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A Systems Approach to Developing Information Systems and Networks

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A Systems Approach to Developing Information Systems and Networks

    A Systems Approach to Developing Information Systems and Networks

    for the Private Sector in Africa

    Report Prepared by M.H. Madhi

    CyberKnowledge Systems

    For

    The Economic Commission for Africa

    Addis Ababa December 1999

Contents

Overview......................................................................................................................... 4

    Methodology ................................................................................................................. 12

    The New Economic Paradigm ....................................................................................... 13 E-Commerce ............................................................................................................. 14 Rural Development and the Information Economy .................................................... 17 Observations and Problems Related to the Current Situation ......................................... 20 The role of information industries .............................................................................. 20 Employment .............................................................................................................. 20 Trade deficit .............................................................................................................. 20

    Africa is not choosing to compete .............................................................................. 20 Understanding the nature of competition ................................................................... 21 The taxation regime impedes growth ......................................................................... 21 Business environment ................................................................................................ 21 Global scale ............................................................................................................... 21

    International competition for investment.................................................................... 21 Information society initiatives ................................................................................... 22 Globalisation, Competitiveness and Constraints in the African Context ......................... 23 Key trends affecting the Information Industries ......................................................... 23 Globalisation ......................................................................................................... 24 The changing composition and terms of trade ........................................................ 24 Convergence and its implications ........................................................................... 24 Shift in value from hardware to services and software............................................ 25 What is Required? ..................................................................................................... 25 Production Chains ..................................................................................................... 25 Path Dependence ....................................................................................................... 27 What do opportunity industries look like? .................................................................. 28 Fundamental change agents ................................................................................... 28 Influence and are influenced by the environment ................................................... 29 Display high growth .............................................................................................. 29 Shaped by dynamic attractors ................................................................................ 30 Scale and learning economies ................................................................................ 30 Increasing returns .................................................................................................. 31 What policies and plans are appropriate for opportunity industries? ........................... 31 What is the nature of the challenge?........................................................................... 32 Real world industry policies ...................................................................................... 37 Analysis .................................................................................................................... 40

    Challenges, Development Models and Action Plans ...................................................... 41 Challenge 1 ............................................................................................................... 41 Recognising the strategic importance of the Information Industries........................ 41

    Impact of the Information Industries on economic growth ..................................... 41 Semiconductors, a high growth industry ................................................................ 42 Policy for the semiconductor industry .................................................................... 42 Impact of the Information Industries as the providers of key enabling technologies 43

    Action : Implement a National Information Industries Database............................ 43

    Challenge 2 Getting on-line to the 21st century.......................................................... 43 Action : Get Existing African businesses on-line .................................................. 44

    Action : Encourage leading edge users ................................................................... 44 Action : Kick start electronic commerce ................................................................ 45

    Action : Ensure that Africa has a world class information infrastructure ................ 47 Action : Establish a model framework for the Information Economy ..................... 47 Challenge 3 Access to Capital ................................................................................... 49

    Action : Alternative Market on Internet ................................................................. 51 Challenge 4 Going global Exporting to the World ................................................... 52

    Action : Networking and consortia among SMEs to warrant more attention by the

    businesses themselves and within government programs. ....................................... 52 Challenge 5 Enhancing skills formation, education and training ................................ 52

    Action : Enhance tertiary information and communication technology education ... 53

    Action : Enhanced ICT education in schools ......................................................... 54

    Action : Enhance education in the workforce ......................................................... 55 Challenge 6 Enhancing research, development and innovation................................... 56

    Action : Ensure greater ICT focus ......................................................................... 56 Action : Provide support for major projects ........................................................... 57 Action : Provide support for key infrastructures .................................................... 58 Challenge 7 National leadership ................................................................................ 59 Leadership ............................................................................................................. 59 Action : Appoint a Minister for Information Industries ......................................... 59 Action : Support improved industry statistics and benchmarking .......................... 60 Leading by example ............................................................................................... 61 Action : Drive the application of information and communication technologies in

    government ............................................................................................................ 61 Action : Maximise industry development benefits from government procurement 61

    Action : Use outsourcing for industry development ............................................... 61 Action : Streamline government procurement processes ....................................... 62

    The Role Of the ECA .................................................................................................... 63 Conclusion .................................................................................................................... 66

    The Importance of Prioritising Initiatives and Sequencing Action Plans .................... 66 Recommended Sequence of Identified Actions .......................................................... 66 Bibliography ................................................................................................................. 69

    A Systems Approach to Developing Information Systems and Networks for the Private Sector in Africa

Overview

    Much has been written and spoken about the problems facing Africa with respect to infrastructure development, Internet connectivity, competitiveness and globalisation. Numerous statistics have been analysed and quoted highlighting the backlog and difficulties in many areas including the provision of essential services. This paper is not meant to regurgitate those observations, facts and figures. Instead it seeks to provide an understanding of some of the key issues facing the continent from a system-theoretic basis. This insight and understanding is then used to develop frameworks and processes that will inform action plans designed to contribute meaningfully to the development of African private sector information systems, networks and relationships with the public sector.

    Background

    The crucial role of the private sector in growing and developing the economies of African countries has long been recognised by governments, aid agencies, and global institutions. As a consequence numerous projects and programs have been undertaken to promote private sector growth with varying degrees of success or failure. Often these programs have not taken into account the dynamics of the new information economy as it relates to all types of industries, ICT and non-ICT.

    Little use has also been made of advances in disciplines such as cybernetics, non-linear dynamic systems, chaos theory, complexity engineering and evolutionary dynamics that can enhance understanding of the dynamic environment in which change is sought.

    This paper outlines key features of the socio-economic forces at play in the emerging global information economy and how these affect and are affected by information and resource flows. Based on this understanding actions and programs are recommended that are aimed at improving the macro-economic situation.

    Without understanding the nature of the information economy and the dynamics of the global competitive environment that Africa finds itself in, projects and programs of action are bound to be unsustainable and have limited impact.

    One of the purposes of this paper is to sketch the context within which private sector information systems and networks must be viewed and understood.

    Once this understanding is gained the chain of production must be known in order to develop information systems access strategies and sustainable programs. These programs can then be prioritised and kick-started by means of appropriate pilot projects.

    Information by and of itself is not conducive to being push-driven and hence information access strategies that are based on this mode are likely to fail. Instead access strategies

    must be linked to information demand that can be surfaced as a result of fundamental economic factors. This implies the development of appropriate criteria and knowledge of the conditions required to exploit latent demand for information and access. The New Economic Paradigm

    The shift from an industrial age economy to an information-based economy requires an understanding of a fundamental shift in the dynamics of competitiveness.

    The dynamics of the information age are very different to those of the industrial age. Old paradigms and ways of doing business must change to accommodate the requirements of the information age. Decision makers need to understand the dynamics of the new information economy and how this has altered the traditional value chains.

    Just as important as it is to educate decision-makers about the dynamics of the new information economy it is equally important to raise awareness among small and medium sized enterprises (SMME‟s) about the impact and implications of globalisation.

    Similarly policy-makers need to be wary of using models of success from the industrial age to formulate development strategies for the information age. Countries and regions that have been successful in the past are not necessarily role models for success in the future.

    E-Commerce

    If e-commerce is to have a meaningful economic impact it will be because it represents a more efficient way of doing business.

    Some expected opportunities are :

    Changes in production costs

    Changes in the value added chain

    Changes in international competitiveness

    New products and ways of doing things

    Implications of the greater use of e-commerce and a view of direct changes ahead by industry are summarised for the following sectors - Information Technology, Communications, Health, Education, Banking and Finance, Business Services, Media and entertainment, Manufacturing, Retail, Transport.

    Rural Development and the Information Economy

    The issue of rural development also needs a complete re-assessment. Policy-makers need to be careful not to confuse age-old problems related to rural development with those of the information age. Some countries have been more successful at this than others and much can be learnt from these experiences, for example in rural Australia.

    As domestic markets become more accessible to overseas suppliers it is no longer valid for African producers to think in terms of domestic and export markets. The reality is that they are competing with producers all over the world for a share of the global market.

    Increasingly, international competition is chain versus chain, rather than company versus company or product versus product. Successful companies will join others to build competitive agri chains.

    To be competitive, the co-ordination, sharing of information, co-operative management, goal setting and planning that have traditionally been done within an organisation will now need to be undertaken between chain partners. This requires new skills and knowledge that are often lacking in the African agribusiness sector.

    In each of the cases above, access to timeous, relevant information is critical and hence the need for appropriate information networks is imperative.

    Observations and Problems Related to the Current Situation

    The information industries play a key enabling role in all Industries

    Employment and Skill Problems

    Trade deficit problems

    Africa is not choosing to compete

    Lack of policy appreciation of the nature of competition

    Taxation regime impedes growth

    A competitive business environment is necessary, but not sufficient

    Global scale is required

    Strong international competition for investment

    Most countries have information society initiatives

    Globalisation, Competitiveness and Constraints in the African Context

    One of the notable trends in world trade is the long-term decline in the share of natural resource-based products vis-à-vis engineered products. Moreover, prices fetched on world markets for natural resource-based products are falling vis-à-vis those fetched by Elaborately transformed manufactures (ETMs). As a result, the things Africa is exporting are earning less and less on world markets, while the things we are importing are costing us more and more. The deteriorating trade position is not simply a matter of gradual decline. Africa cannot rely on natural resource-based products forever.

    In the long-term Africa will not be able to achieve a developed-world lifestyle unless we shift the structure of the economy towards higher value manufactures and services. The passive acceptance of global forces will not lead it to future prosperity.

    Key trends affecting the Information Industries

    Globalisation

    The changing composition and terms of trade

    Convergence and its implications

What is Required?

    If Africa is to prosper in the twenty-first century it will be necessary to pursue industry policies designed to adjust the composition of the economy towards high-growth strategic industries. Above all else, it will be necessary to grasp the fact that the composition of production in the economy does matter and that the future prosperity of Africa depends

    upon managing that composition and facilitating the emergence of a pro-growth industrial structure in Africa.

    Production Chains

    Countries with a higher proportion of high-growth industries will tend to gain a growth advantage. Growth of an economy‟s production base is fed, inter alia, by revenue growth and

    (re)investment.

    Virtuous circles need to be pursued. Understanding the nature of transformative technologies, like information and communication technologies, and of the industries that produce them, is an essential part of understanding the need for industry policies and action plans for the opportunity industries.

    Path Dependence

    The fact that there are multiple roads to growth, and vicious and virtuous circles reinforces the need for sectoral policies for opportunity industries.

    What do opportunity industries look like?

    In making the necessary strategic choices about which industries Africa must develop to support future prosperity it is important to understand what „opportunity industries‟ look like. Among the key characteristics of today‟s opportunity industries are that they:

     are the producers or deliverers of transformative technologies;

     are high growth;

     exhibit significant positive externalities;

     exhibit significant learning economies;

     often exhibit increasing returns to scale; and

     are knowledge intensive.

    Appropriate policies for opportunity industries

    Traditional policies have championed a free market approach with a few exceptions based on compensating for clearly identifiable market failures. These have been called corrective policies. Strategic trade policy goes further in that it seeks to secure economic welfare by providing for the strategic protection, fostering and encouragement of selected industries which may not otherwise achieve the same level of

    development (Honda et al 1994, p9). „New growth‟ policies focus on knowledge, learning and the national innovation system.

    What game are we in?

    In an attempt to understand trade and investment patterns, the patterns of specialisation and the composition of economies, Yoffie et al (1993) identified four characteristic industry structures, comparative advantage, oligopolistic competition, regulated competition and political competition. Each of these industry structures implies different sets of information flows. For private sector information systems and networks to be effective an understanding of the relevant industry structure is first required. Based on this information systems and networks can be developed.

    The key message of this analysis is the importance of understanding the situation, and knowing whether one is playing a game of comparative advantage, political competition, oligopolistic competition or regulated competition, and how that game is changing. Challenges, Development Models and Action Plans

    CHALLENGE 1

    Recognising the size, impact and strategic importance of the Information Industries

    Action : Implement a National Information Industries Database

    CHALLENGE 2

    Enabling users Getting on-line

    Action : Get existing African businesses on-line

    Action : Encourage leading edge users

    Action : Jump-start electronic commerce

    Action : Ensure that Africa has a world class information infrastructure Action : Establish a model framework for the Information Economy

CHALLENGE 3

    Access to capital

    Action: Establish an Alternative Market on Internet (Based on the Australian Model)

    CHALLENGE 4

    Going global Exporting information and communication technology to the World

    Action : Networking and consortia among SMEs to warrant more attention by the businesses themselves and within government programs.

    CHALLENGE 5

    Enhancing skills formation, education and training

    Investment in, and promotion of, high quality education and training is one of the most important contributions that can be made to Africa‟s future.

    Action : Enhance tertiary information and communication technology education Action : Enhanced ICT education in schools

    Action : Enhance education in the workforce

    CHALLENGE 6

    Enhancing research, development and innovation

    Action : Ensure greater ICT focus

    Action : Provide support for major projects

    Supporting Action : Provide support for key infrastructures

    CHALLENGE 7

    National leadership

    If Africa is to meet the challenge of the on-line revolution there must be commitment and personal involvement from the top. Strong and consistent national leadership is essential. It should come from both government and industry in a policy partnership, and it must come from the highest level.

Leading by example

    Action : Drive the application of information and communication technologies in government

    Action : Maximise industry development benefits from government procurement Action : Use outsourcing for industry development

    Action : Streamline government procurement processes

    The Role of the ECA

    The fundamental challenge to implementing the proposed action plans on a continent-wide basis is one of co-ordination. Numerous studies have recently been conducted (especially by the MIT School of Co-ordination Science and the Stanford School of Decision Analysis) that point to the primary importance of sound co-ordination, decision-making and project management in the context of complex development initiatives.

    The quality of co-ordination, decision-making and project management, above all else will determine the success or failure of development initiatives. Most umbrella organisations such as the ECA are active at the policy and planning level, few however have grasped the challenge of superior co-ordination, decision-making and project (and programme) management.

    The ECA is clearly in a position to co-ordinate all development and aid initiatives that are focussed on Africa as a continent. Similarly a decision framework that filters projects and initiatives needs to be established and finally these initiatives must be program managed in a sophisticated manner. The adoption of these actions will significantly leverage current developmental initiatives and will align resources toward the common purpose of African private sector development.

    In addition to the above the ECA should adopt an action-reflection approach where the premises of projects and expected outcomes are clearly articulated prior to their commencement and then evaluated upon completion. The evaluation should help improve plans and adapt expectations for the next cycle of projects and so a learning cycle can be established. This also implies the ECA would become a central knowledge-repository that can be accessed by all other institutions undertaking development initiatives on the continent and elsewhere.

Conclusion

    The funding requirements and impact of projects differ and it is necessary to prioritise these on the basis of well-defined criteria. Each country needs to understand the nature

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