Africa and the global in­tan­gi­ble econ­omy

Business a.m. - - COMMENT - OLUKAYODE OYELEYE Oyeleye is a pol­icy an­a­lyst, jour­nal­ist and vet­eri­nar­ian

MUCH HAS BEEN HYPED about Africa’s pride of place in agri­cul­tural po­ten­tial. Some so­lace has also been found in the sig­nif­i­cant con­tri­bu­tion of com­mod­ity ex­ports from Africa into the global mar­ket­place. Where Africa clearly lags be­hind are crit­i­cal and very es­sen­tial to the con­ti­nent’s pros­per­ity, now and in the fu­ture. With Africa’s lack of com­par­a­tive ad­van­tage in man­u­fac­tur­ing, it would have been ex­pected that the con­ti­nent would be well po­si­tioned to be a strong con­tender in the global in­tan­gi­ble econ­omy. Ev­i­dences to sup­port Africa’s progress in this di­rec­tion are yet to em­anate, not even from pre­tence!

While Eu­rope, North Amer­ica, Asia and the Pa­cific coun­tries are cap­tur­ing the val­ues of in­tan­gi­ble as­sets, al­beit at vary­ing de­grees de­pend­ing on the re­gion, Africa is yet to show sig­nif­i­cant signs of spill-over ef­fects of the world’s emerg­ing lead­ing eco­nomic sec­tor. Apart from the trickle down ef­fects that brought about some no­table changes, there are yet to be re­mark­able im­pacts in any way sim­i­lar to what has trans­formed the economies of some hith­erto third world coun­tries that have climbed the lad­der of progress and now rank among lead­ing economies of the world such as South Korea, Sin­ga­pore, In­dia and, to some ex­tent, China.

Brand Fi­nance, a think tank, in its find­ing from a re­cent re­search, ob­served that, glob­ally, although top brands have sur­passed $50 tril­lion (£38 tril­lion) for the first time in his­tory, three quar­ters of this re­mains un­ac­counted for on bal­ance sheets. Its Global In­tan­gi­ble Fi­nance Tracker (GIFT) re­port es­ti­mates global in­tan­gi­ble value for lead­ing brands, headed by Ama­zon, Mi­cro­soft and Ap­ple, reached $57.3 tril­lion re­cently. This con­sti­tutes 52 per cent of the over­all en­ter­prise value of all pub­licly traded com­pa­nies world­wide, which, it cal­cu­lates, now amounts to $109.3 tril­lion, ex­ceed­ing the $100 tril­lion mark also for the first time. Check out the bourses: NAS­DAQ, DOW, FTSE, SSE, DAX, S&P and some other in­di­ca­tors. Their out­puts tell tales of roar­ing economies, which are roar­ing higher still.

While many of these roar­ing economies and their cor­po­ra­tions are built on in­tan­gi­ble as­sets, the same can­not be said of Africa’s. A World Bank com­par­a­tive study on man­u­fac­tur­ing showed that, as at 2011, the value added per worker was $1,860.42 in agri­cul­ture, $25,911.85 in agri­cul­ture and $26,927.51 in ser­vices. Given that man­u­fac­tur­ing and ser­vices sec­tors to­gether take a small share of the eco­nomic pie in Africa, it is easy to dis­cern, from labour per­spec­tive, what pro­por­tion of the global eco­nomic val­ues ac­crue to Africa. Ex­tend­ing the anal­y­sis be­yond labour, and into the wider mar­ket, the pro­por­tion of prod­ucts of man­u­fac­tur­ing and ser­vices that find their ways into Africa may be ex­trap­o­lated with some ed­u­cated guess. More dif­fi­cult, how­ever, are those of the in­tan­gi­bles.

In­tel­lec­tual prop­erty sup­ports much of the in­tan­gi­ble as­sets that are now driv­ing the global econ­omy. It is reck­oned to now ac­count for over 87 per cent of all com­pany value glob­ally, in the forms of brands, patents, trade­marks, fran­chises, good­will, copy­rights, data, soft­ware code, con­tent, con­fi­den­tial in­for­ma­tion, reg­u­la­tory ap­provals, prod­uct de­signs, in­ven­tions, R&D find­ings and in­dus­trial know how. Their rel­e­vance will con­tinue to in­crease as the largest repos­i­tory of value to­day and in the fu­ture. They, and not agri­cul­tural raw prod­ucts, will con­tinue to be dom­i­nant in the stock mar­ket.

In the ICT sec­tor, Africa still con­tin­ues to search for more great break­throughs after MPESA in Kenya. Even then, the quan­tum leap of Snap Chat, In­sta­gram, What­sapp or UBER (with global in­flu­ence) dwarfs the mod­est im­pact of the mod­est MPESA, with its re­gional in­flu­ence within Africa. But MPESA was a com­mend­able dis­rup­tive in­tan­gi­ble econ­omy that should mo­ti­vate more tech savvy Africans to bring up more new in­ter­ven­tions in var­i­ous sec­tors, in­clud­ing health, agri­cul­ture, trans­porta­tion, and mar­ket­ing. Africa needs in­tan­gi­ble as­sets that are in­ter­net-based, soft­ware pro­grammes and other dis­cov­er­ies.

In any new in­no­va­tion, like with MPESA, brand eq­uity, which is con­sid­ered an in­tan­gi­ble as­set be­cause the value of a brand is not a phys­i­cal as­set but is ul­ti­mately de­ter­mined by con­sumers’ per­cep­tion of the brand, can help cre­ate vi­brant economies. Africa needs to ad­vance faster and take ad­van­tage of spill over ef­fects of tech­nolo­gies from the in­tan­gi­ble economies of the ad­vanced coun­tries. Quot­ing the World Eco­nomic Fo­rum, “the global in­no­va­tion race is heat­ing up, with ad­vances in ar­ti­fi­cial in­tel­li­gence, blockchain, biotech­nol­ogy, data stor­age and other cut­tingedge tech­nolo­gies trans­form­ing sec­tors and global mar­kets. To com­pete, com­pa­nies can in­no­vate in-house, or they can ac­quire oth­ers’ in­no­va­tions.”

WEF reck­oned that spend­ing on R&D is one met­ric by which in­vest­ments in in­no­va­tion are mea­sured. It re­ferred to an ear­lier study by the Euro­pean Com­mis­sion, sur­vey­ing 2,500 com­pa­nies across the world that in­vested a com­bined €24 mil­lion in R&D in the 2016 fis­cal year. Among them were 481 Chi­nese com­pa­nies, in­clud­ing 105 Tai­wanese com­pa­nies. The re­port noted that 10 of them have now en­tered the top 100 global R&D spenders. As noted by Mor­gan Stan­ley Cap­i­tal In­ter­na­tional (MSCI), over “80 per cent of the en­ter­prise value of the S&P 500 to­day is in in­tan­gi­ble as­sets such as patents and trade­marks, as well as soft­ware, brands and IT ac­qui­si­tions.”

Ac­cord­ing to the United Na­tions Ed­u­ca­tional, Sci­en­tific and Cul­tural Or­gan­i­sa­tion (UN­ESCO), “de­spite the progress made in terms of eco­nomic growth, Africa con­tin­ues to present the para­dox of wide­spread poverty in a con­ti­nent that abounds in hu­man and nat­u­ral re­sources. There are sev­eral eco­nomic, po­lit­i­cal, so­cial, cul­tural, en­vi­ron­men­tal and tech­no­log­i­cal fac­tors that could ex­plain this para­dox. It is clear, how­ever, that most African economies re­main de­pen­dent on one or a lim­ited num­ber of prod­ucts with low added value and are heav­ily de­pen­dent on for­eign aid for the fund­ing of their de­vel­op­ment; there is lit­tle in­tra-African trade in spite of the will­ing­ness to pro­mote re­gional in­te­gra­tion of economies and mar­kets.”

In ev­ery eco­nomic trans­for­ma­tion, there are lead­ers and lag­gards. This sit­u­a­tion cre­ates in­equal­i­ties in wealth, in­come and sta­tus. Sadly, this is now a re­al­ity when Africa is com­pared with tech­nol­ogy-driven economies. Eco­nomic growth, wealth cre­ation, re­source ac­cu­mu­la­tion, in­tel­lec­tual in­flu­ence, and tech­ni­cal or so­cio-or­gan­i­sa­tional in­no­va­tions go hand in hand and are mu­tu­ally re­in­forc­ing. The in­tan­gi­ble – rep­re­sented by soft­ware, so­cio-or­gan­i­sa­tional pro­cesses, part­ner­ship or col­lab­o­ra­tion and, gen­er­ally speak­ing, sci­ence and tech­nol­ogy – is an in­evitable part of eco­nomic pro­cesses and out­comes now. With the sea change in global eco­nomic dy­nam­ics, knowl­edge has be­come the most im­por­tant raw ma­te­rial and knowl­edge ac­cess and knowl­edge shar­ing are key is­sues. Sci­ence and tech­nol­ogy are lead­ing driv­ers of the emerg­ing economies.

Cul­tural in­dus­tries can con­trib­ute to the de­vel­op­ment of African economies and need to be pro­moted and ranked among the most dy­namic eco­nomic sec­tors. Given weak economies and the weak roles of the pri­vate sec­tor, em­pha­sis should be on crit­i­cal in­fra­struc­ture to lever­age the in­tan­gi­ble as­sets which can serve as ba­sis for build­ing ro­bust economies. These can help the con­ti­nent tran­sit from low to mid­dle-in­come, or even a high-in­come econ­omy. But avail­able find­ings are not yet en­cour­ag­ing. The out­come of col­lab­o­ra­tive ef­forts on data col­lec­tion span­ning over a 12-month pe­riod end­ing in May 2018, by the Open Tech­nol­ogy In­sti­tute, Google Open Source Re­search and Prince­ton Univer­sity, on 163 mil­lion in­ter­net broad­band speed tests in 200 coun­tries could be of some in­ter­est.

The data was com­piled to mea­sure ac­ces­si­bil­ity and qual­ity of broad­band, still the most widely used form of in­ter­net ac­cess, in terms of av­er­age down­load speeds. “While Euro­pean na­tions dom­i­nated the top ranks, it is Sin­ga­pore that holds the num­ber one spot on the sur­vey. Coun­tries in Sub-Sa­ha­ran Africa are dis­pro­por­tion­ately con­cen­trated in the bot­tom rungs, bar Mada­gas­car, a coun­try which landed the 22nd rank­ing, pri­mar­ily at­trib­uted to an un­der­wa­ter high-speed band­width fi­bre op­tic cable.” What does this tell us about Africa at present? UNCTAD’s 2017 Eco­nomic De­vel­op­ment in Africa Re­port ac­knowl­edged the need for diver­si­fied means of boost­ing the con­ti­nent’s econ­omy.

With par­tic­u­lar ref­er­ence to tourism, the UNCTAD re­port stated that, “to bet­ter har­ness the po­ten­tial of the tourism sec­tor to con­trib­ute to in­clu­sive growth, struc­tural trans­for­ma­tion and achieve­ment of the Sus­tain­able De­vel­op­ment Goals, Africa should adopt poli­cies that strengthen in­ter-sec­toral link­ages, boost in­trare­gional tourism and pro­mote peace.” In ad­di­tion to tourism, Africa needs to think through least cost ar­eas of economies that could eas­ily be scaled up or where it can take ad­van­tage of spill overs, to move the con­ti­nent’s econ­omy for­ward. Jonathan Haskel and Stian West­lake, in their ex­cel­lent book on Cap­i­tal­ism With­out Cap­i­tal: the rise of the in­tan­gi­ble econ­omy, of­fers some in­sight that African lead­ers must con­sider, take se­ri­ously and act upon ur­gently if the con­ti­nent is to stand any real chance of catch­ing up with other vi­brant economies. It is not enough to be clas­si­fied as emerg­ing economies. Africa must be­gin to spawn its own in­tan­gi­ble economies now.

While Eu­rope, North Amer­ica, Asia and the Pa­cific coun­tries are cap­tur­ing the val­ues of in­tan­gi­ble as­sets, al­beit at vary­ing de­grees de­pend­ing on the re­gion, Africa is yet to show sig­nif­i­cant signs of spill-over ef­fects of the world’s emerg­ing lead­ing eco­nomic sec­tor

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