Next Stop, Silicon Valley Africa

There is an old saying in real estate, “Location, location, location.” This applies geographically and metaphorically.

Between China and the U.S. sits the continent of Africa. The location of “the continent,” coupled with a few other attributes of Africa, creates a confluence of conditions under which that somewhat-forgotten land has incalculable value. Sometime in the near-future, one of the great African cities will become the next sister city of Silicon Valley (www.dbta.com/Editorial/News-Flashes/The-Six-Sister-Cities-of-Silicon-Valley-125972.aspx).

If you doubt the prediction, consider the Western perception of China just few decades ago. For the past decade, A.T. Kearney has issued the “Global Cities” report that tracks the performance and, to some extent, the relative importance, of the world’s most influential cities (www.atkearney.com/2018-global-cities-report).

The most important aspect of a continuous study such as this one is not a particular snapshot of any datapoint but the delta.  Examine how various cities have risen on this list and notice the short time span. Then understand the second derivative of the growth curve. For you folks who never took calculus, that means the acceleration of the number of important and influential cities on the non-metaphorical and non-linear curve of importance. In other words, more Chinese cities are becoming more important in a shorter amount of time than any other places in the world. 

Not surprisingly, cities such as New York, Paris, London, San Francisco, Sydney, Boston, and Washington, D.C., make the list consistently. In 2008, only seven Chinese cities made the list, but in 2018, there were 27 Chinese cities on the list. This report is a direct reflection of a country’s increasing competitiveness. It should come as no surprise that Google has offices in Shanghai and Beijing and plans to open one in Shenzhen. It should be alarming in a number of ways.

Africa’s Abundance of Untapped Resources

The continent of Africa is approximately 12 million square miles. Even if you aggregate the total area of Mexico, Canada, and the continental U.S., it only adds up to about 8.5 million square miles, making the African continent  substantially larger than the sum of the areas of U.S., Mexico, and Canada.

The population of Africa is approximately 1.2 billion, which is about equal to India, but more importantly, for various reasons that span the gamut from good to horrifying, the population is relatively young. In fact, Africa is the only continent with accelerating population growth (United Nations Department of Social Affairs 2015, World Population Prospectus: www.un.org/en/development/desa/publications/world-population-prospects-2015-revision.html). But most importantly, this young population is hungry for knowledge and specifically Silicon Valley technology. 

The African continent is blessed with an abundance of untapped materials, resources from diamonds to rare earth elements such as neodymium, praseodymium, and dysprosium. These elements are critical to modern technology. They are used in the creation of products such as batteries, electronic devices, wind turbines, and hybrid cars. (Today, China produces 90% of the world’s supply of rare earth materials.) Mines such as the Steenkampskraal mine in South Africa are known to have some of the highest grades of rare elements in the world (www.steenkampskraal.com).

Technology Is Mobile

The internet has changed the world in which we live in countless dimensions. With the internet came the creation of inexpensive and secure connectivity, making possible new approaches to conducting business. Today, application teams collaborate globally with near-seamless communication. The many applications that leverage the proverbial “cloud” are a tribute to the power of the internet. At the most recent MSPWorld (www.mspworldconference.com), a central theme was that “Winter was coming,” but it had nothing to do with the HBO super show Game of Thrones. The demand by managed service providers (MSPs) to be prepared to offer their customers packages that contained answers to the emerging threat of cyberattacks from all over the globe was prevalent and palpable.

Technology today makes the ability to receive or deploy services to the continent of Africa viable. Anyone who has ever been to Rwanda, Angola, Ethiopia, Ghana, or Kenya knows this fact firsthand.

The Infrastructure Advantage

Historically, the existence of physical infrastructure that was well-maintained and planned was a huge advantage. That advantage is quickly diminishing due to technological advances available globally.  While the U.S. still maintains massive numbers of miles of phone wires, African providers can jump straight to the latest technology without the burden of maintaining existing infrastructure. Ease of connectivity is an essential ingredient to the support of the technology business.

Money Is Mobile

Money is a mobile resource that will go where it has the highest potential to create the most significant return for its investors. India and China are excellent examples of economies that have exploded from an infusion of cash. Today, companies as diverse as Microsoft, VMware, Oracle, American Express, Coca-Cola, Caterpillar, and Google have a substantial footprint in India. Some come to take advantage of the cost advantages of local manufacturing, while others hope to sell their product and services to their citizens. However, according to WeeTracker’s “Venture Investment Report 2018,” more than $725 million was invested in Africa in 2018. This investment represented a 300% leap in total funding (in just 1 year) (https://weetracker.com/2019/01/04/what-a-year-the-state-of-venture-capital-in-africa-2018).

Large Population

Africa is the second most populous continent next to Asia, with an estimated population of 1.2 billion, representing an enormous market for goods and services. This fact is not lost on global companies looking to the future.  As stated above, the population is relatively young and hungry for the new century. 

Early Signs Are There 

In March 2019, Microsoft opened its first African data centers in Cape Town and Johannesburg which are open for business and serving up Azure. Amazon Web Services has announced plans to open an AWS Region in South Africa by early 2020. Google has also opened up training locations. And, VMware has an entire new program, aptly named Virtualize Africa. The focus, of course, is to teach Africans to virtualize Africa. 

Talent in Abundance

Let’s consider the age factor in more detail so as to be able to reflect on the importance of this metric. Africa, the continent, has one of the youngest populations in the world, with an average age of 19.5. Compare this to the average age of 38 in the U.S., 46 in Germany, and 47 in Japan.

To use a term coined by Mark Prensky, Africa is made up of Digital Natives. Digital Natives were born in the age of digital technology and are very familiar with technology from an early age. A number of years ago, an article in this series referred to the conundrum of older Americans looking for new jobs in the digital age. We wondered how the 50-year-old prospective employee would explain that she was “born and educated before the internet.” Africa does not have that problem. 

In a McKinsey interview, the founder of the African Leadership Academy and the African Leadership Network, Ghana’s Fred Swaniker, said, “Today, an African sitting in Kenya can get access to a world-class curriculum—can attend classes virtually from Harvard Business School, from Cambridge, from Oxford, from MIT, all in one place—because of technology” (www.mckinsey.com/featured-insights/middle-east-and-africa/talent-and-technology-in-africa-today).

The Stars Are in Alignment

The location of Africa, between the U.S. and China, makes it an ideal place to develop robust manufacturing capabilities with easy access to the world’s largest economies. There is an abundance of raw materials and specifically rare-earth elements. There is an abundance of talent that is hungry to work and possesses digital fluency. The infrastructure that is currently evolving will be state-of-the-art and does not have the burden of an aging technology infrastructure to contend with. Money is quickly flowing into Africa, accelerating the growth process. The potential of global economies to profit from an emerging middle class is a powerful siren drawing them to Africa.

Companies such as Google, Microsoft, and VMware are quickly establishing a strong presence on the continent. It’s just a matter of time before an African city emerges as a bonafide sister city to Silicon Valley itself. In a few short decades, Western businessmen who in their earliest days would have considered Africa to be as inaccessible as the moon will look back and wonder, “How did we miss this multi-trillion-dollar opportunity?” Finance is the key; it always is the key.



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