innovation – These Hands

Part 4: Botswana in the context of Africa’s future wealth potential – Can Botswana leap-frog to a multi-local society?

Posted on June 21, 2015 by handsin

Africa has the potential to construct more wealth in the next 35 years, than the $1,3-trn it amassed in all of history.

This impetus will be driven by technological innovation that is enhancing intelligence, reducing costs and accelerating its performance capability to create value 10 times faster than 100 years ago. Between 1900 and 1990, the USA grew its GDP from $500-billion to $9-trillion in the same way.

With a forecast of 5.2% growth, an estimated $13-trn in extractable energy, a comparative advantage in solar energy, a young and fast-growing middle class, the rapid absorption of mobile connectivity and communication technologies enabling sophisticated tracking and interpretation of big data, Africa may double its economy every 12 years to reach $2,6-trn by 2027 (and $13-trn by 2050).

Africa’s wealth prospects

According to Prof. Ezio Manzini, one of Europe’s most eminent social innovation experts, Africa is poised to leapfrog from a ‘not yet fully industrialised’ economy into a hybrid, multi-local society.

Manzini argues that if first world innovation is applied to valorize Africa’s third world commodity base, it will by-pass certain stages of economic development to reflect a new form of post-industrial society with a different economic structure.

The Leapfrog Hypothesis

A shift towards an advanced multi-local society in a not-yet (fully) industrialized society

According to Professor Philip Spies, one of Africa’s leading futurists, Africa’s leapfrog requires a supportive innovation environment to enable such a future economy. This would blend endemic (human-centered) technological innovation with ‘technology transfer’ (artefact-centered innovation) in a way that strengthens rather than disrupts a community’s potential for development.

Global investors like Unilever, are already adopting this strategy in Africa with a multi-local, rather than multinational approach to sustainability on the continent. It is sourcing local products and using local people, embedding local values in the design and using first world technology to produce and distribute goods to market. In this way, technology transfer and diffusion of innovation has a far greater rate of success.

The structure of the Industrial economy in the developed world

The structure of Africa’s post-industrialised, multi-local economy

There is growing awareness that while first world technology will boost Africa’s intelligence, ensure greater quality, reduce labour costs through mechanising replicable actions and enable better monitoring, in the developed world it produced a regenerative industrial culture and marginalised the poor.

Therefore a host of educational and policy initiatives are underway to drive Africa’s transition to an innovation-led economy with supportive socio-economic conditions. In 2014 the African Union adopted the Science, Technology and Innovation Strategy for Africa (STISA).

This continental strategic framework focuses on six critical areas for socio-economic innovation:

eradication of hunger and ensuring food & nutrition security;
disease prevention and control
and ensuring well-being;
communication,
live together- build the community and;
wealth creation.

The changing structure of global trade, international architecture of finance and technological innovation in banking will have a profound impact on wealth creation in Africa.

The International Monetary Fund (IMF) forecasts that in the next 10 years, six of the ten highest growing economies will be in Africa. Current FDI flows are around $60-billion a year boosted by the BRICS geo-political alignment encouraging greater trade with Brazil, Russia, India and China. The rate of return on foreign investment in Africa is higher than in any other developing region with almost three times the average multiple growth potential.

However, it is constrained by four major obstacles: a lack of access to formal financial services, weak infrastructure, a lack of funds for public investment and political instability in certain countries.

While agriculture and fishing accounts for two-thirds of jobs in Africa, they suffer the most from these obstacles. Currently, Africa is the least wealthy region with the lowest number of High Net Worth Individuals [HNWI] in the $52.5-trn global wealth system.

2013 Global Wealth by Region

Rank	Region	Overall Wealth USD trillions	Annual Change	No. of HNWI (millions)	Annual Change	Forecast Growth Rate
1.	North America	14.8	16.6%	4.3-m	16.6%	3%
2.	Asia Pacific	14.2	17.3%	3.02-m	25.8%	7%
3.	Europe	12.3	12.5%	3.83-m	12.5%	.2%
4.	Latin America	7.7	3.1%	0.45-m	8.3	1.3%
5.	Middle East	2.1	16%	Under 1-m	7.1%	2.5%
6.	Africa	1.34	3.7%	0.14 -m	13.2%	5.2%
Total		52.6-t		13.5- m		Av: 3.2%

According to the CapGemini’s 2014 World Wealth Report, wealth it is led by North America [$14.8 -t], Asia Pacific [$14.2 -t], Europe [$12.3 -t], Latin America [$7,7 -t], the Middle East [$2,1 -t].

Africa’s HNWI

In 2014, Forbes’ annual ranking of the world’s richest people recorded 1,226 billionaires and 13.5-million HNWI. Of these, there were 16 African Ultra High Net Worth Individuals [UHNWI] who comprise a little over 1% of the positions on the Forbes list.

Of the 2-million HNWI who entered the rank last year with assets between $1-m – $5-m, Africa increased its share by 13.2% to 140,000 (0.14% of total).

Global HNWI Wealth is expected to reach $64.3-trn in 2016 and will continue growing at 6.9% a year across all regions, except Latin America. Asia-Pacific is set to overtake North America’s HNWI population and wealth by 2016 with a growth rate of 9.3%. Over the longer-term however, Asia’s tigers will be out-paced by Africa’s lions.

Growing Middle Class Consumers

Africa has the fastest growing middle class in the world comprising 313-m (34%) of its 1-billion population; a 100% rise in less than 20 years. Of this, 123-m are capable of spending $2.2 a day. By 2050, Africa’s middle class will grow to around 1 billion (42%) of its total population and represent 53.7% of the world’s consumers. They will require financial products and services to provide for rising needs in education, housing, transport, telecommunication, technology and protection of their household and business appliances.

The exponential and recursive impact of financing socially innovative technologies go beyond gains in intellectual property rights. Investments such as 3D printers in education, financing hybrid energy solutions for homes, re-fitting of fuel stations for electric vehicles and use of wearable devices in healthcare disrupts conventional ROI thinking and enables everyone in the value chain to play to their strengths.

Africa’s Middle Class Consumers

Youth demographics

The nature of the African market is distinctly different to Europe. Africa has a younger, more mobile market. Of the 1-billion people in Africa, 50 percent are under the age of 25. As children of ‘the unbanked’, they have very little education in financial services, lack a savings mindset and the majority are unemployed or work in primary and secondary industries. Of its adult population, two-thirds do not have a bank account or access to savings, credit or insurance. The disposable income required to consume such services includes costs for banking fees, transport, ICT infrastructure and electricity.

Innovative, Pan African financial products need to be designed to educate and cater for the continent’s youth, nomadic, migrant and refugee community. This is where Ecobank and M-Pesa are gaining a first mover advantage with technologies that enable users digital access to money, markets and products.

Says Judith Seekopp, a Swiss Banker and Wealth Manager, “Whereas the European market focuses on wealth preservation to cater for more mature, aging investors to secure generational wealth, Africa’s financial services products needs to have a stronger focus on wealth creation and tap unused wealth for start-up investments of young entrepreneurs on the continent.

Judith Seekopp

Digital Banking

The adoption of digital technology by wealth management firms in Africa has lagged behind the broader financial services industry. However, as digital connections ramp up among Africa’s youth, firms will have to adapt to provide integrated touchpoints which will enable stronger client relationships, reduce operating costs, enhance reporting systems and effectively deliver on its brand value proposition. The preference for digital contact in Africa is much greater compared to older clients in Europe.

According to the CapGenesis Global Wealth Report 2014, the global preference for digital is 26.4%, up from 23.7%; and is especially strong in Asia-Pacific (excl. Japan) at 37.8% and the Middle East and Africa at 33.5%. There is also an increasing preference for customized services (29.2% versus 26.0% a year earlier). This is especially strong in the emerging markets of the Middle East and Africa (48.2%), as well as Asia-Pacific (excl. Japan), at 36.7%.

Open Architecture

More investors are drawing on the expertise of local financial institutions than New York or Europe bankers to channel wealth into investments on the continent. In the past, wealth was primarily channeled offshore.

According to André Rangasamy of Wealth Planners, an investment advisory and financial planning firm to HNWI, there is increasing investor interest in Africa funds. “When constructing a global portfolio, the relatively low correlations between African equity returns and developed market returns make exposure to African equities particularly attractive. The ride may be bumpy, particularly over 1- 3 years, but this trend looks set to continue as the expected returns over the long term remain relatively attractive”.

To manage wealth across African countries, at various stages of economic development and socio-political systems, would require a Pan African approach to portfolio management with a wealth management network and open architecture product platforms. This would enable private banks to distribute products of other banks in exchange for a commission and not be restricted to selling only its proprietary products.

By using technology, wealth managers will better determine interests and contradictions quicker and develop more responsive strategies.

Says Judith, “Banks in Africa will attract more Euro-clients in the future as more HNWI invest on the continent. Open architecture systems will be needed. Also, they will require the proximity of a wealth manager on-site to enable access to tailor-made and traditional investment solutions at the level of quality, service and comfortability experienced by a UHNWI in Switzerland.

“The DNA structure of Swiss banking standards is the golden seal in wealth management globally. By blending South Africa’s technologically innovative banking system with world-class standards applied to socially responsible investments, new growth strategies can be unlocked. Quality, productivity and service delivery in wealth management are presently hampered in Africa without such innovation.”

Investment opportunities exist in infrastructure finance and corporate funding to facilitate Africa’s key growth sectors – agriculture, energy, finance, fishing, health, human capital, manufacturing, mining, technology, tourism and water. They present investors with early-stage investment opportunities.

To contribute to Africa’s leapfrog, innovative channels, products and services need to be designed that leverages its commodities, renewable energy and telecommunications systems for greater impact, sustainability and security.

Says Prof. Spies, “Such interventions, if well designed within a climate of social innovation, have recursive qualities to be the cause and the effect of transformative actions, thereby propelling a ‘snowball’ effect”. Eventually this momentum reaches a tipping point.

Extractable energy

Africa extractable energy resources (oil, natural gas, coal, and uranium) are worth between $13-14.5trn. In addition, there is around $762.4bn in net new money to be generated by untapped production potential in six key sectors – agriculture, water, fisheries, forestry, tourism and human capital. These provide scope for innovative investment products linked to IP (intellectual property) for institutional and private investors to benefit from exponential scaling using pricing models that are outcomes-driven.

Green comparative advantage

Renewable clean energy through wind, solar, hydro and biomass projects play a major role in sustaining Africa’s comparative advantage in the global green economy. With a 30 year history in solar innovation, it stands on par with the developed world. Mega projects are underway to develop solar and wind farms across the continent. This will enable Africa to increasingly delink economic growth from energy consumption and secure, clean energy supply to investment projects over the long term.

Philanthropy

The next generation of HNWI are ‘the millennials’ who have different social values. Those from the developed world will require guidance to manage significant inherited wealth and they will look for relationship managers who connect with their mindset. Currently, 75.0% of HNWI under 40 cite driving social impact as either extremely important or very important. However, the tendency declines about 10% with each age segment, reaching a low of 45.4% for those 60 and older.

Young HNWI recognize that one of the most serious threats to a sustainable world is global inequality in wealth and human competence. Today, some 85 percent of global wealth is owned by 10 percent of the global population. Empoverished people in Africa are caught in a low level human developmental trap largely because of their historical inability to profit from technological innovation.

Education and skills development in Africa therefore continues to strike a chord among HNWI who strive for social good. However, academic research proves that an innovative community cannot be ‘caused’ by developing skills or by more education. Rather, innovative societies emerge through cascading leadership and processes of infective social learning that lifts the confidence and status of members to apply, express and share their competence.

In the future, the inherent creative abilities of Africa’s youth needs to be tapped to encourage such endemic innovativeness. Using the paradigm of design thinking, the success of every-day problem-solving can be increased through this calculated, mapped out experiential learning process.

Technology and design innovation for sustainable tourism in Africa

Design is a bridge between creativity and innovation. It serves as a key source of differentiation, competitive advantage and value creation to drive economic growth. Historically, Africans have been unable able to exercise their own transformative power to produce value and thereby, wealth through design. Real development in Africa will only occur when its people are able to satisfy their own legitimate needs and aspirations in a meaningful way.

Untold Wealth

It is interesting to note, that at Blombos Caves in the Western Cape, the world’s earliest archeological evidence of design can be found in stone artifacts, clay pots and shell work depicting a 100 000 year design heritage. These contain locked-up knowledge on Africa’s ancient design code. Just as Steve Jobs created the Applemac on the code of Zen design, real African innovation will source its principles on this deeper foundation. Therefore, the master key to Africa’s future wealth is yet to be unearthed.

Blombos Caves: near Pinnacle Point in the Western Cape

Since the scramble for its resources began in the mid-17^th century, Africa’s precious metals have found their way to the balance sheets of colonial empires and its people dislocated from its philosophy of wealth.

In the 21^st century, it is poised to grow faster than the rest of the world with a greater ability to take stock of and account for its wealth. The time is opportune to build a scalable private wealth management industry at the service standards of the developed world in a multi-local way.

Part 1: The Value of Cultural and Creative Industries for Botswana and Africa: Taking a Human-centered approach to Development – What can we learn from Botswana?

Posted on May 29, 2015 by handsin

As we prepare to host IDDS D’Kar 2015 in Botswana, it is useful to present a local perspective on what development might mean in an African context and how the value of indigenous knowledge in design might open up new pathways of understanding for our participants.

This is the first post of a 5-part blog series in which I will share some insights into key themes in Botswana around the role of the state, human capital, creativity, wealth creation and historical challenges to development. As Co-founder & CEO of These Hands GSSE and ardent Creative Economy Advocate in Botswana, I will frame 5 pertinent questions for reflection:

Taking a human-centered approach to development: What can we learn from Botswana?
Youth, Education, Development: what are the gaps and prospects for the future?
How can design help Botswana’s cultural and creative industries drive economic development?
Botswana in the context of Africa’s future wealth potential – How can design help Botswana leap-frog to a multi-local society?
Can Africa strike the right balance in the 21^st century? Profit AND People-driven development – can we think either/and?

My contribution is supported by Merle O’Brien (@merleobrien), a South African futurist and participant of IDDS D’kar 2015 based at Creation iLab (www.creationilab.com) where she specializes in creativity, design and innovation through indigenous knowledge. She shares her insights on Africa’s potential to amass more wealth in the next 35 years than in all its history. The biggest opportunity here is for design to influence the global value chain of future African innovations – from concept, the design prototype, sourcing raw materials, embedding creative and quality standards of suppliers, the marketing, logistical distribution, retail experiences and service support to the end user. In this way, economies such as Botswana could leapfrog from an agro-industrial economy to a multi-local society driven by a human-centered design approach to technology innovation. It is against this backdrop that the value of IDDS D’Kar 2015 becomes more significant as we begin to recognize the relevance of our design approach at this point in time, in Africa.

The world’s earliest evidence of design can be found in Southern Africa. The stone artefacts, ochre paint pots, beaded shells and weapons found in Blombos Caves in the Western Cape date 100 000 years back. These archeological findings reflect how the earliest humans conceived ways to survive, communicate, express meaning and evolve new ways of doing, thinking, eating, hunting and playing.

It is a paradox that the continent with the world’s oldest design heritage is currently the poorest, yet set to grow faster than any other in the first half of the 21^st century alongside the value of design. It is also humbling to know that the San communities in Botswana have a deep design heritage locked up beneath the foundations of modern thinking. It is as if, through D’Kar, we might return to source to unearth the old, to help us make better sense of the new. It is therefore appropriate that the summit is themed KURU: a Naro word meaning TO DO or TO CREATE.

Blog 1: Taking a Human-centered approach to Development – What can we learn from Botswana?

Before World War II most world states were largely interested in economic growth as the only measure of economic development. After the World War II, prior and during the decolonization of most African states, there was a looming ideology of communism which was quite opposite to the capitalistic view in that it introduced a social welfare or basic needs approach to the realm of economic development. In the 1990’s most countries were undergoing a choice process of either aligning with absolute profit driven economic growth policies for economic development or go with the other absolute social welfare development principles of economic development.

Post the cold war the Millennium Development Goals (MDGs) which were introduced by the United Nations Development Programme came into play to strike a balance between the two extremes and find synergies. This created space for the interlinked principles of development economics and managerial economics which signal out clearly the role of the state in economic development.

The principles of managerial economics teach us that it exists to ensure that firms and households at micro level are willing and able to produce maximum output which shall ensure maximum profits and maximum satisfaction as the per the demands of the households respectively.

At a macro level the understanding based on the principles of development economics, teach us that it exists to ensure that governments are willing and able to ensure viable industrial growth which will in turn ensure economic growth and maximize social welfare of the households.

The role of economic profit is therefore a very important one, as government depends on profits from firms to ensure economic growth and maximize social welfare. When firms make profits they are willing and able to create employment as they expand, which satisfies the welfare aspect of the government agenda.

These profits of the many firms and that of some that may mushroom from the employment created, result in aggregated tax revenue which satisfies the economic growth agenda as embedded in the principles of development economics. Some of the tax revenue is used to create a harmonious environment to grow the industries and also combat other welfare needs like health care and education (Todaro, M, et al 2006)

The economic profit further satisfies the society’s development through sponsorships and donations that are made by the firms to community based organizations, non-governmental organizations, social enterprises and community trusts as it assists the government agenda of maximizing social welfare and improving wellness.

The role of the State, in an open economy like Botswana, is to ensure sound, informed and sustainable laws and policies in order to ensure a harmonious working environment for industrial growth and job creation which will consequently satisfy the government agenda of having maximum economic growth and social welfare.

The following are some of the elaborate micro and macro level benefits of economic profit that a good state that satisfies its role diligently can ascertain:

Rewards and encourages initiative, hard work and risk-taking.
Encourages innovation, progress, improvements, efficiency, and technological advancement.
Encourages scientific exploration and Research and Development to discover new innovations and advancements.
Encourages new suppliers/businesses to enter the marketplace, thereby creating more competition and diversity of goods and services.
Provides people with a vast array of goods and services that they want and need.
Lowers prices and makes goods and services more affordable.
Creates jobs for citizens and opportunity for immigrants.
Attracts investment by rewarding banks and individuals that invest in companies and entrepreneurs.
Creates new capital (retained earnings) that can be used for economic growth and to provide insurance in times of recession.
Creates wealth and capital for charities, the arts, and good works.

Botswana has since independence experienced great economic growth with the Gross Domestic Product per capita and Purchasing Power Parity (US dollar) in Botswana being last recorded at 4377.56 US dollars and at 14752.70 in 2011 respectively. The GDP per Capita in Botswana is equivalent to 35 percent of the world’s average. However, the social welfare of its people seems not to be matching these positive developments. Based on a comparative measure of life expectancy, literacy, education, and standards of living for countries worldwide, Botswana has a Human Development Index of 0.633 and is ranked 98th in the world signifying medium human development for a country of its economic status.

Economic Development exists when a country compared to other comparable countries in the region (Sub Saharan Africa), has managed to grow the economy away from primary industry dependency to one that will be driven by secondary and tertiary industries.

Botswana is performing poorly in economic development as it is still largely dependent on the primary industries of mining and agriculture as her main contributors to economic growth and has failed to develop the secondary and tertiary industries. Moreover, job creation in the private sector is insufficient and to date the government is still the largest employer. The costs of production for the private companies are still too high and they do not have the necessary markets locally and regionally and thus cannot make the necessary profits to create jobs.

Botswana’s National Development Plan goals which are pegged and closely driven by the pillars of her Vision 2016 are to ensure economic growth, reduce poverty and create employment. We can point out that so far Botswana has managed to succeed on the economic growth goal but has failed on the other two based on the 35% unemployment rate of the youth and the relatively low Human Development Index.

Acknowledging these gaps, the government of Botswana is trying to address them with initiatives like the private sector development strategy in partnership with the voice of business being the Botswana Confederation of Commerce, Industry and Manpower (BOCCIM), a youth in business High Level Consultative Council (HLCC) Sector committee that meets with the Minister of Youth, Sports and Culture twice every quarter to advice on high level red tapes that hinder industrial growth or opportunities for youth owned businesses, the youth development fund, Citizen Entrepreneurial Development Agency (CEDA), a Local Enterprising Authority (LEA), a revived department of cooperatives under the Ministry of Trade and Industry, The Botswana Innovation Hub, Botswana Institute of Technology, Research and Innovation and the National Human Resource Development Strategy which is headed by the Human Resource Development Council to mention a few that have been setup to stimulate this diversification drive.

Through successive development plans since NDP7, the importance of developing Botswana’s human resource capacity has been a first line priority. From a broad range of perspectives such as educational attainment, skills and training, quality of life issues, and the expansion of the labor market, considerable progress has been made. However, a lot still needs to be done to have an educated and informed nation that will actively participate in the economic development of the country. In the next blog post I will present my insights into the themes of youth and education and how they relate to the development of Botswana. I will discuss some of the gaps and strategy’s that the government has initiated to address these, as well as prospects for the future.

Meet the Authors:

Merle is a design futurist at Creation iLab, a start-up transmedia and design innovation lab which serves as a testbed for her doctoral research. She holds a MPhil Future Studies from the University of Stellenbosch Business School, specialising in the future of creativity. She is exploring how the fields of art and science are moving towards a common space and the radical innovation this holds for the confluence of creative lifescience, technology and indigenous knowledge to alter the axis of Africa’s future in sustainable and positive ways.

Thabiso Blak Mashaba (@BlakMashaba), Lead Organiser of IDDS D’Kar 2015