Guateng Province
Destined To Be Next Silicon Valley
South Africa looks to be a major contender in the high-tech boom with
the construction of Guateng's first innovation hub.
By Greg Winter
PRETORIA, South Africa — Down a soggy stretch of red earth road, in a field where Guinea fowls nest among neat rows of maize and cows graze in the tall grasses, sits the spot where the Gauteng Province, South Africa's commercial powerhouse, wants its future to be born.
For nearly a century, the University of Pretoria has preserved this pastoral site, bequeathed by an Afrikaner farmer who died childless, and has run it as an experimental farm. But in less than 18 months, this throwback to the Gauteng's agricultural past is destined to be transformed into the region's first innovation hub, an 85-acre office park of business incubators, entrepreneurial services, state-of-the-art training centers and anchor tenants to help pay for it all.
Drawing from a three-year, $23 million allocation by the provincial government, the project aims for nothing less than a high-tech renaissance of South African companies capable of challenging their idols in Silicon Valley.
"That may be a bit presumptuous," said Dr. Neville Comins, a director with CSIR, one of the organizations coordinating the project. "But we want small companies to think big and not just take the insulted view. We are looking to be a player."
Although it is the smallest and least populous of South Africa's nine provinces, the Gauteng is the nation's economic epicenter, responsible for roughly 38 percent of the country's Gross Domestic Product. Home to Johannesburg, the commercial capital, as well as Pretoria, the seat of most government branches, the province is the bellwether of the nation's economy. Its health is critical to the stability of a new democracy where one in three people between the ages of 15 and 65 are unemployed.
With scores of information technology firms from around the world, the Gauteng has long since begun its shift to a post-industrial economy. The mining and heavy manufacturing that once powered the apartheid state are nearly invisible now, blocked by a 30-mile wall of high-tech companies lining the freeway from Pretoria to Johannesburg like a concrete gully. Signs for Siemens, Acer, Hewlitt-Packard, Novel, Compaq and others dot the landscape like marquees for a Silicon Valley on African soil.
But as much as the names attest to South Africa's booming information technology sector, they also reveal a lop-sided relationship with the country's trading partners in Europe and the United States. Ninety percent of South Africa's software arrives in boxes from abroad, as do the cell phones cradled by nearly a third of the nation's population. Almost all of the nation's computers are assembled from parts manufactured abroad, and the same foreign companies that give the Gauteng its high profile choose to develop their products close to the hip at home.
Despite the enormous space high-tech occupies in South Africa's hopes for economic vitality, the country remains a reseller market, a dumping ground for technology developed overseas. Rarely, if ever, does the product-flow travel in the opposite direction, a reality many are desperate to change but few are optimistic will happen. "We're bit players, small time," said Kerry Swift, publisher of PC Magazine in South Africa. "We need to be part of the game, but we can't contribute much. The big players aren't that interested."
There are some notable exceptions, of course, enough to feed speculation that South Africa is emerging as a high-tech contender, ready to spawn companies with global stature. In businesses circles, the name Mark Shuttlesworth, who sold his digital fraud prevention company in February to Mountain View-based VeriSign for $500 million, carries near mythical weight, somewhat akin to a South African Bill Gates. And Dimension Data, the computer networking company that recently bought an 80% stake in an American rival, elicits the kind of pride South Africans typically reserve for the national soccer team.
But the frequency these few icons of South African industry are evoked only highlights how uncommon they are — rare exceptions that merely drive home the rule.
The hub's planners don't pretend that incubators alone will make South African success stories any more commonplace. They are all too aware that free office space, consulting services and ready access to some of South Africa's top venture capitalist won't do much in the absence of entrepreneurs who can build a better Web browser.
"What we need is a feed of creative people," said Comins. "The hub will not generate the ideas. The ideas will come from sparks from individuals."
To ferret out fresh talent, project coordinators are linking up with the University of Pretoria, in hopes of luring technologies to market that might otherwise remain in the lab. But some advisors worry that the hub's success will be marred by South Africa's dwindling technical expertise, one of the key reasons the country currently has trouble breaking into world markets.
Until recently, South Africa had one of the world's highest concentrations of technicians certified to work on Microsoft systems. But, according to a recent report by the South African Department of Trade and Industry, that skills base has been severely eroded by a pattern of annual emigration that hemorrhages a minimum of 400 engineers, ten times the number of doctors or dentists lost every year. Many experts place the figure much higher, noting that the government can't count those who lie on their departure documents to escape limits on how much money can be taken out of the country.
"We have a lot of skilled people, but they leave," said Barry Brady, senior analyst at BMI-Techknowledge, a research company that tracks the high-tech industry in South Africa. "Those guys get qualified and go to London to earn pounds. Success is a curse."
According to the group's most recent findings, up to 25 percent of South African emigrants are IT professionals, from entrepreneurs to mid-level managers, resulting in a widening skills deficit for which the faltering school system simply can't compensate.
The innovation hub hopes to counter the trend by offering internships within its incubators, a way to steep university students in product development before they try making a living at it. And to lure would-be entrepreneurs, hub organizers are pushing the bucolic setting — a sliver of the past for a future South Africa may never achieve.
Indeed, some members of the project team question whether their efforts will have more than a marginal impact, and would consider the hub a success if it simply added to the short list of South African high-tech celebrities. Despite the broad trading opportunities that have accompanied democracy, some feel that South African businesses were considerably stronger, at least in terms of talent and market share, when the country faced boycotts by the international community.
"When we were isolated, we had to do many things for ourselves," said Hugo Meyer, a former head of Africon engineering group who is now a consultant on the project. "We had to develop everything the people in this country needed."