Poor commitment to policies, lack of subsidies and tax breaks for innovation and government short sightedness impact negatively on South Africa’s ability to innovate and be seen as a business hub for investment.
This is the view of BDO South Africa’s head of ICT, Nico Fourie, referring to the results of the BDO International Business Compass (IBC).
The BDO IBC provides guidance to small- and medium-sized enterprises which in particular face: location choices that affect entrepreneurial success. It covers societal information for countries and draws together numerous aspects in sub-indices, regarding countries’ suitability as markets and production locations.
In 2015 the focus was on labour, while in 2016 the IBC focused on innovation in transport, energy and telecommunications[ii] by market and unfortunately saw South Africa dropped 15 points from 93 in 2015 to 108 in 2016 due to our economic conditions.
“It is not all doom and gloom in South Africa,” he points out. “We are still the most diverse African economy out there. Though our dependencies on the resource sector and lack of innovation around modern and future technologies are concerning, we do have the highest per capita income in Africa and are ranked the world’s most affordable country to live in with one of the lowest cost of living standards.”
South Africa has more than 85% of the world’s platinum but very little is being invested in a core future technology which looks more and more like battery technology.
“We should take a page from Elon Musk’s book of innovation and start driving the agenda,” Fourie says. “Why the Joule, an all-South African electric car designed by world renowned Jaguar designer Keith Helfet and darling of the Paris motor show, failed is a mystery to me and almost feels like sabotage.
“The only reason I can see is because our government is not on-board with subsidies or tax breaks as they are too dependent on tax revenue from fossil fuel. Or were a few key stakeholders not part of the inner circle and the progress quickly halted?
“It does feel incredibly short-sighted in a world where a Tesla Model 3 rakes in over 250 000 $1000 pre-orders online. Musk Tweeted shortly after ‘Looks like we will have to increase production plans for the Model 3’. Is that not a good problem to have?” Fourie adds.
“With South Africa’s abundant supply of platinum and the need for jobs it is imperative that we invest in future battery technology. At least the Western Cape is courting Elon Musk for investment of his GigaFactory technology for south of the equator global distribution.”
South Africa is also a key candidate for call centre technology as its geographical timeline is well situated, yet it is unable to get these initiatives off the ground due to a bungling from government and their broadband policies, Fourie believes.
“Fibre penetration is getting better but it is the affluent who can afford the private investment and this will just widen the poverty gap even more,” he says.
“A recent call centre project in Mafikeng was canned for unknown reasons and this is another case of meddling and bad planning that could’ve produced decent jobs to an underserved and job-seeking community. The software and developers who were on-board were all South African from the local Tshwane-Potchefstroom community. Their platform is a proven platform and has been used in the debt collection space for many years. We can’t afford that initiatives start and fail as they do,” Fourie says.
However, there are many positive points, recently South Africa was once again put on the map with Capitec being voted the world’s best bank by Lafferty. With ABSA and FNB being in the top 10 banks globally for innovation, technology and transactional volume processing efficiency and capability. Toyota and BMW committed to South Africa in recent months with BMW supporting innovative green power production techniques in South Africa.
“I meet people every day who are innovating and want to disrupt established market forces and make the world a better place. South Africa is unique and will always be, we should just be patient over the coming years and hope for a positive political outcome and good young leadership stepping to the fore,” Fourie says.
How did the rest of the countries fair?
Malawi and Kosovo are the two countries making the greatest leap forward in the IBC ranking with both improving their position by 20 places. In the case of Kosovo, this development is due to improvements in all three pillars of the IBC. In Malawi, it is mainly driven by gains in the economic and societal indicators.
Thanks to Cape Verde and Namibia, there are two more African countries among this year’s biggest winners, with each improving by 18 and 14 positions, respectively. Mongolia also leapt by 14 places.
Not surprisingly, the Ukraine lost the most points, dropping 41 places compared to last year, due to a worsening in all categories. This is primarily a result of the political crisis and continuing civil war in the Eastern part of the country. For the economic indicators, the drop is observed to be especially significant.
African countries Lesotho, Mauritania and South Africa are among the biggest losers. Lesotho has lost ground with respect to the political influences, Mauritania with respect to the societal issues and South Africa with respect to the economic conditions.