Silicon Africa?

Andrew Thomas-Woolf, was probably one of the few people whose comments about my “Sillycon Scrape” post hit the right strings with me. Thanks for engaging Andrew, and I have to say that your words has left some lingering thoughts.

I agree that the Cape and it’s lifestyle has much to offer, and that it definately has a great many attractions for “the right” people. I never disputed this. I like your Cape. I don’t necessarily like all the fscktards living in it.

What I disagree with Thomas about,  is that South Africa has too small a market to “attract” venture capital. Reason: You’re thinking about just South Africa!

The entire Silicon Cape initiative is  soooo South African focused.  Hello. We live on a continent.

It’s called Africa. I’ts fairly big.

Andrew said:

Our economy is just plain and simply too small. A 20% penetration rate on say 4 million Internet subscribers at R200 total lifetime value per customer == R160m or US$20m.

This is just such a typical  SillyconScrape way of looking at things. Certainly,  if you’re trying to build another Web2.0 company this is the case. The market is small.  But Information Technology is certainly not limited to Web2.0 startups and doing business in the global internet economy. Unfortunately, this is all that SiliconCape appears to care about.

Infrastructure is where IT’s at:

There are many opportunities in Africa in that does not align with the “Youtube/Facebook/Web2.0” sphere of Information Technology. Just because Social Media is currently the “big thing” on the internet, does not mean that Africa has the access to it, or the opportunity for business in it.

Africa needs IT infrastructure before it can enter the blogosweer.

And that is the venture capital problem that REALLY exists. Very few venture capitalists want to invest in infrastructure, because it’s not exciting enough or in their mind doesn’t “promise” enough return.

On the other hand funds earmarked for infrastructure all over Africa is being misapplied by the largely corrupt governments  in charge of said funding on initiatives that are too driven by hype and marketing than anything else !

Africa NEEDS basic infrastructure:

How are we ever going to eradicate the information poverty that exists within Africa ? What about telecommunications, data centers and the real nuts and bolts that makes IT work ? What about PCs for people? You need ROADS before you can have INDUSTRY. How are we going to address that poor “Internet penetration rate” ?

Perhaps if we focused on upping our “penetration rate” in South Africa, we’d have more venture capital. News24.co.za certainly seems to be able to profitably cater to a “very poorly penetrated” community. Ach, enough about sex then…

It appears that all the Silicon Cape is interested in, is in what the REST OF THE WORLD WANTS, and not what Africa NEEDS, because basic infrastructure like connectivity, computing facilities and the rest is simply not exciting enough for most people. “It’s droll”. It’s “plumbing”. I know a lot of rich plumbers though…

The opportunity I see, and have have a passion for is Africa. Not the “rest-of-world”. There are a great many opportunities north of the South African borders, yet unrealized and waiting to be picked. Opportunities that can make money, and on top if it make a difference.

Basic infrastructure DOES make money:

What Africa needs is virtual roads. Of course, that’s just simply not exciting enough for Venture Capital… However companies like Altech seem to be making a KILLING in this industry. Why ? Because they don’t take the short-term venture capitalists view. They know a lot about basic economics and ignore Seth Godin-like economics like the “long tail”. Even heavyweights like Dimension Data seems to have caught on to this fact.

My company is aligned with this African view. And I’ll tell you straight, it’s hard to do business “up there”.

We struggle on a daily basis to keep our customers happy, to understand contracts written in Arabic, French, and other languages. But the reality is that there is simply no better country, populous, or  skill-set better than South Africans geared to doing business in Africa. We understand the continent. We live on it. We breathe it.

Idealistically, basic infrastructure is  where I’d rather be involved. I was born African, and have a passion for remaining African. I certainly do not have a passion for becoming the next “Intellectual Property” export of South Africa. I have a passion for providing Internet services in Zanzibar, Lagos, Nairobi —  and for applying technology in a way that makes a difference to people.

I don’t even have a facebook account, because I consider it stupid. Facebook is not infrastructure. It’s the Internet  equivalent of an annoying tea-party with a bunch of people you’d rather call fuckwits.

It appears that the SillyconScrape  is more interested in wasting venture capitalists  money and enriching themselves. Because they can tote the success of Facebook, and others. Oh wait, perhaps that’s premature. Facebook isn’t actually profitable yet.

Conclusion:

I guess my problem  is that what I’ve seen about SillyconCape is that in  it’s entirety it simply misses the point of Africa, and focuses on the rest of the world and the global internet, when the reality of Information Technology on this content is abysmal.

I predict that the next company to make it “big” in this continent will be the company capable of doing business in Ki-Swahili.  MX-It in Ki-Swahili anyone?

My roadmap to success, is based north of our borders in this content, rather than across the Atlantic or Pacific.  Supplying Internet plumbing.

It’s a completely untapped market, and as MTN and others have shown, ready for the picking. Competition is low, revenues are high, and the ability to get entrenched is phenomenal.

I guess it just doesn’t fit with what SillyconScrape fanboys sees as “Information Technology”.

To end this post I could have quoted from Vinny’s presentation: “Yes We Can!” But that would have just been cliche, and  I don’t do that kind of crap.

Honestly, I’d rather just fall back to the great British morons:

“Let’s just get ON with it dear…”

Author: roelf on October 11, 2009
Category: Uncategorized
7 responses to “Silicon Africa?”
  1. Andrew Thomas-Woolf says:

    Hi Roelf,

    Thanks for engaging in the way you have. Before I deal with certain of the points you have raised, I want to make clear that I am entirely in agreement that the “Youtube/Facebook/Web2.0″/”SocialMedia Space” view of ICT is a big problem. Part of what we collectively need to do is a process of education, helping people to understand more broadly the constraints and opportunities that we face here, something which I believe you are trying to do, albeit in a harsh tone probably borne out of frustration!

    You quoted my explanation of how small our local Web2.0 market is, seeming to interpret it as saying that SA was too small for VC. On the contrary, my point was exactly the same as yours: that people’s *THINKING* is too small.

    This is the same point that both Vinny, Justin, Laurie and others made at the conference. People need to let go of this idea that some kind of localised version of a foreign service is the way to go. In fact, someone commented that they heard a groan in the audience when Vinny stood up and said, “If anyone is working on a South African version of Twitter, give up now.”

    Re: Infrastructure is where IT’s at.
    One of the things that came out of the conference was that, for those present, bandwidth was no longer a primary constraint. This is a 15 year+ project and given our mobile penetration rates, it would be fair to say that the majority of innovation that will come from our shores would be in that mobile space.

    With cloud computing, the necessity for high-bandwidth sytems and content delivery is no longer necessary. Maybe for IPTV, etc, but this isn’t where the “man on the street” (or various versions of him) is going to interact and where the possibility of entrepreneurial led innovation is going to lie.

    With regards to VC for infrastructure: you are absolutely right. VC’s will not generally fund infrastructure. The economics of infrastructural development are very different from those in scalable, internationalizable (is that a word?) early stage (more risky) businesses. Infrastructure, e.g. SEACOM, EASSY, etc should be funded by institutions with the appropriate expertise and financial backing: banks, project financiers, development funding institutions, goverments, the public via debt (bonds), etc. It is /generally/ capital intensive with lower returns. Frankly, VC’s don’t have the kind of budget (nor the ability to magically create cash via the fractional reserve system that the banks have) to fund the majority of these investments.

    None of this is to say that they are not important, but those of us involved in the SC initiative (which, by the way, was announced as an attempt to build a Silicon Valley of Africa – I’ll get back to this shortly), are focusing on other hurdles.

    With regards to your passion for Africa: I am glad that you have this and emotionally I can connect and share this. When we were discussing the issues of work permits for foreigners coming into South Africa of help deal with our local skills shortages, one of the ideas that came up was that it might be more political palatable and feasible to offer easier entry to fellow African Union members first, before going global. Personally, I think we would be best served by allowing people generally into our communities to help build our knowledge base, but there you have it – differing opinions 🙂

    Yes, we *ARE* interested in what the rest of the world wants. Sitting in the background of this drive is that the biggest provider of our foreign currency earnings is currently raw materials, minerals being mined out of the ground, which will eventually run out. Geographically, we are located out in the middle of nowhere with few currently major markets nearby.[1] (We have to cross oceans or fly over land to get tangible products to people.) When we run out of minerals, what are we going to be selling or exporting? The one place where it seems that we will be far less relvatively disadvantaged from our geographic location is in IP-based, intangible products.

    I’m glad that your business is focused on Africa and that you’ve found yourself a potentially profitable place by focusing on economic fundamentals: barriers to entry & lack of existing competition or easy substitutes.

    I trust that you yourself have come across some of the painful regulatory issues at play: ExCon, newly remedied issues with claiming foreign tax credits when receiving payments from e.g. Botswana, underavailability of relevant supporting professional knowledge (e.g. legal & tax, foreign language communication), etc.

    Forget about the fanboyism, please. Focus on what is concrete, tangible, real and being targeted. We’re aiming to create substantial change over a long time period. After the hype dies down, there’ll still be people pushing along, trying to make a difference. I just hope that you’ll remain one of them.

    [1] Something that would add greatly to intra-Africa trade would be the development of a decent rail network. I suppose baby-steps: our’s, though improving, still needs some sorting out. Having such a physically large country isn’t always the best for these kinds of things!

  2. Andrew Thomas-Woolf says:

    Falling back to the Silicon Valley of Africa:
    The very first blog post, which everyone visiting the http://www.siliconcape.com website was encouraged to read as a starting point, contains an FAQ. The very first question in the FAQ reads:
    “Why the Cape? Does Silicon Cape exclude the rest of South Africa?

    Not at all. The whole of South Africa is most definitely included and everyone is invited. South Africa as a whole is without doubt the technological powerhouse of Africa. However, much like with Silicon Valley, we feel that an initiative and a brand like this needs a focal point, and that the Cape contains the unique mix of all of the varied ingredients that ultimately serve to bring together the right participants. This would already seem to be evidenced by the number of tech startups which are Cape based.”

    Regarding comments that there are already initiatives in play, in the same first post was another FAQ:
    “How does CITI, Bandwidth Barn, and other great projects fit in with Silicon Cape?
    Silicon Cape doesn’t exist to compete with or duplicate the great work done by these projects. They are all very complementary to each other and very necessary, and indeed Silicon Cape can highlight the opportunities that they create and work together with them.
    Silicon Cape is more of an awareness campaign and a global brand which serves to catalyse conversation, attract interest and highlight opportunities and challenges, and create a focal point that the community across the board can own and rally around.”

    Hope this helps.

    Kind regards,
    Andrew

  3. Colin Alston says:

    There’s an old saying which goes, “The only people who MAKE MONEY FAST on the Internet are those who manufacture routers and disk drives.”

  4. Colin Alston says:

    @Andrew Thomas-Woolf
    “People need to let go of this idea that some kind of localised version of a foreign service is the way to go”

    My argument is that people need to let go of this idea of some localised version of a foreign idea… like Silicon Valley… Oh wait…

  5. Andrew Thomas-Woolf says:

    @Colin Alston: Re: your point @23:17.

    If you had attended the event or followed up with the published speakers notes (front page of the SiliconCape website), you would know that the model that is currently most favoured for “localising” is *not* that of Silicon Valley, but in fact the Israeli VC model, which Laurie Olivier, one of the speakers, has watched and experienced from the ground up and watched Israel grow (with e.g. the Yozma programme) from a relative tech backwater in 1990 to a country with one of the highest per capita R&D in the world and which is now home to various research arms of IBM, HP, Intel, Cisco and others.

    To requote for context:
    “On the contrary, my point was exactly the same as yours: that people’s *THINKING* is too small.

    This is the same point that both Vinny, Justin, Laurie and others made at the conference. People need to let go of this idea that some kind of localised version of a foreign service is the way to go.”

    You seem to want to contradict some element of what I said by some form of reductio ad absurdum. The underlying assumption is that a replication of a business service and the replication of an enabling environment are identical, which they are not.

    The creation of a business supplying a particular service is a choice. One can choose to enter or not enter a particular marketplace.

    You cannot however choose not to have a regulatory environment within which to construct that business. It exists regardless of any particular business you seek to create. You cannot choose to “opt out” of having a regulatory environment in a country. Even “no regulation” is a regulatory regime.

    We are thus compelled, in some way, to compete in an international market place for the attraction of people and capital. Our businesses will be helped or hindered in their international trade (exports, international expansion), our environment making it easier or more difficult to sell to foreign customers.

    The only way we can choose not to compete in this way would be to go the way of North Korea: become entirely internally focused. Even then there would be positive and negative environmental issues affecting the internal development that takes place.

    Your analogy is false, and further leads to the absurdity that learning from anyone else’s experiences where those people are not South African is
    not to be valued.

    Your comments are not constructive and I can see that you are not interested in entering into an actual discussion about any of the above. Although I will continue to respond to any statements that I see as misleading or factually incorrect, I will for the foreseeable future not be engaging further with you on this topic.

  6. Colin Alston says:

    I’m not being constructive because you failed before you began. The key to successful technology is passionate and capable people on every level. Top down approaches fail EVERY time. If you look at every successful company now, rather than short lived fads, every one of them began with able people not suits with Big Ideas.

    Your constant, borderline personal diatribe about not engaging my arguments is entirely transparent. Many others have done as you have, and I’ve been pointing at it each time. It’s the fundamental reason for my tone right from the start.

    I could have been nice and constructive, I’m perfectly capable of that, but that wasn’t my goal. I’m very aware of the people involved in Silicon Cape and I know how they react to disagreement and criticism.

    Here’s a fact, not all criticism and suggestions are wrapped in fur and tailored to your liking. Ultimately, the people in Silicon Cape will always cry “You’re just jealous” and allow personal mud slinging as a means to defend themselves. I’ve spent the better part of a decade watching it.

    Unfortunately for you though, at the end of the day I represent many of the people capable of writing the code, and the nuts and bolts critical to almost any of the ideas that might be involved or relate to Silicon Cape. Best of luck achieving anything if you can’t convince people like me.

    I guess I wasn’t entirely honest when I said “I don’t want your valley”. It’s more a case of “I don’t need your valley”.

    You see, I don’t actually *have* to win anyone over or stroke their egos. I could replicate their ideas in an evening with a pot of coffee. You see what the people who don’t know programming don’t realise is that technical merit rewards usability, and usability is what gains users. Your users.

    Caio.

  7. Andrew Thomas-Woolf says:

    @Colin: Thanks for the explanation.

    I think what’s happened is that your experiences with a bunch of the people who have chosen to associate themselves with the whole SC drive have badly coloured your expectations of how people will behave and that you have extrapolated from this to all of the people involved.

    I have definitively tried not to engage in ad hominem attacks. In fact, in one of my first posts to you I made clear that I *knew* of your intellect and ability and therefore thought I made clear that you personally and likewise people with the *ability* to deliver are valuable and necessary. (I worked in IT for several years and I expect that some of the people in your social circles would be able to give you a bit more info on my technology background – not sure if this would help?)

    I’m very happy to engage on facts and continue this discussion and appreciate you taking the time to set out more of your views. Perhaps I should join with you and Justin Spratt at some point, given that I now live in Johannesburg? (And grew up in Port Elizabeth, by the way, so I’m not even a Capetonian by birth or current living place!)

    I’m going to mail you privately and we can continue this discussion that way 🙂

    Andrew

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