southern Africa)
following those proposed for the study on computer hardware production. Thus, in each region
at least two leading countries in terms of depth and history of ICT use and production will
be selected for in-depth study. This will permit the envisaged analysis of their potentials for
ICT production. The following countries have been involved in diverse ICT-based projects
at national and international levels: Nigeria and Ghana (Anglophone West Africa); Senegal
and Cameroon (Francophone West Africa); Kenya, Uganda and Tanzania (East Africa); South
208
Africa and Mozambique (Southern Africa); and Egypt and Tunisia (North Africa).
Pooled data from these countries should permit robust analysis of activities and characteristics
of the software industry in Africa.
9.2 Tentative Work Programme
The basic elements of the project execution are presented in the tentative schedule below. It
is expected to begin at the same time as the hardware production project. The study will, like the
hardware production project, start with the perfection of the framework papers to standardize
the methodology to be adopted for the study. This will allow a comparison of the results from
the selected countries to reflect the general situation in Africa.
AERC is expected to select the authors of the country case studies to attend a workshop
on the framework papers sometime in May 2007. A final integrated framework paper will be
produced to guide the investigation of the research questions. The framework papers will be
published as the first contribution of the project to knowledge on methodological approaches
to evaluating the computer production industry in Africa.
The case study authors are expected to spend a month to prepare their research proposals,
which will form the basis of the commissioning of the studies by AERC in July 2007. The
studies will invariably involve considerable fieldwork to collect primary and secondary data
and to interview stakeholders. It is, therefore, envisaged that the interim reports of the country
studies will be submitted in February 2008 and a research review workshop will be held in
March 2008. The authors will incorporate the outputs of the research workshop to prepare the
draft final reports for submission in May/June 2008. This will be followed by a research review
workshop to be held in July 2008 to consider the draft final reports. The revised final reports
will be submitted by September 2008 after which dissemination activities will commence,
beginning with national dissemination workshops followed by a regional workshop. These
workshops are expected to take place between September and December 2008. The relevant
publications at the national and regional levels are expected to be prepared and disseminated
during the period. The need to disseminate the findings of the studies to policy-makers and
other stakeholders cannot be overemphasized, bearing in mind the crucial role of a focused and
integrated policy for the development of the sector.
Tentative Work Programme For Project Execution
ID
Task Name
1
Commissioning of Framework papers
2
Selection of Country Case Study Authors (CCSAs)
3
Workshop to discuss Framework Papers with CCSAs
4
Finalisation of Research Proposals by CCSAs
5
Issuance of Research Grants to CCSAs
6
Submission of Interim Reports by CCSAs
7
Research review Workshop to consider Interim Reports
8
Submission of Draft Final Reports
9
Research Review of Draft Final Reports
10 Submission of Revised Final Reports
11 Dissemination Workshops (National & Regional)
Q1 07
Q2 07
Jan Feb Mar
Apr May Jun
Q3 07
Jul
Aug Sep
Q4 07
Oct
Nov Dec
Q1 08
Q2 08
Jan Feb Mar
Apr May Jun
Q3 08
Jul
Aug Sep
Q4 08
Oct
Nov
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209
References
Aichernig, B.K. 2003. Open Source Software: Challenges and Prospects for Developing Countries. INTECH
Technology Policy Briefs, 2((2). United Nations University.
Arora, A. and S. Athreye. 2002. “The software industry and India’s economic development”. Information
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Athreye, S.S. 2003. “The Indian software industry”. Working Paper 03-04. Software Industry Centre, Carnegie
Mellon University, Pittsburgh, USA, October.
Basant, R. and U. Rani. 2004. “Labour market deepening in the Indian information technology industry: An
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Blumling, M., K.A. Frick and W. F. Mehan III. 2002. Software companies caught in a downward spiral find it
exceptionally difficult to escape. Yet a determined few succeed. The McKinsey Quarterly, No.3.
Coetzee, N.. 2002. “Free and open source software in Africa”. At (http://www.maailma.kaapeli.fi/africa.html)
Heeks, R. 1996. India’s software industry: State policy, liberalization and industrial development. Sage
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Heeks, R. 1999. “Software strategies in developing countries.” Working paper. Development Informatics.
Hosalkar A. and B. Bowonder. 2000. “Software development management: critical success factors”.
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NASSCOM. 2004. The IT industry in India: Strategic review 2004. New Delhi:NASSCOM.
NASSCOM. 2007. The IT industry in India: Strategic review 2007. New Delhi:NASSCOM.
NACI. 2002 “Open Software & Open Standards in South Africa: A critical Issue for Addressing the Digital
Divide”. National Advisory Council on Innovation (NACI): Open Software Working Group. (http://www.naci.org.
za)
Porter, M. 1980. Competitive Strategy. New York: The Free Press.
United Nations University, Maastricht, Netherlands, publication: “Innovation or Cost Advantage? A Case of
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Utomi, P. 1998. Managing Uncertainty: Competition and Strategy in Emerging Economies. Ibadan, Nigeria:
Spectrum Books.
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Appendix A
Software Project Types and the Development Process
Implementing software is like a journey; when you think you’ve finally arrived, the finish
line moves: Inlaks Computers Ltd, Nigeria
Software differs considerably in terms of complexity, novelty, inter-activeness and value
addition. Software development can be classified into four broad categories, namely conversion
projects, client-specific software, packaged software, and enterprise system software.
Conversion Projects involve change of software platforms or data conversion projects, like
the Y2K conversion of existing software. The main focus of such projects is not creating new
software but adapting existing software for use in new environments. Several data conversion
projects were undertaken in the late 1970s and early 1980s to effect the switching from IBM
computers to other systems. They were usually executed on premises (called on-site models).
It was also referred to as body shopping in literature.
The period was marked by heavy dependence of software on hardware. Most of the software
written during this period was not independent of the hardware of the computer. Software firms
like Patni Computer Systems (PCS), TCS, Computer Maintenance Corporation (CMC) and
Datamatics, all from India, were actively involved with such projects through strong alliances
with hardware manufacturers.
Client specific software caters to specific needs of individual users. This is in the class of
tailor-made software that are developed with close collaboration between the developer and
the user. Although it has the inherent advantage of satisfying current needs of the user, such
platforms tend to be expensive. The developer has to be constantly in touch with users to meet
the changing needs.
Packaged software are aimed at developing completely new products, which need to be
marketed.It has to be generic in use as no customization is envisaged at the installation stage. It
is akin to the proprietary software in the above classification. There are several software giants,
like Microsoft, involved in this category.
Enterprise system software requires an enormous amount of interaction and development
of independent but interlinked sub-modules. An enterprise resource planning (ERP) software
seeks to integrate all departments and functions across a company onto a single computer
information system that can serve the different needs of all departments. In other words, ERP
software serves to coordinate functional activities in the process of production of goods and
services, from finance and planning to warehousing and sales (Figure 7A.1). ERP was originally
designed for manufacturing companies to enable them manage the myriad of tasks involved
in manufacturing processes. It was the success in applying the package to manufacturing that
fuelled its current rollout into other sectors, including banking and finance. ERP is probably
the most complex software project to implement. The top-tier ERP vendors in the world market
are PeopleSoft, Systems Applications Products (SAP) AG, Oracle, Siebel, JD Edwards and
Microsoft. The SAP ERP tool, from SAP AG of Germany (formed by a group of former IBM
personnel), is one of the industry leaders in the supply of ERP packages. Its world-acclaimed
SAP software is acknowledged as one of the best-in-class ERP tools available today.
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211
Basic Elements of an ERP Software
Marketing
Sales
Projects
Financials
ONE
DATABASE
Human
Resources
Order
Management
Procurement
Service
Manufacturing
Supply Chain
Although the implementation procedure and the critical success factors of the above classes
of software projects differ, the last two categories of software dominate the industry. In general,
software development involves the following sequential events of varying duration (see Figure
7A.2):
• Considerable groundwork to obtain data and information on the needs of the potential
markets that will shape the structure and attributes of the software.
• System design to achieve the desired attributes of the proposed software.
• Programming, involving labour-intensive coding of instructions.
• Pre-tests of the developed software to obtain feedback from selected potential users on
its as-it-is performance in terms of desired functionalities and attributes.
• Articulation of necessary changes to be incorporated into the software to take care of
the above feedback.
• Implementation of all necessary pre-market changes to arrive at a marketable software
product or post-market changes to satisfy the expressed needs of the client.
• Demonstration and launching of completed version of the software into the market.
• Sales and implementation on the purchaser’s system followed by regular contact to
take care of any bugs or new requirements by the client.
212
Fig. A.2: Basic Software Development Process
Survey of Market Needs
Articulation of needs to be met
by the Software
Software System Design
Programming and Coding
Selected Tests of the
Developed Software
Deficient
O.K
Articulation of necessary
modifications
Packaging and Launching of
the Software
Feedbacks
Sales and Installation of the
software
Software development can take from a few weeks to some years depending on the complexity
of the software. During such a period, a company spends a considerable amount of money on
the payment of salaries of programmers/researchers, procurement of software development
tools, training, etc. It is therefore a period during which the company relies on other sources of
income as the software being developed cannot generate income until much later, and that is if
it successfully penetrates the market.
It is at the sales and support phase of a software package that the company starts recouping
the cost of its development with positive returns on investment taking two to three years in
successful cases. Moreover, part of such income must be ploughed back to support software
upgrading activities if the software is to be able to withstand competition and achieve continual
customer loyalty.
Labour costs were estimated at about 70% of all software costs in the early 1990s. With
the decrease in hardware prices and the increase in the wages of software professionals this
estimate is likely to be on the lower side for the late 1990s (Arora and Athreye, 2002).
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213
Software Industry Quality Measurement
Quality is a key factor today in international business competition. The software industry
also has industry-based quality measurements. The Software Engineering Institute (SEI), a
R&D organization funded by the US Department of Defense, is equipped with a charter to
advance the practice of Software Engineering. SEI developed a useful bench-marking process
called the Capability Maturity Model (CMM). The CMM consists of a set of criteria to evaluate
an organization’s software development and maintenance efforts and considers, among other
factors, the level to which processes are standardized and followed across an organization.
The progression from an immature, unrepeatable software process (SEI-CMM™ Level 1)
to a mature, well-managed software process (SEI-CMM™ Level 5) is described in terms of
maturity levels in the model. The characteristics of the different levels are presented in Table
B.1.
Table B.1:
Characteristics of SEI—CMM levels of quality assurance
Level
Characteristics
5. Optimizing
Continuous process capability improvement
4. Managed
Quantitative measurement of process
3. Defined
Software process defined and institutionalized
2. Repeatable
Project management process institutionalized.
Gaps in technical practices
1. Initial
Key project
inconsistent
management
and
tracking
The SEI-CMM is adopted as a framework for continuous software-development-process
improvement. The use of CMM enables an organization to steadily improve its organizationwide software processes to reap continuous and lasting gains in software-process capability.
CMM helps a firm to identify the characteristics of effective software processes, which the
firm, in turn, can tailor and apply to its own software processes in accordance with maturity
level recommendations. Software firms in countries such as India continue to improve on their
quality ISO/CMM quality certifications as shown in Table 7A.2. This indicates a considerable
increase in the process capabilities of Indian software firms.
214
Table B.2:
Profile of quality certifications of Indian software firms in the past few years
SEI quality assessment
No. of companies as at No. of companies as at 31 No. of companies as at 31
31 Dec. 2001
Dec. 2002
Dec. 2003
SEI CMM Level 5
36
48
67
SEI CMM Level 4
19
23
22
SEI CMM Level 3
9
22
19
SEI CMM Level 2
1
1
1
SEI CMM Level 1
1
2
5
PCMM Level 5
1
5
4
PCMM Level 4
1
1
1
PCMM Level 3
4
5
6
PCMM Level 2
4
3
2
ISO 9001
N.A.
178
ISO 9002
N.A
13
ISO 9000
N.A
6
Source: NASSCOM (2003 and 2004).
Today, India-based centres (both Indian firms as well as MNC-owned captives) constitute the
largest number of quality certifications achieved by any single country. As of December 2006,
over 440 Indian companies had acquired quality certifications, with 90 companies certified at
SEI CMM Level 5—higher than any other country in the world (NASSCOM, 2006).
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215
CHAPTER 8
The Vision and Challenges of ICT
Production in Africa: Computer
Hardware Production
A Framework Paper Draft By
Prof. O. A. Bamiro
Vice-Chancellor University of Ibadan Ibadan,
Nigeria December2006
African Economic Research Consortium (Aerc)
1. Background and Context
I
nformation and communication technology (ICT) is a convergence of various
technologies and applications. The basic elements and the determinants of level of
access to them are schematically illustrated in Figure 8.1. The telecommunications
infrastructure, basically the backbone of ICT, determines the level and diversity of means of
information exchange, with the information generation and/or exchange taking place between
different computer hardware under the control of function-specific computer software.
The aim of this paper is to guide the conduct of the proposed studies on the challenges of
ICT production at country level. Previous ICT-related studies in existing literature, particularly
a few ICT-related studies—Adeyinka (1998), Odebiyi (2000), Ifeoma (2000), Kajogbola et Al.
(2001), Uguru (2001) sponsored by the African Technology Policy Studies Network (ATPS),
were mainly in the area of the use of ICT in various sectors (banking, manufacturing and service,
education and agriculture) in Africa. The interest of most governments in ICT development
(essentially involving the three elements identified above) is predicated on the fact that ICT
is considered a high growth industry with potential for creating jobs and economic growth.
However, to enhance the economic benefits and achieve these development objectives through
ICT development, experiences of developing nations, particularly those described as newly
industrializing, have clearly shown the need for the evolution of policies and programmes that
do not only foster ICT use, but also promote ICT production. Production is the main concern
in this paper, which differs significantly from previous studies in the sense that it is geared
towards a critical examination of the potentials of our countries for IT production. The key
areas in which Africa has some potential for IT production are computer hardware, software
and services. These are the areas most developing economies target for development through
the evolution of appropriate policies and programmes. Other sectors of the ICT industry are
complementary to the computer sector as they provide inputs (components and semiconductors),
industrial capacity, skilled workers and needed infrastructure (e.g. telecommunications).
216
Fixed Lines
INFORMATION
(Voice,text, images, data)
Mobile Platforms
TELECOMMUNICATIONS
Fixed Wireless
1G
2G
2.5G
3G
Wireless
Optical Fibre
Super
COMMUNICATION
(Transfer of information:
- point-to-point
- point-to-multipoints
COMPUTER
HARDWARE
Mainframe
Minicomputers
Micros
Operating System (OS)
TECHNOLOGY
'effecting the transfer of
information'
COMPUTER
SOFTWARE
Applications Programmes
Existing literature
indicates
thereLEVEL
are marked
differences between the computer hardware
ACCESS
DETERMINANTS
Figure
1: ICT that
production and services industry and the software and services industry in terms of industry
structure and characteristics as well as policies and programmes for their development. The
need for a practical understanding of the nature and effects of the environment and ICT-driven
policies on the development of these sectors therefore necessitates their separate treatment.
Furthermore, it is possible for a country to preferentially concentrate its efforts on one of these
two main sectors as a matter of deliberate policy. A typical example is India, with policies and
programmes that have promoted software production and services while computer hardware
production has been relegated to the background as will be discussed later. The reverse is the
case in Taiwan and China, with growing computer hardware and components production in
contrast to their relatively weak software industries.
2.0 Computer Hardware Production (Assembly) and Services
In order to appreciate the characteristics of the computer production and services industry, it
is apposite to first appreciate the different types of computers, the various hardware devices, the
computer production or assembly process and the nature of services involved in the industry. The
different categories of computers and the various hardware devices that constitute a complete
computer system are presented in Appendix A. It is shown that computers vary in capacity,
speed of operations and complexity of manufacture from the ubiquitous microcomputers
(comprising laptops, notebooks and personal computers) to the supercomputers used for
scientific calculations, of which there are only a few in the world. However, the potential
for computer hardware production in Africa lies mainly in the microcomputer category,
with production involving basically the local assembly of computers—mainly the computer
processing unit (CPU)—from electro-mechanical components and devices (see Appendix 8B)
which may be locally produced or imported. The CPU combined with the relevant accessories
- Bamiro -
217
and peripherals make up the complete computer system as illustrated in Figure 8.2.
Figure 2:
Elements of a Computer System
Input Electro-Mechanical
Components
v
v
v
v
v
v
v
Motherboard
Processor
Hard Disk
RAM
CD Drives
Fans
Casing
Accessories/Peripherals
COMPUTER
ASSEMBLY
(CPU)
§
§
§
§
§
§
§
§
§
§
§
§
Printers
Monitors
Mouse
Mouse Pad
Flash Disk
Diskettes
Scanners
Speakers
CD Writers
Modems
Uninterruptible
Power System
Network
components
COMPLETE
COMPUTER
SYSTEM
Computer hardware assembly is basically the bringing together of discrete computer
components to make a complete computer system. The basic process can be accomplished
in most countries in Africa, either in the formal sector, involving the establishment of outfits
to assemble what is referred to as “branded systems”, or in the informal sector, involving
individuals assembling systems almost invariably from non-standard components to produce
what is referred to as “clones” or “unbranded systems” (see Appendix 8B). The cloned systems
and the branded systems, described further below, exist in most countries—developed or
developing—in varying degrees.
Cloned or Unbranded Systems
As indicated above, these are systems assembled by individuals to meet the demand of
customers, almost on a wait-and-get basis. Clones are highly patronized in terms of the market
demand and volume of sales in most countries due to a number of factors, including:
• Prices are much lower and more affordable: This is because the hardware components
are usually imported from Asian countries where cheap skilled labour makes low
pricing possible.
• Ease of servicing: Cloned computers lend themselves to relatively easier servicing
than branded systems by the very fact that the parts are locally assembled and can be
easily replaced by sufficiently trained but not necessarily highly skilled persons.
• Customization: Clients can easily decide the exact configuration and quality of the
individual hardware components of their computer.
Builders of clones act purely with a trade mentality. More often than not, there is no
guarantee, warranty or after-sales customer relationship. These types of market exist worldwide.
218
In fact, individuals can assemble their own personal computers with little or no knowledge.
Thus, it has great potential for direct and indirect employment generation. The case study of
the Otigba ICT Cluster in Nigeria by the author showed that assembling of computer clones
was a major employment generator for unemployed graduates streaming into the cluster to
set up shops after acquiring the relevant skills through an apprenticeship scheme operated
in the cluster. With proper nurturing and supportive policies, such enterprises can grow. The
history of Apple and Dell bears this out. These computers, both leading brands today, started
from the “garage” or “unbranded” channel to their present large-scale production of branded
systems. Rather than the traditional brick-and-mortar infrastructure of most business start-ups,
these acorns grew into the proverbial oak due to an unyielding entrepreneurial spirit and being
customer oriented. The same scenario can unfold in African countries as attested to by Stan
Ekeh, Chairman, Zinox Computers Ltd., the first manufacturer of branded computer systems
in Nigeria, who noted that “…people start as clone assemblers until they become branded.
You learn the cloning process before you start talking about branding. Even our partners in
South Africa started to clone before branding.” Thus, acquiring the capability to clone is
usually the first step in the journey towards upgrading to brand manufacturing in the computer
production business. For a firm’s product to be regarded as branded, it is normally issued with
the WHQL (Windows Hardware Quality Lab) certificate for the product. WHQL certification is
the global industry standard for computer hardware manufacturers. However, WHQL is more
a certification of product than process by Microsoft. Four firms—Zinox Computers (jointly
owned by Stan Tech- Nigeria, Mustek- South Africa, and Alhena- France), Omatek Computers,
United Information Technologies (UNITEC), and Beta Computers —have entered the Nigerian
market with different branded computer systems.
Fortunately, acquisition of relevant skills for computer assembly is becoming relatively
easy. In the past, characterized by less standardization, assemblers had to do a bit of cutting
and soldering to get parts to fit. Nowadays, critical components are standardized and come with
manuals to closely guide installation.
Local And Foreign Branded Systems
Importation of foreign branded computer systems into a country comes with too many
associated costs. These include foreign labour, which may account for 10% to 20% of the total
costs. With local assembly, foreign labour and distribution costs are eliminated as local labour
costs a fraction of what foreign labour does. Elimination of foreign labour in the assembly of
local brands also means local job creation. The competition between locally branded systems
(where they exist) and foreign ones (e.g. Compaq/HP, Dell, IBM, Toshiba, etc.) is still keen in
the volume-driven computer market as discussed later.
Services Related To The Computer Production Sector
Of crucial importance in the computer production industry is the availability of different
components. There are only a few manufacturers of the different electro-mechanical components
for computer producers or assemblers in the world (Table 8B.1, Appendix 8B. It has become
a large-volume-low-margin business, with the economies of scale coming into play. Asia has
now become the major source of these components and accessories in the world, particularly
to African countries, such as Nigeria, with a growing computer production industry.
From the foregoing characteristics of the sector, one can readily identify the following range
of support services for the sector:
• Importation of computer parts, components and accessories for direct sales.
• Sales, repairs and servicing of computers and accessories
• Sales of new and fairly-used imported computers.
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219
Because of its strategic importance, particularly the potential for employment generation
at minimum cost, national ICT policy must promote the growth of the sector. It is a highly
competitive sector in which the locally produced brands or clones must compete with foreign
brands—new and fairly-used—to gain market share in the increasingly globalized market
economies of the world. Furthermore, the comparative study of the technology policies vis-àvis computer production in 11 countries in the Asia-Pacific region conducted by Kraemer and
Dedrick (1995) (discussed later in the literature review) showed conclusively that technology
policies have a significant impact on computer production in a country. Specifically, they found
that countries that developed strong government policies were more successful than those that
left development to market forces. Given that ICT policies do impact on the sector, what forms
should they take to ensure sustainable development of this emerging industry in the countries
of Africa? This paper posits that for any enterprise in the sector to thrive, it must continually
innovate and learn while developing linkage capability to the national education, training,
research and innovation systems in the country. The study results are expected to provide
practical insights into the industry characteristics of the sector, the forces driving competition,
and package of policies required to promote these emerging enterprises.
3. The Computer Hardware Industry
As earlier mentioned, the computer hardware industry is indeed competitive and has
different players—local and international. This section presents the nature of the market in
Nigeria based on an update of a recent study by this author. This is expected to reflect, to a large
extent, the basic structure in most countries of Africa, which the AERC ICT production project
must seek to determine.
The computer hardware market segmentation in Nigeria is depicted in Figure 8.3. The market
is dominated by microcomputers (desktops, laptops, notebooks) for home use, educational
purposes and businesses.
Fig. 3: Computer Hardware Market Segmentation in Nigeria
COMPUTER CATEGORIES
PRODUCT TYPES
SOURCES
Direct
Importation
(Companies)
Foreign Brands
SuperComputers
Local Vendors
Mainframe
Minicomputers
Direct Importation
(Individuals and
Enterprises)
Local Brands
Microcomputers
or Personal
Computers (PCs)
Internationally
Certified Local
Computer Assembly
Plants using imported
computer parts and
components with some
of them locally designed
(Desktops, Notebooks)
Peripherals/
Accessories
Unbranded/
Clones
Local computer assembly
activities using available
imported computer parts
and components
Banks, companies (especially the multinationals), higher education institutions, special
220
government establishments and parastatals use mainframe and minicomputers to handle large
volumes of data and computer networks. Data churning establishments, particularly in the oil
and gas, power and telecommunications sectors use mainframe computers in their operations.
Peripherals (monitors, keyboards, motherboards, power supply and control units) are also used.
The market for personal computers (PCs) was estimated in 2002 at 100,000 per year. With an
estimated population of 120 million in Nigeria in the same year, this rate of purchase is rather
small. With available computers in the country translating to one computer to probably 200 to
300 people (compared with one computer to less than 10 people in most developed economies),
one can readily appreciate the expanse of the digital divide between the developed and the
developing economies such as Nigeria. A major factor militating against the growth of the
local market is the decreasing purchasing power of people resulting from the current economic
downturn. Computer purchase, either for home or business, is a capital investment, which
has to be subjected to the usual cost–benefit analysis. The local market for PCs is, however,
predicted to grow with increasing popularity of IT in the country, particularly in government
and the education sector. The AERC project on ICT in Higher Education is particularly relevant
to the education sector.
The “supply side” of the computer hardware industry in Nigeria comprises three product
types—foreign branded products, local branded products and the local unbranded or clones.
Foreign Branded Computer Products
These are dominated by IBM, Compaq, Dell, Toshiba, Sun Microsystems, Gateway, etc.
They are usually brought into the country from three main sources:
Direct importation by end-users (especially multinational companies).
• Direct importation of new or fairly-used systems (referred to in the local parlance as
tokunbo) by individuals for their own use or for sale
• Local vendors (quite a number with several years of experience) appointed by foreign
brand manufacturers and given responsibility for marketing, sales and technical
support services.
Locally Branded Computer Products
From 2000 to date, five local companies have been established and are already producing
for the growing Nigerian market for locally branded computers that meet the WQL standard.
Zinox Technologies Ltd. (jointly owned by Stan Tech-Nigeria, Mustek-South Africa, and
Alhena-France) led the way with a range of products—desktops, notebooks, servers—launched
in October 2000. The Zinox Computers assembly plant, located in Lagos, has an operational
capacity of 200 to 350 computers per day, with plans to increase capacity if the market picks
up. The company’s computers have a number of components and parts (power circuits, casing,
keyboard and packaging) fabricated abroad to the company’s design. According to Mr. Stan
Ekeh, the MD/CEO of Zinox: “…On the competition side, we made it clear from the onset
that our competitors are the Compaq, the HP, and the Dell. Those are the class we fall into. …
These companies are still holding most of the major accounts that we are gradually buzzing in.
With time, we’ll be there …” Zinox is also planning to compete not only in the Nigerian market
but also in the export market in the West African sub-region. To achieve this, the company is
planning additional investment aimed at digitizing the production process to increase production
capacity and product quality.
However, since the launching of the Zinox series of locally branded computers in Nigeria,
other players such as the United Information Technologies (UNITEC), Omatek Computers,
Beta Computers and Pragmatic Technologies have entered the market also with different
branded products. And it would seem that a number of other actors will soon join the market.
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221
UNITEC was floated by nine highly successful computer vendors who have brought their
experience in handling foreign brands over the years to bear on the establishment of a joint
local production outfit. UNITEC planned to embark on local manufacture of some critical
electronic components (backward integration) in the second phase of its development. Omatek,
a completely Nigerian-owned outfit, has innovatively developed and deployed into the market
its own branded systems, including a keyboard that is local currency (Naira)-enabled and
also capable of handling three Nigerian languages. Omatek has also engaged in backward
integration through local production of computer casings and speakers. Seventy per cent of the
casings and speakers produced by the firm are currently used internally on its PC assembly line
while the rest enter the Nigerian market.
Local Production of Computer Clones
The operators in this sector produce unbranded computers or clones using parts and
components (of varying and usually uncertified quality) brought into the country from all over
the world – most especially from the relatively cheap Asian markets. These actors tend to form
clusters involving various parts and components suppliers and individual assemblers. A typical
cluster is located at the Otigba market in Ikeja, Lagos. The major attributes of such computer
clones are their relatively low cost compared to foreign or local brands1. A major marketer
remarked:
”Although the quality of branded systems was better, both clones and branded products
were in high demand. Multinational companies preferred branded systems while some 85% of
Nigerians preferred cloned systems due to price differential.” The computer market will thrive
if government ensures the quality of computer components being imported into the country.
Nature of Competition and Existing Government Policy
The competition in the market seems to be between the local branded or unbranded products
and the foreign brands. The strategy of the local brand manufacturers is predicated on matching
the foreign brands quality for quality, customizing the computers to the local environment
(especially with power and heat problems in mind) and low pricing. The question is: can they
face the stiff competition on a long-term basis without the support of government and the
national research and innovation system?
The National Information Technology Policy (NITP) document (available at www.nitda.
org) of the country contained the following provisions of relevance to the computer hardware
industry:
• Promotion of the growth of alliances and partnerships among local firms and with
foreign firms through the establishment of joint ventures and strategic alliances based
in tax-free technology parks.
• Imported IT components and software tools for industries, set up solely for exporting
finished IT products and services, will be duty-free.
• The import duty on IT “knocked down” components for the domestic market will be
1.5% whereas import duty on imported finished IT goods for the domestic market will
be 7.5%.
• Tax holidays will be accorded to all enterprises that demonstrate substantial financial
commitment to the advancement of IT capacity and training for its staff.
• Federally owned, funded or controlled organizations will not deduct the statutory
1 It has been alluded that clone assemblers are able to produce cheap computers because they usually pre-install
pirated software on their systems at little or no additional cost to their customers.
222
withholding taxes from payments to Nigerian IT solution providers for the following
services, among others:
• One hundred per cent locally-developed software.
• Locally assembled or manufactured ICT equipment.
• Internet access services, local web hosting, and local websites.
In addition to the above was the directive by government to its establishments and agencies
to patronize locally assembled computer companies. Consequently, the local manufacturers
have been increasing their share of the large government market for computers. But is it
sustainable into the future?
4. Literature Review
The relationship between technology and economic development is now well established.
But of crucial importance is the need to understand how government technology policy can be
applied to achieve economic objectives. This approach calls for careful consideration of the
effects of past and present policies to gain insight into which approaches are effective under
what circumstances. Previous relevant work of interest to this study are: the work of Kraemer
and Dedrick (1995) which compared the effectiveness of various technology policy approaches
in promoting the production of computer hardware, software and services in 11 countries in
the Asia-Pacific region; and the case study by Bamiro of the Otigba ICT cluster in Nigeria,
an innovating cluster with activities ranging from computer production to sales, services and
repairs.
The Asia-Pacific region has seen rapid growth in the IT sector. The policies adopted by
the countries in the region fell into two broad categories—the so-called “plan-directed” and
the “market-directed”. The countries that adopted the plan-directed strategies (Japan, Korea,
Taiwan, Singapore, Thailand and India) developed strong government policies to promote the IT
industry, believing that the state had to take the lead in planning the development of the industry
and should not be content with allowing market forces to prevail. This was predicated on the
fact that “IT is considered an economic and technological driver, as technologies developed for
IT can be applied to other industries and a growing IT industry can drive growth in supporting
industries such as components and manufacturing equipment” . Those countries that adopted
the market-oriented policies (Hong Kong, Australia, Malaysia, Philippines and New Zealand)
believed that the operation of the free market would lead to optimum resource allocation and
result in the most desirable economic outcomes. The government’s role is therefore limited
mainly to regulating the private sector to achieve social goals such as pollution control or
equal opportunity, and to providing public goods such as education and infrastructure. Thus,
while plan-directed strategies treat the market as a means to achieving government-determined
ends, market-directed strategies treat the market as an end in itself—an alternative allocation
mechanism to political/bureaucratic processes. Suffice it to note that the market- versus plandirected dichotomy represents two models of industrial and technology policy adopted as
the theoretical tool for analysing and comparing the industrial and technology policies in the
different countries studied by the authors.
However, these two sets of policy models are not mutually exclusive, as noted by the
authors.
All governments are engaged in policies which have an impact on the development of
high-technology industries. Governments operate public education systems, provide support
for research, influence exchange rates and interest rates, set tax and tariff rates, and regulate
telecommunications and other public utilities. All of these policies affect the computer industry.
More directly, government procurement accounts for a large share of most countries’ computer
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223
markets, in some cases over 50%. The procurement procedures employed have a major effect
on the industry. Thus, it cannot be argued that some governments have technology policies and
others do not. The definition of market- versus plan-directed is based on the nature and extent of
government intervention, rather than its presence or absence. In regard to government policies
toward the computer industry, this paper defines countries’ policies as predominantly marketdirected or plan-directed on the basis of empirical data on the extent of government planning
and intervention. To understand the factors driving the development of computer production
in Asia-Pacific nations, it is necessary to acknowledge that in addition to government policy,
computer production is strongly affected by national economic and political environments.
Based upon the above, Kraemer and Dedrick 1995 designed a framework for analysis
whose elements are the technology policy, the environment, and the IT production. These
enabled them to determine, for each country, the nature of success in computer production, the
types of environmental endowments related to success in computer production, and the types
of government policies related to success. Their analytical framework has been adopted and
significantly modified in this paper and is presented in below.
From the comparative study of the above 11 countries, Kraemer and Dedrick 1995 made the
following pertinent observations/deductions:
Computer production was very low in all the countries except Japan in late 1970s. During
the 1980s, Singapore, Taiwan, Korea and Thailand experienced tremendous growth in
computer production, while Hong Kong lost its initial lead. What accounts for this tremendous
growth?Around 1980 each of the three newly industrializing countries (NICs) adopted national
IT plans which targeted the microcomputer industry for development. Each used different
vehicles to implement this strategy, based on its local environment: Singapore teamed up with
the multinational corporations (MNCs); Korea pushed its large conglomerates into computer
production; and Taiwan orchestrated the efforts of its many small firms through governmentrun laboratories and institutes. In addition, each government provided a series of trade, tax and
industry promotion incentives. Thailand did not implement a specific national IT plan, but did
provide tax breaks and other incentives to electronic companies to spur hardware production.
India employed the strongest government intervention in the computer industry, but focused
on nationalist goals of technological independence and state ownership of production, an
approach which resulted in limited success in computer production. Hong Kong, with its
laissez faire approach, grew slowly in computer production during the 1980s, and its industry
remains limited to simple screwdriver-type assembly operations. Australia and New Zealand
maintained a market-directed strategy and had little success in computer production. In 1987,
Australia offered some limited incentives to MNCs to encourage increased exports and R&D,
but computer production had not taken off as of 1990…
The above provides evidence that technology policies have a significant impact on computer
production in a country. The countries covered in the study adopted different strategies with
different results. More significantly, it was found that countries which followed plan-directed
policies were more successful than those which followed market-directed policies. For
example, in 1990 Taiwan had 710 hardware companies (mainly small and medium enterprises)
with production targeted mainly at the export market. The country initially focused on original
equipment manufacture (OEM) contracts with foreign companies until later when Taiwanese
companies, such as Acer, started to export their brand-name computers. Although Taiwan still
depends on import of technology and key components, its manufacturers are able to design
and get standardized products to market quickly. However, current dynamics of the computer
hardware market is such that companies in the region are now relocating their production
outfits outside their borders to gain comparative advantage. For example, China was expected
to displace Taiwan as the world’s largest manufacturer of notebook PCs by the end of 2003.
224
Most major notebook PC manufacturers, with nine from Taiwan alone (such as Acer, Uniwell
Computers and Mitac International) are relocating production to Suzhou, a province in Eastern
China with its present output of 10 million notebook PCs per year projected to increase to 20
million BY WHEN?, representing 50% of the world demand. While production takes place
in Suzhou, the companies retain research and development (R&D) and product development
in their home countries. However, cheap labour is not a basis for developing the computer
industry. Hardware production requires people with the technical skills to manage sophisticated
manufacturing operations, a requirement driven by the industry’s strict demands for quality
control, rapid changes in product lines and constant technological advances (Kraemer and
Dedrick 1995)
By and large, policy instruments which have been found to be highly supportive of the
growth of computer production, and are used in varying degrees by the countries studied, are:
• Development of human resources.
• International focus.
• Encouragement of domestic use.
• Targeting of the software and services sector.
• Entertainment of some measure of local competition.
• Coordination of policies around strategic goals by a strong coordinating body which
can compel action on the part of other agencies and the private sector.
The Otigba ICT Cluster in Nigeria is a classic case of a cluster in the informal sector of a
developing and less industrialized country, which has thrived despite the rather weak institutional
support and infrastructural environment. The cluster evolved from trading in imported ICT
equipment, electro-mechanical components and products over a period to currently engaging
in computer hardware, and software trade and production. The Otigba cluster, located in Ikeja,
an industrial zone in Lagos (previous political capital of Nigeria, but now indisputably the
commercial nerve centre of the country), started in the early 1990s as sales and repairs outlets
specialized in stationery, printers, photocopiers, branded computers and office equipment. The
two major streets on which the cluster started were originally designed and approved as a
residential area. With increased activities in the computer and IT business, driven by demand
for hardware sales and services in Nigeria, the residential buildings in the growing cluster
gave way to more business highrise buildings. The cluster has now grown to a major business
district. The development of the cluster was a salute to the courage and entrepreneurial spirit of
the operators as government intervention was, and still is, minimal.
From the records collected from the main trade association, there were about 3,500 micro
and small enterprises (MSEs) that directly employed more than 6,000 people in 2003. This
was due to the continuous stream of self-employed entrepreneurs coming into the cluster. Over
5,000 enterprises (employing more than 10,000 workers) were recorded to be operating by the
end of year 2004 and, measured in terms of employee size, they were mostly MSEs. The cluster
has now started to witness the arrival of bigger players from the formal sector.
Analysis of the productive capacity of the cluster showed that the core technology driving the
various ICT activities and other elements of productive capacity is computer assembling process
technology and repairs. This has been acquired easily by the operators through apprenticeship
and tacit knowledge. There is considerable learning and diffusion of tacit knowledge through
apprenticeship. The competition is keen and driven by pricing as a major factor, as can easily
be gleaned from the weekly advertisements of diverse products and services placed in the
national dailies by firms in the cluster. Some operators have since acquired the capability to
assemble the more intricate computer notebooks which are also available for sale in the cluster.
The cluster also possessed the skills set to handle trading in computers and allied products,
servicing and repairs of computers and intricate allied products. Hardware repair involves a
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225
good knowledge of the relationship between software and hardware, good diagnostic capability
to establish the state of the system, and knowledge of components and their compatibility
characteristics. Most operators in the cluster depend on tacit knowledge to undertake repairs.
Some are not able to easily distinguish between software-related problems and problems that
arise from hardware malfunction. This often results in extra work, lost time and expensive
repairs. The capability to repair hardware varies considerably in the cluster, with the successful
operators being mainly those who have a strong technical background. It is also an area that
involves wide consultation among operators when repairs become problematic. Computer
repairs are relatively easier than printer and monitor repairs. Only a few operators are engaged
in repairing printers and monitors because of the specialized nature of such highly standardized
and technology-intensive accessories. Some of the operators involved in printer and monitor
repairs trained in the formal sector of the economy before establishing themselves in the cluster.
The vendors and operators within the cluster are mainly graduates of computer science,
computer engineering and business administration. Graduates and undergraduates with
different backgrounds attached themselves to some of the established enterprises to acquire
some IT capabilities. They started small and operated along the street doing small businesses
until they were able to rent a shop from their savings as there were no credit facilities available.
The study of the Otigba cluster found that nearly all the IT parts, components and accessories
were imported into Nigeria. According to Obinna of IT World Ltd., a BSc (Economics) graduate
with an MBA:
Computer components are sourced from China for the cheap end and the domestic market,
but high grade servers and components that require high technical input are often got from
Europe and the US. The bulk of people that are selling in this cluster are selling for the mass
market, they get their components mainly from the Far East, Dubai, Japan, Singapore and
Europe.
Trading in computers and allied products requires a reasonable level of marketing skills
matched with astute business acumen. Trading requires close monitoring of the technology
market due to the rapid rate of obsolescence of equipment and process characteristics of the IT
sector. A trader must be able to determine when to buy and when to quickly get rid of inventory.
Information is critical to the success of the business. Most traders in the cluster therefore use the
Internet for information and business transactions. Most operators have sophisticated mobile
sets “to connect with the world”. Equally important is a close monitoring of the Nigerian
foreign exchange market and import duties due to heavy dependence on importation and the
sensitivity of buyers to prices. The big operators in the cluster advocated what they referred to
as “Technology Watch” to ensure that the trader keeps pace with the continual changes as they
unfold in the global computer industry. The leaders are relied upon to bring in bulk items such
as casings, keyboards, mouse, speakers and monitors for sale to the smaller players. But nearly
70% of the operators travel abroad to purchase fast moving and relatively light items like
RAM, hard disks, processors and motherboards. Such components are usually air-freighted to
the country. Close to 800 different suppliers from China, Dubai, Taipei, Singapore, Japan, the
United States and some other Asian countries are involved. Most operators closely guard their
sources of supply in an attempt to gain market advantage.
Customers of the cluster are drawn from all over Nigeria and, most significantly, from
across the West African coast—from Benin Republic to Senegal. Otigba has gradually become
the IT hub for the Economic Community of West African States (ECOWAS) region to satisfy
the IT needs of diverse customers while already attracting the attention of big component
manufacturers such as Intel, the world’s largest chip maker.
The cluster’s physical infrastructure is grossly inadequate and limits the growth of this
cluster. Government intervention in the area of infrastructure has so far been minimal, especially
226
electric power supply, roads and industrial space. Constant power supply is required in all the
facets of computer business, from assembling to testing of products and accessories for buyers.
Also, erratic power supply can damage sensitive components and accessories. Consequently,
almost every business unit in this cluster owns a generator for alternative power supply during
power outages. This constitutes an environmental hazard and increases the cost of doing
business.
Overall, the cluster has made a significant impact not only on the national economy but
also on the promotion of cross-border trading between Nigeria and most countries in the
West Africa sub-region. This is a positive development for ECOWAS in its drive towards the
economic integration of the sub-region. Furthermore, the cluster is also playing a vital role in
the transmission of practical IT knowledge in addition to nurturing potential entrepreneurs. This
is through the involvement of a number of enterprises in the cluster with the Students Industrial
Work Experience Scheme (SIWES) being operated by the universities and polytechnics in the
country. Under SIWES, science and technology-based students are sent to industry for practical
exposure in their areas of study. The cluster has become a popular place for student placements.
The cluster has also had a positive impact on the development of technical skills; some of the
students have imbibed the entrepreneurial spirit freely exhibited in the cluster.
5. The Conceptual Framework Of The Study
Manufacturing in developing economies, even in less knowledge-intensive sectors with the
underlying technologies mainly in the public domain, has not been competitive due to several
factors, among which are poor infrastructure, high cost of doing business and limited capacity
for innovation. This seems to be the general situation in most of Africa. According to Mytelka
and Oyeyinka (2003), “the loss of global market share and competitiveness in traditional
exports and the sharp decline in government spending on education in most developing nations,
particularly in Africa, pose a growing challenge which requires closer attention to the processes
of learning and innovation if these countries are not to remain at the margins of society and
world economy.”
Viewed against this background, the need for a critical study of the operational environment
of business and ventures in the knowledge-intensive computer hardware manufacture cannot be
overemphasized. Conceptually, in carrying out this study, the computer hardware manufacture
sub-sector will be embedded within the national research and innovation system (NRIS). The
innovation process consists of interactions between the innovative potential of the firm and
its environment. Such interactions are the mechanisms that allow the firm to absorb external
knowledge, transform it and incorporate it into the innovation process. Thus, innovation is
understood as an interactive process in which enterprises in interaction with each other and
supported by institutions and a wide range of organizations play a key role in bringing new
products, new processes and new forms of organization into economic use. It involves a
wide range of institutions and organizations. Higher education institutions, public research
organizations, specialized suppliers, financing institutions, technology transfer organizations,
professional associations, standardization institutions, intellectual property set up and specialists
all play a role in the innovation function (Mytelka and Oyeyinka, 2003). This is coupled with
government policies in setting the parameters within which actors take decisions.
The above has largely informed the proposed analytical framework shown in Figure 8.4.
It is a modified form of the framework used by Kraemer and Dedrick (1995). The framework
posits that computer production is shaped by environmental factors, such as the state of
economic development and the presence of adequate infrastructure, both directly and through
the moderation of technology policies which promote (or inhibit) computer production. It also
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shows that the environment and infrastructure are affected by government policies in areas
such as education, science and technology and direct investment in infrastructure. Also shown
are the potential technology policy instruments that affect computer production.
Fig.4: Framework for Analysis
Technology Policy
Environment
Political Environment
National economic development
IT Infrastructure
- Capital
- Human Resources
- R & D Institutions
- Industrial Capacity
- Physical Infrastructure
Broad Economic/Industrial Policy
Computer Production
EXTERNAL POLICY
Trade
- Export Promotion
- Import Restrictions
Foreign Investment
- Promotion
- Restrictions
Technology Transfer
- Promotion
INTERNAL POLICY
Subsidies to industry
Demand creation
DEVELOPMENT OF
COMPUTER INDUSTRY
•
•
•
•
•
•
•
•
Production Level
Growth rate of production
Export level
Use of computers in the
economy
Breadth of production
Depth of Technology
Available skills
Linkage to NRIS
- Government procurement
Infrastructure
- Computer skills training
- Telecommunication
Industry Coordination
- R & D Funding & promotion
- Coordinating Agency
The framework is aimed at providing analytical tools to explore the following three key
parameters:
• The nature of success in computer production.
• Types of environmental endowments that impact on computer production.
• Elements of government policies of relevance to the computer industry.
Success in Computer Production
A measure of success of the computer production industry is effected with eight parameters—
four quantitative (industry outputs, exports, rate of growth and level of computer use) and four
qualitative (the breadth of production, the depth of technology, available skills and the linkage
capability to the NRIS and domestic industry).. Each of these measures is discussed below.
228
Quantitative Measures
Level of production refers to the quantity of production in both volume and value. This is
a quantitative indicator of how large a player a particular country is in the computer industry
in comparison to others.
Growth rate in production refers to the growth rate of the computer industry over a
designated period for which data are available in a country. In this study, a common period will
have to be adopted to facilitate comparison of the selected countries even though different ICTdriven national policy initiatives may have been implemented at different times. The policy
impacts, if they exist, should show up in growth rates achieved by the countries.
Export orientation refers to the level of exports in volume and value. This is to provide a
measure of the relative size of the country’s participation in the international computer market
and its ability to compete internationally.
Use of computers in the economy is a measure of the demand pattern for computers in
the economy. This is a critical parameter as it serves as an indicator of the level of use of
computers; it will provide insight into the level of stimulus for production to meet the demand–
supply gap, if any.
Qualitative Measures
Breadth of production refers to the range of computer categories in which the country has
significant production capacity. This will involve mainframes, minicomputers, microcomputers
(PCs, laptops and notebooks) and peripherals (monitors, keyboards, motherboards, power
supply units, storage devices, etc.). A mentioned before, we expect most countries in Africa to
be engaged in the microcomputer production category.
Depth of technology refers to the level of technological sophistication involved in computer
production. Three levels of sophistication are defined: computer clone assembly, computer
brand production, and computer maintenance and repairs.
Available skills refers to the range of skills available in the country to support computer
production, sales and services. This is a measure of the level of local technological capability
in the country with emphasis on the innovation potential to support and grow the sector. It is
also to be derived from a measure of participation by domestically-owned companies against
production by multinational corporations in the sector. These corporations may choose to
relocate, leaving the host countries to the vagaries of whatever capability has been acquired
and assimilated to sustain the sector. The capability may also act as a stimulus for foreign
investment in the sector as being witnessed in some Asian countries.
Linkage to the NRIS is the degree to which the computer industry is integrated into the
national innovation system comprising mainly the educational and training system for basic
skill acquisition; the research and development system (universities, polytechnics and specialty
research institutes) to undertake research into product and process development; and the
domestic industry in terms of backward and forward linkages.
The levels of success in computer production by countries to be covered in this study can
be compared by attaching numerical values to the above qualitative parameters. A zero to five
base score can be adopted for each of the four qualitative parameters. The countries can then
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229
be ranked according to these scores, which are to be combined with values obtained for the
four quantitative parameters. These rankings can be used to correlate the success in computer
production against various environmental factors and the elements of relevant policies adopted
by the countries.
Environmental Endowments And Government Policies That Impact On Computer Production
The relationship between the enterprises and firms (as they seek to develop and deploy
relevant technological capabilities), the environment in which they operate (defined by human
resources, financial infrastructure, physical infrastructure, capital goods industry, and the R&D
system) and government, in terms of formulation and implementation of policies that impact on
the sector is shown in Figure 8.5. This paper posits that enterprises and firms in the computer
industry must seek to develop a range of technological capabilities (TCs) in order to thrive in
the highly competitive computer industry; hence, the location of the firms/enterprises at the
core (Figure 8.5) with government policies affecting the environment, which, in turn, have an
impact on the technological build-up of the firms/enterprises.
Fig. 5: Policy/Environment-Induced Firm/Enterprise-Level Capability Development
Government Policies
ra
nf
ia
nR
es
ou
rce
s
ds Industry
Ph
ysi
cal
Inf
ras
R&D
Production
Investment
Innovation
Strategic Marketing
•
•
•
•
Government Policies
Firm/Enterprise Level
Capabilities
Capital Goo
Government Policies
Fi
ma
lI
nc
na
Hu
e
ur
ct
ru
st
ers
tru
Oth
ctu
re
Government Policies
At an enterprise or firm level in the computer industry, production capability relates to
the knowledge and skills used in computer production, maintenance and repairs. At this
stage, formal and informal education and training, and experience and “learning-by-doing”
will continue to play an important role, despite the growing science-intensity of computer
manufacturing. Investment capability refers to the knowledge and skills utilized in the
identification, preparation, design, setting-up and commissioning of a new industrial project
or the expansion and/or modernization of existing ones. For example, going from the “clone”
230
assembly mode of operation to “brand” manufacturing requires expertise in project packaging
which involves technology choice, financial engineering, etc. Innovation capability is the
ability of an enterprise to improve and adapt its products and processes continuously. It
refers to the vast area of adaptive engineering and organizational adjustments involved in the
incremental upgrading of product design and performance features, and of process technology.
This capability comes into play in the computer industry characterized by frequent changes
in products. Strategic marketing capability includes the knowledge and skills for collecting
market intelligence, for the development of new markets, for the establishment of distribution
channels and for the provision of customer services to satisfy the needs of the customers. The
development of this capability is targeted at ensuring that a firm manufactures what customers
want to buy rather than the customers buying what the firm makes. This capability is particularly
required when a firm is contemplating exporting its products or to stay ahead of competitors in
the local market.
Environmental Factors
The environmental factors which are expected to impact on the enterprises as they seek to
develop their capabilities and expand production are human resources, financial infrastructure,
physical infrastructure, the capital goods industry, the R&D system and others such as the
nation’s level of economic development. The educational and training system of a country
is expected to provide channels for training in the acquisition and continuous development
of requisite skills. Particularly needed are computer scientists and engineers, technicians,
marketing and finance specialists. The anticipated continuous enterprise-level product and
process innovation in the sector is also to be supported by the national R&D system. The
capital goods industry will provide a strong industrial base for the manufacture of electromechanical components and devices for the computer industry. Physical infrastructure involves
the basic elements—electricity, transportation and telecommunication. Electrical power supply
is particularly important as all activities in the sector are driven by electricity. The financial
infrastructure determines the nature of investment funds available in the country. The formal
sub-sector of the computer industry engaged in brand manufacturing typically requires large
amounts of long-term capital at competitive rates. Finally, a nation’s level of economic
development determines the size of the local market for computer systems.
Government Policies
Kraemer and Dedrick (1995) noted that government policies of relevance to the computer
sector fall into three broad categories: macroeconomic and industrial policies, external policies
and internal policies. The various instruments of policies as they relate to the computer industry
are presented in Table 8.1. External policies include policies for trade, foreign investment and
technology transfer. In each case, there are examples of incentives and restrictions which may
be applied. For example, trade might be restricted by tariffs, quotas or non-tariff barriers or it
might be promoted by various export incentives. Foreign investment and technology transfer
into the country can likewise be promoted or restricted by policies such as those outlined in
Table 8.1. Internal policies are those which directly target the computer industry. These policies
support domestic industry, create local demand or develop infrastructure. Support to domestic
industry can take the form of direct grants, tax incentives, low-cost loans or direct government
ownership of computer firms. Local demand can be created or increased through government
procurement policies which favour local producers, incentives to users, or mobilization of bias
to create a favourable attitude towards computer use. In Nigeria, the government has used the
instrument of procurement to create demand. In 2000, the Nigerian Government also set a fiveyear target to produce 500,000 ICT professionals for the economy. Towards this end, many
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private training institutions and outfits sprang up, coupled with the establishment of a special
school by the government for training in computers and telecommunications. The government
also took coordination seriously through the establishment of a coordinating agency responsible
for promotion and regulation of activities in the sector.
Table 8.1: Basic policy instruments for the development of the computer industry
Category
Policy instruments
Examples
Export promotion
Export financing facilities, tax breaks on export income,
overseas marketing assistance.
Import restrictions
Formal: tariffs, quotas, licensing requirements. Informal:
obstructive standards requirements, “buy local”
requirements.
External
Trade
F o r e i g n Promotion
investment
Restrictions
T e c h n o l o g y Promotion
transfer
Tax holidays, free trade zones, employee training, and
subsidy for plant construction.
Equity restrictions, limits on profit repatriation.
Requiring foreign firms to transfer technology or conduct
R&D in the country, offsets requirements, assistance to local
firms in obtaining and applying technology. Intellectual
property protection for transferred technology.
Internal
Domestic industry
Subsidies to industry
Payments to producers based on local production, industrial
development grants, state-owned enterprises, government
loans at below market rates with flexible repayment
schedules.
Demand creation
Government procurement
“Buy local” requirements, pilot projects, procurement of
new technologies, network development.
Infrastructure
Computer skills training
University education in computer science and related fields,
vocational training for technicians.
Telecommunication
Investment in networks, enhanced services, improved
technology such as digital switching.
I n d u s t r y R&D
coordination
Agency creation
Direct funding of R&D. Tax credits to firms for R&D
expenditures. Creation of cooperative research consortia.
Presence of an agency or agencies which coordinate
government policies relating to computer production.
Source: Kraemer and Dedrick (1995).
5. Objectives And Research Questions
The computer hardware market is highly globalized, with basically unrestricted entry of
products and services into our countries. The emerging local manufacturing outfits assembling
clones or local brands to international standards face stiff global competition, especially in the
private sector where government policy does not often hold sway in the decision to purchase
as it does in the public sector. The export market is expected to be even tougher for local
232
manufacturers contemplating the export market if they emulate the industrializing economies
of Asia. Overall, computer manufacturing business is a tough terrain all over the world as can be
seen partially from the above review. In respect of the sector, Stan Ekeh, the managing director
of Zinox Computers in Nigeria observed that, “Available global statistics show that 90% of
entrepreneurs who venture into hardware manufacturing disappear in the first 12 months, 6%
in another 18 months and out of the remaining 4%, 2% struggle to survive while the remaining
2% become accepted international brands.”
Most of the actors in the manufacture of local brands in most countries in Africa probably
come from a background of several years as agents for foreign brands. Thus, they enter the
sector with strong marketing, sales and after-sales service capabilities. The question is: how
quickly can they acquire other capabilities (production, investment and innovation) required
to thrive in the sector? And how supportive is the environment and the range of government
policies that affect the sector? This is a basic issue of interest in this study.
A visit to a computer depot such as the Otigba market in Ikeja, Nigeria, often referred to
as the “silicon valley” of Nigeria, reveals a flurry of activities where computer clones are
assembled daily. Basically, an Otigba player buys components from several component sellers,
which abound in the market, and assembles them into a working computer system for immediate
delivery to the buyer since he or she produces strictly to order. These types of market always
exist worldwide. Some of the actors in this market segment are computer illiterate managers
with limited ability to follow the dynamic trends in the computer industry. The users of cloned
systems are on the increase in Nigeria due to their relatively low cost. The question is: what are
the possible interventions to improve technical capability and incorporate new competencies
in the production process of these actors to achieve improved product quality and modes of
business transactions?
5.1 Research Objectives
General Objectives
The overall objectives of this study are: to determine the industry characteristics of the
computer production industry in a few selected countries in Africa; evaluate the level of
preparedness of the enterprises to face global competition in the sector; and, to formulate
micro- and macro-policy interventions that can help the growth of the sector.
Specific Objectives
The specific objectives are:
• To identify the key actors in the computer hardware industry sector.
• To determine the operational characteristics of the different market segments of the
sector.
• To establish the extent of market penetration of the different market segments.
• To articulate the environment within which the actors operate.
• To determine the capacity of the actors for innovation.
• To determine the role of the NRIS in sustaining the actors in business.
• To identify and evaluate government policies that impact on the performances of the
sector.
• To analyse the findings of the study and come up with the micro- and macro-policy
interventions that can promote the growth of the sector.
5.2 Research Questions
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This study will address the research questions indicated below.
In respect of the computer importation market segment:
a.
b.
What is the level of import of computer hardware into the country by product
category?
Who are the major users?
In respect of the locally branded computer manufacture market segment:
a.
b.
c.
d.
e.
f.
g.
h.
How many manufacturers of locally-branded computers are there in the country?
What are the main products produced by these manufacturers?
What is the depth or level of technological sophistication involved in production?
What are the market shares of these products in the Nigeria?
What are the underlying forces driving competition in the sector?
How are the manufacturers facing local and global competition?
What is the role, if any, being played (or can be played) by the NRIS in the sector?
What is the degree to which the computer industry is integrated into the domestic
economy and local capability is created?
In respect of the computer clones assembly in the country:
a.
b.
c.
d.
e.
What is the level of activity?
Who are the key players?
What are the main products?
What is their mode of operation?
What are the underlying forces of competition in the sector?
In respect of all the three market segments:
a. In what ways do the relevant government policies impact on the operations in
each segment?
b. What are the operational constraints—institutional, attitudinal, structural or
whatever—that have limited the performances of actors in each segment?
c. What micro- and macro-policy interventions can we put in place to promote the
growth of the sector?
6. Methodology
The study will be conducted partly through desk research to collect secondary data and
extensively through surveys involving interviewing key actors, organizations and institutions
as well as case studies of key actors. Secondary data will be sourced from published and
unpublished reports on the computer industry prepared by government agencies, consultants,
industry associations and the print media in the country. The field work will be in the four
categories, as presented below.
Collection of data and information towards the construction of the industry characteristics
This will entail selected administration of questionnaire and visits to some key actors in the
private and public sectors of the economy, including:
• Relevant business associations and societies.
• Ministries responsible for trade, industry, science and technology.
234
• Coordinating agencies established by government.
• Major computer users in the public and private sectors of the economy.
Information garnered from the above will be geared towards:
Establishing the nature and characteristics of the computer hardware industry in the country.
• Identifying the major actors in the industry.
• Identifying the relevant policies and programmes impacting on the operations in the
sector.
• Establishing the nature of competition in the industry.
• Identifying the nature of barriers to and opportunities for entry into the sector.
• Providing an insight into the present and projected market for computer hardware in
the country.
Case studies of key actors in the different market segments
Whilst the industry analysis provides a panoramic view of the industry, case studies are
expected to be an in-depth study of a few selected establishments in each market segment.
Case study of local computer vendors for foreign brands: The main thrust of this case
study is the identification of the operational characteristics of this class of computer suppliers.
There is usually a large number of local vendors with considerable experience in promoting
different foreign brands such as Compaq, IBM, Dell, etc. Case studies of at least three key
players are suggested.
Case study of local brand manufacturers: The main interest is the identification of outfits,
if any, that are actively involved with the manufacture of local brands. Each of the operators will
be covered in great detail to obtain information on: range of products, market share, available
skills, level of development of technological capabilities, extent of linkage to the economy, etc.
Case study of outfits involved in the assembly of unbranded or cloned computers:
There are several outfits actively involved in the assembly of computer clones for the local
markets in various parts of the world. Oftentimes they operate in clusters in most developing
countries, as typified by the Otigba ICT cluster in Nigeria referred to earlier. The case study is
expected to provide an insight into the nature of the operators, their modes of operation and the
nature of market for their products.
Focus on the activities of the National Research and Innovation Systems
This will entail a critical evaluation of: the educational and training systems for the production
of computer skills; the national research and development (R&D) system; government
establishments (ministries of trade, industry, science and technology); and a coordinating
agency, if any, concerned with the formulation and implementation of the national IT policy
implementation agency. The body of data and information collected will serve to determine the
environment within which the actors in the computer hardware sector operate.
Preliminary Data Collection
The first port of call in the execution of this project will be the key players in the different
market segments of the computer industry. Those considered market leaders will have to be
identified. Such key players will have to be sensitized on the objectives of the study while
helping to shape the proposed plan for study implementation. It will be a good platform for
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reaching out to the main actors in the sector and also for later dissemination of study findings.
Data Analysis
The bulk of the data to be obtained from the study is envisaged to be quantitative and
qualitative as well static and dynamic in nature. Computer-based data handling is proposed.
This will facilitate data processing towards answering the basic questions posed in Section 5
and much more.
7. Expected Results And Impacts
The following are the expected results and impacts of the study:
• The study should provide information about the characteristics of the computer
hardware industry in the country.
• It should provide insight into the forces driving competition in the sector and the
possible role of the NRIS and the environment in sustaining and enhancing the
competitive capability of the enterprises in the computer production segment.
• It should be able to identify the existing policy instruments and their impacts, if any,
on the sector.
• The study should come up with broad and specific policies to promote the growth of
the sector.
8.0 Scope and Tentative Work Plan
8.1 Scope
The AERC proposes embarking on the project that will identify “The Vision and Challenges
of ICT Production in Africa” under the umbrella of the main study geared towards evaluating
the impact of ICT on the economies of African countries. This paper is devoted to a study
of the computer hardware production and services industry in selected African countries.
It proposes that the study be carried out in five regions in Africa (Anglophone West Africa,
Francophone West Africa, East Africa, Central Africa and Southern Africa). In each region,
at least two leading countries in terms of depth and history of ICT use and production will
be selected for in-depth study. This will permit the envisaged analysis of their potentials for
ICT production. Several countries in Africa have been involved in diverse ICT-based projects
at national and international levels, namely Nigeria and Ghana (Anglophone West Africa);
Senegal and Cameroon (Francophone West Africa); Kenya, Uganda and Tanzania (East Africa);
South Africa and Mozambique (Southern Africa); and Egypt and Tunisia (North Africa).Pooled
data from these countries should permit robust analysis of activities and characteristics of the
computer industry in Africa.
8.2 Tentative Work Programme
The basic elements of the project execution are presented in the tentative schedule below. The
study will begin with the perfection of the framework papers to standardize the methodology to
be adopted. This will allow a comparison of the results from the selected countries to provide
the general situation in Africa.
AERC is expected to select the authors of the country case studies who will attend a
236
workshop on the framework papers some time in May 2007. A final integrated framework
paper will be produced to guide the investigation of the research questions raised in Section 5.
The framework papers will be published as the first contribution of the project to knowledge on
methodological approaches to evaluating the computer production industry in Africa.
The authors of the case studies are expected to spend a month preparing their research
proposals, which will form the basis of the commissioning of the studies by AERC in July 2007.
The studies will involve considerable field work to collect primary and secondary data and to
interview stakeholders. It is therefore envisaged that the interim reports of the country studies
will be submitted in February 2008 and a research review workshop will be held in March
2008. The authors will incorporate the outputs of the research workshop in the case studies and
prepare draft final reports for submission in May/June 2008. This will be followed by a research
review workshop in July 2008 to consider the draft final reports. The revised final reports
are to be submitted by September 2008 after which dissemination activities will commence,
beginning with national dissemination workshops followed by a regional workshop. These
workshops are expected to take place between September and December 2008. The relevant
publications at the national and regional levels are expected to be prepared and disseminated
during the period. The need to disseminate the findings of the studies to policy-makers and
other stakeholders cannot be overemphasized, bearing in mind the crucial role of a focused and
integrated policy for the development of the sector.
Tentative Work Programme For Project Execution
ID
Task Name
1
Commissioning of Framework papers
2
Selection of Country Case Study Authors (CCSAs)
3
Workshop to discuss Framework Papers with CCSAs
4
Finalisation of Research Proposals by CCSAs
5
Issuance of Research Grants to CCSAs
6
Submission of Interim Reports by CCSAs
7
Research review Workshop to consider Interim Reports
8
Submission of Draft Final Reports
9
Research Review of Draft Final Reports
Q1 07
Q2 07
Jan Feb Mar
Apr May Jun
Q3 07
Jul
Aug Sep
Q4 07
Oct
Nov Dec
Q1 08
Q2 08
Jan Feb Mar
Apr May Jun
Q3 08
Jul
Aug Sep
Q4 08
Oct
Nov
10 Submission of Revised Final Reports
11 Dissemination Workshops (National & Regional)
References
Adeyinka, F.M. 1998. “Technological response of electronic firms to telecommunications development in
Nigeria”. Sponsored by ATPS.
Government of Nigeria. “National Information Technology Policy (NITP) for Nigeria”.
At www.nitda.org
Kajogbola, O.D. and I.S.Y. Ajiferuke. 2001. “The impact of information technology on the manufacturing and
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service sectors in Nigeria.” Sponsored by ATPS.
Kraemer, K.L. and J. Dedrick. 1995. National Technology Policy and Computer Production in Asia-Pacific
Countries. Centre for Research on Information Technology Organisations, Paper 47. 1995. University of California,
Irvine.
Mytelka, L. and B. Oyeyinka. 2003. “Competence building and policy impact through the innovation review
process”. Paper presented at the IDRC-UNESCO Workshop on Future Directions for National Reviews of Science,
Technology and Innovation in Developing Countries. UNESCO, Paris, 23–24 April.
Odebiyi, A.I. and B. Soriyan. 2000. “Impact of computer technology on banking operations in Nigeria”.
Sponsored by ATPS.
Ifeoma, S. 2000. “Impact of information technology on the secondary tier on Nigerian educational sector: A
case study of special science schools in Nigeria”. Sponsored by ATPS ().
Uguru, F. 2001. “Information technology: Access, capabilities and use among administrators of agro-technology
transfer programmes in south-eastern Nigeria.” Sponsored by ATPS.
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Appendix 8A
Computer Types and Hardware Devices
8A.1 Computer Types
Computers are categorized as super computers (or monster computers), mainframe
computers, minicomputers and microcomputers (Figure 8A.1). The super computers are
enormous and execute more operations per second than any other computer systems. They are
used for scientific research (nuclear physics), military applications, molecular biology or bioinformatics and weather forecasting. These are areas of scientific analysis involving complex
equations to describe the behaviour of a system. Super computers are used by scientists and
engineers. The Cray and Cyber computers are examples of super computers. There are only a
few hundred in the world; each costs several million dollars.
Fig. A.1: Different categories of Computer Systems
SUPERCOMPUTERS
MAINFRAME
COMPUTER
CATEGORIES
MINICOMPUTERS
Personal Computer
(PC)
Laptop
MICROCOMPUTERS
Notebook
Handheld
Mainframe computers do more data processing work than other computers do. They are
housed in special rooms because of their special power and environmental requirements. They
support large networks of terminals, i.e. many users. They are found mainly in big banks and
research establishments. Minicomputers (or, more appropriately, medium-sized computers) are
smaller, slower and less expensive than mainframes, although they perform many tasks that
mainframes can, but on a reduced scale. They can support several users. The microcomputer
comes in different sub-categories—handheld, notebook, laptop and personal computers (PCs).
A microcomputer usually supports a single user. Its greatest assets are its portability, cost and
reasonable processing power. They are very common as they are to be found in homes, offices
and educational institutions. Their computational power has been increasing to the extent that
the present-day microcomputer possesses far greater capability than the mainframes of a few
years ago.
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The potential for computer production in Africa lies mainly in the microcomputer category
with distinct possibility of assembling some of the hardware devices, as presented below.
8A.2 Computer Hardware Devices
A complete computer system consists of hardware devices and software. Without software
to tell computers what to do, they remain ordinary machines or toys. The hardware devices of
a typical computer system are illustrated in Figure 8A.2. They are basically in four categories:
• Processing devices
• Storage devices
• Input/output devices
• Peripherals
Fig. A.2: Computer Hardware Devices
PROCESSING
DEVICES
CPU
MOUSE
INPUT
DEVICES
KEYBOARD
SCANNER
COMPUTER
HARDWARE
PRINTERS
OUTPUT
DEVICES
VDUs
STORAGE
DEVICES
Processing Devices
DISKS
TAPES
The processing devices are the central processing unit (CPU) and the main memory. The
CPU consists of the control unit and the arithmetic/logic unit (ALU). The control unit controls
all the operations, including the functioning of the memory and processing, and the operation
of the peripheral devices such as printers, display screens and data storage devices. The ALU
performs the calculations and logical operations needed to process data. The main memory
of a computer electronically stores the data and the program the computer users. There are
two types of memory: the read-only memory (ROM) and the random access memory (RAM).
The ROM is permanent since the contents of this memory will not be lost or changed when
the computer is switched off. It is built into the computer when it is manufactured. It holds
the basic instructions that tell the computer what to do when it is switched on. The computer
can read and execute the instructions in ROM but it cannot change them. The RAM is the
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type of memory that holds instructions and data while the computer is working on them. The
computer can enter information into RAM, change information already stored in RAM or erase
the contents of RAM. The computer loses the content of RAM when it is switched off or there
is a power outage. Thus, the RAM is a computer’s scratch pad.
As indicated above, the greatest potential for computer production in Africa lies in the
microcomputer category. Currently, the assembling of the CPU of such systems is envisaged.
The process of assembling a CPU is presented in Appendix 8B in view of its importance in
this project. Suffice it to note that all the other hardware devices (described briefly below)
are, to a very large extent, produced as single units that are peripherally connected to the
CPU to complete the computer hardware system. Most computer manufacturers assemble
their CPUs in-house while outsourcing the other hardware devices and peripherals as complete
units to make up the complete system. Thus, the assembling of CPUs from outsourced electromechanical components is the starting point for outfits in the developing countries of Africa.
Storage Units
The basic storage devices are: the hard disks (HD), floppy diskettes (FD), compact disk
(CD), tape streamer and flash disk. The HD is a high-speed internal storage device (installed
inside the CPU). It is typically an electronic device. A floppy diskette is a low-speed external
memory device that is typically magnetic or electromechanical in nature. It is gradually
becoming obsolete. A compact disc (CD), made from durable plastic with a reflective metal
coating approximately 12cm in diameter and weighing a mere 15g, can hold approximately
660MB of data, equivalent to 330,000 typewritten pages or 500,000 bibliographic references.
The disk, when placed into a CD drive linked to a microcomputer, can be read by a laser beam.
A tape streamer can store from 500MB to a few gigabytes of data. It is mainly used to back up
data from the hard disk. The flash disk is the most recent storage device that combines extreme
portability and ruggedness with increasingly high storage capacity.
Input Devices
The input/output or I/O devices are the means by which we communicate with the computer.
Typically, input devices are the keyboard, mouse, and scanner. The keyboard is used much like
a typewriter, with alphabetic, numeric and special character keys. Each character keyed in is
encoded into the computer systems data-coding scheme and is stored in memory. A mouse is
used to move the cursor round the screen to select functions to be performed by the computer. A
scanner operates more like a photocopying machine. It transfers copied or scanned data directly
into the computer as an input.
Output Devices
Typical output devices are cathode ray tubes (CRTs) and printers. The CRTs have a number
of names, including tubes, monitors, video display units (VDUs) and screens. CRTs are used
as primary output devices for microcomputer systems. Printers are also output devices which
produce printed versions of output. There are different types—page printers (which print an
entire page at once), line printers (which produce the lines one at a time) and character printers
(which produce one character at a time). They vary in speed and in quality of print. Some
printers can print 120 pages per minute or 30 to 50 characters per second. Printers also produce
printed materials of varying quality. Laser-based printers tend to produce the ultimate quality.
The quality of printed characters and speed in terms of printed characters per second have been
improving as manufacturers compete to increase their market share.
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Appendix 8B
The Computer Production (Assembly) Process
The basic computer assembly or production process flow is encapsulated in Figure 8B.1.
There are two basic routes for capturing user requirements—either by direct specification by
the purchaser of the intended use of the computer towards the production of a tailor-made
system for him or her or the computer firm determining usage requirements/capabilities of
the system to be mass produced to meet the perceived needs of a broad spectrum of potential
buyers, usually based on regular market survey. The first route is typical of the computer clone
assembly business as it operates in the informal sector while the latter is the mode of operation
of firms producing branded systems in the formal sector.
Fig. B.1: Computer Assembly Process
Customer/Product
Requirements
System Design
Components Specification and
Sourcing
Hardware Assembly
Installation of Operating System
Software
Installation of Applications
Software
(Optional)
Testing
No
System O.K.?
Yes
MARKET/SALE
The user requirements constitute basic inputs to the system design, which involves the
specification of the hardware components (motherboard, processor, RAM size, various drives,
hard disk capacity, casing, etc.) and software configuration to satisfy both compatibility and
system functional requirements. This is a critical step as there are diverse makes of components
(Table 8B.1) of different capacity, operational characteristics, durability, price, etc. in the
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market, with some incompatible with others.
For example, the HP RAM may not be compatible with the GIGAPRO motherboard.
This is where the clone assemblers may have to use tacit knowledge garnered from past
successful system configuration. There is an element of trial and error in the use of nonstandardized components. This distinguishes a brand manufacturer from a clone manufacturer.
The brand manufacturer has standardized components and parts for the assembly process
based on established system design while the clone manufacturer, in order to satisfy the
varying customer requirements, sometimes juggles various available components to produce a
functional system at minimal cost.
Table C1: Computer components: Different types and makers
Item
Popular types/makers in the world market
Motherboard
GFXCEL, GIGAPRO, AMD
Different speeds and architecture
Processor
INTEL, ATHLON, AMD, CELERON
Different strengths and weaknesses in
software handling
Hard Disk
SEAGATE, MAXTOR, WESTERN DIGITAL Different Access speeds
Ram
SDRAM)
(DDRAM/ KINGSTON, HP, SPECTEK
Comment
Compatibility and speed
CD Drives
CD WRITERS, CD ROM, DVD ROM, Different media and applications
COMBO
Casing
ATX, AT
Different aesthetics, architecture and
power units.
The system design leads to the specification of parts and components for the assembly
process. The hardware assembly involves the coupling of the various components. This is
basically an operation that requires skills and involves the following tasks:
• Fixing the processor with its cooling fan onto the motherboard.
• Adjusting the necessary jumper settings on the motherboard.
• Attaching the drives (CD-ROM, floppy disk, hard disk, zip disk, etc.) to the appropriate
parts of the CPU casing.
• Fastening the motherboard to the CPU casing.
• Connecting the drives to the motherboard with the controllers.
• Connecting the appropriate interface cards (e.g. VGA, modem, sound card) to their
appropriate slots on the motherboard.
• Starting up the computer and installing the desired operating system.
• Installation of the required application software.
The next stage is the installation of the operating system software to drive the various
hardware units. Applications software (e.g. Microsoft Office suite, CorelDraw, Photoshop, etc.)
may be pre-installed and buyers may separately purchase any additional applications software
for installation on their systems.
The final stage is the testing of the assembled system. If the system works as designed, it is
packed and ready for delivery. If there is any problem, the assembler may have to revisit the
system design. According to a manufacturer of branded notebooks in Nigeria:
It is important that products are of the highest standards and quality because nothing can
damage a brand name more than inferiority or unreliability in service and perception. A good
product will always sell itself. In developing new products, it is important that comprehensive
tests, especially with regards to our local environment, are carried out before introduction to the
public. Our products are tested for a minimum of six months before going public.
Human Capital Development Programme
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CHAPTER 9
Human Capital Development
Programme
for Effective ICT in Africa
By Nimal Nissanke
Framework Paper for the AERC Project on
Human resource development is a crucial requirement not only to build up technical knowledge
and capabilities, but also to create new values to help individuals and nations cope with rapidly
changing social, environmental and development realities. – World Commission on Environment and
Development,
1. Introduction
O
ver the last three decades or so, Africa’s performance in economic growth and
development has been below expectations and raises serious concerns about
its prospects relative to other developing regions such as East Asia, South East
Asia, Latin America and, more recently, South Asia. Though the growth performance in
many African countries improved over the last several years, largely due to the commodity
booms, there are serious doubts as to whether the growth dependent on the boom in natural
resources is sustainable over the long term, especially for creating a path towards broad-based
economic development, and whether it can play a role of an effective conduit for fundamental
transformation of structures of African economies. Among other conditions, Africa’s huge
handicap in taking advantage of the worldwide information and communication technology
(ICT) revolution requires particular attention in considering Africa’s future in the global
economy. So far, the uneven spread of ICT seems to underline and sharpen the disparities
between Africa and the rest of the world, particularly the developed world. Yet, the very same
ICT, the great “leveller” between “haves” and “have-nots”, provides a unique opportunity for
Africa to break away from this vicious cycle, following a path similar to that taken by the
vibrant new economies in Asia and Latin America. A prerequisite for making this a reality,
however, lies not directly in her traditional strength in natural resources but in her untapped,
potentially significant, human resources. This paper attempts to identify the challenges faced
by Africa in terms of her human resources in exploiting ICT to her economic advantage and
explores how best to bring about Africa’s human resources capability in ICT to a competitive
level that is in line with world standards.
Compared to its current achievements, there is significant further scope for Africa to benefit
from ICT. In this discussion, we distinguish between two aspects of ICT: first, reliance on ICT
applications for efficiency gains and, second, the production of ICT goods for the internal
market and for export. Dealing with the internal market first, from a utilitarian point of view,
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the use of ICT applications in industry, commerce, agriculture and public administration
could bring about, as in the developed and many other developing countries, significant
efficiencies, improved quality of service in areas such as health and education, better quality
of life for citizens, enhanced and new market opportunities for entrepreneurs, etc. These may
take numerous forms, benefiting, amongst others, rural communities through marketing and
financial services and producers of developing countries through new global markets for
their business, etc. A fuller account of different benefits may be found in Digital Opportunity
Initiative (2001). These could in turn generate new businesses and new and better employment
prospects for all. A complementary way to exploit ICT as a vehicle for economic development
is to invest in the production of ICT goods with the specific aim of entering the ICT producing
market, in particular, in areas such as software development and assembly and manufacturing
of computing equipment and components. Though initially they may be limited to meeting
internal demand, such efforts may offer, in the longer term, opportunities for export and
outsourced technological processes.
Av. annual export growth rates in %
25
Developed countries
Developing countries
20
15
10
5
0
Primary
Resource-based
manufacture
Low-technology
manufacture
Mediumtechnology
manufacture
High-technology
manufacture
Information and
communication
technologies
Technology intensity
Figure 9.1. Significance of ICT on Export Growth (Annual Growth Rates of World Exports by Technology
Intensity 1985-2000; Source: UNCTAD World Investment Report 2002)
Of the above two possible paths, competent use of ICT applications is undoubtedly the
most immediate way of benefiting from ICT regardless of the level of development of a given
economy. In the case of most developing African countries, the significance of ICT to economic
development could outweigh the benefits that could be drawn from the production of ICT
goods. However, the importance of efforts directed at the production of ICT goods is not to
be underestimated. Developing counties appear to enjoy generally significantly higher growth
rates in ICT exports compared to other export-oriented economic sectors (Figure 9.1). This
suggests that such efforts could offer, at least for some African countries, long-term strategic
advantage in turning their economies into modern knowledge-based economies.
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The attainment of such a goal, however, requires careful planning since an all out massive
investment in high-tech industries is economically unsustainable for any developing country.
One promising avenue, however, is to target any investment capacity available at strategically
chosen market niches. In this respect, by virtue of its special characteristics as manifested in
today’s global economy, the software industry offers an unusual opportunity to all developing
countries (Mansell and Wehn, 1998), as that enjoyed by countries such as India and China
(Tigre and O’Connor, 2002; Singh, 2003). Firstly, thanks to its knowledge-intensive nature and
relative independence from the hardware manufacturing industry, compared to other high-tech
industries, the software industry requires relatively much less capital expenditure on equipment
and, instead, shifts the emphasis predominantly towards human capital. Secondly, the increasing
reliance of commercial and industrial enterprises on the Internet as a ubiquitous communication
medium to globalize their operational activities is creating a worldwide market for software
development. Thirdly, due to high labour costs in the developed world, the software industry
is experiencing increasing pressure to look towards low-wage, but technologically capable,
countries to fill the gaps in its capability that it cannot fill locally in developed countries. Not
only do these factors open the software industry to worldwide competition but also make it
possible for developing countries to compete successfully. The key ingredient for success,
however, is the availability of sufficiently well-developed human resources. African countries
aiming to cash in on this opportunity have to take, bearing in mind the current state of their
human capital, urgent and imaginative steps to upgrade their ICT workforce to the necessary
professional standard in order to quickly and effectively respond to this emerging demand.
The broad thrust of an approach such as the one outlined above could be used to transform
the economies in the developing world, including those in the African continent. It offers a
unique opportunity to break away from the traditional mould of international trade as a supplier
of raw materials and low-cost labour intensive goods. In addition, it could be used as a stepping
stone to leapfrog certain phases of industrialization that the developed world underwent in the
development process. The viability of this approach has already been demonstrated, to a certain
extent, by countries such as India (discussed later in this paper), Brazil and, interestingly,
Costa Rica. Digital Opportunity Initiative (2001) discusses Costa Rica’s endeavour to become
an exporter of software products and services. Unlike in the case of many other developing
countries, however, African developing countries rich in natural resources possess a special
advantage to make this happen quickly by exploiting the revenues of the currently buoyant
commodity market to rapidly create the required technological and human resource capability
with almost no, or considerably less, external financial input.
Following such a path, Africa would be able to play a balanced role in ICT as a partner on
an equal footing with other countries so that it could fully benefit from ICT, not merely as a
consumer but also a producer. The continent would also be in a strong position to shape the
future development of ICT, paying particular attention, in the African context, to its specific
socio-economic goals and long-term sustainability. Therefore, it is vital that African countries
adopt forward-looking long-term ICT policies as a matter of urgency.
As we examine possible paths for ICT development in Africa, it is instructive to position
Africa and other developing countries with similar economic backgrounds in the ladder of the
historical phases that the developed world has gone through in its ICT development. Particularly
in countries of the West, ICT development took place in several relatively easily identifiable
phases (Sleezer et al., 2002) with the following characteristics:
1. Early adopters and primitive tools (1951–1962).
2. Regulated environment and frustrated users (1963–1974).
3. End-user computing and decentralization (1975–1984).
4. Information technology (IT) as a competitive strength (1985–1995).
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5. E-commerce and ubiquitous (anywhere, anytime) computing (1996 to date).
This historical perspective provides Africa (and other developing countries) with a basis
for developing a strategy for the development of its ICT. Though the early phases can be
skipped to an extent, Africa needs to adopt (4) as its immediate goal in relation to all her
economic activities, industry, agriculture, social services and government administration,
and (5) as some of the key areas where early demonstration of local competence may help
Africa, in due course, to project an image of a region with high ICT capability; (see Goldstein
and O’Connor 2000 and Tigre and O’Connor 2002 for some of the policy issues involved in
relation to e-commerce). This does not, however, imply that the early phases of Western ICT
development can be entirely ignored. This is the era when the developed world put in place
some of the core institutional structures (discussed under the section on institutional structures
below) required for facilitating and regulating the development of ICT. Africa needs to go
through the same exercise quickly. Having the benefit of both the Western historical experience
and that of the Far East, Africa is in advantageous position to accomplish this task more
effectively and in time for African ICT to have the necessary credentials, though exercising
care in adapting the institutional structures from other countries to prevent being “locked into
a mode of knowledge production … less relevant to their specific technological and economic
requirements” (Mansell and Wehn, 1998: section 3.2).
The aim of this paper is to explore how to develop a strategy that will facilitate the rapid
upgrading of human resources capability in Africa in ICT so that the continent is better placed
to exploit the unfolding worldwide ICT revolution to its economic advantage and to use it as
an impetus to drive African countries towards becoming knowledge-based economies. The
paper examines the role of human capital in ICT technological capability building in Africa,
how well the continent is equipped currently to play such a role, and what needs to be done to
improve the state of affairs in human capital development in ICT. To determine what needs to
be done involves constructing a framework to undertake a detailed study of the human resource
capability of a selection of African countries on a more ICT-specific set of criteria than those
used in most studies devoted to assessing the state of human capital. Such a study should enable
the formulation of strategies and policies based on accurate information on how to go about
raising the standards of Africa’s human capital in ICT.
The study of human capital development for ICT in Africa involves several important issues.
Broadly speaking, it concerns the roles of governments, educational establishments and private
enterprises in developing the technological and human resources capabilities in order to bring
about and support greater use and exploitation of ICT for economic development. A proper
appreciation of these issues requires some understanding of the core ideas in technological
capability building with special reference to ICT, indicators for measuring the technological
and ICT capability, and the means to achieve it, particularly with reference to human capital.
The indicators mentioned are essential because without them there are no means to ensure
the achievement of technological capability to a level sufficient to bring about an ICT-driven
knowledge-based economy.
In discussing these issues, the remainder of this paper is structured as follows. The
next section introduces the roles of knowledge, technology and information in a modern
economy and highlights how any deficiencies in them can be used to gauge what needs to be
accomplished. This is followed by an overview of different aspects of technology capability.
Its aim is to highlight, rather than to give a detailed account about, what specific capabilities
constitute technology capability, the place of human resource capability in this context, the
roles and the means of technology and knowledge transfer in its realization, and the role of
governments. The next section discusses various mechanisms of technology and knowledge
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transfer leading to a discussion of some of the indicators used in current practice by different
agencies and researchers to measure technology capability and the attainment of the required
human capital stock. Based on widely available sources of data, the next section points out
the challenges facing African countries in terms of technological capability and human capital
and inspires possible ways forward for Africa by examining the experiences of three countries,
newly industrialized Singapore, and India and Costa Rica (two of the recent success stories in
the developing world in tapping ICT for economic development). This is followed by a section
that outlines the predominant means of human capital development. A framework for assessing
human capital development requirements for ICT development as part of the proposed country
research follows. The final section concludes with a summary and certain policy options and
required actions for capability and human resource development in Africa.
2. Information and Technology in Knowledge-driven Economies
As never before, modern economies are characterized by the knowledge-based intangible
assets in the production of goods and services and in their trade. This becomes even more
pronounced in today’s society, which is undergoing sweeping changes under the twin forces
of globalization and the technological revolution taking place in the areas of information
processing and telecommunications. In addition to bringing in efficiencies in manufacturing
and commerce, the information age has given rise to intangible “goods”, hitherto unknown in
international trade, and services provided over the Internet unrestrained by the usual natural
barriers to trade. A by-product of this virtually borderless marketplace with no international
time zones has been the intense competition forcing innovation and the multiplying of the
opportunities open to all and making them equitable, at least in theory. How these processes
operate in practice, however, is different. They let the stronger and the richer become even more
so, often marginalizing, or at the expense of, the weaker and the poorer. Dividing the world
into a three-tier global divide, namely innovators, adopters and those practically excluded from
the technological advancement, Sachs and McArthur (2003) showed how those excluded tend
to fall continually behind the other two groups, while the adopters in East Asia, during certain
periods in the past, even performed better than the leaders of technology. The challenge is to
alter this state of affairs such that the weak and the poor have a truly equitable share of the
benefits that the globalization and the increasingly knowledge-based, ICT-propelled economies
are capable of bringing about. An essential ingredient in such an endeavour is to raise the level
of education and, through it, to bring about a competent workforce capable of making the best
use of ICT to the economic advantage of developing countries, particularly, in Africa.
2.1. Knowledge, Technology and Information
Such a development strategy requires a clear understanding of how such economies operate.
Any knowledge-based economy rests on three pillars: knowledge, information and technology.
These are terms which lack precise meanings. Knowledge in particular has philosophical and
epistemological underpinnings. As understood here, however, it refers to the scientific and
technical knowledge in areas such as computer science, information technology, engineering
and manufacturing. It enables us to understand our surroundings, the environment and the laws
governing its evolution, materials and other substances, their behaviour and possible uses, etc.
The term “technology” refers to the means and the processes used in the application of scientific
and technical knowledge to improve or modify our natural environment or to innovate the things
that we have already produced in order to satisfy perceived materialistic human needs, from
the production of things that we need and the comforts that we take for granted in our day-to-
248
day life to taking care of our environment. Nowadays, we resort to technology inevitably with
industrial or commercial objectives, paying particular attention to mass production, efficiency
and cost-effectiveness.
Information is a term complementary to knowledge but has a distinct meaning (World Bank
1999). It refers to knowledge about “attributes” of different aspects of our material life such as
the quality of a product or a service, market information such as cost and prices, the performance
of a worker or a company, the facilities provided by a bank or a development agency, track
record of an entrepreneur or trustworthiness of a borrower, trustworthiness of a system, safety
of a plant, state of the climate, etc. This kind of information allows us to make judgements about,
or critically evaluate, our material life or investment decisions, enabling us to make better and
judicious choices in running plants, farms, transport, schools and government departments
efficiently and smoothly, and in taking proper care of our resources and the environment. The
critical evaluations, made on the basis of such actual observations, prompt the designers and
developers to think of possible improvements, possibly forcing the frontiers of knowledge
forward. Thus, they serve as an internal driver for innovation in technology.
All three concepts, knowledge, information and technology, therefore play an indispensable
role in any development effort undertaken towards a knowledge-based economy. Success would
depend on how well we address the “gaps” in knowledge and technology and the deficiencies
in available information (“information problems”) at the same time (World Bank 1999). The
strengths and weaknesses of the three concepts serve as a gauge to identify how far, and in
which direction, African countries have to move in order to transform their economies into
knowledge-based ones.
2.2. Gaps in Knowledge
The knowledge gaps and the information problems should not be taken in an absolute sense.
Given the current state of development, local conditions and local priorities of most African
countries, it is virtually impossible for them to fill the knowledge gaps in an absolute sense with
any developed country or, for that matter, certain developing countries such as India. There
are two reasons for this. First, the body of technical knowledge accumulated by developed
countries is vast by any standard and, second, knowledge is not static and unfolds continuously
at a pace hitherto unknown in human history. It is a futile exercise for less developed African
and other countries to go through the same processes of learning, discovery and innovation.
Even if filling the knowledge gap in an absolute sense is possible, it is an unnecessary
task. In today’s world, knowledge gaps may be filled through international educational and
technological collaborations and strategic industrial alliances. Given such opportunities, what
is important for African countries therefore is to set appropriate developmental goals, realistic
and achievable over a given timescale and within available resources, to identify the missing
gaps in knowledge, and to concentrate efforts to remedy the situation, that is, to acquire,
assimilate, adapt or refine the missing, or the insufficiently developed, areas of knowledge.
2.3. Gaps in Technology
Technology and technical knowledge are inextricably linked; one cannot exist or flourish
without the other. Even if the knowledge may be acquired by some means, the technology that
is needed to put knowledge into good use requires funds, infrastructure, equipment and plants,
and skills. Thus, the level of technology that a country can have is determined by affordability.
Therefore, given the dire economic conditions, technological backwardness of most African
countries is hardly surprising. Any technology they have is often limited to basic processing
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of natural resources, often to a level just sufficient for export purposes. The current state of
manufacturing and other technologies is well documented in Lall and Pietrobello (2003)—a
joint study by the United Nations Conference on Trade and Development (UNCTAD), the
World Trade Organization (WTO) and International Trade Centre on four African countries:
Kenya, Ghana, Uganda and Tanzania. Disjointed poor production facilities, dated plants and
equipment, low productivity, low-level processing and basic manufacturing activities are all
too typical in the African industrial scene. Bridging the technology gap in manufacturing
and other industries is perhaps one of the biggest challenges that Africa faces. However, the
technology gap in ICT may not be so alarming. The fast uptake of mobile phone technology has
made such an impact on Africa that at least the establishment of an advanced communication
infrastructure in the near future is a possibility. Given our earlier argument on the viability of
the software industry in developing countries with relatively low capital layout, this offers a
different path to bridge the ICT technology gap in Africa.
2.4. Information Problems
Though knowledge gaps can be addressed through some form of knowledge transfer (as
discussed below in the section on “Knowledge and Technology Transfer”), the same cannot
be said of information problems. This is because the bulk of the information has to be locally
generated and managed, that is, gathered, analysed and synthesized, maintained and made
available in a form beneficial to the interested parties. In the case of certain African countries with
similar economic, cultural, geographical and other backgrounds, however, some information
problems may be addressed through other means, for example, adoption of experiences of
other countries, e.g. standards and norms. Generally, the kind of information of primary interest
here falls into a number of different broad categories (World Bank 1999), including:
• Market information (costs, prices and suppliers of products and services).
• Research, development and experiential information (material publicized for the overall
good of the economy, better public awareness or professional scrutiny; this includes,
for example, the latest research and development [R&D] findings, new services and
facilities, new products, novel techniques, achievements and failures, lessons to be
learnt from experience, etc.).
• Regulatory and normative information (information on standards, norms and best
practice, for example, information on quality of products and services, performance
and norms on industries and institutions, as required by law or regulatory authorities
or on the grounds of best practice).
• Performance information (information on measurements or observations, for example,
on actual quality of products and services or actual performance levels of industries
and institutions, as observed at plants, at institutions, in the field, etc.).
Deficiencies in information could be a serious hindrance to development. Furthermore,
information could be costly and dependent on technology and, hence, asymmetrical in
accessibility. Addressing information problems promptly could bring about significant economic
benefits by enabling markets to function properly (World Bank 1999). These benefits could be
significant in the African context since they typically concern provision of reliable information
on market conditions in both urban and rural environments (e.g. prices of farming equipment
and farm produce), open and free access to information facilitating more informed negotiations
between buyers and suppliers to each other’s competitive advantage and creating a level playing
field for all those who operate in a given economic sector (e.g. manufacturers, sub-contractors,
retailers, consumers, etc.); see Singh (2003) and the section on ICT for Economic Opportunity
in Digital Opportunity Initiative (2001). The same applies to attracting investments, since local
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information and information about potential clients are vital for investment decision-makers.
3. Knowledge and Technology Transfer
Bridging the knowledge and technology gaps is essential if African countries are to succeed
in exploiting ICT in their economic development. It is also clear from the aforementioned
that both are interconnected and, in addition, there are other factors that are also closely
linked. They all need to be addressed at the same time and is done so under, what is known as,
capability development. This section demonstrates that there is already a wealth of experience
in capability development that could be relied upon in ICT capability development.
3.1. Technological Capability Development
A common definition of technological capability is the ability of a given country to make use
of the knowledge to acquire, assimilate, adapt, and change existing technologies and develop
new products and processes to meet development objectives (SciDev.Net, 2008). Technological
capability has several dimensions of capabilities, or constituent or sub-capabilities. These are:
human resources capability, process and management capability (in relation to industrial plants
and processes), institutional infrastructure capability, technological infrastructure capability,
and financial capability;1 (see Figure 9.2). However, if we are to better appreciate the goals to
be achieved and the roles to be fulfilled by the agents involved in the process of its acquisition,
a deeper understanding is necessary.
Figure 2: Constituent capabilities of technological capability
technological
capability
process and
management
capability
human resources
capability
technological
Infrastructure
capability
institutional
infrastructure
capability
financial capability
Taking an instrumental view in the form of an intermediate good, specifically as an input to
an economic system enabling the more productive use of its resources, three essential aspects
of technological capability can be identified (Eagle, 2006). Firstly, it encompasses the ability of
humans to understand technical processes, acquire knowledge about them, interpret and adapt
it to suit local conditions and apply it creatively to the solution of practical industrial problems.
Secondly, it carries a strongly institutional character, implying the existence of certain specific
institutions that enable the integration of technical knowledge possessed by the society as a
whole into a coherent framework and thus its application in a complementary and productive
manner for the benefit of society. Thirdly, it has to be driven by a common purpose shared
1 These are similar to individual skills, process maturity, management capability, technology, revenue model and
product marketing capability (Tigre and O’Connor, 2002).
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by society, thus letting it draw its strength from the psychological motives and the political
aspirations of the society. Though it is perhaps wrong to place extra emphasis on any single one
of these elements, for all three must be in place on an equal footing if technological capability
is to deliver what is expected of it, its “institutional character” and the need for a “common
purpose” are two aspects that require special mention in the case of some African countries
because of their relatively low starting economic base and, historically, the volatility of political
leadership and hence a lack of an uninterrupted clear direction for long-term development.
3.2. Technological Capability Development in ICT Compared to Other Economic Sectors
Out of the three economic sectors applicable to developing countries, namely the primary
sector (agriculture); the secondary sector (industry); and the tertiary sector (information
processing as output, for example, in banking, finance, medical care, wholesale and retail
trade, administration of government, education, etc.)-Eagle, (2006), the two sectors that are
directly relevant to ICT development in Africa are the secondary and tertiary sectors. This is
because they are characterized by their reliance on knowledge conveyed through education
and training and internationally standardized techniques, rather than on knowledge passed
down from generation to generation and specialized knowledge provided by various agencies
and institutions as in the primary sector. Thus, the secondary and tertiary sectors shift the
employment criteria to skills from family or social connections relied upon in the primary
sector. Another distinction is that, unlike in the primary sector, the technological capability
in the secondary sector is task-specific (Eagle, 2006). Tasks vary from the simplest to the
more complex, require more training from procurement and installation of capital equipment
to operation and major improvements in existing techniques, and involve closer relations with
suppliers and customers. In the tertiary sector, capability has little to do with such mastery of a
technology for producing goods.
For African countries aiming at a greater role of ICT in the economy, the above view
of economic sectors might be too restrictive. This is because depending on the nature of
its role, ICT may fall into one, or both, of the secondary and the tertiary sectors. As some
African economies advance, with emphasis on the manufacture, assembly and maintenance
of computing hardware and in industrial scale software development and software support,
production of ICT goods will begin to share some of the characteristics of the secondary sector,
in particular, aspects of production control, reliance on high-skilled labour, etc. However, in the
economies that rely primarily on ICT applications to efficiently run industries, administration
and services, ICT belongs to the tertiary sector, with obvious restriction of most applications
being specific to each country and hence the non-transferability of related technologies between
countries with differing practices. Regardless of these specificities, that is, whether an African
country chooses to place emphasis on ICT applications or production of ICT goods, there is a
wealth of experience in technology transfer to be drawn from traditional economic sectors of
the developing countries (see, for example, Eagle, 2006).
3.3. Technology Transfer
In relation to the two basic ways of advancing technology, namely, innovation and adoption
(Sachs and McArthur, 2003), technology transfer as understood here is to be associated with
adoption of technologies developed elsewhere. Technology transfer has a significant impact,
directly or indirectly, on the constituent capabilities of technological capability (see Figure
9.2). Its predominant and immediate contribution would be to process and management
capability (Figure 9.3) but it could also contribute to other capabilities. The role of lower level
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capabilities (e.g. financial capability) in supporting the higher level capabilities (e.g. human
resources capability) is also shown in Figure 9.3 (through arrows). As is mentioned in the
previous section, the technology transfer in ICT shares some commonalities with that in other
traditional industries (Virmani and Rao, 1997). The account below places some of these in ICT
and, where applicable, African contexts.
• Availability of human resource skills, availability of appropriate technological and institutional infrastructures, etc.
The importance of these for capability development has already been mentioned.
Other factors that could have an equally important bearing on successful technology
transfer, particularly in the African context, are: the overall state of the economy,
government policies particularly with respect to investment, the availability of
appropriate technological infrastructure in the public and private sectors, the demand
for and the interests of the local economy in the technology concerned, and the social
attitude or receptiveness for the technology. These conditions are unlikely to be met in
most African countries because of their predominantly agrarian economic base, where
poverty and low standards of living are major concerns and, as a result, matters such
as the development of the necessary skilled labour and managerial expertise drop to a
lower priority.
• The distinction between full and partial technology transfer
Depending on the form of transfer being sought, technology transfer can take place
either partially or fully, with the obvious ensuing drawbacks and benefits. In ICT,
partial technology transfer takes place with the adoption of foreign ICT applications
in pursuit of efficiencies and may also be identified with outsourced technological
processes. As with other technologies, partial technology transfer in ICT also results
in increased dependence of the recipient on the supplier of the technology. This is
inevitable in the case of ICT applications but such dependence is not critical as in the
case of other technologies acquired for economic development where least dependence
on technology suppliers is often sought or regarded as desirable.
• The need for involvement of indigenous people in the production process for full
technology transfer
In situations where the indigenous people are not conversant with the technology, as
is the case with most African countries, it is necessary to acquire and assimilate the
technology and the required knowledge completely. This applies only to the production
of ICT goods and, similar to other technologies, concerns the knowledge and knowhow applicable right through the life cycle of the product concerned, from the design,
manufacture or production, marketing, maintenance, etc.
• Implications of technology transferred being an expression of social values of the
supplier nation
Being itself an artefact of human creation, any technology is also an expression of the
social values of the supplier nation. Therefore, a technology cannot usually be simply
transplanted from one place to another. It needs to be adapted to suit the local conditions
of the recipient nation, taking proper account of its cultural and social values, and any
technological norms. In relation to ICT, this applies, for example, to user interfaces,
linguistic aspects of ICT applications, content of educational software, various aspects
of entertainment applications and the design of ICT devices such as mobile telephones.
Manufacturers of such applications and devices are already paying attention to these
aspects, though this is driven by commercial considerations directed at capturing the
emerging African markets rather than by any other considerations. African countries,
however, need to approach this from a broader perspective, for example, to ensure the
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widest possible accessibility of the technology to the local users and, to ensure safe
and beneficial use of such applications and devices by them, etc.
• Involvement of the transfer of both tangible and intangible assets in technology
transfer
Technology transfer generally involves the transfer of tangible and intangible assets.
Tangible assets include machinery, capital goods, etc., while intangible assets are the
designs, plans, patents and other intellectual properties. In ICT, intangible assets are
particularly important and the extent of the actual transfer would depend on factors
such as the licence limitations (i.e. capabilities sought by the recipient in the technology
being transferred), IPR issues, marketing agreements, etc.
• The opportunity cost of not undertaking the technology transfer
Issues such as whether to adopt full or partial technology transfer necessarily involve
economic and political decisions. The economic considerations may in turn involve an
analysis of the opportunity cost of not undertaking the technology transfer concerned in
the light of other alternatives, such as the possible expansion of existing technologies
and the potential transfer of any alternative technologies. Because of the competing
socio-economic priorities, these are important issues that need to be addressed by
African countries seeking to advance their ICT capability.
Figure 9.3: Capability building through technology and knowledge transfers
technological
capability
technology
transfer
process and
management
capability
human resources
capability
technological
Infrastructure
capability
knowledge
transfer
institutional
infrastructure
capability
financial capability
3.4. Managing the Technology Transfer
According to (Virmani and Rao, 1997) , the conventional forms of technology transfer in
traditional technologies are:
• R&D alliances (licensing agreements, technology and personnel exchange, joint
development and research partnerships).
• Manufacturing alliances (original equipment manufacture, second sourcing, and
fabrication, assembly and testing agreements)
• Marketing and service alliances (procurement agreements, sales and servicing agencies)
• General purpose tie-ups (standards coordination and joint ventures)
The forms of technology transfer in ICT are not significantly different from the above
(Mansell and Wehn, 1998). However, in ICT, out-sourcing is perhaps currently a more
predominant form of technology cooperation between firms in developed and developing
countries such as India and China (Mansell and Wehn, 1998), though this could change over
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time as developing countries acquire greater capabilities in engineering and production of ICT
products. Technology transfer related to ICT applications is likely to be restricted to marketing
and service alliances. It is this form that will dominate ICT technology transfer in the African
context in the foreseeable future. All four forms are applicable to production of ICT goods.
Although only the leading ICT countries in the developing world such as India and China
are benefiting currently from these forms of technology transfer, those African countries that
already have some capability or are aspiring to gain a foothold in the production of ICT goods
need to promote these forms to widen the modes of ICT technology transfer.
Negotiation processes involved in ICT technology transfer are also similar to the practices
in other technologies. The type of alliance adopted in a particular situation depends on the
needs and strengths of negotiating parties and the price of the technology on market forces and
the negotiating capabilities of the parties. These are unlikely to be favourable to most African
countries and therefore there is a strong case for government involvement, for example, through
incentives and underwriting (see discussion in the next section). In the negotiation phases,
the countries need to be aware of various additional indirect costs resulting from restrictions
imposed by the parent company. These may include territorial market constraints, linkage of
technology transfer to purchase of goods and services, restriction on the recipient for entering
into competing and complementary technologies, R&D restrictions, restrictions on adaptation
and innovation, etc. (Virmani and Rao, 1997)0. They may have further effects, for example,
on export capacity, higher import costs, expansion restrictions, consequences on balance of
payments and economic development at the national level.
3.5. National Policies
Since African firms are unlikely to be able to negotiate technology transfers in ICT from
a position of strength, African governments have an important role to play. In addition to
providing visionary leadership, there are pragmatic reasons for governments to take a proactive
role in promoting ICT technology transfer and making it happen (see Tigre and O’Connor,
2002; Willem to Velde, 2002). As mentioned earlier, it is costly for the less developed countries
to keep abreast of technological developments in ICT in developed countries. Given the
scarcity of resources, it is also important to prevent the reinvention of existing technologies.
With increasing interdependence of nations, it makes more sense for the less developed
African countries to strive to achieve technology transfer through international cooperation in
a mutually beneficial form.
Successful ICT technology transfers are likely to be undertaken in conjunction with the
national industrial policies and taking into account factors such as indigenous capacity,
consolidation of existing infrastructure, labour intensive measures and a country’s R&D
infrastructure (Virmani and Rao, 1997). As mentioned earlier, such a national industrial policy
would identify the most promising areas for the technology transfer, as countries such as
Singapore, Korea and Japan did while they were industrializing. This would strike the right
balance between the government role and the role of the private sector. It would also make
the local economy attractive to foreign investment through proper infrastructure, correct
government policies, liberalization of the economy, promoting R&D investment at macro and
micro levels and demonstrating, as China (Tigre and O’Connor, 2002), Malaysia and Singapore
managed, a country’s capacity to absorb technology transfer by investing in education and
training in science and engineering. In addition, governments may choose to play a particular
role in specific cases of technology transfer.
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3.6. Sustainable Development and ICT
ICT has both a role in and an impact on sustainable development depending on one’s
perspective, because sustainable development is a multi-dimensional concept with
environmental, social and economic considerations. From the environmental perspective,
the Report of the World Commission on Environment and Development (Brundtland Report)
defines sustainable development as “development that meets the needs of the present without
compromising the ability of future generations to meet their own needs” (UN, 1987:27) and
identifies the role of ICT in sustainability as the ability to “help improve the productivity, energy
and resource efficiency, and organizational structure of industry” (UN, 1987:). The experience of
the industrialized world has shown that it is possible to make industries more resource efficient
and thus more profitable while safeguarding the environment. ICT plays an important role in
this respect, for example, in monitoring, gathering, forecasting and publishing environmental
data and in establishing legal compliance with environmental laws and regulations (Hilty et
al., 2005). In addition, decentralized distributed small-scale manufacturing supported by ICT
provides an environmentally friendly, viable economic model for some of the less developed
developing countries (UN, 1987), which is a particularly attractive proposition for developing
countries in Africa. Given that the African continent is one of the most threatened ecosystems
in the world, African ICT developers have an important role to play in its conservation through
different means.
The above is a stance focussing primarily on the impact of society on the environment,
treating ICT as a tool helping to ensure sustainable development. However, there is another
important aspect, that is, the impact of ICT on the society and, in particular, on the social fabric,
that is, the sustainable development of ICT itself. A hint of this in the general industrial context
may be found in the Brundtland Report (UN, 1987), which states that “widespread poverty is
no longer inevitable. Poverty is not only an evil in itself, but sustainable development requires
meeting the basic need of all and extending to all the opportunity to fulfil their aspirations
for a better life.” The significance of this in the context of new technology is highlighted
in a persuasive argument (Nissanke, 2006) showing that because of its heavy bias towards
skilled and educated labour, the technological advancements of the new technology would
tend to increase inequalities in both developed and developing countries. The reference to
“sustainability” and “poverty” in the Brundtland Report (UN, 1987) and to the widening
“inequalities” induced by the new technology in Nissanke (2006) has a strong resonance in
relation to ICT. Such widening inequalities are evident between the poor and the rich in some of
the newly industrialized economies forging ahead with ICT-driven industries. This is obviously
an issue to be borne in mind in ICT development in Africa. In this respect, it is important to
ensure that the development of ICT is itself sustainable in the sense that the benefits are spread
out right across African society equitably, that such development is not at the expense of poorer
sections of the population, and that it should not replace or eliminate the traditional economic
activities that affect the livelihood of the poor without proper alternatives in place.
4. Mechanisms of Technology and Knowledge Transfer
As with other technologies, the mechanisms of ICT technology transfer vary from those
achieved through collaborative efforts to those achieved through independent effort. Generally,
mechanisms achieved through collaboration include fully owned subsidiaries or joint ventures,
purchasing of licences by payments of fees or through loyalties, and technology transfer by
foreign direct investors (Virmani and Rao, 1997). Transfer by foreign direct investors may
take the form of recruitment and training of local workers with the necessary technical and
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managerial skills to replace expatriates or specifically with the aim of enabling them to start
new domestic enterprises and to modernize existing enterprises.
4.1. Foreign Direct Investment (FDI) and Knowledge Transfer
As evident from numerous studies, including OECD working papers (Pissarides, 2000;
Cohen and Soto, 2001; Blomstrom and Kokko, 2002; Kapstein, 2002; Ritchie, 2002; Slaughter,
2002; Miyamoto, 2003; Gholami et al., 2006) there is widespread agreement about the important
role of foreign direct investment (FDI) by multi-national enterprises (MNE) and international
organizations in knowledge transfer and, hence, in human capital formation, in particular,
through direct provision of education, training in new skills, bringing in new information and
other technologies to the host country. In addition to increased competition and subsequent
efficiency gains in local firms, the presence of MNEs has a direct impact on diffusion of skilled
labour and management skills trained by MNEs to the local industry, greater inspiration for
adopting new technologies, and the technology transfer to local suppliers via outsourcing.
An aspect that is of primary interest here is the extent of validity of the above observations
for ICT and the role of human capital in attracting FDI. Though there are analytical and other
works such as Gholami et al. (2006) and Kapstein (2002) attempting to establish a causal
relationship between ICT and FDI, there appears to be no clear-cut evidence of any causal
relationship between human capital development and FDI. With reference to knowledge
transfer in general, Miyamoto (2003) drew certain observations from the findings of two
groups of research studies. Based on separate data sets belonging to different historical periods,
namely, the 1960s and the 1980s; and the 1980s and to the mid 1990s, Miyamoto examined
the significance of human capital in attracting FDI depending on the skill levels required by
the incoming FDIs. Specifically, the human capital associated with labour intensive low-end
manufacturing during the first period above appears to play no noticeable role in attracting FDI,
while the human capital associated with high value-added manufacturing during the period
(b) above is having a positive effect in inward FDI. This observation appears to make some
sense in the light of the general shift of FDI in favour of high-tech manufacturing during the
recent years. Therefore, human capital appears to be “an important determinant for inward FDI
among the efficiency-seeking MNEs while not an important determinant in resource-seeking
MNEs” (Miyamoto, 2003).
The above observation has important implications for ICT in developing countries in
Africa. Firstly, it is consistent with the current nature of inward FDI flowing to Africa, namely
its exclusive concern with the exploitation of Africa’s rich natural resources. For example, the
share of primary goods remains high and constant in Africa, which is seen as a sign of natural
resources continuing to remain the attraction for MNEs in Africa (Miyamoto, 2003). This is
in sharp contrast to what is happening elsewhere.2 Concurrently, there is a marked crossregional disparity in FDI, for example, the five largest host developing countries attracting
62% FDI and African countries lagging behind considerably in attracting FDI compared to
the developing countries in other continents (Miyamoto, 2003). This is an important issue that
needs to be addressed to identify what positive steps can be undertaken by the less successful
developing African countries to rectify the imbalance. In the meantime, however, it seems
sensible for African countries rich in natural resources and wishing to advance ICT capability
to maintain this resource-seeking interest of MNEs to national economic advantage and treat
2 The trend elsewhere may be characterized by a marked growth in the share of the services sector in developing
countries (to more than twice the primary and manufacturing sectors taken together) with an equal decline in the
primary goods sector, the manufacturing sector still dominating other sectors in FDI (reaching as high as 51.2% in
China in 1993), and a shift towards technologically advanced FDI (Miyamoto, 2003).
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it as a stepping-stone to extend MNE activities gradually to high-tech efficiency-seeking
industries, for example, through fiscal transfers and government incentives (Willem te Velde,
2002). For example, in the experience of South East Asian countries, government incentives
tend to encourage large firms involved in high-tech manufacturing for export to provide training
(Ritchie, 2002).
In order to attain this, however, significant efforts should be directed towards improving
the human capital through other means, to begin with, through formal educational. This can be
strengthened by the creation of institutions for upgrading industrial skills, though, as evident
from the experience of South East Asian countries, the initial absence of such institutions is not
necessarily a handicap to attracting FDI (Ritchie, 2002). Interim benefits of enhanced human
capital even before attracting efficiency-seeking MNEs are many; they will help to create the
right social and political conditions for attracting FDI through better governance, reduction of
corruption, civil liberties, awareness of civil responsibilities, etc., all contributing to instilling
the sense of “common purpose” mentioned earlier, right across the society. These conditions
appear to differ considerably between African countries and developed countries such as
Singapore and Germany (for specific country case studies see Adjibolosoo, 1998).
The findings (Miyamoto, 2003)suggested that secondary school education is the minimum
level for attracting relatively high valued-added, efficiency seeking FDI. Since it has to be
undertaken at national level, even achieving this to an adequate level requires considerable
effort. In the interim, however, there is considerable scope for Africa to change its image by
raising its educational profile at the tertiary level selectively in ICT-related courses. This would
require supporting leading computing and IT departments at universities and other tertiary
educational institutions in each country significantly with targeted funds and in collaboration
with specialist educationalists.
4.2. Other Means
Reproduction of a capability through reverse engineering is an independent mechanism of
technology transfer (Virmani and Rao, 1997). Reverse engineering being an active research
topic in computing, there are tools and methodologies for it, making it a particularly attractive
approach in ICT technology transfer. Generally, it involves breaking up a product, or analysing
a piece of software, and rebuilding it with one’s own knowledge and resources. In the case
of ICT products, the reverse engineering of programs can be prevented by restricting the
product distribution to binary code, but the design of systems and devices may be worked
out, to an extent, through observation of their behaviour (e.g. in tests). However, capability
building through reverse engineering does not come free, as it carries the risk of disputes and
controversies because of the unilateral or non-collaborative nature of such actions.
A less formal type of technology transfer, which is becoming quite common in ICT
development in Asia, is through international community networks of a given nation. It is
predominant among the overseas Chinese and Indian communities, who tend to maintain their
traditional relationships with their home communities through transfer of capital, propagation
of technical know-how and exchange of entrepreneurial skills. Similarly, in the African context,
the African diaspora in the Western world could be a significant source of ICT specialists,
entrepreneurs and well-wishers that could be tapped for ICT development in Africa. Technology
transfer also takes place through mobility of trained personnel. Migration of skilled workers
and reverse engineering played this role before in the early stages of the industrial revolution
and innovation efforts undertaken in R&D laboratories later on (Freeman, 1993).
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4.3. Institutional Structures Required for Supporting Technology Transfer
Institutional infrastructure supports and facilitates technology transfer, and may also provide
training activities outside formal education (see below). In addition, there are nowadays
institutions other than universities and other academic institutions which are engaged in
“knowledge production” (Mansell and Wehn, 1998). Generally, the institutional infrastructure
includes the following:
a) R&D institutions
In many developing countries the majority of scientific and engineering personnel are
employed in research institutions in the government sector but in areas such as agriculture,
health and other pubic services. Generally, industrial institutions are rare or non-existent. As
these countries look towards technology transfer, there is a strong case for embedding any
existing, or newly created, industrial R&D institutions, especially in ICT, within the industries
themselves, but taking care to institute special measures (e.g. incentives) to ensure product
innovation, technology acquisition, knowledge dissemination, training, etc.
b) Scientific and technical services
Such services include regulatory structures, technical libraries, bodies for introducing and
enforcing standards, professional societies with accreditation rights and that are capable of
maintaining professional standards, a body to protect international property rights (IPR) and
patents and advisory services.
Because of their significant operational cost, most African countries may find it appropriate
to consider, from a sustainability point of view, the formation of such institutions and services
at a regional level.
5. Measuring Technological Capability
In attempting to measure the capacity of a nation to take advantage of its human and other
resources for economic development through the advancement of its technological capability,
it would have been ideal, in the light of our earlier discussion, to be able to measure the level
in each of the constituent capabilities shown in Figure 9.2. This is beyond the scope of this
work and therefore this section covers the indicators used to measure the overall technology
capability at an aggregate level in the next section followed by those for measuring human
potential in more detail. This treatment inevitably results in some overlap of the two categories
of indicators.
5.1. Technological Capability Indicators
The appropriateness of technological capability indicators used in relation to developing
countries depends not only on what questions need to be answered but also on the relative
maturity of the economies of these countries. The latter is due to the relatively poor quality of
available historical data in these countries, in particular with respect to data availability and
reliability, coverage and significance (Archibugi and Coco, 2004; UNDP, 2005), compared
to those of the developed countries. Although organizations such as the United Nations
Development Programme (UNDP) take various measures to overcome or compensate for
these inadequacies, an appreciation of the nature of the statistical data is vital, especially when
attempting to draw comparisons of cross-country potential.
In addition to internationally agreed statistical measures, both within UN organizations
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and other organizations such as the World Bank, there are other approaches such as ArCo
(Archibugi and Coco, 2004) which attempt to draw more realistic cross-country comparisons
across a larger sample of countries by considering different capability dimensions, focusing
on indicators with a more satisfactory coverage and by filling in any missing gaps through
estimates based on expert opinions and comparisons with similar economies. The UNDP
Human Development Index (HDI; UNDP, 2005) is based on three basic dimensions: basic
human development as captured by life expectancy; knowledge as captured by literacy rate,
enrolment rates of students to primary, secondary and tertiary educational institutions; and
the standard of life as captured by the gross domestic product (GDP). UNDP recognizes the
limitation of some of these dimensions; for example, it calls for a new “literacy profile” (UNDP,
2005) that takes into account a wider range of an individual’s skills such as reading, writing
and numeracy to replace the simple literacy rates currently used in its Human Development
Report. Conversely, ArCo (Archibugi and Coco, 2004) specializes on technology and uses
eight attributes under three capability dimensions: technology creation (captured by patents
and scientific articles); technology diffusion (as captured by Internet penetration, telephone
usage and electricity consumption); and human skills development (as captured by literacy
rate, years of schooling and enrolment to tertiary science and technology institutions).
A directly relevant work to this study is Nair and Kuppusamy (2004), which is a comparative
study of trends in ICT development over the period 1995–2001 in 14 countries belonging
to three groups: developed countries (USA, Ireland, Finland, Switzerland and Japan), newly
industrialized countries (South Korea and Singapore), and developing countries (Malaysia,
Thailand, Indonesia, the Philippines, Mexico, Chile and Brazil), with the aim of drawing
lessons for developing countries. The data sources for this comparative study were: IMD World
Competitiveness Report (1995–2003), World Intellectual Property Organization (WIPO)
(1995–2001), Digital Planet 2002: The Global Information Economy and the United Nations
Statistics Database. It uses 14 variables classified into four categories: ICT infrastructure
(Internet penetration, per capita IT hardware expenditure, per capita software expenditure, per
capita telecommunication investment, number of personal computers (PCs) used at home per
one million people), human capital (per capita expenditure on public education, competitive
educational index: appropriateness of educational system for a competitive economy based on
a survey), innovation (R&D personnel per 1,000 people, per capita R&D expenditure, patent
productivity per 1,000 R&D personnel), and productivity (labour, industry, service, overall).
Compared to other systems of indicators, the use of a competitive educational index to account
for the quality of education is an important contribution of this work. This is based on a survey
of responses by 2,500 senior executives; unfortunately Nair and Kuppusamy (2004) provided
no details about the nature of this survey.
The overall findings of the above work (Nair and Kuppusamy, 2004) were that the
developing country group, as expected, lags behind the other two groups of countries in almost
all categories, though the Latin American countries and Malaysia seem to be ahead the rest
in the same group in ICT infrastructure, human capital and innovation. Although there are
important lessons to be drawn, the developing country group considered is not representative
of most of the African countries to be considered in our work.
It is also instructive to compare the above indicators with the metrics recommended by
the Science and Engineering Indicators (National Science Foundation, 1998) of the National
Science Foundation (NSF S&T indicators) for assessing IT capability in the USA; these are:
IT diffusion indicators (e.g. IT investments in industry, IT hardware and internet access in the
classroom); economic impact measures (these are recognized to be industry sector-specific,
the ones specific to the banking industry being volume of transaction processing, transaction
costs relative to transactions processed by humans and processing times of transactions); and
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the quality of life indicators (e.g. protection from health hazards and breaches of security,
entertainment, etc.).
Although some of the above NSF S&T indicators are somewhat ambitious for many of
the developing countries in the African continent, they nevertheless serve a useful purpose,
namely, that they highlight the need to choose the indicators that are right for the economic
and social context under consideration and that they provide a longer-term perspective for the
strategic planners engaged in capability development in developing countries. For example,
to meaningfully pose and answer questions pertinent to African countries and therefore guide
their capability development in ICT, it is necessary to consider ICT-specific indicators suitable
for the African context. However, some caution has to be exercised in the extrapolation of some
of the comparisons and, hence, observations made later in this work based on UNDP data under
rather general criteria, when assessing both the potential and the challenges faced by African
economies in developing their ICT capability. Therefore, it is vital that we carefully examine
the indicators to be used in assessing the role and the impact of ICT in Africa.
A specific case in point is that, because of the cost of immediate expansion of tertiary
education in ICT on a wide scale, it would be more cost-effective for African countries to target
any available resources in the most promising areas of ICT from their economic perspective and
to deploy such resources as efficiently and effectively as possible. This could be facilitated by
having a combined measure that incorporates both quantitative and qualitative aspects (similar
to the competitive educational index in Nair and Kuppusamy (2004)) of such education. This
involves considering a weighted measure of student enrolment rates or even a more refined
metric such as the student graduation rate that automatically disregards the drop-out of students
between enrolment and completion, and such metrics as course portfolios vital to country’s
economic objectives, course accreditation by professional bodies, etc. The weights in the
combined measure can be chosen in such a way that an appropriate balance can be maintained
between the training of high-quality graduates with the potential for driving innovations and
entrepreneurship for setting up of new businesses and the training of graduates required for less
demanding roles in the economy, for example, technical support for industrial and commercial
enterprises, manufacturing and maintenance of IT products and services, etc.
In devising indicators to measure the economic impact of ICT, another important point that
has to be borne in mind is that made in National Science Foundation (1998) and Pohjola (2001)
and elsewhere with regard to the “productivity paradox”—the difficulty in detecting a clear
statistical correlation between IT investments and the productivity in the private sector—and
its possible dependence on our natural expectation of positive results from the deployment
of IT in industry. There are also studies such as Nair and Kuppusamy (2004) (based on a
comparative study of historical trends) that affirm productivity increases in countries investing
heavily in infrastructure, education and innovation. The immediate question is, however,
whether the productivity gains are measurable in a meaningful manner, that is, in a manner
that they are attributable solely to ICT, and, if so, how to go about measuring them. According
to the National Science Foundation (1998), some of the important issues are: 1) the need for a
standard definition of IT costs: do they comprise just capital investments or include, in addition,
the usually high operational labour costs; 2) treatment of IT costs in accounting, whether as
an annual “flow” of expense or as part of cumulative “stocks” (due to rapid obsolescence of
IT equipment and ever falling prices of computer hardware); 3) the difficulty in measuring the
contribution of activities such as accounting with intangible outputs; and 4) the contribution
of IT to both efficiencies and higher qualities at the output front and cost savings at the input
front as well as through the production process (Pohjola, 2001). Added to this is the apparently
long time lag, possibly decades, between the time of introduction of a new technology and
the time when the society tends to accrue its real benefits. These factors make it harder to
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determine indicators that could realistically measure the economic benefits that can be gained
in developing African economies through investment in ICT, especially since such investments
are likely to be at a much lower scale and made at a much lower economic base in comparison
to the early stages of deployment of IT in industry and commerce in the developed countries.
5.2. Human Capital Indicators
The skills base of the workforce is the most basic factor determining the success or the
failure of any industry, including ICT, and hence its impact on the economy. Its creation through
education is also one of the costliest items in any national budget, in addition to being one of
the most difficult tasks facing any country. Therefore, from budgetary and performance points
of view it is important to be able to measure the educational attainment of the population as a
whole. Human capital indicators are such measures. Since they reflect the educational attainment
at an aggregate national level, they are necessarily rather crude measures and ignore important
factors such as the actual skills and competences accomplished at the point of completion
of studies, personal characteristics such as motivation and commitment of individuals, etc.
Nevertheless, they are an important means of evaluation of performance of educational efforts
leading to economic development.
The OECD report on Human Capital Investment (OECD, 1998) defines human capital
as “the knowledge, skills, competences and other attributes embodied in individuals that are
relevant to economic activity” and regards it as “an intangible asset with the capacity to enhance
or support productivity, innovation, and employability”. Human capital is created through a
variety of complementary means (OECD, 1998):
• Formal education (provided by educational institutions at different levels: kindergarten,
primary education, secondary education, vocational training, tertiary education, adult
education, distance learning, etc.).
• Non-formal education (provided by enterprises and public organizations through
training and R&D activities).
• Learning in informal environments (taking place within families, in communities,
through media and information networks, societal learning, learning by doing, learning
by observing others).
Among the widely used human capital indicators for measuring the attainment levels of the
current working population are (OECD, 1998):
a. Percentage of the relevant section of the working adult population (adults in the age group
of 25–64 years) to have successfully completed a given level of education (e.g. secondary,
upper-secondary, tertiary, etc). Advantage: an internationally agreed measure by the
International Standard Classification of Education (ISCED); drawbacks: no reference
to the actual skills and competences acquired and their inconsistency (variability) in the
definition of attainment levels across countries, and inconsistencies in classification of
educational programmes under different levels (e.g. vocational programmes under uppersecondary level).
b. Years spent on education at or up to a given level. Advantage: a single measure to deal with.
Drawbacks: assumes human capital grows proportionately with each year, irrespective
of the level of education, an indicator less variable from country to country and hence
its inability to sharply discriminate between attainment levels of different countries; and
programmes of some countries take relatively longer periods to complete.
Note that (a) consists of several measures, one for each level of education being considered.
It therefore gives a better profile of the educational attainment of a given country, whereas (b),
being a single number, gives a more abstract measure and is not necessarily in conformity with
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(a) in substance. This is in addition to the various advantages and drawbacks mentioned under
each.
The other factors that may need to be taken into account when assessing the educational
attainment in greater detail are (OECD, 1998):
• The changes in educational attainment over time.
This is relevant to situations undergoing rapid and significant expansion of the
educational system, due to increased demand or policy initiatives, perhaps as a response
to rapid growth of the economy. Basically, it is a comparison of attainment of a given
educational level of two (or more) cohorts of different age groups taken from a fixed
number of years apart. Since any expansion of education in African countries is unlikely
to meet the above criteria, this indicator is not relevant to the current African context.
• Educational attainment of different groups
These groups may be defined by gender, generational difference and intergenerational
mobility (likelihood of better educated offspring coming from less educated parents).
Here, educational attainment by gender could be an important indicator in the current
African context.
Though the indicators listed above are useful to an extent, they suffer from some wellknown drawbacks, such as:
• Non-uniformity of knowledge and skills as reflected by the education attainment levels
from country to country.
• Omission of knowledge and skills acquired through means outside the formal
educational system in education attainment levels.
To overcome such deficiencies, an alternative measure is suggested in OECD (1998) based
on a set of skills (e.g. prose literacy, document literacy, etc.) tested on actual tasks performed in
a simulated work environment and detailed interviews of a sample of individuals.
6. Opportunities and Challenges for Africa
6.1. Current State of Human Capital in Africa
6.1.1 About the Data and Figures
Using the data given in the UNDP Development Report (UNDP, 2005) and an Analytical
Survey of the UNESCO Institute for Information Technologies in Education (Chinien, 2003),
this section gives an overview of the current state of human capital in African countries.
The purpose is to highlight the positions occupied by different African countries in relation
to one another and, more importantly, to developing countries from Asia and Latin America,
which have shown significant or some achievements in ICT capability building. The UNDP
data (UNDP, 2005) relevant to Africa come under the two lower classifications of human
development, medium and low, out of the three HDI classifications: high, medium and low (see
Figure 4). Therefore, some of the comparisons are given separately for these two categories.
Note that our observations are based on visual comparisons of graphical presentations and not
on a statistical analysis of the data, and that countries with missing data under a given attribute
are not commented upon
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Figure 9.4. World Map by Human Development Index
(Source: Wikipedia):
█ high (0.800 - 1), █ medium (0.500 - 0.799), █ low (0.300 - 0.499)
Here are a few notes on how to read the figures. For example, the public expenditure on
education as a whole as a percentage of GDP, and on secondary and tertiary education as a
percentage of the total education budget (i.e. for all levels of education) for the year 1990 and
for one of the years in 2000–2002 (shown in figures simply as 2000–02) for countries with
medium human development (medium HD) are shown in Figure 9.5. The same is shown for
countries with low human development (low HD) in Figure 9.6. Note that in the case of certain
countries, some of the above data may be missing and hence are not shown in the figures.
Superimposed on the same figures (by labelled horizontal lines) are the levels corresponding
to expenditures by reference countries, India and Mexico. The choice of reference countries
is quite arbitrary, except that in most cases (except, for example, Peru) they are all known for
higher degree of achievements in ICT compared to African countries.
6.1.2.
African Expenditure on Education
Table 9.1: Expenditure on education, India and Mexico (2000–02)
Reference country
Expenditure on education (% of GDP or education budget; 2000–02)
All (% GDP)
Secondary (% of all levels)
Tertiary (% of all levels)
India
4.1
40.1
20.3
Mexico
5.3
28.7
19.6
Among the medium HD African countries, the total expenditure (as a percentage of GDP)
is generally comparable with our reference countries, India and Mexico, with the exception
of Equatorial Guinea and Uganda (based on data only for 1999), though there is marked drop
in expenditure in the case of Botswana in the 2000-02 period (Figure 9.5). In the low HD
category (Figure 9.6) Swaziland, Lesotho, Kenya, Eritrea, the Ivory Coast, Malawi and Burundi
compare well, while others fall below in varying degrees. In secondary education, all medium
HD countries lie within, or comfortably close to, the band 25–40% where India and Mexico lie,
while Equatorial Guinea stands at 18.1%. Among the low HD countries Kenya, Gambia and
Malawi lie close to 20%, Rwanda at 16.7% and Mozambique at 15.7% and others in the band
25–40%. In tertiary education, all countries except South Africa, Togo, Swaziland, Lesotho,
Rwanda, the Ivory Coast, Zambia and Burundi are noticeably below the Indian and Mexican
level of roughly 20%. These data clearly indicate that the expenditure on education by most
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African countries is low in comparison to the two reference developing countries.
6.1.3. African Literacy
Table 9.2: Literacy rates, India and Brazil (2003)
Reference country
Literacy rates ( %; 2003)
Adult
Youth
India
61
76.4
Brazil
88.4
96.6
Literacy rates for both adults and youth among the medium HD African countries (Figure
7) compare well to our reference countries, India and Brazil (Table 2), with the exception of
the Comoros. In the low HD category (Figure 9.8), the picture changes quite significantly;
Mauritania, the Gambia, Senegal, Benin, the Ivory Coast, Mozambique (adults only), Ethiopia,
Central African Republic, Guinea-Bissau, Chad, Mali, Burkina Faso, Sierra Leone and Niger
are all below our reference country levels, which are 61–88.4% adult literacy rates for IndiaBrazil (in that order) and 76.4–96.6% youth literacy rates for India-Brazil. Thus, in respect of
literacy, the large number of low HD countries in Africa is a concern.
6.1.4. Primary, Secondary and Tertiary Student Enrolment in Africa
Table 3: Student enrolment in primary, secondary and tertiary institutions, Indonesia and Costa Rica
Enrolment rates %
Reference country
Primary
Secondary
Tertiary: Maths,
Engineering
Indonesia
93
70
40
Costa Rica
85
81
31
Science
and
a) Primary Education
Among the medium HD African countries, in primary education (Figure 9.9) it is only
Comoros, Ghana and Congo that fall below the rest in a band 54–60%; others being comparable
to Indonesia and Costa Rica (Table 9.3). Among the low HD countries (Figure 9.10), however,
only Madagascar, Lesotho, Gambia, Nigeria and Tanzania are close enough to Indonesia and
Costa Rica; others all lie in a band 36–75%.
b) Secondary Education
In secondary education, all countries except Mauritius and South Africa, followed
immediately below by Cape Verde and Botswana are way below the reference country
performance (see Figures 9.9 and 9.10).
c) Tertiary Education (maths, science and engineering)
In tertiary education in mathematics, science and engineering, only Mauritius, Ghana, Kenya,
Benin, Tanzania, Malawi and Zambia compare well with the reference country performance
(see figures 9.11 and 9.13). All others fall near or below 20%.
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6.1.5. Communication Technologies
Table 4: Use of ICTs, Mexico, Malaysia, Thailand, Peru (2003)
Reference country
Users per 1,000 people in 2003
Telephone
Mobile
Internet
Mexico
160
295
120
Malaysia
182
442
344
Thailand
105
394
111
Peru
67
106
104
In the use of communication technologies, the pattern of telephone, mobile phone and
internet usage tends to vary widely from country to country; only in the case of countries such
as Mauritius, Cape Verde, Namibia and a few others does a reasonable balanced picture exist.
In the other countries, mobile phone usage tends to dominate the other two, perhaps as a sign of
the relatively poor state of the latter. For example, only 3% of Africa is connected by landlines.
Limiting ourselves in the discussion here to medium HD countries (Figure 9.14), with
the exception of Mauritius, Cape Verde, South Africa (mobile phones only), Gabon (mobile
phones only) and Botswana (mobile phones only), other countries compare unfavourably to
our reference countries (excluding Peru) (Table 9.4).
6.1.6. African Contribution to Innovation
a) Royalties and Licence Fees
The sample of data is too small for any generalizations to made on royalties and licence fees
(Figure 9.15). In addition, it is unclear how much of these fees are royalties for literary works
and how much are for technical works.
b) R&D Expenditure
The sample of data is again too small for any generalizations to be made on R&D expenditure
(Figure 9.16) but the available data compare favourably against the reference countries: Chile
at 0.5% of GDP and Malaysia at 0.7% of GDP. It is unclear how much of this expenditure is
spent on technological R&D work.
c) R&D Workers
The available data on Cape Verde, South Africa and Guinea (Figure 9.17) compare favourably
against the reference countries: Mexico with 259 workers per million people and Thailand with
289 workers per million people. Other countries with any data lie below 50 workers per million
people. The ratio of workers on technology related R&D work is unclear in the data.
6.1.7. African Emphasis on Science and Engineering
Based on the data given in the Analytical Survey of the UNESCO Institute for Information
Technologies in Education (Chinien, 2003), percentages of students in tertiary education in
21 African countries and six non-African countries (India, Korea, Japan, Vietnam, Costa Rica
and Mexico; this group is referred to as Asian and Latin American sample, or ALAS) studying
specific subject areas (Table 9.5) were compared.
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Table 9.5: Comparison of subjects studied by students in selected African and non-African tertiary education
institutions
Averages (% of all)
African
Humanities, education, social sciences, business and law (Figure
16)
69.8
ALAS†
D e v e l o p e d
Countries
54.7
57.8
Science, engineering, manufacture and construction (Figure 17)
14.4
26.6
26.3
Science (Figure 18)
8.7
10.4
12.7
Engineering, manufacture and construction (Figure 20)
6.4
17.9
10.3
† Asian and Latin American sample.
The above summary clearly shows that, compared to both developed countries and the
sample of Asian and Latin American countries featuring in the figures, African tertiary
education is geared toward producing more graduates in non-technical subjects (humanities,
education, social sciences, business and law) than in technical subjects. The implication of
this very clear, that is, most African countries are not producing enough graduates as required
by modern technological economies even for using ICT for efficiency purposes. Furthermore,
since science and technology play an important role in innovation (Mansell and When, 1998),
this is a serious barrier for some African countries to become knowledge-based economies. The
figures also show how individual countries fare in relation to the same goal. Ghana, Kenya and
Mauritius do well in relation to engineering, manufacture and construction, and a relatively
large number of African countries also do well in science, even better than the averages of other
two categories of countries. Yet, the overall picture is not favourable for technology-oriented
economies.
6.1.8. Summary
The above discussion confirms nothing new but simply brings into focus the real state of
African human capital. Investment in education, the student enrolment pattern across different
educational levels and student numbers in technical education are not in line with those
expected in (relatively) modern industrial economies of the developing world. Technological
infrastructure, as expected, is inferior to that of other rapidly developing countries in Asia and
Latin America. However, penetration of mobile phones and wireless networks (Eagle, 2006)
seems to suggest the viability of alternative ways to create an advanced telecommunication
infrastructure in some African countries. Major efforts are required to bring innovation, research
and development into line with other competitors, especially in the areas of technical subjects.
Note that since no relevant data are available, our discussion does not address the needs of ICT
at all as seen from the capability building point of view.
6.2. Experience of Countries from Elsewhere
Given the above situation, it is instructive to examine how a number of developing countries
across Asia and Latin America, many with economic backgrounds similar to or worse than
those of some African countries a few decades ago, managed to pull themselves to the forefront
of the ICT revolution within a short time. African countries, and other developing countries
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across the world, could benefit immensely from the experiences of these countries. Three such
countries, which have taken different paths to become some of the leading countries in hightech industries and ICT product development, are discussed below.
6.2.1. Singapore
Singapore’s rise to the league of newly industrialized countries within a relatively short
historical time span is not only relevant to our study but also, in terms of economic development,
exemplary for other countries aspiring to achieve rapid industrialization. Since its formation
in 1965 after expulsion from Malaysia, recognizing its natural handicaps such as the lack
of natural resources and being a small island state of approximately 700 square kilometres
(including reclaimed land), and its demographic limitations (a small poorly educated population
consisting of farmers, fishermen and traders), Singapore embarked on a rapid programme of
education, raising itself from a low scientific base to a nation with a highly skilled workforce.
To counter the small domestic market, Singapore followed an export-led path with policies
designed to attract foreign investment, initially into labour intensive industries but gradually
diversifying into more and more skill-intensive industries such as electronics and computing
hardware, thus creating a virtuous cycle of knowledge and technology transfer and further
foreign investments. For example, in the 1980s Singapore concentrated its efforts on labourintensive assembly of consumer electronics and semiconductor components. In the 1990s the
country switched its attention to technology-intensive manufacturing of advanced ICT products
such as disk drives, and it recently moved towards R&D activities, each time consolidating its
achievements with frontier technologies (Pohjola, 2001). This has been complemented with
diversification of the economy into other areas, notably into finance and other service sectors.
The above has been backed up strategic proactive investments by the government in a
modern communication infrastructure, for example, the installation of a nation-wide broadband
network in the 1990s, as the technological pillar for supporting a modern knowledge-based
economy. At the same time, the government has been taking a proactive role by encouraging
foreign hardware and software vendors and companies to invest in Singapore, promoting
indigenous IT firms and boosting the internal demand for ICT by extending the use of ICT by
the public sector, a typical example being Singapore’s civil service computerization programme
(Pohjola, 2001).
Though the above achievements were arguably at the expense of some aspects of liberty,
absence of corruption, the reputation of a disciplined workforce and the political stability
have also been conducive to attracting foreign investment. Better social well-being, high
standards of life and harmonious race relations have instilled a sense of “common purpose”
among her citizens and helped to channel their commitment and energy to productive ends.
The pragmatism shown by maintaining the English language as the medium of instruction
in technical education (especially, tertiary) has made her educated workforce outwardlooking, with immediate benefits such as easy access to the technical advances made in the
developed world through literature and training, and access to the employment opportunities
available through foreign companies operating in Singapore. The net effect of all these factors,
educational, technological, political and cultural, is that today Singapore hosts some 3,000
multinational corporations, together accounting for more than two-thirds of her manufacturing
output and export, and exhibited a GDP growth rate exceeding 7% over the period 1975–99,
more than twice that of the OECD countries.
6.2.2. India
Despite being dubbed as an emerging global economic superpower, India is a land of
extremes, whether it is in terms of in material well-being, health, education or transport. The
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gaps between “haves” and the “have-nots” are continually widening, though nowadays not so
much because of “problems of a complete failure of the state—but of incomplete successes,
mixes of failure and success, of achievements that create new challenges” (Pritchett, 2006).
The lessons for us are, however, not in India’s failures but in her successes.
One of India’s greatest fortunes has been her endowment with some rare individuals as her
leaders at many levels of the society. The world acclaimed Indian Institutes of Technology
(IITs) form the pinnacle of India’s achievements in technical education. They were conceived
even before the country’s independence in 1947. Recognizing that “the future prosperity of
India would depend not so much on capital as on technology” (Wikipedia), Sir Ardeshir Dalal
of the then Viceroy’s Executive Council envisaged the formation of laboratories under the
umbrella of the Council of Scientific and Industrial Research (CSIR), an institution at the helm
of India’s drive for excellence in science and technology, and conceptualized institutes of the
nature of IITs for training specialists locally to run them, instead of training them abroad. In
addressing the first convocation of the first IIT at Kharagpur, Jawaharlal Nehru, India’s first
Prime Minister, proclaimed in 1956, “Here in the place of that Hijli Detention Camp stands the
fine monument of India, representing India’s urges, India’s future in the making. This picture
seems to me symbolical of the changes that are coming to India” (Wikipedia). This was the
vision of a nation, known to the rest of the world then for its poverty rather than its science, at
a time when nobody could contmeplate the impending “globalization” that could help Indian
enterprises and entrepreneurs to lift India out of the bottom of the developing club to become
an economic superpower. Most remarkable was the fact that this vision was turned into reality
within a life time through the dedication and hard work of many. The credit goes no less to
India’s political leadership, in particular, the prime ministers who showed their commitment to
and direct interest in development through science and technology by taking up the Presidency
of CSIR.
Graduates from India’s seven IITs today, spread over different parts of the country, and
those from other leading Indian institutions are now sought after in the USA and in Europe.
Indian scientists have a worldwide reputation for their achievements. They have demonstrated
to the world that Indian technology is a force to reckon with, especially in the software industry
(Singh, 2003) with China providing a strong challenge (Tigre and O’Connor, 2002). With the
economic reforms introduced in the 1990s, leading to opening of certain sectors of her economy
to private and foreign investment, India in now well placed to reap the well-deserved rewards
for decades of investments in technical education. Reverse brain-drain of Indian nationals
returning from the West, with years of extensive professional, managerial and entrepreneurial
skills in the developing world, has not only given rise to an influx of capital into the country
but is playing the role of technology transfer through a form that no other developing country
is likely to experience, namely, in the form of highly skilled experts and industry leaders
themselves as knowledge carriers. The nature of technical education also gives an edge to
India over other newly industrialized nations in the region. Maintenance of a good all-round
education in science, use of the English language as a medium of instruction, exposure to
Western thought and literature including those in scientific disciplines without interruption in
the post-independence era, etc., have all left India well-placed to compete internationally, even
with advanced Western countries, in all areas of high-tech goods and services, particularly in
ICT.
6.2.3. Costa Rica (based largely on Digital Opportunity Initiative 2001)
Better known until recently for its agricultural produce, e.g. coffee beans and bananas, Costa
Rica has become, through careful planned diversification of the economy, another success story
in Latin America, alongside countries such as Brazil and Mexico. Sound economic and social
welfare policies, combined with a stable political climate, have transformed the country into
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one with a high standard of living. It now exports more Intel microchips than coffee or bananas;
microchips taking 37% of the export share in 1999 compared with 10% and 5% respectively of
the latter, while the exports are continually rising, at roughly 20% per annum.
All this has been a culmination of technology capability building policies put in place on
all fronts over a relatively short time span of around 15 years. To begin with, Costa Rica’s
human capital development programme included actions such as introduction of computing to
the school curriculum, introduction of innovative learning techniques with the help of the nonprofit Omar Dengo Foundation established in 1987, and turning the Costa Rican Technological
Institute (ITCR) into a premier ICT school. Educational achievements of the population are
impressive with an illiteracy rate below 3.5%, and 18.5% of the active population having some
form of tertiary education in 1999.
In addition to the above, the university-supported National Center of High Technology
(CENAT) was created in 1997 to promote innovation and scientific advancements. Commitment
to professionalism in production processes has been demonstrated by actions such as the
formation of a Program for the Improvement of the Software Sector. To underline the safeguards
and respect for intellectual properties, the relevant international agreements have been signed.
Technological infrastructure consists of high-speed submarine cables connecting Costa Rica
to the USA and an efficient Internet infrastructure across the country. Telephone coverage is
one of the best in Latin America with one telephone for every five people on average, compared
to one for 20 people in the neighbouring Central American countries.
The government makes good use of fiscal policies to promote ICT and attract MNEs.
Investment in ICT strategy was around 8.3% of gross national product (GNP) in 1999. The
government has reallocated funds from defence to education and taken the initiative to use ICT
to improve its own services. It has reduced taxes on computers and introduced incentives to
attract foreign companies through free trade zones, going as far as introducing electronics and
the English language into the high school curriculum specifically to attract an MNE, namely
Intel (Slaughter, 2002). As a result, the country now hosts 32 foreign electronics firms including
software and hardware giants such as Microsoft, Lucent and Intel. FDI amounts to US$530
million per annum currently, roughly 5% of GNP.
6.2.4. Reflections
The experiences of the above three countries highlight certain factors that helped them
undertake significant steps towards establishing knowledge-based economies through
investments in ICT capability in varying intensities over short to relatively modest periods
of time. African countries could certainly benefit from these experiences, despite the three
countries not being quite representative of the African context. Broadly speaking, all three
countries highlight, amongst others issues, the importance of the following:
•
•
•
•
•
•
•
•
Visionary political leadership.
The need for a liberal economy and an appropriate stable political framework.
Proactive role of governments.
Instilling a sense of “common purpose” among citizens.
Having a strategy for raising the level of the human capital.
Timely establishment of required technological and other infrastructures.
Having a strategy for phased development of ICT and other high-tech industries.
Promotion of English language for technical education.
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7. Means of Human Capital Development
Among the predominant means of human capital development are formal and non-formal
education and learning-by-doing in real ICT enterprises.
7.1. Human Capital Development Through Formal Education
Basic and certain advanced skills and scientific knowledge acquired through formal
education are an essential prerequisite for technology transfer to any developing country. In
creating such a knowledge- and skill-base, it is inconceivable how this could be achieved in the
medium- to long-run without raising the general level of education of the country’s population
as a whole and without creating a strong science base incorporating certain graded skill levels,
such as “basic technical skills for all, medium-level skills for many and high-level skills for a
few” (Eagle, 2006).
Provision of the basic technical skills, i.e. numeracy, elementary scientific skills and
knowledge of elementary science in addition to literacy, usually comes under the realm of
primary education. Ensuring the attainment of these skills satisfactorily, i.e., in terms of both
quantity and quality, requires primary education to be universal and backed by well-trained
teachers in the relevant subjects, i.e. mathematics and science.
The medium-level skills may be provided through a variety of means, in the formal education
sector through secondary education and vocational training, to varying degrees. Referring to
these two, there is some debate as to the most effective institution for delivering such skills
(Eagle, 2006) and the debate is not necessarily confined to the developing world. In the
developed world, secondary schools accomplish this task to a satisfactory level, particularly in
IT. However, there is no universal formula giving the right mix of these two kinds of institutions
for a particular country. Considering the resource constraints that developing countries in
Africa normally experience, it is a matter of optimizing the available resources to produce an
adequate number of graduates, individually trained to the right skill level and collectively to
the right skill profile (range of skills), bearing in mind the costs (equipping the laboratories and
workshops, and teacher training) and benefits (quality of training, range of competences, and
graduate numbers) of spreading funds possibly across a larger number of secondary schools or
concentrating the funds in a smaller number of specialized vocational training centres (Eagle,
2006).
The highest level of skills is attainable only through tertiary (higher) education, that is,
through universities and other institutions enjoying similar status. The number and the quality
of tertiary educational institutions vary considerably from country to country in the developing
world, depending on the priority attached in each country to higher education and the level
of funding they attract. Given the expenditure levels in Africa in public education, mentioned
earlier, it would be surprising if the same is not true in Africa, if not worse. With such funding
constraints, a crucial issue, particularly in the African context, is how well such institutions
function from the perspective of knowledge and technology transfer. In this respect, though it
needs to be substantiated through field work, there are grounds to believe that the curricula of
a significant number of such African institutions may not have the right subject profile across
specializations and is not geared towards knowledge transfer, particularly in relation to ICT.
For example, many tertiary educational institutions in Africa still concentrate on humanities,
thus overwhelmingly catering for the demand in the civil service and the commercial sector
for administrative personnel. In some African countries, the lopsided emphasis paced on
technology already discussed, is a consequence of continuing the academic traditions prevalent
during colonial times, while in others it is, perhaps, due to a lack of proper appreciation of
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the country’s economic goals. Therefore, there is an urgent need for these African countries
to examine closely the academic content of curricula in higher educational institutions and to
make sure that they reflect accurately the demands of the economy and, in particular, structural
changes foreseen by a modern knowledge-based economy.
Turning to the needs of ICT-based industries, the curricula of higher educational institutions
in Africa need to include subject areas such as IT, computer science, telecommunications,
and electronics and electrical engineering as possible specializations. Obviously, this requires
foundation courses before or during the first year or two of higher education in the areas of
science and mathematics. Furthermore, the courses should be modern and up-to-date in each
subject area with a strong practical and problem-solving element and emphasis on handson experience. Experimental, simulation and computational skills, practical skills in using
industry-standard tools and databases, an appreciation of domain specific knowledge such
as in health care, commerce, public services, etc., should be part of formal higher education
in ICT (Mansell and Wehn, 1998). The courses should conform to the required professional
expectations of the practitioners, by ensuring that the graduates are conversant with modern
industrial tools and methodologies, are aware of ethical and legal matters as they relate to the
profession, and are familiar with national and international requirements for IPR. They should
have the built-in capability to evolve over time by being able to adopt new knowledge and
techniques and to adapt to changing economic and social circumstances. The course content
and delivery should aim for accreditation by appropriate professional organizations.
7.2. Human Capital Development outside Formal Education
With respect to human resource development through training outside formal education, our
concern is primarily higher-level skills and technology-specific forms of training. The providers
of training outside the formal educational sector include the government and private sector
R&D laboratories and other ancillary institutions, on-the-job training provided by foreign and
domestic suppliers and firms (discussed below), government departments, and engineering and
management consultants (Willem te Velde, 2002).
The current state of vocational training provided outside formal education by the private
sectors is poorly understood. According to a World Bank survey, about 60% of firms provide
some formal training in East Asia and Latin America (Miyamoto, 2003). However, there are
disparities with high and low training incidences: 76% firms in Singapore and the Philippines,
65% in China, 46% in Indonesia and 29% in Malaysia.
Despite their beneficial aspects, compared to the formal training offered by formal
educational establishments, such training suffers from major drawbacks. These include the
lack of an independent form of quality control with respect to the course content and delivery,
the ad hoc nature of training courses, the determination of the course content by the immediate
needs of the organization or the firm concerned, etc. However, governments can establish a
more formal framework for regulating the delivery of such training and be directly involved
in order to influence the nature of the training and to make sure that it is in line with country’s
economic objectives. Incentive structures aimed at both personnel and providers of training
can significantly boost the effectiveness of such training (Virmani and Rao, 1997). These may
include material incentives for personnel in the form of rewards and extra income for gaining
additional qualifications and tax concessions and similar incentives to providers for widening
the scope and depth of training.
272
7.3. Learning by Doing
The opportunity to learn by doing is open at all levels, from apprenticeship to experienced
professionals. At lower levels of training, it has the attraction of non-formality and suits
particularly those who prefer learning by immersion and through direct involvement. At
higher levels, it allows experienced professionals to reflect and innovate, thus enriching their
experiential knowledge.
With the growth of ICT, whether due to indigenous ICT firms or driven by inward flow
of FDI and influx of MNEs, learning-by-doing becomes a viable way to extensively raise the
competence of the ICT workforce. Among those likely to receive more training from MNEs are
the highly skilled, educated, better-paid workers and managers (Ritchie, 2002). This explains
why learning-by-doing tends to have a significant effect on innovation and productivity. ICT
being a fast-moving technology and practice in ICT often being ahead of the theory and what
is taught at universities and technological colleges, learning-by-doing is an essential mode
of learning and is perhaps the only means of keeping abreast of technological advances. In
addition to learning through production processes, learning may take place through activities,
for example, marketing and investment in physical equipment.
7.4. Critical Mass of ICT Human Capital
For ICT to make an impact on the economy that is sufficient to tip the balance in favour of
turning it into a knowledge-based economy, it is necessary for African countries to fulfil several
requirements. These are that there is a critical mass of ICT professionals who are capable of
supporting effective use of ICT across the spectrum of economic and social activities; that they
have the means and incentives to pool their expertise as and when necessary; and that they
in turn are supported by professional organizations and appropriate scientific establishments
(universities, research institutions, etc.). The role of these establishments is particularly
important since they eventually enable the country to stay ahead in the ICT industry through
leading research and innovation.
ICT is a technology that permeates through every industry and commercial or other human
activity, requiring all professionals to be competent in ICT skills as users or creators to an
extent that is second only to their first speciality, whether one is a scientist, a banker, a medic
or a librarian. Therefore, for effective utilization of ICT in such activities it is necessary
that professionals in such areas possess the necessary ICT skills to an appropriate level of
competence.
7.5. Effect of ICT on Employment and Skill Upgrading
The growth of ICT can have an effect on mobility within employment and through it on the
constitution of human capital in terms of skills. Some observations drawn from the experience
in the USA experience are provided below solely as evidence, rather than as a source that could
be necessarily relied upon in drawing conclusions in the African context:
Whilst alluding to the need for better insights into skill upgrading and deskilling, the Science
& Engineering Indicators of the National Science Foundation (1998) draws attention to several
important findings, or observations, made by various studies devoted to the impact of IT on
employment in the USA. These are:
• Computerization of the workplace widens the gap between the incomes of those with a
college (higher) education and those with a high school (secondary) education or less.
• It is difficult to isolate the net effect of IT on aggregate employment because of its
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conflicting influence in labour creation, especially in new knowledge-intensive
industries and labour saving, and due to other factors such as business cycles, industry
conditions and labour mobility.
• Employment in IT producing industries was predicted to nearly double over the period
1986–2006, though this was entirely due to employment demand in computer and data
processing services, which outstripped that in the other related industries by over a
four-fold increase, the equivalent figures for other industries being 0.7 for computer
and office equipment, 0.86 for communication equipment and 1.15 for electronic
components.
• Although the development of IT is accompanied simultaneously by deskilling as well
as skill upgrading, the different studies suggest that there is no overall deskilling effect
and skill upgrading is considered widespread.
• In addition to there being a greater demand for workers with analytical capability
and cognitive skills in handling information compared to those with data entry and
data collating capabilities, the employment among the managerial, professional and
technical personnel tends to grow faster than that of unskilled and semi-skilled workers.
• An important factor that drives the demand for skilled labour is the rapid skill upgrading
in computer-intensive industries (i.e. those with the highest levels of computer
investment per worker and attracting most workers with computing skills, and those
with the largest share in overall investment).
• The industries with the largest computer use tend to experience a shift in employee
mix towards more managerial and professional staff from administrative and support
staff.
Deployment of computers for information processing results in some mobility within
employment with an effect on associated skills and the effect of intensity of computer investment
on the demand for skilled labour. These are indicative of secondary effects of ICT investment
on the form and, to a lesser extent, the nature of the human capital.
8. Methodology
This section proposes the kind of information that needs to be gathered as part of the proposed
country research on human capital development efforts of individual African countries, and
outlines how it is to be synthesized and evaluated. Human capital development is a collective
effort led by a tripartite partnership involving the government, the academia and the industry.
We shoud therefore examine how effectively each of these agents performs its role in each
country covered by the study.
The objective of this exercise is to establish human capital indicators, similar to those
discussed earlier, but more specialized for assessing the maturity of human capital in terms of
ICT capability to meet the needs of a country striving to become a knowledge-based economy.
Obviously, if it is to be accomplished properly, this needs to be undertaken as a national effort,
encompassing education at all levels among other issue. This is obviously a huge task and is
unlikely to be within the scope of the proposed project.
Therefore, a simplified approach is proposed here, concentrating more on tertiary education
and other forms of specialized education and, to a limited extent, on secondary education. To
curtail the scope, this study does not cover primary education.
The majority of human capital indicators already discussed are based solely on quantitative
data such as student enrolment rates and numbers of R&D workers. An exception is the work
of Nair and Kuppusamy (2004), which attempts an assessment of the quality of education by
274
means of a “competitive educational index”, designed to give a measure of the appropriateness
of country’s educational system for meeting the demands of a competitive economy. It was
based on a survey of responses by 2,500 senior executives.
We consider the quality of education an important attribute in assessing how well the object
under study, whether it is an academic department or a company training office, is equipped to
serve the task of building an ICT-driven economy. However, our approach will differ from that
used in Nair and Kuppusamy (2004) in several ways. Firstly, it will not be based on responses
by executives or other personnel to a simple questionnaire, though such a questionnaire-based
approach could be a part of it. Our approach will be based primarily on fieldwork, whereby
researchers will gather the required information by a variety of means such as consultations
of course documentation; published examination results; interviewing teachers, professors,
university administrators, government officials and company directors; and using any other
information available. Secondly, it will gather both quantitative and qualitative data and
information from the relevant sources in a systematic manner. The information to be sought
will be carefully selected so that it focuses on ICT capability assessment, and its amount is
manageable and sufficient for the purpose.
Important note: The information listed below is only tentative and indicative at this stage.
This is to be revised in consultation with AERC.
8.1. A List of Countries for Case Studies
Below is a list of countries proposed for detailed country studies. They cover several regional
categories, reflecting also the colonial backgrounds to a limited extent. The list does not reflect
any rank order. The countries to be chosen would depend on the number of countries that the
project is aimed at, as well as on the availability of researchers in the countries concerned,
though it makes sense to choose at least one country from each category.
The countries are Ghana and Nigeria (Anglophone Western Africa); Cameroon, Côte
d’Ivoire, Burkina Faso and Senegal (Francophone Africa; Mauritius is also included in this
category although it is also an Anglophone country and an India Ocean state); Kenya, Tanzania,
Ethiopia and Uganda (Eastern Africa); Rwanda (Central Africa); and South Africa, Zambia,
Botswana and Namibia (Southern Africa).
8.2. Information to be Gathered on Tertiary (Higher) Education in ICT
The information to be gathered should address both quantitative and qualitative criteria.
The relevance of the proposed quantitative data is perhaps self-evident. The qualitative data
are aimed at forming an overall picture of the institution concerned based on the competence of
teaching staff, their familiarity with the latest technical know-how, the academic standards, the
academic QA procedures, the learning environment, etc.. A higher score on these criteria would
give greater credibility to student attainment levels. In addition, competence of academic staff
in research would give a higher score to country’s R&D capability.
This will be limited to a representative sample of tertiary educational institutions drawn
from a range of performance levels in ICT.
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8.2.1. Learning and Teaching
Quantitative information:
a. Enrolment and graduation numbers in ICT related courses, their comparison against
other disciplines (engineering, business studies, law, medicine, humanities, etc.), the
relationship of actual numbers with the those required for industrial needs and the
institutional capacity.
b. Annual enrolment and graduation growth rates in ICT related courses.
c. Staff/student ratio, its comparison against the same in other disciplines, its growth in
time and in relation growth in student numbers.
d. Destinations of graduates in ICT and related courses.
e. Plans for expansion of ICT courses to meet increasing demand.
Qualitative information:
a. Academic qualifications of staff (academic and professional).
b. Curriculum and syllabus (subject profiles, pre-requisites and post-competences or
learning outcomes).
c. Academic standards (examination procedures including moderation, external examiner
reports).
d. Academic quality assurance (student and staff evaluation of courses, actions taken in
response).
e. Learning environment (stock of academic books and other literature in libraries,
laboratory facilities: hardware and software).
f. Accreditation of degrees by national and/or third country professional bodies.
8.2.2. Staff and Departmental Research
a. Publication output (scientific papers, academic books and other scholarly articles
produced by the academic staff).
b. Numbers of research students registered for higher degrees and their graduation rates.
c. Research grants (the numbers, amount of funds and the number of staff employed in
each).
d. Industrial consulting activities.
a.
b.
c.
d.
Subject profiles of publication output.
Citation by external authors of publications by academic staff.
Independent evaluations of research grants on completion.
Collaborations with external and international institutions.
8.2.3. Contribution to Professional Development
Professional development activities are required to assess the learning by industrial workers,
in conjunction with activities listed in the section below on “Information to be gathered on
MNEs and FDI”.
a. Industrial courses given and their subject areas.
b. Incidence and intensity.
c. Attendance levels.
276
d. Employment/company distribution of attendees.
a. Subject areas.
b. Prerequisite (attendee) qualifications and learning outcomes.
c. Feedback by attendees.
8.3. Information to be Gathered on Secondary Education in ICT
This will be limited to a small representative sample of secondary schools to be agreed
locally within each country and will be confined to learning and teaching aspects
a. Enrolment numbers of students.
b. Student numbers attending ICT classes and the proportion of students taking ICT as a
subject in final examinations.
c. Student numbers attending science classes and the proportion of students taking
science as a subject in final examinations.
d. Staff/student ratio in ICT classes.
e. Destination of students on completion of secondary education (specially, student
numbers entering ICT courses, and ICT-related courses, at tertiary educational
institutions and at vocational institutions).
a. Academic qualifications of staff teaching ICT (teacher training, qualifications in ICT
or sciences).
b. Place of ICT and science in the curriculum and syllabus.
c. Academic standards (examination bodies and procedures).
d. Learning environment (library facilities for ICT, laboratory facilities: hardware and
software).
8.4. Information to be gathered on MNEs and FDI
a.
b.
c.
d.
e.
f.
Incidence, intensity and the type of training provided by MNEs and domestic firms.
Beneficiaries of training.
Source of finance for training.
Government activities in support of such training activities.
Growth rate of inflow of MNEs and FDI over time.
Survey of the forms of MNE inflow (e.g. mergers and acquisitions (through equity
acquisition in private companies and privatization of public enterprises) verses
Greenfield investment (new capital investments though newly formed subsidiaries)).
a. The nature of training (operational training, higher-order training activities: design and
manufacture, management, planning, etc.).
b. Identification of specific areas of knowledge targeted by the training activities for
knowledge transfer.
c. Effectiveness of government role in MNE-driven training activities.
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277
d. Evidence of a virtuous circle of human capital formation and increased inflow of
MNEs.
8.5. Information to be Gathered from Government Officials
a. Government budget on ICT education at tertiary education, absolute as well as relative
to the overall budget in tertiary education.
b. Government budget on ICT education at secondary education, absolute as well as
relative to the overall budget in secondary education.
c. Government targets on ICT graduates, absolute as well as relative to the targets in
other subject areas.
d. How the above are met nationally.
e. Plans for expansion of ICT education and training to meet increasing demand.
f. Leading academic institutions providing ICT education and their funding levels for
ICT.
g. Distribution of ICT educational budget across institutions in (d) above.
h. The companies with which the government liaises regarding ICT education both within
formal educational system and within the industry.
i. A list of educational activities provided by the industrial sector.
a.
b.
c.
d.
e.
Government ICT policies and programmes, if any.
Student admission criteria for different tertiary educational institutions.
Policies in quality assurance in teaching.
The nature of educational activities provided by the industrial sector.
Government support for research within ICT departments.
8.6. Synthesis and Evaluation
From an analytical point of view the above constitute a list of quantitative and qualitative
attributes, respectively with numerical and non-numerical values, on tertiary education,
secondary education, training provided by industrial organizations and private companies and
government role in education and training. Our aim is to cluster these attributes into a number
of groups, so that each group signifies one of the following aggregate attributes:
a. Academic standard of graduates in ICT and ICT-related disciplines upon completion
of studies (knowledge, competence, professional accreditation and employability).
b. Sufficiency of graduates in ICT and ICT-related disciplines to meet industrial needs
nationally.
c. Opportunities for high quality professional development for ICT workers in industry.
d. R&D capacity in ICT departments (and elsewhere, if applicable) and their performance.
e. Sustainability of required ICT education (national expenditure, commitment, teacher
training, maintenance of a suitable learning environment, expansion of education and
training with expanding role of ICT in economic development).
Each one of them will be mapped to values on an appropriate numerical scale. The above
set of aggregate attributes should produce a profile of each country’s ICT capability. In most
cases, this should be an adequate measure of the overall performance of a given country in
ICT capability. However, if necessary, a single overall numerical score may be derived for
the complete set of attributes by taking a weighted sum of the values of the above aggregate
278
attributes. The approach to be followed in arriving at (a) to (e) above, or a single overall
numerical score, would be similar that followed by United Nations agencies in deriving HDI
(see UNDP, 2005).
It would have been ideal if the proposed approach could be tested first on a number of
countries, the ranking of ICT capability of which is not in question. These countries may be
drawn from both developing (outside Africa) and developed countries. If the approach produces
the expected ranking, this would give some credibility to the broad validity of the approach.
Unfortunately, this is not possible as part of this project. Therefore, the analysis should be
conducted by weighing the information not only quantitatively but also judiciously, constantly
questioning the outcome of each step critically.
9. Summary and Conclusions
Many countries in the developing world in Asia and Latin America are taking the achievements
of ICT into great advantage in turning themselves into vibrant modern economies producing
hi-tech goods and services, thereby bringing prosperity to their nations. This paper examined
how to develop an ICT strategy for Africa, with particular reference to its human capital, in
order to enable it to pursue a similar path of development. A specific task of this framework
paper is to form a basis for several country studies aimed at establishing accurately the current
state of the human capital in African countries in the area of ICT. Such detailed country case
studies would be a significant input to formulation of policies directed at improving both
the human capital of African countries with respect to ICT and their overall technological
capability. This is essential if they are to position themselves better to implement ICT inspired
economic strategies for the benefit of their own economies. Since not all the African countries
have the economic capacity to have their own institutions, it make sense to develop sustainable
ICT capability development policies for Africa establishing, for example, regional institutions
to train the necessary ICT professionals and to support ICT enterprises and activities. Regional
technical universities of excellence could be a part of such an institutional structure.
This paper begins with an overview of major issues related to human capital development
in Africa. The paper highlights the need for African governments first to develop a strategy
towards the development of ICT with a view to securing the maximum benefits to the economy
and, where feasible, transforming their economies into knowledge-based economies along the
lines undertaken by some of the successful developing countries in ICT capability building.
The paper points out two possibilities for ICT capacity building: use of ICT applications for
efficiency gaining and production of ICT goods for internal market and export, but emphasizes
their different roles in the economy. It also highlights the need to address knowledge gaps in the
country using knowledge transfers and, concurrently, the need to address information problems
so that those who really matter, i.e., the farmers, the industrialists and the entrepreneurs,
have access to information, enabling them to draw the maximum benefit from the available
information for productive work and thus to drive the economy forward.
As human capital development is inextricably linked to capability development as the
ultimate goal, it is essential to understand how they relate to and enrich each other. The paper
examines different facets of this relationship, the dependence of technological capability and
human capital on other capabilities such as technological and institutional infrastructure, the
role of national governments in bringing about technology transfer, and various mechanisms
of technology transfer. In this respect, the paper underlines the importance of the following:
• The need for a conducive socio-economic environment for founding a knowledgebased economy (macro-economic stability, favourable conditions for foreign
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investments, liberalization of the telecommunication sector, good industrial relations,
trade and financial liberalization).
• The need to create an advanced communication and technological infrastructure.
• The need to create an appropriate institutional infrastructure to support ICT technological
capability (professional organizations, body for protecting IPR and patents).
• Development of human capital through education at all levels, especially in ICT and
technological disciplines and training.
• Promote innovation and R&D activities both within academia and industry.
• The need for national commitment bound by a “common purpose” and inspired by a
visionary leadership.
• Coordinated action on capability building with the full involvement of government,
industry and academia.
In pursuing technology capability development and human capital development, it is
important to be able to measure progress and the effectiveness of the effort that a country puts
into them. The paper examines some of the indicators produced for this purpose by public and
international organizations and researchers in development studies. Using these indicators and
the data available in the public domain, the paper then highlights the current state of human
capital in Africa from a general point of view and draws attention to some of the notable
weaknesses in human capital development, especially in terms of expenditure on education,
literacy, the number of graduates in technological disciplines, etc., compared to other countries
in the developing world which have made significant progress in the development of ICT to
economic advantage.
In turning attention to country research aimed at establishing the current state of human
capital from the point of ICT, the paper underlines the importance of paying attention to
qualitative measures, in addition to the quantitative measures used in other more general
studies on human capital development. The paper then proposes some tentative quantitative
and qualitative attributes for gathering information through fieldwork in country studies on
tertiary education, secondary education, training provided by industrial organization and
private companies and government role in education and training.
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ga
b
U
m
Zi
All (1990; % of GDP)
All (2000-02; % of GDP)
Secondary (1990; % of all levels)
Secondary (2000-02; % of all levels)
Tertiary (1990; % of all levels)
Tertiary (2000-02; % of all levels)
Mexico: 5.3% of GDP
during 2000-02
India: 4.1% of GDP
during 2000-02
Mexico: tertiary 19.6% of all
during 2000-02
India: tertiary 20.3 % of all
during 2000-02
Mexico: secondary 28.7% of
all during 2000-02
India: secondary 40.1% of all
during 2000-02
Figure 1. Public expenditure on education in African countries with Medium Human Development (Source: UNDP Human Development Report, 2006;
UNDP, 2005)
Public expenditure on education
282
ar nd n ho ia ya ia ea al ia da la ea in re of wi ia ue di ia lic so ne er
sc ila roo sot itan en mb uin neg iger an ngo ritr en Ivoi p. ala mb biq run iop ub Fa eo Nig
a
B '
z e
r K a G e N w A E
d Re M Za am Bu Eth Rep ina ra L
ag wa m Le au
G
R
S
k r
te U.
ad S Ca
M
oz
ô
an Bur Sie
M
C ia,
M
c
i
r
an
Af
nz
al
a
r
t
T
en
C
0
5
10
15
20
25
30
35
40
All (1990; % of GDP)
All (2000-02; % of GDP)
Secondary (1990; % of all levels)
Secondary (2000-02; % of all levels)
Tertiary (1990; % of all levels)
Tertiary (2000-02; % of all levels)
India: 4.1% of GDP
during 2000-02
Mexico: 5.3% of GDP
during 2000-02
Mexico: tertiary 19.6% of all
during 2000-02
India: tertiary 20.3% of all
during 2000-02
Mexico: secondary 28.7% of
all during 2000-02
India: secondary 40.1% of all
during 2000-02
Figure 2. Public expenditure on education in African countries with Low Human Development (Source: UNDP Human Development Report, 2006; UNDP,
2005)
Public expenditure on education
45
- Nissanke -
283
M
0
20
40
60
80
100
120
us
iti
r
au
e
ap
C
e
rd
Ve
h
ut
So
lG
ri a
o
t
ua
Eq
a
ric
Af
a
ne
ui
ia
ib
m
a
N
a
an
w
ts
Bo
om
C
os
or
G
na
ha
go
on
C
go
To
a
nd
a
g
U
m
Zi
e
bw
a
b
Adult rate (1990)
Adult rate (2003)
Youth rate (1990)
Youth rate (2003)
India: 61% adult
rate in 2003
India: 76.4% youth
rate in 2003
Brazil: 88.4% adult
rate in 2003
Brazil: 96.6% youth
rate in 2003
Figure 3. Literacy rates in African countries with Medium Human Development (Source: UNDP Human Development Report, 2006; UNDP, 2005)
Literacy rate
284
ar nd on ho ia ya ia al ia da la ea in re of wi ia e ue di ia lic au ad ali so ne er
sc ila ro sot itan en mb neg iger an ngo ritr en Ivoi p. ala mb f th biq run iop ub iss Ch M Fa eo Nig
a
B '
z e
r K a e N w A E
L
a
d Re M Za p. o am Bu Eth Rep a-B
ag wa m Le au
G S
R
i n ra
e oz
te U.
e
ad S Ca
rk ier
M
n
ô
R
n
,
i
u
a
M
. M
C ia
B S
ric Gu
n
em
Af
za
D
l
n
,
t ra
Ta
go
en
on
C
C
0
10
20
30
40
50
60
70
80
90
Adult rate (1990)
Adult rate (2003)
Youth rate (1990)
Youth rate (2003)
India: 61% adult
rate in 2003
India: 76.4% youth
rate in 2003
Brazil: 88.4% adult
rate in 2003
Brazil: 96.6% youth
rate in 2003
Figure 4. Literacy rates in African countries with Low Human Development (Source: UNDP Human Development Report, 2006; UNDP, 2005)
Literacy rate
100
- Nissanke -
285
M
r
au
0
10
20
30
40
50
60
70
80
90
a
e
a
a
ia
os
go
on
na
pe
rd
ib
an
ric
ne
ci
or
ab
ha
on
w
m
ui
n
Af
Ve
i
m
s
C
a
G
G
t
o
h
e
Pr
N
lG
C
ut
Bo
d
ap
ri a
n
C
o
So
a
t
é
ua
m
Eq
To
o
Sã
us
iti
a
e
go
nd
bw
To
a
ga
b
U
m
Zi
Primary enrolment ratio (2002/03)
Secondary enrolment ratio (2002/03)
Tertiary Maths, Sci & Eng out of all (1998-03)
Costa Rica: Maths, Sci. & Eng. 31% of
tertiary education in 2002-03
Indonesia: Maths, Sci. &
Eng. 40% of tertiary
education in 2002-03
Indonesia: secondary enrolment
70% in 2002-03
Costa Rica:
primary enrolment 85% and
secondary enrolment 81% in 2002-03
Indonesia: primary enrolment
93% in 2002-03
Figure 5. Primary and secondary student enrolment and student numbers in tertiary education in African countries with Medium Human Development
(Source: UNDP Human Development Report, 2006; UNDP, 2005)
Enrolment or student ratio in %
100
286
ar nd ho ia ya ia ea al ia da la a in re of wi ia ue di ia lic au ad ali so e er
sc ila sot itan en mb uin neg iger an ngo ritre en Ivoi p. ala mb biq run iop ub iss Ch M Fa eon Nig
a
B ' e M a m u th e p B
z
r
a
L
d R
Z a B E R aag wa Le au K G G Se N Rw A E
na a
z
ki err
te U.
e
ad S
M
r
n
o
ô
n
i
,
i
M
C ia
M
ca u
Bu S
fri G
an
A
z
l
n
tra
Ta
en
C
0
10
20
30
40
50
60
70
80
90
Primary enrolment ratio (2002/03)
Secondary enrolment ratio (2002/03)
Tertiary Maths, Sci & Eng out of all (1998-03)
Costa Rica: Maths, Sci. & Eng. 31% of
tertiary education in 2002-03
Indonesia: Maths, Sci. &
Eng. 40% of tertiary
education in 2002-03
Indonesia: secondary enrolment
70% in 2002-03
Costa Rica:
primary enrolment 85% and
secondary enrolment 81% in 2002-03
Indonesia: primary enrolment
93% in 2002-03
Figure 6. Primary and secondary student enrolment and student numbers in tertiary education in African countries low Medium Human Development
(Source: UNDP Human Development Report, 2006; UNDP, 2005)
Enrolment or student ratio in %
100
- Nissanke -
287
M
0
50
100
150
200
250
300
350
400
r
au
e
ap
C
us
iti
h
ut
So
e
rd
Ve
lG
ri a
o
t
ua
Eq
a
ric
Af
a
ne
ui
G
a
ia
os
pe
ib
an
ci
or
w
m
n
i
a
ts
om
Pr
N
C
Bo
d
an
é
m
To
o
Sã
on
ab
G
na
ha
go
on
C
go
To
a
e
nd
bw
a
ga
b
U
m
Zi
Telephones (1990)
Telephones (2003)
Mobile (2003)
Internet (2003)
Mexico: 120 Internet
users in 2003
Mexico: 160 telephone users in
2003
Malaysia: 182 telephone users
in 2003
Mexico: 295 mobile telephone
users in 2003
Malaysia: 344 Internet
users in 2003
Thailand: 394 mobile telephone
users in 2003
Figure 7. Use of communication technologies in African countries with Medium Human Development (Source: UNDP Human Development Report,
2006; UNDP, 2005)
No. of users per 1000 people
288
l a a a a n
i a c u d li o e r
i a
r d n o a a a a
f
e
ca an oo th ni ny bi e ga ri nd ol re ni ire . o aw bi the u nd pi bli sa ha Ma as on ige
F Le N
as zil er eso rita Ke am uin ene ige wa ng Erit Be 'Ivo ep al am of biq uru thio pu Bis C
g
A
N R
e ad . R M Z p. am B E
a wa am L au
G G S
na rra
i
R
d
e
e
z
k
t
e
U
a S C
r ie
M
ô
an in
M
. R Mo
C ia,
Bu S
m
ric Gu
n
f
e
a
lA
nz
,D
ra
Ta
go
nt
n
e
o
C
C
0
20
40
60
Telephones (1990)
Telephones (2003)
Mobile (2003)
Internet (2003)
Peru: 67 telephone users in
2003
Thailand: 105 telephone and
111 Internet users in 2003
100
80
Peru: 106 mobile telephone and
104 Internet users in 2003
120
Thailand: 394 mobile telephone
users in 2003
Figure 8. Use of communication technologies in African countries with Low Human Development (Source: UNDP Human Development Report, 2006;
UNDP, 2005)
No. of users per 1000 people
140
- Nissanke -
289
0
1
2
3
4
5
6
Cape Verde
0.2
Botswana
0.3
Uganda
0.2
Brazil: US $0.6 per person
South Africa
1.1
Madagascar
0.1
Swaziland
0.1
Malaysia: US $0.8 per person
Lesotho
5.9
Kenya
0.4
Mozambique
0.8
Figure 9. Receipts of royalties and license fees in African countries with Medium and Low Human Development (Source: UNDP Human Development
Report, 2006; UNDP, 2005)
Royalties in US$ per person in 2003
7
290
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
Mauritius
0.3
South Africa
0.7
Uganda
0.8
Madagascar
0.1
Chile: 0.5% of GDP
Malaysia: 0.7% of GDP
Burkina Faso
0.2
Figure 10. Research and Development Expenditure in African countries with Medium and Low Human Development (Source: UNDP Human
Development Report, 2006; UNDP, 2005)
R&D expenditure as % of GDP in 1997-2002
0.9
- Nissanke -
291
0
50
100
150
200
250
300
e
ap
C
e
rd
Ve
131
h
ut
So
a
ric
Af
192
go
on
C
29
Thailand: 289 workers
a
nd
a
g
U
25
o
th
so
e
L
42
Mexico: 259 workers
G
a
ne
ui
286
m
Za
an
ric
f
lA
ra
t
en
C
a
bi
47
lic
ub
p
e
R
47
na
ki
r
Bu
so
Fa
17
Figure 11. Researchers engaged in Research and Development in African countries with Medium and Low Human Development (Source: UNDP
Human Development Report, 2006; UNDP, 2005)
R&D researchers per million people during 1990-2003
350
292
0
20
40
60
80
100
43.3
53.2
55.8 57.2
67.5
60.7
68.8
46.4
68.8
65
51.9
86.7
55.7
67.4
61
75.2
66.5
100
72.4
74.8
63.4
84.2
80.9
i
r
r
a co
a ea an
a
lic
na nd
go rea pia ana nya tho eria ca itius ibia ige
pe ne rica and ogo nda
ol
di
i
am ic
r
s
ci eo
l
f
o ib
r
In Ko Jap etn a R ex ng swa uru pub on rit hio
h Ke
T ga
a
N
n
m
s
i
u
L h A a zi
C
r
E Et
a
G
L
A ot
M
U
B Re
ag Ma
Le
a
P
N
t
Vi ost
w
r
d
r
u
B
d
S
a
n
e So
C
n
i
a
M
a
S
ric
e
m
Af
o
l
T
t ra
ao
en
S
C
53
65.4
71.6
77.3
Average of developed countries: 57.8%
Asian and Latin American sample average: 54.7%
African sample average: 69.8%
Figure 12. Students studying humanities, education, social sciences, business and law (Source: Chinien, 2002)
Students studying soc. sci., edu. & humanties (in % of all)
120
- Nissanke -
293
0
5
10
15
20
25
30
35
40
45
20.5
19.7
24.1
30.8
18.3 18.6
9.6
15
11.2
17
12.4
25.5
29
8
11.2
19.8
24
10.3
6.7
7.7
17.3
10.9
7.6 7.8
r
r
a an
a co
a
la
di
lic
na
go ea pia ana nya tho eria ca itius ibia ige
pe one rica and ogo nda
di
i
am ic
re
s
ci
f
o ib
go wa run ub on ritr
o
il
r
i
e
In Ko Jap etn a R ex
h
e
T
a
N
n
s
m
n
u
ga
K
C
g
ri a L h A az
E Eth
e
a
G
L
A ots Bu
ep
M
a
U
a
L
P
Vi ost
t
N
w
R
r
M
d
u
r
B
d
S
a
e So
C
an
M
an Si
ric
e
f
m
lA
To
t ra
o
n
e
Sa
C
20.1
44.3
Figure 13. Students studying science, engineering, manufacture and construction (Source: Chinien, 2002)
Students studying science and engineering (in % of all)
50
294
0
2
4
6
8
10
12
14
16
9.8
3
11.5
12.5
9.7
14.4
4.9
13.3
10.2
17
3.2
11.7
10.4
8
7.3
12.8
8.2
6.1
4.9
0
6.8
10.6
5.3
5.9
2.4
r
r
a an
a co
a
la
di
lic
na
di
i
am ic
re
s
ci
f
o ib
o
il
r
i
e
h
e
T
a
N
n
s
m
n
u
ga
K
C
g
ri a L h A az
E Eth
e
a
G
L
A ots Bu
ep
M
a
U
a
L
P
Vi ost
t
N
w
R
r
M
d
u
r
B
d
S
a
e So
C
an
M
an Si
ric
e
f
m
lA
To
t ra
o
n
e
Sa
C
15.1
Figure 14. Students studying science (Source: Chinien, 2002)
Students studying science (in % of all)
18
- Nissanke -
295
0
5
10
15
20
25
30
35
17.5
19.7
12.6
18.3
8.6
4.2 4.7
1.7
1
9.2
13.8
18.6
3.9
7
15.8
4.2
1.8
0
0.9
6.7
5.6
1.7
5.4
r
r
a an
a co
a
la
di
lic
na
di
i
am ic
re
s
ci
l
f
o ib
o
r
i
e
h
T
a
N
n
s
m
n
i
p
h
u
ga
Le h A azi
K
C
r
E Et
a
G
L
A ots Bu
e
M
U
ag Ma
Le
a
P
Vi ost
t
N
w
R
r
d
u
r
B
d
S
a
n
o
e
C
M
S
an Si
ca
e
f ri
m
A
l
To
t ra
ao
en
S
C
5
34.5
Figure 15. Students studying engineering, manufacture and construction (Source: Chinien, 2002)
Students studying eng., manuf. and construction (in % of all)
40
296

- African Economic Research Consortium

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