Knowledge is Africa’s most valuable asset
AFRICA is poised for economic growth from an unlikely source — exporting knowledge rather than commodities.
According to the Interna tional Trade Centre (ITC) — an agency of the UN and the World Trade Organisation — knowl edge process outsourcing (KPO) is being hailed as one of the biggest areas of potential eco nomic growth for the continent.
A global demand study, com missioned by Geneva-based ITC, estimates that by 2010 KPO will be a $10bn to $15bn a year industry, with a projected annu al growth rate of 45%.
KPO is possibly a country's most valuable asset — its intel lectual capital. It refers to the trade in services — which in turn can be defined as any busi ness that holds the expertise to deal in the application of knowl edge and sell this skill globally, through technology and pre dominantly the internet .
The service sector deals in intangibles. Intellectual capital is its product and this is more valuable than the material goods we use daily .
"KPO is the outsourcing of knowledge-intensive business processes," says Emmanuel Bar reto, ITC senior adviser on trade in services .
"It is the trade in the intel lectual capacity essential to drive services. Basically it's ev erything you can't drop on your feet. It covers more than 155 subsectors, including construc tion, IT, engineering and medicine.
"Given the structure of ser vices, it is covered by SMEs and micro organisations.
"While business process out sourcing (BPO) is more con cerned with entering records on a database, KPO analyses that data , turning it into valuable business information."
SMEs are well placed to fulfil the requirements of the KPO business model because they are largely knowledge focused and can respond quickly to requests, which makes them highly competitive players.
"Service providers must be able to differentiate niche mar kets. They are experts at selling specialist knowledge."
He says one of the biggest problems for service providers is that there are no economic incentives for them.
"It's difficult for govern ments to understand and back the intangible. People are attached to the physical — soft ware products are sal able, but the skills to produce them have a much greater market value than the end result. To unlock the KPO opportunity requires a paradigm shift in business thinking ."
He says there are three main pillars to developing a sustain able KPO industry: education, a legal framework that protects the data used in the knowledge process and, most importantly, a technology infrastructure.
In SA's case the cost of broad band yet again raises its ugly head as an economic inhibitor.
While SA boasts the most so phisticated telecoms infrastruc ture on the continent the cost of bandwidth is estimated to be 10 times that of developed nations.
Although services — ranging from transport and telecommu nications to accountancy and call centres — account for more than half of the economic out put of African countries, African states have been slow to seize the potential of outsourcing to boost exports.
SA is considered the econom ic powerhouse of the continent but its outsourcing businesses employ less than 3% of the workforce. Therefore, although this country has more educated people per capita than its African neighbours, it still lags behind other emerging markets.
"The goal of the ITC is to open the eyes of the South African government to KPO and to help the country's SMEs to engage in global markets.
"KPO is a whole new busi ness proposition with immense potential for job creation, gen erating foreign exchange that in turn contributes to economic growth, poverty alleviation and social upliftment. It also pre sents enormous opportunities across the board in any society for all sorts of professions and people. Anything that can be digitalised can be done by KPO."
Barreto says that many coun tries appreciate the value of intellectual capital.
ITC research reports indicate that the frontrunners in the sup ply side of the KPO industry are India, China, Mexico, Russia and the Philippines, while chal lengers include Brazil, the Caribbean, Eastern Europe, Malaysia, SA and Vietnam.
Demand mostly comes from developed nations for whom KPO provides a competitive cost reduction, sustained economic growth, improved efficiency lev els and helps to address existing skills shortages.
Developing countries are al so important markets for knowledge services. South African knowledge of risk as sessment could be sold to African financial institutions, for example.
