Software production capabilities are building up within
every African nation, and one can see formative software industries in
many places (the work reported here derives from ongoing research into
African and Asian IT industries, including continent wide surveys plus
specific fieldwork in countries such as Kenya, The Gambia, Zimbabwe and
India). This article investigates past and future directions to this
capability build-up, and the lessons that can be learned from other
Before proceeding, one fundamental question needs to be
addressed: does it make sense for African nations to set up their own
The answer is an unequivocal "Yes". Information
technology (IT) overall is one of the most critical technologies
affecting economic growth in Africa and, within the overall set of
technologies that make up IT, software is vital since other technologies
cannot function without it. Software has also been forming an increasing
component of overall value within information technologies.
The development of a local software industry can therefore
lead to many positive externalities, and is a necessity if African
countries are to adapt software technology to suit particular local
"Software production is nowadays an industry,
essential for the growth of the economies of the developing countries;
and the launching of programmes to promote strong and indigenous
software industries is a priority task." [Fialkowski K., Software
industry in the Developing Countries: the possibilities, Information
Technology for Development, 5(2),1990].
Software production is also the best entry point for Africa
into the IT production complex. For example, compared to hardware
production, software production has much lower entry barriers because it
is less capital-intensive, more labour-intensive, with a lower rate of
obsolescence, and (at least for certain types of software) it has far
fewer economies of scale. All of these factors work in Africa's favor,
and software's labour-intensity of production combined with low African
labour costs offer a clear opportunity.
Strategies for Future Growth
Experience shows that there are four strategic positions
that can be taken within the software industry, as shown in Figure 1.
1: Strategic Positioning for Software Firms
For many African countries and software firms, the
export-oriented strategy seems highly attractive. They look to the
example of India as proof that software exports can be hugely successful
for developing countries. The figures seem to support this. Software
exports from India in 1994/95 were a staggering US$480m - up from less
than US$4m in 1980 and growing at 40% or more per year. 18 Indian firms
earn more than US$5m annually from software exports, with the largest (Tata
Consultancy Services) earning US$90m - more than all
merchandise exports from entire African countries such as The Gambia and
However, software exports are not a panacea for African IT
development nor, therefore, are strategies C or D to be recommended at
present for two key reasons, detailed below.
The Illusion of Indian Export Success
Firstly, India's export performance is not all that it
might seem. The figures quoted for India give gross earnings.
Most of this money leaves the country to pay for travel costs and living
allowances of those software developers who work overseas, marketing
costs, profits of multinational subsidiaries, and the import costs of
related hardware and software. In reality, then, 75-80% of the foreign
exchange earned does not end up in India.
Much of the work done is in no way glamorous, but involves
the most basic, dull conversion and maintenance tasks that Western
programmers are unwilling to undertake. Partly because of the consequent
lack of job satisfaction for Indian software workers - combined with
their frequent citing in the US, Europe or Australia - the export trade
has encouraged a brain drain of talent amounting to around 15% of total
industry workforce each and every year.
Finally, the export drive has incurred a large opportunity
cost as the finest local minds now produce software to boost the
performance of American and European companies rather than using their
talents to address domestic developmental needs. Dependence on foreign
multinationals is heavy, and this has been associated with a
snuffing-out of local innovation.
Barriers to African Software Exports
Even if one still wishes to believe that, "warts and
all", India's export experience provides a model for Africa, there
is a second, stronger argument against the export-oriented approach:
that Africa currently faces far too many barriers to enter this market.
The barriers include:
Lack of skills:
Though software exports are often "low-skilled", they still
require at least a graduate with in-depth technical experience. Such
workers are in serious short supply in all African countries.
Lack of infrastructure:
The software export trade increasingly demands a sizeable installed
computer base; reliable and pervasive telecommunications links both
domestically and internationally; and reliable electricity supply. With
hand on heart, few African countries can yet claim to provide this.
Lack of market information:
Exports are based on understanding your export market and having trading
contacts in that market. Such information is not readily available
In addition, African nations face the difficulties of any
late-comer to a market. Countries like India, Singapore and the
Philippines arrived on the export scene many years ago. They have
already developed the requisite skills, contacts, policies and
infrastructure that are so lacking in Africa. As a result, these
established players will continually consolidate their position whilst
squeezing out potential African newcomers.
There are, of course, a few producers in countries such as
Egypt and South Africa who export software. Unfortunately, they have
tended to do more harm than good in terms of image because they are the
exception, not the rule, and the focus of African software industry
attention must be placed elsewhere.
"Plan B" - The Software Package Market
If export-orientation is currently inviable, should African
firms, instead, be aiming for the production of domestic software
packages? In the general applications market (e.g. word processing
software, spreadsheets, databases), they certainly should not.
The Microsofts of this world have that market wrapped up,
and entry barriers for African firms remain formidable.
High development costs:
Any low labour cost advantage in development is quickly eroded because
of the huge advertising and marketing budget required for a successful
package (many major software multinationals spend 40-50% of annual
revenue on sales and marketing, and microsoft spent roughly US$1.5bn in
1994. Even research and development is becoming costly. The main firms
spend 14% of revenue on this and, for example, microsoft spent US$ 60m
developing its Access database - Economist 1994). Aside from these
costs, experience suggests that only about 1-5% of products succeed,
thus providing very little return on most package investments.
Foreign software preference:
Irrespective of price, quality and features, African consumers appear to
prefer foreign rather than local software.
Piracy: Rampant package piracy squeezes
an already small domestic market to minuscule proportions, thereby
rendering unit costs for marketing and distribution even higher.
Dearth of market information:
Information on the domestic market is lacking, making it very hard to
plan, design and market a new package
Narrow, vertical package markets do exist in Africa, in
public administration, health administration, hotel management,
insurance, accounting, etc. African software firms are addressing these
markets but one finds that their "packages" are often just a
set of menu or window interfaces that are used as a marketing or
development platform for further customisation. In addition, the steady
globalization of all markets means that competition from multinational
imports (both legal and pirated) increasingly threatens even these local
Mastering Strategic Position A
Firms therefore need to aim for strategy A by providing
software services for their local markets. This is the easiest market
segment to enter and it is here, inevitably, that most African software
firms sit. They offer installation, training and customisation based on
imported packages (typically dBase, Access, Lotus and Excel) or, more
rarely, custom-built software from scratch according to customer
In the longer-term, African software firms can seek to
follow strategic development paths such as A->C or even
A->B->C. However, this can only come about once strategic position
A has been successfully mastered.
A cold, hard analysis of firms' performance in this
strategic sector shows that all is not well and that position A has yet
to be mastered. There is still heavy reliance on foreign software
developers for most large contracts. Systems integrators have shown
themselves more adept at selling and installing equipment than at
meeting user needs. Software development staff are often self-taught
from the manual and, while they may have some technical skills, lack an
understanding of information systems analysis and design techniques,
especially an understanding of human and organizational requirements.
The US Software Engineering Institute offers a five-point
scale against which firms' software development processes may be
Initial: ad hoc processes
Repeatable: basic management practices are defined and
Defined: technical practices are defined and enforced
Managed: fully defined process is measured so that
performance can be controlled
Optimizing: measurement results and error prevention
activities are fed back to identify areas for improvement
The vast majority of African firms fall into category 1,
with only the smallest handful finding their way towards categories 2
and 3. It is little wonder that customers are turning to imported
packages, with their guarantees of quality, reliability and longevity,
and trying to keep local customisation to a minimum, even if this means
that they do not have their needs fully met.
The way forward is clear enough and involves actions such
as more staff training, a more professional approach from software
company management, and greater customer orientation. Yet such things
are far easier to describe than to implement, partly because firms face
external constraints which they alone cannot overcome. Higher
authorities must therefore become involved.
The Need for Government Action
The obvious higher authority to involve is government, but
not all commentators support this. Many US-based companies and
development organizations, for example, claim that the best development
path is that provided by reliance on market forces and "rolling
back" of government intervention.
These advocates of the free market approach are suffering
selective amnesia. America built its IT industry on government money
pumped in during critical early growth years in the 1940s, '50s and
'60s. Those preaching market forces today do so only because their
industry is now fully-established and because the market-only approach
means more sales and less competition for US software products.
The free market will never provide a software industry for
Africa and government action is essential. If this is the case, what
actions should African governments take?
Before doing anything, they must survey the current status,
trajectories and needs of the local software industry. Having done so
they are likely to find a menu of constraints which need to be
addressed, some of which have already been mentioned. They include:
Lack of capital, especially venture capital.
A small, heterogeneous domestic market with high piracy,
poor IT awareness, a consumer preference for imports, and a lack of
recognition of the need for customisation to meet organizational needs.
Lack of software development skills and software production
management skills, leading to problems with local software development
productivity and quality.
Lack of information about local and foreign software
markets, and a lack of marketing skills.
Lack of relevant infrastructure.
In some countries only, language barriers give predominance
to English within the software world.
Some of these are hard to address and can only be attacked
slowly and indirectly - for example, those on local consumer
preferences. However, in all the other areas, government can - indeed,
must - act. For example, government and industry must work together to
plan appropriate education and training institutions, courses,
curricula, and quality assurance, delivery and financing mechanisms.
Here, the experience of other countries provides a valuable guide, from
India's training certification scheme to Ireland's tax breaks for
In conclusion, then, one can predict that African countries
are unlikely to become software giants for many decades. However, they
can become players within the global software market, but only if they
learn the lessons of those who have gone before. They must eschew the
bright lights of software exports and -ignoring the selfishly-motivated
calls of the free marketeers - install a flexible but co-ordinated set
of government promotional interventions.