South Africa has always prided itself on being more comparable to countries in Europe and the US than its neighbours on the continent, but that might be changing given anaemic-at-best growth in developed countries while Africa has powered through the credit crisis and has been developing disruptive sources of technologi-cal innovation.
In the January to March period, South Africa’s economy – the biggest in Africa – grew 2.7% on a seasonally-adjusted and annualised basis, compared with a 3.2% rise in the last three months of 2011.
The International Monetary Fund, part of supra-national organisation the World Bank, forecast in January that Africa would post 5.4% growth this year while Europe flirts with a double-dip recession and the US struggles with its debt burden.
Africa’s growth has remained above 5% in the past eight years, while real gross domestic product rose by 4.9% a year from 2000 to 2008, more than twice its pace in the 1980s and 1990s, according to management consultancy McKinsey.
The source of the growth has been put down to strong prices for its natural resources, better governance and growing disposable incomes.
But the continent is linking up through faster broadband internet access with proposed undersea cable links joining South Africa to the other Brics nations (Brazil, Russia, India and China) as well as to another 21 African nations.
This connectivity will bring in one of the final remaining major populations to the technology revolution and South Africa is looking to remain an innovation hub for the continent.
Switzerland-based non-government organisation the World Economic Forum ranked South Africa 50th this year, up four places from its Global Competitiveness Report 2011-2012.
The country remained the highest-ranked in sub-Saharan Africa and second-placed among the Brics economies.
The forum said South Africa “benefits from the large size of its economy, particularly by regional standards (it is ranked 25th in the market size pillar). It also does well on measures of the quality of institutions and factor allocation, such as intellectual property protec-tion (30th), property rights (30th), the accountability of its private institutions (third), and its goods market efficiency (32nd)…
“South Africa also does reasonably well in more complex areas, such as business sophistication (38th) and innovation (41st), benefiting from good scientific research institutions (30th) and strong collaboration between universities and the business sector in innovation (26th).”
Although the forum added that “efforts must also be made to increase the university enrolment rate of only 15%, in order to better develop its innovation potential”.
The country has developed research joint ventures between its universities and a wide variety of companies, from Nestlé in nutrition to Nokia in information and communication technology to Johnson Matthey in advanced industrial technology.
Barry Murrer, director of the Johnson Matthey Technology Centre, said at the PraxisUnico conference last month that Johnson Matthey was concentrating on the top universities as part of its innovation programme, including developing partnerships in South Africa with academic institutions because of the quality of research and the level of government funding supporting science.
Netherlands-based nanosatellite company Isis is also looking to set up a development and manufacturing part-nership with InnovUS, the technology transfer company of South Africa’s University of Stellenbosch, to make nanosatellite systems.
Satellite production is a high-technology, high-skills niche which the government has earmarked as an area for human capital development and a way to increase investment in the country.
The country’s Science and Technology Minister, Naledi Pandor, said the Treasury had put R100m for satellite development.
The government has also been looking internationally for ways to encourage local entrepreneurs.
South Africa-based technology platform Personera has raised $1.4m in its series A round from quasi-corporate venturing unit Hasso Plattner Ventures Africa, which was set up by one of the co-founders of software group SAP, while Intel Capital, the corporate venturing unit of US-listed chip maker Intel, made its first investment in South Africa by providing $5m as a convertible loan to Johannesburg Stock Exchange-listed Allied Technologies (Altech), part of the Altron Group. US-listed technology company IBM is also preparing to join intel in South Africa, where its venture capital group will open later this year with a SmartCamp programme for local entrepreneurs and ahead of potential investing as a limited partner in the country’s venture capital funds.
In March, South Africa’s deputy minister of trade and industry Elizabeth Thabethe said at the country’s Small Enterprise Development Agency Incubation Day she was encouraging incubation as a way of boosting entrepreneurialism having seen the “number of business incubators is growing rapidly over the world, from 200 at the beginning of the 1990s to more than 8,000 worldwide today”.
By helping incubate entrepreneurs, South Africa is looking to encourage the next generation of growth businesses across a society referred to as the “rainbow nation” for its plurality of ethnicities, including those who formerly ran the country under apartheid until 1994 – Afrikaners and English-speaking whites.
In his article Lost tribe of the Rainbow Nation, writer Simon Kuper for news provider Financial Times said Afrikaners could flourishas individuals but might dissolve into white, English-speaking South Africa.
And some of the companies that survived the economic sanctions imposed by the rest of the world during the apartheid era have thrived in the era of multiracial elections partly by using corporate venturing.
South Africa-based media company Naspers, whose first editor went on to introduce apartheid in his latter career as a politician in order to help poor Afrikaners, has used its Myriad Investment Holdings (MIH) corporate venturing unit to invest primarily in emerging markets round the world.
MIH has backed China-based media group Tencent, Russia’s DST (formerly Digital Sky Technologies) and Abril in Brazil.
Peers, such as energy group Sasol and diamond company De Beers’s E6, are also launching or expanding their corporate venturing programmes.
And they have also had success with local businesses. Financial services group Sanlam and conglomerate Remgro (an investment group built off a tobacco business) backed South Africa-based lender Fundamo before its sale to credit card supplier Visa for $110m.
Fundamo is base-of-the-pyramid business model tapping into an audience under-banked by traditional financial services firmsbut mobile and more used to using technology to carry out transactions than many in more developed markets.
This is an opportunity for Visa to bring so-called reverse innovation back to developed countries as Fundamo has already five million subscribers in 40 countries.
A similar opportunity exists for South Africa-based iced-tea maker Bos, which sold a fifth of the company to Invenfin,the corporate venturing unit of local conglomer-ate Remgro.
However, in order to enhance its competitiveness the country will need to address some weaknesses, according to the World Economic Forum, as it said South Africa ranked 95th in labour market efficiency, with poor workforce health and high crime.
Fact box
Population: 50.5 million
GDP: $357.3bn
GDP per capita: $7,158
GDP as share of world total: 0.71%
Source: World Economic Forum Global Competitiveness Report 2011-2012