South Africa’s ability to produce globally competitive businesses has become constrained for two main reasons. The first is the poor quality of the country’s education system.
“One of our primary issues in South Africa is a talent shortage,” says Arun Babu, digital and technology leader for Deloitte Consulting Africa. “Our ability to innovate is limited by how quickly we can create talent.”
Given the level of dysfunction in large parts of the country’s education system, this problem is not likely to be alleviated in the near term. The level of research and development in South Africa will, therefore, remain subdued.
Innovation has also been heavily impacted by recent years of weak economic performance. To ensure that they survive, many companies have focused most of their efforts on managing costs, rather than looking for ways to grow.
“South African companies have actually slowed down their rate of innovation,” Babu believes.
‘In the mid-1990s and early 2000s we had some amazing inventions coming out of South Africa, such as prepaid cellular capabilities and certain banking technologies. But if you look at the last 10 years, very rarely have we pioneered anything that is world leading.’
It is no coincidence that this has also been a period during which South Africa’s global competitiveness has fallen. Export growth has come down since 2014, despite the weaker rand, which shows that the country is falling behind.
The solution to these challenges may lie in technology. The explosion in cloud services has the potential to lift the restrictions facing local companies and quickly place them on a level with their global counterparts.
Many people still view the cloud as somewhere to store data without the need for your own server. However, it has become far more than that. Moving business onto the cloud is not just about saving on hardware and software requirements, but making use of the leading technologies that it makes available.
‘With the cloud you are accessing global intellectual property at extremely low cost,’ says Babu. ‘A company sitting here can access a capability developed somewhere else in the world and transform itself.’
Without the need for its own research and development or its own IT infrastructure, a company that does this also gains the benefit of massively reduced time to market. Using the cloud also allows a business to scale, either up or down, extremely efficiently.
For instance, retailers have enormous capacity requirements on Black Friday or over Christmas that they wouldn’t need at any other time of year. Instead of sitting on the extra capacity for all of that time, using cloud services would allow them to only pay for what they actually require at any point.
This can add huge value to any business, but many larger South African companies are either wary of the cost or haven’t appreciated the transformative potential. This is not, however, the case for many of their smaller counterparts.
“We have a big disparity between large companies that are extremely conservative in their views about the cloud and start-ups that are inherently cloud native,” says Babu.
The latter naturally expect to play in a global marketplace and understand that to do so they have to access the leading technologies that are available on the cloud. This gives them the potential to be highly disruptive if established players don’t move fast enough.
“The challenge for any company in South Africa is to be globally competitive, and to do that we have no option but to modernise large companies at pace,” says Babu.
“These are large employers, meaningful companies that are under pressure, but we have reached the plateau of normal evolution of businesses,” he adds.
“The next evolution in South Africa will be a technology-led one, and it will be a case of swim or sink.”