Government appears to have experienced a double epiphany. It has begun to recognise that by nurturing the growth of the local ICT industry, it can better tackle many of the enormous social and economic problems that currently beset the country. It has also come to realise it can't accomplish such a gargantuan task on its own. It needs help, and lots of it.
As a result, government has started courting multinational technology corporations in the hope they will support its endeavours to grow and expand the South African ICT industry. It believes the development of what it terms “a vibrant, sustainable and innovative indigenous ICT industry” will help improve education, accelerate social upliftment, generate employment, strengthen the economy, and bolster international trade.
The Department of Science and Technology (DST), which is fronting the initiative, has already won over SAP Research, Microsoft and Nokia, and is wooing several other potential suitors. Likely candidates include IBM and Intel.
The challenge facing government is substantial. It plans to boost the local ICT sector to a R250 billion-a-year industry, employing a million people, within the next decade. Current revenues are around R120 billion a year. Science and Technology minister Naledi Pandor acknowledges that the R4.4 billion earmarked in the 2011 budget for local research and development is insufficient to meet government's objective of establishing a “knowledge-based economy: in SA. Its annual spend on ICT research is around R320 million. Partnerships with the private sector are essential, and international corporations possess the financial, technical and marketing clout government desperately needs.
The DST is looking to its international partners to provide substantial foreign investment, access to critical technology and expertise, and long-term guidance and support in the development and implementation of its ICT research, development and innovation strategy. Unveiled in 2010, the strategy aims to bolster local ICT research by substantially improving local skills and facilities as well as fostering increased product innovation and development.
Strategic partnership
After more than a year of negotiations, the DST recently concluded partnership agreements with SAP, Microsoft and Nokia. All the agreements build on existing relationships and projects and commit the multinational corporations to expanding their involvement in the development of the South African ICT industry for at least the next five years.
“It's a long-term strategic partnership. We are working with government to help build South Africa's capacity for technology research and innovation,” says Jussi Hinkkanen, Nokia VP for Government Relations in the Middle East and Africa. The telecommunications giant has entered into similar partnerships in its home country, Finland, as well as in China and the US. This is its first such liaison in Africa.
We recognise the importance of technology in addressing crucial social issues such as job creation and employment.
Vis Naidoo, Microsoft South Africa
Nokia will channel financial, technical and managerial resources into four key sectors - education, social development, research, and innovation and entrepreneurship - as well as provide government with advisory services that address policy, technology development and market trends. Among eight initial projects earmarked by Nokia, in consultation with government, are further support for ICT graduate education and training; the accelerated rollout of the locally-developed Mobile Learning for Maths education programme; the provision of broadband networks in rural areas; participation in the newly-established mLab mobile applications incubator; and backing for SA's bid to site the giant Square Kilometre Array (SKA) radio telescope. The agreement includes Nokia Siemens Networks - the telecommunications vendor in which the Finnish corporation holds a 50,1% stake. Hinkkanen says new projects will be initiated as further needs and opportunities are identified.
The scale of Nokia's investment in SA is difficult to quantify. The company is reluctant to disclose figures. Its educational initiatives are estimated to cost around R20 million and further commitments under the partnership agreement will probably amount to several times this figure.
Funding for the ICT partnership projects is likely to come from direct investment as well allocations from counter trade commitments. Foreign corporations are required by government to invest 30% of the value of large state contracts back into SA. In terms of the partnerships brokered by the DST, government will carry a large slice of the cost of the joint ICT projects.
Substantial opportunities
The benefits for the foreign multinational corporations are several. Their partnership with the DST secures close ties with government and ensures participation in charting the development of the local ICT industry. Furthermore, it provides substantial opportunities to develop and market products and services especially suited to SA and developing economies elsewhere on the continent.
We are working with government to help build SA's capacity for technology research and innovation.
Jussi Hinkkanen, Nokia
“The more developed South Africa becomes as a market for technology, the better for companies like Microsoft, which is a leading supplier of technology services and products,” says Vis Naidoo, citizenship manager at the US corporation's local subsidiary.
Microsoft's partnership with the DST will result in the software company providing financial, technical and management support for several projects. These include help in designing enterprise systems to serve rural communities with access to broadband networks, advanced research into climate change, and further promotion of ICT training and education for high school, college and university students. The company is tight-lipped about the financial value of its commitment to the DST.
“It's a substantial investment for Microsoft South Africa. We recognise the importance of technology in addressing crucial social issues such as job creation and employment,” says Naidoo.
From our point of view, the partnership has been a success.
Danie Kok, SAP
The task of co-ordinating the ICT partnerships forged by the DST falls to the Meraka Institute of the Council for Scientific and Industrial Research (CSIR). Meraka was last year appointed by the DST to manage the implementation of government's ICT research, development and innovation strategy. The organisation has set up a liaison office to engage with the DST's international partners and co-ordinate the various projects initiated by the ICT corporations. It will work closely not only with the DST, but also with other government departments that are involved in specific projects. They are likely to include the departments of Basic Education, Higher Education and Training, Communications, Public Works, Trade and Industry, and the State IT agency.
Kobus Roux, manager of strategic initiatives at Meraka, says the organisation will help identify potential projects and ensure the foreign investment in research, development and innovation is applied as effectively as possible. The demands on Meraka are likely to grow as the DST signs up more international partners. Some projects may involve the participation of several international partners. The bid for the SKA radio telescope, for example, already includes ICT vendors such as Nokia Siemens Networks and Microsoft, as well as IBM, Intel and Dimension Data.
Other avenues
It is too early to tell whether the DST partnerships will be successful. Perhaps the best indicator is to go back to the origins of the programme. In 2006, the DST and Meraka entered into an agreement with SAP that resulted in the German software giant investing R85 million in SA in an effort to upgrade local research capacity, boost human capital development, advance social upliftment and stimulate ICT product development. In October, SAP renewed the agreement with the DST, as part of the department's ICT partnership programme, and committed to invest a further R130 million in local research.
Danie Kok, SAP's head of research for Africa, says the joint initiative has helped fund, train and mentor 23 postgraduates, works with eight local universities, employs 44 researchers and students, and has developed a business application for emerging economies that will begin pilot testing later this year.
“From our point of view, the partnership has been a success,” says Kok.
The portents are encouraging. But government has a lot of work ahead of it to achieve its ambitious goal of establishing a large, innovative and thriving local ICT industry. If it succeeds, it will be good news - not just for the ICT sector, but for the whole country.
First published in the November 2011 issue of ITWeb Brainstorm magazine.
* Article first published on brainstorm.itweb.co.za
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