International Finance
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An interactive view of cloud computing in Africa

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New life-changing innovations are introduced on the continent. Are there favourable laws in place?

The scale and complexity of technology is bringing new life-changing innovations to Africa. Young entrepreneurs on the continent are inspired by the works of Silicon Valley, which, is currently believed to be a prominent factor in spurring the technology race. By the numbers, there has been a significant growth in technology hubs, pointing to more than 50 percent in the last few years. In fact, the growth and expansion of the continent’s technology business is attributable to the growth of computer engineering talent that is groomed there.

It is reported that there are 643 technology hubs on the continent, with significant numbers spotted in Nigeria, Egypt, Kenya and South Africa. That said, 41 percent of the technology hubs are incubator facilities, while 24 percent of them are innovation hubs and 14 percent of them are accelerators. These hubs are collectively considered pivotal to the continent’s technology business.

According to a research carried out by Briter Bridges and AfriLabs, Nigeria has the highest ratio of hubs pointing to 90. Meanwhile, South Africa followed second with 78, Egypt with 56 and Kenya with 50 across the 34 countries that the study covered. The research report titled Building a Conducive Setting for Innovators to Thrive observed that the majority of survey hubs on the continent have received funding that is less than $100,000. Shockingly, 62 percent of the hubs have below 10 paid employees.

A re-discovered learning is that underutilisation of talent will not foster technology growth. Ibrahim Youssry, the general manager of Microsoft Middle East & Africa Emerging Markets, told International Finance, “According to the African Development Bank, 12 million young Africans enter the workforce each year. This means the continent could have a larger pool of Information Technology talent by 2035 than the United States, China and India combined.” The continent is witnessing a revolution in new cloud and data centre capacity, with a growth forecast of 80 percent and 50 percent, but there are constraints that need to be removed.

Microsoft plays a big role in Africa’s cloud

This is profound news. Microsoft, for example, is observed to be spending more than $100 million on a cloud development centre which will employ 500 staff in the next five years. Currently, it has a data centre in Cape Town and Johannesburg. “Since Microsoft first opened its offices in Africa, we have witnessed incredible growth on the continent—more internet connectivity, more digital capability, and more innovation. Africans have expanded the applications of technology, changing the way communities bank, farm and even access healthcare,” Youssry explained.

The establishment of cloud data centres have positioned Microsoft as the first public cloud provider offering cloud services on the continent. “Therefore, we see an increasing number of technology companies like Microsoft investing in local data centre infrastructure. We were the first global provider to deliver cloud services from data centres on the continent with the launch of two new enterprise-grade data centre regions in Africa, based in Cape Town and Johannesburg in 2019. Also, in 2019, Microsoft launched Edge Nodes in Kenya, Nigeria and Egypt to bring its customers a faster network and enhanced access to cloud services,” he said.

“The continent’s growing demand for cloud services is driving ever-increasing opportunity for digital transformation in the market. Even before Covid-19, organisations across Africa were embracing the potential of cloud to engage their customers more effectively and optimise operations,” Youssry explained. “Already, the use of cloud among medium and large organisations was near pervasive.” It is worth noting that Microsoft has been investing in Africa since 2013. The 4Afrika initiative, for instance, was pivotal as it opened doors for the company to closely work with governments, partners, startups and young entrepreneurs to develop greater access to the internet and promote relevant technologies on the continent.  “Investing in digital transformation to help boost the region’s economic development is more important than ever and cloud is a key factor in enabling that transformation.”

For Africa, the trend in promoting new technologies is evolving. But there is a stubborn challenge. A report states that ‘a multitude of dictatorships’ in various countries like Sudan, Zimbabwe and Chad among others that face Internet shutdowns is making predictions on investment returns quite difficult for companies. But Youssry remains optimistic about the continent’s technology potential. “While there was great optimism at the start of the decade with bold ambitions for growth and success, the pandemic has challenged African organisations and governments. But technology offers a real opportunity for the continent to recover and reimagine the future.”

MARI is making a difference

Microsoft is even expanding its footprint to reach new African regions. It is seeking to build up presence in Egypt, Nigeria, Kenya and South Africa, while Angola is on its radar. In the big picture, the cloud service delivered by Microsoft on the continent will help local companies to move their businesses to the cloud in a secure manner. “At Microsoft, we are very fortunate to have played a part in realising this potential, building strong partnerships to accelerate digital transformation and create sustained societal impact,” Youssry said. “A big milestone for this investment came last year with the launch of our first Africa Development Centre (ADC). The two sites in Nairobi, Kenya and Lagos, Nigeria serve as a premier centre of engineering for Microsoft, where world-class African talent can create solutions for local and global impact.”

For that reason, Microsoft created the new Microsoft Africa Research Institute (MARI) in Kenya, which will be co-located with the Africa Development Centre. The research institute will focus on foundational research to improve productivity in three prime areas: work, health and society. First: Several organisations in Kenya are using technology to create new organisational structures which will enable creation of new artificial intelligence and  machine learning solutions on a global scale. Second: The institute will explore how artificial intelligence-enhanced mobile technology can improve the effectiveness of healthcare interventions. Third: The institute will present itself as an ideal platform for addressing some of the biggest societal challenges. It will even demonstrate how analytics can be used to improve work on the ground and address problems globally. The mission of the institute is to ‘understand, build and deploy cloud and artificial intelligence technologies’ on the continent. What is interesting about the institute is that it not only seeks to draw the essence of the continental opportunities, but also to address local challenges to build the technology of the future.

In 2019, 17 African countries presented their progress on achieving the Sustainable Development Goals at the United Nations. Although the progress was identifiable, it required radical interventions to achieve those ambitious goals. The answer to that was already clear: cloud computing. Several American companies have been in action for building their cloud services on the continent. There are four fundamental pillars that need to be in place for cloud computing to add value to the continent’s development. These pillars are skills development, policy and safeguards that ensure privacy and security of all data and infrastructure that provides reliable and affordable access to the Internet.

According to Youssry, the growth of cloud computing has been greatly assisted by the rising number of undersea cables connecting the continent to the rest of the world. In an example, Google launched its Project Link initiative which is essentially building links between undersea cables, ISPs  and mobile networks. The company’s first metro fibre network was rolled in Kampala in 2015 and expanded into Ghana, where it plans to build over 1,000 kilometres of fibre in Accra, Tema and Kumasi. The initiative has also evolved in the CSquared business and Google has committed an additional $100 million to boost its expansion into the African continent.

Is data colonisation rampant? 

But the heart of the issue here is the fear of data colonisation for African countries, and their subsequent efforts in implementing laws that might dwarf growth.  Although the growth of big technology companies is a boon to the economy—extraction, monopolisation and monetisation are forming the crux of data colonisation. For what it is worth, this is a prevalent problem beyond Africa. According to the United Nations for Trade and Conference, there are pronounced gaps in cyber law adoption that are leaving consumers vulnerable to global crises, such as the coronavirus pandemic.

The organisation found that only 66 percent of the countries of the world protect consumer data privacy. This is despite an estimated fact that there would be a 11 percentage point increase in adoption of data protection and privacy legislation between 2015 and 2020. This finding simply highlights how vulnerable Africa is amid the pandemic, especially in comparison to its European counterparts. To make the difference more obvious, 96 percent of European countries have data protection laws in place—and then the number drops to only 50 percent of countries in Africa.

The continent is technologically diverse yet nascent in its own way. Although it trails the developed part of the world in digital penetration and capabilities, it still offers vast datasets for big technology companies. But the relative lack of data protection policies and restricted understanding of how valuable data is—is the trigger for data colonisation. Because data is a valuable commodity and deserves full protection—African policymakers must proactively develop a pan-African strategy for cross-border data flows.

Contrasting theories on data localisation

For the uninitiated, cross-border data flows are crucial to ensure secure provision of mobile money-enabled remittance services that cannot be compromised. According to a report published by GSMA, data localisation requirements can directly impact the ability of emerging markets to capture the full potential of mobile money to reduce remittance cost—which has become a cause for concern for mobile and digital players. The regime usually involves: Data storage requirements and data processing requirements. By definition, data storage requirements point to certain datasets, such as government data and personal data of national citizens, which are hosted in data centres in the national territory. On the other hand, data procession requirements point to activities related to data entry, manipulation and processing. In this case, management takes place domestically.

There are mixed views about data localisation laws. One school of thought is that these laws can result in: Improved data security; robust privacy protection for citizens’ personal data; easy access to data and control; and creation of local jobs for establishing data centres. The second school of thought is that data localisation laws will sever access to cloud services, which in turn can potentially dwarf technology growth, because cloud is becoming the lifeblood of African economy—and is absolutely essential for it to flourish in the fourth industrial revolution. For that reason, governments should enable companies to access the cloud without restrictions in accordance with global standards. The positive effects of that will lead to an increase in international investment, stimulate growth of local technology companies and build resistance to cyber attacks at large.

Does the law dwarf economic modernisation?

Nigeria, Rwanda, Kenya and South Africa have vouched for data localisation. These laws might have been in response to the growing concerns of African governments, but they have come at a cost. Take Nigeria, for example, where the data localisation framework specifically underlines its ‘clear negative trade balance’ in the Information Technology sector. Although few governments are investing efforts to control data colonisation on the continent—there are real concerns stemming from those efforts for policymakers. For one, there is very little evidence to prove that data localisation has led to outcomes in line with the first school of thought.

Even in the economic aspect of things, the benefits of data localisation is only observed for some local companies that own data centres and have fewer employees. More importantly, what it seems occurred is that these laws have not led to an increase in foreign direct investment from big technology companies that are seeking to establish their infrastructure on the continent. In hindsight, data localisation laws are more of a trade barrier, making cloud computing burdensome and hindering economic modernisation.

Policymakers in action 

To combat these problems, African policymakers can consider the European Union’s General Data Protection Regulation as a benchmark for building a framework that fits with the current circumstances and capabilities through public-private cooperation. In this context,  Youssry said “Microsoft has long standing commitments to privacy and with the understanding that our customer data belongs to them, we have regularly taken steps to give customers more information and more choice, including being the first large company to voluntarily extend strong privacy protections offered under the GDPR to customers from around the world.”

Already, the continent is found to have transformed itself during the pandemic and it will  continue to see results if the regulations are favourable. “Covid-19 pandemic had an unprecedented effect on digitisation. We saw two years’ worth of digital transformation in the first two months of the pandemic—and Africa has been no exception,” Youssry explained. “From the outset, business leaders have viewed technology as key to overcoming challenges posed by Covid-19 and helping them thrive in a post-pandemic world. According to PwC, 80 percent of African CEOs cite operational efficiency as a key growth driver. A further 62 percent want to accelerate automation in the workplace post-pandemic”

To achieve that, companies will need to embrace the cloud, which is ‘foundational to digital transformation’. Youssry pointed out that The Cloud in Africa 2020 report shows that companies in sub-Saharan Africa are already increasingly leveraging cloud technologies to drive digital transformation. More than half of all respondents to the survey believed that over a quarter of their applications will have moved to the cloud by the end of next year. So what is really needed is a comprehensive data flows framework that will allow local startups and big technology companies to scale across the continent. After all, the Internet of Things and data-driven insights are important for the continent to thrive in the fourth industrial revolution.

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