Top in ICT in Sub-Saharan Africa -Mauritius, South Africa and ...The Gambia?

Sub-Saharan Africa did very poorly on the latest World Economic Forum’s Networked Readiness Index (NRI) with the majority of the region lagging in the bottom half of the 138 countries being ranked in the report. Exceptions were Mauritius (which ranks 47th) and South Africa (which ranks 61st).
Burundi (137th) and Chad (138th) were the worst ranked of all countries on the list.
Rwanda, which probably would have fared pretty well within Sub-Saharan Africa, was not ranked. This is rather strange since Rwanda’s ICT efforts are mentioned in the report. Moreover, Rwanda’s government has set the country on a fast-lane to technology growth.
The ranking holds some surprises. The Gambia and Senegal rank higher than Kenya even though Kenya did rise 9 places since the 2010 report. Hmmm. How much did The Gambian and Senegalese governments pay? :)
Here are the rankings of Sub-Saharan African countries

Country	Rank	Notable Improvement
Mauritius	47
South Africa	61
Gambia	76
Senegal	80
Kenya	81	up 9 spots since 2010
Namibia	82	up 7 spots since 2010
Cape Verde	84
Botswana	91
Ghana	99
Zambia	102
Nigeria	104
Malawi	105	up 14 since 2010
Mozambique	106	up 10 since 2010
Uganda	107	up 8 since 2010
Côte d’Ivoire	113
Benin	114
Tanzania	118
Mali	120
Lesotho	121
Burkina Faso	122
Ethiopia	123
Cameroon	125
Mauritania	130
Zimbabwe	132
Angola	133
Swaziland	134
Burundi	137
Chad	138

The full report is available of the World Economic Forum website for download (pdf)

Technorati Tags: Africa,Africatech,ICT,NRI,WEF,INSEAD,Sub-Saharan Africa,report

African Innovation Needs Real Venture Capital

I came across this Forbes article today by Mfonobong Nsehe in which he decries the absence of venture capitalists to support the technology innovators on the continent:

Africa has its own Mark Zuckerbergs, Andrew Masons, Mark Pincuses, Larry Pages and Sergey Brins. But it lacks its own Yuri Milners, John Doerrs, Vinod Khoslas and Y Combinators.

He adds:

Africans can create hugely successful tech products that will sweep the world off its feet. There are several entrepreneurs out there waiting to break through, but their ideas might never see the light of day because of a lack of seed finance. This is the reason Africa might never produce a Facebook, Groupon, Zynga or Google: There are no venture capital firms in Africa to fund these ventures.

Nsehe is right. When it comes to African technology, there is no, or little venture capital available to African entrepreneurs. The financing that is available generally comes from “social’ or ‘development’ type funders, not from venture capitalists wanting to get a huge return on investment. As a result, the funding comes in very small increments of $10,000 to $25,000. This is a lot of money in Africa but it cannot help African innovation compete at a worldwide scale.

Ushahidi is a perfect example of this. This revolutionary technology, whose founder is Kenyan woman entrepreneur Ory Okolloh (pictured). The technology has received worldwide acclaim and has been used around the world. But their funding mostly came from this social/development community. In fact, the funders listed on the Ushahidi web site almost all end in “Foundation.”

Sure, you could argue that Ushahidi has a “social benefit” aspect to it and therefore, it is normal that the funding would come primarily from the development or social funding community. But I wonder if the funders’ list had been different, if the technology could not have evolved into a profitable business venture as well.

A few years ago, I ran into a VC firm that had raised money from Vivendi and other big players. Their sole objective was to fund African technology. This was exciting. However, they were only interested in these mom and pop tech firms that had a ‘social’ benefit. The VC firm soon disappeared.

As an African woman, it is worse. You say funding, and the automatic reaction is “Micro-Finance,” a real pet peeve for me. As if African women entrepreneurs were incapable of managing anything more than a $50 loan. (Don’t let me get going on the women and finance thing here…). Development, social and micro-finance are not evil. They have their role and do help keep millions out of poverty. But Africa cannot develop by simply trying to not be poor. We need real multi-million dollar financing for African innovation. Is there risk? Of course there is, but no more than funding an online pet shopping site in Silicon Valley.

Technorati Tags: African technology,venture capital,africa entrepreneur,Forbes,Ushahidi

, Mfonobong Nsehe

Managing my Psychology

I read and re-read the post by Ben Horowitz today: What’s The Most Difficult CEO Skill? Managing Your Own Psychology. I kept reading it over and over because I finally realized that I was not alone. As an African entrepreneur, I am confronted with challenges that CEOs in developed countries don’t even know exist. But they have their own challenges and in the end, the psychological ‘condition’ and the internal struggle are the same. Horowitz says:

‘The first rule of the CEO psychological meltdown is don’t talk about the psychological meltdown.’

This is so true. Because who do you talk to? As well meaning as they might be, friends, even employees simply cannot understand. It is like a White person not knowing what it is like to be Black. I mean, they feel for you. Intellectually, they understand that it might be different but in the end, they really don’t know. As a result, I spare my friends and my family with the gory details of entrepreneurship in Africa and I save them for my blog.

I remember one time, I had several members of my American family together for Thanksgiving and they really wanted details about my life in Africa. So I started to tell them a story and seeing their bewildered look, I stopped and brought the story to an end. Even then, they were wondering why I just didn’t come back to the US where I could lead a more ‘normal’ life. Another time, I met with members of the World Bank’s “Doing Business” staff as they were getting background information on my country to compile their yearly report. After three hours, they looked at me and said: “Why are you still there?” A ‘normal’ person simply cannot understand what drives an entrepreneur, nor understand, as Horowitz so perfectly describes, the loneliness of being a CEO.

But my favorite quote from Horowitz’s article is:

Tip to aspiring entrepreneurs: if you don’t like choosing between horrible and cataclysmic, don’t become CEO.

I often say that leadership involves choosing between bad and worse and you will be judged on making the bad choice. Few, if any around you understand that you had few options when making an important decision or that all of your options were bad ones. In the end, they will simply conclude you made a bad choice. Having made some over the more than 11 years since I started my company, I have a soft spot for all leaders, be they business or political when people second-guess their decisions.

Horowitz ends with some nice suggestions on how to manage your psychology. His final advice:

'Don’t Punk Out and Don’t Quit As CEO, there will be many times when you feel like quitting. I have seen CEOs try to cope with the stress by drinking heavily, checking out, and even quitting. In each case, the CEO has a marvelous rationalization why it was OK for him to punk out or quit, but none them will every be great CEOs. Great CEOs face the pain. They deal with the sleepless nights, the cold sweat, and what my friend the great Alfred Chuang (legendary founder and CEO of BEA Systems) calls “the torture.” Whenever I meet a successful CEO, I ask them how they did it. Mediocre CEOs point to their brilliant strategic moves or their intuitive business sense or a variety of other self-congratulatory explanations. The great CEOs tend to be remarkably consistent in their answers. They all say: “I didn’t quit.”

I will re-read his advice every time I feel overwhelmed and the very next time I feel like a mad woman. I still think that being an entrepreneur in Africa is harder than it is in the developed world. Last week, Columbia University held its annual African Economic Forum and one of the speakers said that to be an entrepreneur, you had to be a little crazy. I responded: ‘To be an entrepreneur you have to be crazy. To be an entrepreneur in Africa, you have  to be raving mad.

Well, after reading the article from Horowitz, I am still convinced that I am raving mad, but at least I know I am not alone.

When Your Employees and Customers Unite to Defraud You

Our main Cisco router recently died. We have had it for many years and it was due for an upgrade. We contacted a few of our current suppliers to get quotations. One, we’ll call ABC, sent their regular sales representative who spent some time discussing our needs. Within a couple days, we received a quotation from the sales representative. Interestingly, it was in the sales rep’s own personal name! He has a small business on the side, doing exactly the same thing that his employer ABC does.

Surely, ABC is unaware that we received this quotation from his employee. The employee probably told his superiors that we no longer wanted the router or that we had purchased it elsewhere. He was quite confident that we would buy the router from him and never tell his management, an indication that he has done this several times before.

Another local IT company developed some industry specific software and customized it for their primary client. They trained their main developers extensively, even sending one to North America for classes. The client then unexpectedly decided to cancel the contract. The IT company felt protected by the fact the client would eventually be forced to honor the contract or cease operations since this was a mission critical application and they could not operate without it. Unbeknownst to them, the client had already purchased the source code from the IT company’s developer, who, with a still valid visa, had fled to North America. Given the state of the judicial system in this country, there is not much recourse for this IT company.

We complained once to our former internet provider about slow bandwidth even when there were few of us connected at once. They kept checking their system and said that we were using all of our allocated bandwidth. After an investigation, it was discovered that one of their employees had given other customers access to our bandwidth paying the employee directly for the extra bandwidth.

We have also been on the other side of employee/customer fraud. A few years ago we did some training for a very large customer. We did not get the purchase order up front since both their IT director and their training manager came to our office to confirm the training, promising to bring the purchase order during the training. Well, even after the training was over, we still had not received the purchase order. For the next year and a half we waited for the purchase order. The salesperson responsible for the deal on our side was very active in keeping in contact with the client and updating us with the internal problems the client was having, asking us to be patient. The client’s IT director also came to see us several times asking us to hang in there and that there were larger projects down the road for us if we remained patient. They were a very large customer and the potential was huge so we waited.

Eventually, we decided to send a fax to the customer’s CEO to state that we were walking away from the $26,000 in revenue and wanted them to acknowledge our “donation.” We first called his office to get his fax number. Hearing the name of our company, the secretary said that she had seen a payment document come through with our name on it. She transferred us to accounting. The accountant confirmed that she had just issued the payment. She confirmed our invoice number, the invoice description and other details, all of which were correct, then added. “We just ordered a wire transfer to your account at 123 Bank.” Well, we didn’t have an account at that bank. She insisted that the account information was on the invoice and faxed us a copy of the invoice.

The invoice had been copied exactly from the one we had submitted with one exception: the payment details were the account number of a company our salesperson had set up with the customer’s IT director! Even after the fraud was discovered, we still never got paid in full. The purchase order had been issued in the name of the other company and we had to negotiate a lower payment. As part of the agreement, we had to pay the salesperson her commission!

One of my friends also owns an IT company in this country. They have devices that secure revenues for a government agency. The devices are all connected to a server which reports on the revenues generated by the devices. One of his employees, in complicity with agency employees, took one of the devices offline. The device continued to collect revenue but none of it was reported. When my friend uncovered the subterfuge, he immediately notified the client and fired his employee. The agency had my friend briefly arrested and his employee's accomplices within the agency kept their positions! Obviously, the agency management was in on the fraud. Had my friend kept quiet, everyone would have been happy.

I am not sure what the solution is to this disease that permeates business relationships in this country. The judicial route is risky at best and no one wants to take customers to court, even when they acted improperly. You can of course fire your employee or file criminal charges for theft but you are again left to the mercy of the judicial system.

Some employees use the excuse that they are not well treated by their employers but in all the examples I listed above this was not the case. Our salesperson earned $1,000 a month before commission and had $300 in monthly telephone credit which is quite decent, especially since she was not full time. In the other cases, the employees were some of the highest paid and best treated in their respective companies, some even having company cars and expense accounts. This really just boils down to the general business climate in the country. Anything goes. There is no right or wrong, just a quick way to make money.

I feel very blessed with the staff I have right now and I am confident that they don’t engage in this type of behavior. At least… I think.

Fiscal Tyranny (Part 1)

Yesterday, our tax adviser stopped by for a meeting to discuss our monthly filings. A meeting that was intended to raise her concerns about hotel bills turned into a philosophical discussion about taxes in this country.

Our tax advisor’s specific concern was that we had paid hotel bills for some people but that our records did not reflect a contract for those people or any consulting payment to them. Our explanation to her was that these people were company staff in the US and Europe who had travelled to our country to provide sales and technical assistance just made it worse. That meant that we needed to pay a technical assistance tax of 15% for those individuals. We explained that they were employed by our US and European entities and therefore there was no fee to be paid by our local entity and 15% of 0 was 0.

She explained that this would never fly with the tax authorities. We needed to draft a technical assistance contract for their work with an estimation of the value of their services even though the services would not be paid for. She also warned that without those contracts, we would likely have to pay for payroll related taxes for those individuals even though they are not on our payroll. Of course, once a contract is established, it needs to be “registered” with the tax authorities and the “fee” is 2% of the value of the contract. If the contract was registered late, then there is a 100% penalty for the fee. There are also taxes on the fees which are about 50%. So really you are paying 3% or 6% if you register more than 30 days after the work is performed. If the amount is under the $US of $10,000 then the registration “fee” is actually 5% plus the taxes, all doubled if you are 30 days late.

So because we wanted to reinforce our local activities with resources who came in from overseas we now had to pay thousands of dollars in taxes for services which we never had to pay for out of our local coffers.

This was insane but very logical to this poor tax advisor who was just doing her job. She was so enmeshed in the tax code and the way of doing business in this country that she was oblivious to the madness of the tax code and surprised that we objected to it. She really believes that this is the way business is done all over the world and she said that we were the first to complain not just about the process (will blog about that another time) but about the tax structure itself.

And that is the real problem. It is impossible to make real progress when most stakeholders do not understand that business as usual in this country is detrimental to our development. Everyone focuses on enforcing the current system and or complaining about the heaving handed collection process. But what is needed is a complete change in mentality. Taxes, fees, duties are not elements of progress for business but elements of repression. This by itself is not unique to this country. Business people all over the world complain about taxation and regulation. The state of Maryland, where our business was started, has just instituted a sales tax on computer services amidst an uproar from the tech community. Where this becomes insidious in a developing country like the one I am in is that the complexity and multiple layers of taxation are taken as an opportunity for tax officials to personally enrich themselves. The more complicated the tax structure is, the more repressive it is, the more taxpayers will look for ways to cheat and tax officials are all too happy to assist them in that manner… for a personal fee.

It's the About the Application of the Law Stupid!

The Managing Director of the IMF recently visited the country I am in. I read and re-read his concluding statement and it seemed very on-point:

"...Creating an environment conducive to private sector development is another priority area. In this context, strengthening governance, including a sound and predictable legal and regulatory framework, and an efficient judiciary is important."

It sounded almost as pertinent as the New Year speeches our President makes every year. Just as the Director of the IMF, our President really does seem to understand what is wrong with the country. The problem with him is the same as the problem with the Director of the IMF, they are either powerless to do anything about it other than making speeches that give people like me a half an hour's worth of hope that things will change, or they want to look the other way.

A few years ago, our President, in his New Year's speech announced the passage of a law eliminating taxes and duties on all information technology products. I was still living in the States then. About a month after his declaration, I landed in this country with computers, printers and other equipment for our local subsidiary. The customs officers were quick to tell me that we had to pay an inordinate amount of customs duty. We reminded them that the Head of State had announced that there was no more customs duty. They said that they had heard the speech as well and the law had been passed but that the “texts of application” of the law had not yet been drafted so we still had to pay. Of course, they offered a "discount" to keep it off the books. I thought that the receipt would be a weapon to use in the struggle to improve the business environment so we paid up.

A month later, the “texts of application” were published. Before anyone had a chance to take advantage of the new law, they repealed it. Taxes and duties were back on. No speech, no announcement, just those nasty “texts of application” that cancelled the law. Imagine the consequences for a company that placed a large technology order from overseas that had not yet received its merchandise? Not a nice surprise, especially not when the taxes and duties are about 50% of the value of the technology.

Back to the recent IMF visit. Of course, high on the list of the discussions was the fight against corruption. As in the President’s New Year’s speech and in many other political speeches, the government reiterated its commitment against corruption. But that little problem of the “texts of application” of the law creeps up again. In their Letter of Intent following the visit of the IMF, the country stated:

In April 2006, the government enacted a law defining the modalities for application of [the law], which refers to the disclosure of assets by senior government officials. Nevertheless, the commission that was to have been set up under this law to receive the asset declarations has not yet been established because the legal texts governing the application of the law have not yet been prepared. Similarly, the National Commission to Fight Corruption, created in March 2006, is not yet operational as its members have not yet been named, given the considerable time needed to ascertain the integrity of potential members.

Given that corruption is the government’s top priority, you start to understand why nothing changes here. And every time the World Bank, the IMF or US Government officials come in, our government will proudly display the laws on the books to fight corruption, to improve the environment for the private sector, to fight poverty, improve education, etc. And the World Bank and friends will have their conscience relieved that their admonitions were effective and that finally the Country is "behaving." The laws are well written and sound great. The problem is not just that they are not applied but that there is no consequence for not applying them. The judges can see the laws and chose to ignore them with no consequence, same with the police, the custom agents and all other public servants. Until the Country has to account for the non-application of its laws, it will not establish mechanisms to enforce them.

Private Sector Corruption… win/win?

Earlier today, one of my business development guys (let's call him JM) went to follow up on a quote he dropped off a couple days ago to be signed by the number 2 executive at a large company. JM had met with this executive a couple times and the executive had introduced him to the IT manager for follow up. JM and his direct supervisor met with this IT manager a number of times, including as recently as two weeks ago.

Today, the executive requested that the proposal which had been given to the IT Manager months before be attached to the quote so that he could approve it. The IT Manager was called and, forgetting that it was this same executive who had introduced him to JM, he claimed never to have met JM, never to have received any proposal, and basically, he had never heard of our company. The executive asked the IT Manager to go look for the proposal. JM waited, and waited for over an hour before deciding to come back to the office to get another copy.

In another context, one might interpret this incident as perhaps a personal problem the IT Manager might have with JM. But in the context of this country, we understand exactly what the problem is. The IT Manager gets his products/services from companies who give him a percentage of the deal. He is in fact known for that. If you don't play the game, he punishes you.

The case of this IT manager is not unique. We experience private sector corruption on almost all the deals that we are faced with. There is an expectation that you have to increase the amount of the invoice between 10 and 50%, sometimes more, and give the extra to the decision maker. They call it "surfacturation" or overbilling in English. Sometimes part will go to to the decision maker and he will split with others along the line like the accountant who will hold up payment if he does not get his share.

We have made a conscious choice not to go that route but it has come at a cost that we never expected would be so high. In one case, a manager at a company for which we had already signed a contract threatened us with making our life "hell" if we did not "thank him" for his committee vote in our favor. We did not comply. He followed through with his threat. Certain purchases for which we already had written orders were passed to competitors. Certain of our invoices approved for payment ended up torn and in the trash. And so on and so on.

Trying to go through the top is not a workable option either. You might be close the owner or General Manager and he might like your proposal. However, if he is not an IT expert (which most are not), he will ask for the opinion of others in the company. If these people decide that they want to block you because they don't have a personal interest in the deal, they will make up all sorts of excuses to prove to the boss that your proposal is not a good one or otherwise badmouth your product or company.

Sometimes, the person at the top is worse than those working for him. We have been asked a number of times what "envelope" was planned for the General Manager. Even expatriate managers play the game. It does not take them long in this country to discover how to increase their income exponentially.

A couple weeks ago, about two dozen private sector companies in this country signed an Ethics charter. Nice initiative but the companies read like a Whose Who of the most corrupt private sector companies in the country! The specific examples I listed in this blog were in companies which signed the Charter.

When I came back to this country to do business, I specifically avoided government clients because I expected to face corruption and it was important to me not to do business that way. I wanted to prove that ethical business practices could also lead to success. I was laughed at more times than I can recall.

The shock came not from the expected public sector corruption but from the corruption in the private sector, including – especially - multinationals. After a while, you begin to wonder if you are the one who is wrong. Educated and successful business people will justify their corrupt practices in saying that it is a win/win. The client gets the product; you get the contract and get paid; because you increased your price by the amount of the "commission" to the decision makers so you don't lose any money; the decision makers are happy, you are happy, the company is happy. I have had a number of arguments with friends and sometimes staff who feel that my intransigent style is hurting our ability to do business. They are right in the short term anyway but I just won't bend.

One of my parent's friends told me when I arrived that "honesty is a luxury." I did not really understand what she meant at the time. Today, I understand. Is it selfish to pass up contracts for ethical reasons while employee salaries are late? Can you operate in a vacuum avoiding accepted business practices?

Those are not easy questions to answer when you can't meet your obligations and you begin to wonder if it is worth it. Many of my friends who decided not to bend went back to the US. Others decided to stay and play the game. A few are like me, stubbornly idealistic and believe that in the long run, honesty will pay off. I sure hope we are right...