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Will software piracy threaten the growth of ICT in Africa?

In an article recently published by “Jeune Afrique” (here is the link for those of you reading French), they describe how in Tunisia you can buy pirated software in public stores.  The article then mentions about 30 other similar shops in Tunis full of people buying pirated software. In those stores, a software that is priced at thousands of dollars is sold for five to ten dollars. Actually the biggest piracy is that of music/movies CDs and DVDs sold in more than 35,000 locations across the country.
In this post, I’d like to focus on the software piracy. And this post is not particularly targeted at Tunisia as this happens in all the countries in the region and in other emerging markets like China.
So the good news is that those stores are full of people, confirming that the ICT (and digital media) market is growing in the region. The bad news is that those people buy pirated content and don’t pay the full price, or at least that is the thinking in the developed countries.
The reaction of developed countries to this situation is to require that those countries put in place the laws to protect Intellectual Property (IP) and threatening the users buying pirated versions. In fact Tunisia recently adopted such a law but that did not change the situation. These stores are publicly accessible and the law does not seem to be applied.
So most Independent Software Vendors (ISVs), i.e. the companies that develop those software and sell it for hundreds or thousands of dollars don’t see that revenue to which they are legally entitled.
For those ISVs that want to take the opportunity to increase their revenue by penetrating the growing ICT market in Africa, there is no question that piracy get them thinking twice before making that investment.
Everything I said so far is the superficial analysis of the situation. It typically results from developed countries trying to apply in Africa what they do at home without understanding the local situation. Actually, part of the answer is provided by a customer of one of those stores interviewed in the article: “I know that they are pirated, but I can not afford programs such as AutoCAD or InDesign, they are too expensive. I would have to invest about EUR 4000 for software to be able to work. It is not within my means, but here I have it for 5 euros. Somehow, I find it normal to choose the pirated versions, because the publishers are filling their pockets on the backs of consumers and, with such prices, they create a selection by money”.
Most ISVs in developed countries do not understand how to do business “at the bottom of the pyramid”. In his book “The Fortune at the Bottom of the Pyramid“, C.K. Prahalad makes a great case on how to serve the world’s poorest people AND make a profit. “The rich use cash to inventory convenience. They can afford, for example, to buy large bottle of shampoo to avoid multiple trips to the store. The poor have unpredictable income streams. Many subsist on daily wages and have to use cash conservatively. They tend to make purchases only when they have cash and buy only what they need for that day.”
The first thing to do to address the piracy problem is to adapt the pricing to the region. Clearly selling software at $4,000 is not affordable for most people in the region. “This requires to start with a radically new understanding of the price-performance relationship compared to that currently employed in developed markets. This is not about lowering prices. It is about altering the price-performance”. An example is Microsoft’s Windows XP Starter Edition offered in developing countries. It is a low-cost version of Windows, but users can run only three programs or have three windows opened at once. Performance and price are adapted to local need. ISVs then may fear that those low cost products be sold in developing countries competing with the “same” product sold there at a higher price. That risk is reduced by different performance, the Windows XP starter edition running only three programs at once would probably not satisfy the more sophisticated needs of users in developed countries.
Another way to address the pricing problem are free open source software (OSS). Linux is a free open source operating system, and actually, the best Linux version in the market is Ubuntu developed by an ISV originating from South Africa. The challenge for OSS is that they have very little visibility in emerging markets. Consumers in those markets are very influenced by recognizable brands. The reason is that they have no access to other information about products than brand advertisement. It is very unlikely that free OSS can spend the money to establish their brand and compete against the mega marketing power of Microsoft. This will change over time when access to Internet will increase (see my posting of August 31, 2010)
The second thing that can, and in my opinion SHOULD be done by ISVs to counter piracy is to adapt their software to local needs: local languages, local currency, local culture, desired local “look-and-feel.”,etc. This is called “localization” of the software. Again  Microsoft announced the Local Language Program, a global initiative to partner with governments to localize Windows in regional languages. Localized software in local languages and sold at a lower cost in emerging market are even more unlikely to be sold in Europe or US. But more importantly, localized software will deliver more value and be more attractive to local buyers.
But probably the best protection against piracy is still to come and will be provided by cloud computing. Cloud computing is a new consumption and delivery model for IT. SMEs can buy access to IT resources from cloud providers on a pay-by-usage basis. End-users no longer need expertise in, or control of the technology infrastructure “in the cloud.”   
For SMEs, the traditional paradigm for procuring IT was to buy their own software and hardware. Now the SME only needs a good Internet connection to remotely access the IT infrastructure that is located in the cloud provider’s data center.  The cloud provider can offer access to IT services for a lower cost than an on-premise IT infrastructure. This low cost is achieved by the cloud provider’s ability to share IT infrastructure among a large number of consumers, by utilizing efficient IT service management. 
ISVs use clouds to deliver software applications through Internet. This is known as Software as a Service (SaaS). User then use PCs (even a cheap Netbook with an Internet browser will do it) and mobile phones to access the SaaS of their choice. A familiar example of SaaS is Gmail. Gmail is an email application running in the Google cloud data center and can be accessed through the Internet, using a simple web browser. Other examples of SaaS used by SMEs are Salesforce.com, SugarCRM.com, and zoho.com. 
When delivered as a SaaS, software cannot be copied and pirated anymore as it resides in a remote secured data center and it is not available on CDs or DVDs. In addition ISVs are guaranteed to collect the revenue for the usage of their software by offering access to their SaaS through monthly subscription, typically less than $10/ month/ user. This price would surely better please the customer interviewed in the article. 
ISVs may ask themselves how will I get my investment back with such a low price? First the low price will attract significantly more buyers than the high price. In the telco industry in India, handsets prices used to be in the $300-$1,000 range and not surprisingly, the market was limited. Until one telco offered 100 free minutes for a mobile, multimedia phone with an up-front payment of $10 and monthly payments of $9.25. The company received 1 million applications in 10 days!
Actually ISVs don’t see a penny from the 5 dollars currently paid to the pirate shops. A monthly subscription per user of 10 dollars/month over the lifetime of the usage of the software will ultimately exceed the onetime charge of thousands of dollars in the traditional model. If the user does not pay her subscription fees, the ISV can interrupt access to the SaaS by removing the user name from the authorization database.
So in conclusion, I don’t think that software piracy will impact the growth of ICT in Africa. It is the responsibility of the ISVs themselves to address the problem, not through threatening the users pirating their software, but rather by offering them software adapted to their needs both in terms of functions and price.
Finally the new SaaS delivery model should protect ISVs from piracy and guarantee their revenue.
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Looking for a fast growing market? Think Internet in Africa

As promised, I will start a series of postings about the ICT market in Africa. Today I will start with the Internet situation in Africa.

In 1991, the CERN (not Al Gore) publicized the new World Wide Web project, two years after British scientist Tim Berners-Lee had begun creating HTML, HTTP and the first few Web pages. It really became more accessible to the public with the first browser (Mosaic, do you remember?) in 1994. Even more we had to wait for Yahoo in 1995 to make it more useful. Internet has been a major driver for business in developed countries.

But until recently, Internet was generally not available in Africa and when it was, the cost was high and access was unreliable. This is probably why some people call Africa “the last frontier”.

Well, things are changing and at an incredible pace! Africa is finally getting broadband access to the Internet. This year alone, three major broadband ocean cables have been connected (EASSy, Glo1 and Main One Cable).

These projects are expected to increase Internet access in the region while significantly reducing the cost. Analysts project that the new cables will help reduce broadband prices by up to 90% over time. The effects are already being felt in Ghana where the monthly cost of the access it buys from larger telecommunications carriers drop more than a quarter to $1,625 per megabit per second, from $2,250, in recent months. And a new wave of investment is coming that will vastly raise the bandwidth available in West Africa by mid-2012. The carriers, fearing they could lose customers, have started cutting prices ahead of the new cables landing in the country.

In 2008, 32 million sub-Saharan Africans, or 3 percent, had Internet access in 2008. But that number was growing at almost twice the world average rate. Internet growth in Africa has been phenomenal and has not shown any signs of being diminished by the worldwide slump in the economy. As of June 2010, penetration of Internet in all Africa reached 10.9%, representing a 2,357.3% use growth for the 2000-2010 period!

What is the meaning of all this?

First this will reduce the cost of doing business both in Africa and between Africa and other international parties. It opens the door for the big opportunity of Internet services to be delivered to or from Africa. Here is a good study on the Global Opportunity in IT-based Services from the World Bank.

Second the increasing numbers of broadband cables will bring more capacity, allowing for more sophisticated media based Internet services. An example is Pixel Corps, a US-based digital media firm and a specialist in computer graphics and video production. Pixel Corps has entered into a partnership with the government of Rwanda to start one of the best media production academies in the region. The goal is to train hundreds of African artisans capable of state-of-the-art media development to produce content for their community as well as content for the rest of the world.

Third, increasing number of cables will also deliver more reliability to communications in Africa. Undersea cables are prone to being damaged by fishermen and earthquakes and take weeks to repair. When SAT-3 broke last summer, it took several countries completely offline for a while, and Nigeria lost 70 percent of its international capacity. Here is a good cable map for Africa (and the world) providing technical information about bandwidth, availability and landing points.

Fourth, Internet will provide better access for Africa to the global market. It can help “unlock” landlocked countries and help them come out of poverty. In his book “The Bottom Billion”, Paul Collier identifies “landlocked with bad neighbors” as one of the main reasons for poverty. Thirty eight percent of the people living in the bottom-billion societies are living in landlocked countries. While Internet cables are mainly connecting coastal countries, those cables will also connect land-locked countries in East and Southern Africa. This should provide a unique opportunity for those countries to “unlock” themselves and get access to the global market.

While in the past the West coast of Africa was mainly targeted by those cables to connect Africa with North America and Europe, there has been an increasing tendency in recent years to expand submarine cable in the Pacific Ocean on the East coast in part a response to the emerging significance of Asian markets in the global economy and to major investments in Africa by China and India.

But challenges are remaining.

One challenge is what telco companies call “the last mile”, that is to bring Internet to the people’s homes or to the businesses. This requires the fiber cables necessary to carry the signal from the shores inland which still requires significant investments. Some countries are moving faster than others. Rwanda’s president Paul Kagame told the International Telecommunication Union (ITU) 2009 Summit in Geneva, Switzerland that over half a billion US dollars has so far been invested in communication infrastructure, 70 percent of which was private investment. Rwanda has deployed fiber optic network to serve the capital Kigali and the major cities across the country.

Another challenge is to provide affordable and easy to use devices to access the Internet content. New emerging technologies that bring Internet access to phones will help the region bypassing the need for a computer (including the need for electricity and access to the network) when connecting to the World Wide Web.

Finally, there is the challenge of the Internet content itself which is mostly irrelevant to local populations, not speaking about the fact that it is in another language. This will require Africa to start creating its own content that can help address local needs. An example of a new technology that makes content more easily accessible to underprivileged people while at the same time giving them the possibility to create their own content is the SpokenWeb developed in India.

It is now up to the African innovators and entrepreneurs to grasp this opportunity.

NB: Some of the information used in this post came from Yahoo News.

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Africa needs to give itself the tools to protect against the impact of climate change

Everyone understand how agriculture is depending on the climate. But weather variability has even more impact in Africa. African farmers know too well how weather changes may affect their crops. A good weather prediction is critical for the productivity of tropical crops. Unfortunately good weather prediction is (or was) not easily available to African farmers. Now Information and Communication Technology (ICT) is changing that. The impact of ICT in Africa will be the subject of a future posting in this blog.

Going back to the weather impact, here is an extract from Fernand Bezy, “Demography and under-development”, 1974:

“Tropical agriculture is unfortunately much more vulnerable than that in temperate regions. In Kenya, for example, sorghum has a yield of 1.7 tons per acre ifplanted before the rains, yield which reduces by 27% if one waits just four days after the early rains, and 50% at least for a delay of seven days. Maize, which produces between 1.5 and 2 tons per hectare depending on the season if planted before the rains, is losing 40% of its performance for a delay of six days. When nothing is done to remedy the drawbacks of agriculture in areas with highly irregular climate, crop size can vary from 1 to 8 depending on the years: in Libya, the barley harvest was 22,000 tonsin 1947, the year of drought, and 177,000 tons in 1949, the year of
plenty. When only one crop fails, the stocks carry from one year to another can enable a community to get away without too much difficulty. But should there be two or three years of drought, as in the Sahel, and then comes scarcity: people are being decimated.”

It is this dependency on the weather and the need for immediate labor availability when rain comes that is one of the explanations of the large families making labor more easily available when required.

But there are other weather changes: the increasingly erratic weather patterns due to the climate change in the world, that also impact Africa. African countries are highly dependent on the exports of a few primary commodities, which render them extremely vulnerable to volatility in world prices. The recent drought in Russia has increase the wheat prices by as much as 92% since the beginning of June.

One way to protect against price volatility are world exchanges, in this case commodity exchanges. Unfortunately those are mainly based in Chicago and are difficult to access for Africans. This is why the Whitaker Group is advocating for the development of African commodities exchanges. Follow this link for a much better explanation than I can give.

I had a chance to meet with Rosa Whitaker during a Rwanda Development Forum in Washington DC in January. She impressed me by her strong will. The Whitaker Group (TWG) is the premier strategic consulting firm in the US creating sustainable prosperity in Africa. They facilitate trade and capital flows to Africa and believe in the capacity of Africa and her people to meet the challenges of the 21st century. Their web site is always a good source of information about Africa and its challenges.

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Can we impose our values to other cultures?

History is full of examples of civilizations trying to impose their values to other cultures. While it is often justified by “good values”, what are those values criteria? In reality in most cases the goal is economic domination.

Allow me to share with you on that subject an extract from a book published by my father Fernand Bezy in 1974 on “Morality of Family Planning Policies in Developing Countries”.

“If the problem of relations between people and natural resources belongs to economics, can we rely on economists to define those values? After all is this not simply a matter of optimization? Far from it. A pure product of Western civilization, economic science does not challenge its specific aims. There is no universal economic science: the one whose authorship is attributed to Adam Smith is based on data presented as based on human nature, while they are purely contingent and related to industrial societies’ culture. That is the case for example of the assumption of the homo economicus: the individual is assumed to be determined by his greatest material interest. That such a philosophy of life characterizes the West is all too true. But we can not say the same of Bantu, Muslim, Hindu civilizations.

In every society, the different structures (religious, social, economic) are more or less integrated, of course, but on different planes: they are hierarchical. And culture is nothing other than the identification of that hierarchy in the social mentality: it is a value system that imposes standards of behavior. And from one civilization to another, we observe fundamental differences in the order of importance of the structures which are the very expression of their specificity. In modern societies, it is the techno-economic structure that is predominant; in traditional societies, it is the religious structure, or the social and prestige structure.
Therefore the economic optimum is not the maximum possible use of production factors, but their use that best fit for the operation of each society in its specificity. This means that the rationality of intentional economic behavior of members of a given society is always aligned with the basic unintentional rationality of the hierarchical system of structures that characterizes that society. Therefore there is no rationality by itself, nor is there a final form, a model of economic rationality.

Nothing is less objective than the notion of well-being: each civilization has its own. In the West, growth in production has often been regarded, at least implicitly, as the growth of welfare or even happiness, so much so that recently it seemed to be the necessary and sufficient condition for human progress in all social systems. The West has been claiming to impose this design on the universe: to colonize was to bring back the world’s diversity to unity of which two or three Western countries were then the models and the recipients. And everywhere there was an elite that swayed towards the West, which seemed the ideal model of all civilization and real culture.
But even here in the West, the dogma of economic growth is questioned. We begin to become aware, even if we are still confused, of the harm of growth and its fatal results: destruction of nature, abuse of the concentration of economic power, frustration due to growing inequalities, etc… Then a council of wise people advocated zero growth, under penalty of apocalyptic disasters, and the American economist JK Galbraith reassures us: “Fear not, St. Peter will not ask you how you have contributed to the growth of
national output!”. Finally some calming words!

This is the end of Eurocentrism: each culture has its own system of values and there is none that can boast of being superior. The comparisons are pretty useless, everyone being only able to appreciate each other’s culture through its own, which removes any objectivity in the comparison. Suffice it to acknowledge that while economic growth will increase the control of man over his environment, and even increases its freedom, it is subject to a purpose that goes beyond economics and may vary from one society to another.”

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It is sometimes good to read bad articles

It is sometimes good to read bad articles, it allows you to understand how other people are thinking. Here is one about “The Case Against Corporate Social Responsibility“. The argumentation of this paper is quiet amazing. Here are some quotes from that article:
“Companies that simply do everything they can to boost profits will end up increasing social welfare. In circumstances in which profits and social welfare are in direct opposition, an appeal to corporate social responsibility will almost always be ineffective, because executives are unlikely to act voluntarily in the public interest and against shareholder interests.”

How can we possibly imagine that corporations have no social responsibility and should only be driven by profit? Ask the people in the Gulf about BP social responsibility!

In Africa, they seem to be ahead of us in that regard. Social programs are an important element of corporations doing business in Africa. As an example, look at MTN social program in Nigeria .

In a recent panel organized by McKinsey about “Can Africa continue to grow?”, one of the participants said: “The last point is that companies have to also understand that, in order for them to have a license to operate in Africa, they have to earn that license, not from the governments but from the consumers. And that license means that you’re doing things that support socioeconomic development in Africa. You have a role in doing things to support the improvement of the standard of living of Africans. It means that you have to invest in the communities in which you do business, be it in building plants, creating jobs, providing skills, providing business opportunities.” I can’t agree more, and this should be valid for any country, not only in emerging markets.

The best advocate for Social Business is Muhammad Yunus the 2006 Peace Nobel Prize recipient who brilliantly described the concept in his book:

In that book he makes the case for a new form of Capitalism: Social Business that would coexist with the current profit based model.

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Some interesting articles and books about "democracy" in Africa

– An interesting article published in The Economist: Efficiency versus freedom. Probably as interesting if not more are the comments by the readers at the end of the article.
– Two other articles on a similar subject in CNN: Can democracy thrive in Africa? and Why foreign aid and Africa don’t mix
– Finally a book:  DEMOCRACY AND CULTURE: AN AFRICAN PERSPECTIVE by Lioba Moshi and Abdulahi A. Osman (Editors). I did not read the book yet (just ordered it from Amazon) but the review seems very interesting.
Here is an extract from the review: “The above (democracy) definitions are based on the Western concept of liberal democracy and they reflect specifically Anglo-American cultural bias. This bias tends to reduce the concept of democracy to elections, multiparty system and universal suffrage such that any deviation is seen as an anomaly. As argued, this style of democracy failed in many parts of Africa mainly because the Western political parties aggregate primarily along class interests, whereas in Africa an established class system is mainly absent. Thus, contemporary Western insistence on multiparty politics does not consider indigenous cultural values, which makes multiparty electoral politics to degenerate into ethnic or communal conflicts.”

To me the basic idea I’m interested in is: why do western countries (US and Europe) want to impose their democracy models in Africa and make their aid depend on it?
Even beside the question of the appropriateness of the western democracy model for Africa, I would even question the quality of those democracies. Do I need to remind how G W Bush was elected for his second term? Or how in Belgium, it is the political party who decide who will end up being elected by ranking their candidates in their election lists. Only the top candidates of the list end up being elected if the list of the party has collected enough votes.

Just some food for thought and discussion. Enough for today…

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