From Rands to Riches: South Africa’s AI Potential
Artificial Intelligence in South Africa
“Wise words are not enough to fix South Africa’s economy” ~ The Economist
“South Africa Sees Fresh Start for Economy, With the Same Challenges” ~ The New York Times
“South Africa Heading Toward Becoming a Failed State” ~ Bloomberg
Through major headlines such as these, it is no wonder that there is little conversation surrounding South Africa’s future in AI when there are currently far more tangible and pressing concerns.
Yet, as Nelson Mandela once said, “it always seems impossible until it is done.” In my mind, these words evoke the character of a nation that has broken many seemingly insurmountable barriers in the past.
And so, South Africa does have a future as it is slowly positions itself as the leader of Africa’s Fourth Industrial Revolution.
Before analyzing the artificial intelligence scene in South Africa, it is imperative that we take a look at their recent, current, and future economic status. Before the wrath of the pandemic ensued, South Africa was already struggling financially.
In 2018, the current president of South Africa, Cyril Ramaphosa, pledged to attract $100 billion dollars of foreign investment in order to improve the problems that stem from South Africa’s unemployment rate, which is the 18th highest unemployment rate in the world.
However, in the last two and a half years, South Africa has seen little improvement of widespread poverty.
When juxtaposing South Africa, Africa’s second largest economy, with Nigeria, Africa’s undisputed largest economy, we can see that Nigeria had a GDP growth of 2.9 percent compared to South Africa’s 0.8% growth (African Development Growth Bank). This discrepancy in growth points towards South Africa’s strong lag behind its competitor.
South Africa entered the pandemic in a sub-optimal financial state. Thus, it comes as no surprise that the effects of COVID-19 were beyond detrimental.
The unemployment rate during the pandemic skyrocketed to 30 percent, a record high for the nation.
However, in the depth of South Africa’s turmoil lies a glimmer of hope; the IMF has recently approved a loan of 4.3 billion dollars for the South African government to help with the ensuing economic crash. Despite this hefty loan, the IMF has decreased its forecast for South Africa’s GDP growth from 3.5 percent to 3 percent for 2020.
You may ask: “How will South Africa escape this dark financial hole?”
The future lies in AI.
~ Prerequisites for an AI hub
In the words of the renowned author Parag Khanna, the key ingredients to a successful AI hub involve capital investments for startups, support of small businesses to leverage AI, and investment in a highly skilled workforce.
Fortunately, South Africa is moving in the right direction.
A 2018 report by a Pan-African research and media firm Weetracker stated that 40 percent of the total foreign and domestic investments that year were received by fintech startups.
In fact, according to BusinessTech, South Africa has invested a total of $1.6 billion in the last decade with the intent of instilling a drive for innovation in the tech industry among the population in a multitude of ways. Domestically, both the public and private sector have worked together to advance the country’s startup ecosystem.
In February of 2020, President Ramaphosa created a $95 million fund for small to medium sized enterprises (SMEs).
Additionally, South Africa’s Tech Innovation Agency looks to incentivize digital development by offering a 150% deduction of expenditures related to research and development. Furthermore, effective as of June 2021, the government will provide tax relief to VCs that invest in select startups, thereby accelerating tech growth.
One example of an effective government-funded startup is Bandwidth Barn Woodstock, an incubator that provides mentorship and facilities for the nation’s entrepreneurs. To date, Bandwidth Barn Woodstock has helped grow over 100 companies, including 25 tech startups.
Similarly, in the private sector, the VC firms like HAVAIC engage with early-stage tech businesses across South Africa. One of HAVAIC’s client is the health-tech company RecoMed, South Africa’s largest platform for online booking of health-related matters, which has reported a record-number of bookings amid the pandemic according to Cape Town-based startup media firm Ventureburn.
Just like RecoMed, there are countless other SMEs that have grown from both private investments and government grants that has laid the groundwork for a strong digital economy, which in turn has elevated the job market. According to the African Tech Startups Funding Report 2019, 311 tech startups received almost $500 million in funds in 2019 alone, demonstrating the positive ripple effects seen through initial investments.
Finally, South Africa has done well to invest in the skill of their citizens, particularly in the tech sector. For this reason, there now exists programs such as the National Skills Fund and as of 2020, the government has proposed the establishment a Digital Development Fund to ensure broadband internet connectivity for the whole population.
Even amid the pandemic, South Africa has built up the infrastructure and prepared itself to enter the world of AI.
As it sets the stage of leveraging smart applications, South Africa has already completed its first step in establishing a 5G network. Earlier in 2020, South Africa’s telecom carrier Rain developed Africa’s first standalone 5G network in partnership with its Chinese counterpart, Huawei, currently available in the major cities including Johannesburg, Cape Town, and Port Elizabeth.
Huawei already accounts for 70 percent of 4G networks in South Africa and attempting to cut connections with this massive corporation in the midst of a 5G breakthrough is not a realistic option.
Thus, as South Africa continues to strengthen their partnership with China and Huawei, relations between South Africa and the US in the internet technology and communications space specifically will likely deteriorate.
South Africa’s 5G capability presents an opportunity to expand their regional influence. As a member of the intergovernmental organization the Southern African Development Community, South Africa will likely be able to deploy 5G infrastructure to fellow member states—which includes Botswana, Zambia, and Zimbabwe.
According to the International Association of Privacy Professionals, South Africa’s data protections regulations that will be enacted in June 2021 will provide further attract neighboring states. make a full transition to Rain as the dominant telecom carrier, rather than relying on Huawei with its well-known privacy violations moving forward.
South Africa has experienced anemic GDP growth over the last 5 years
With this ability comes the opportunity to develop digital supply chains, as corporations with a presence in South Africa can now leverage applications like the Internet of Things in light of the emergence of 5G.
~Digital Supply Chains
Although South Africa has a relatively small manufacturing scene, especially in the tech space, its potential as an AI hub and increasing capacity to handle digital supply chains is apparent.
According to Manufacturing Global, Samsung has disclosed plans to begin manufacturing TVs in South Africa. Samsung is collaborating with TADA, a digital transformation platform to advance cognitive intelligence regarding their supply chain orchestrations. Additionally, car companies such as Ford and BMW with established manufacturing plants are investing in blockchain technology for supply chains.
As long as South Africa continues to be a manufacturing attraction to global tech companies, they will reap the rewards of the digital supply chains that are soon to be developed. This will be useful for a number of reasons, one of which being that digital supply chains and trade will become ever more efficient, with artificial intelligence using patterns to dictate how much of a certain product is necessary for each trading port and which trade routes are the most efficient and least expensive.
~Leading the Way
Despite the detrimental effects of the pandemic and their current economic state, South Africa still has the opportunity to thrive for one reason: artificial intelligence.
With their fast-growing technology sector, an avid tech start-up scene, and 5G network, South Africa will likely become the continent’s premium AI hub in the medium to long term. South Africa has distinguished itself as a real contender in the AI race, and if they play their cards right, they can truly be a force to be reckoned with.
Written by Kedar Nagaraj
Edited by Calvin Ma & Alexander Fleiss