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Dow Off 512 Points Yesterday – The Lessons From PIIGS For African Union

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Tekedia Editors
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Yes, Dow Jones Industrial Average (DOW) is off 512 yesterday. We quickly revisited an old piece about what caused all the EU problems that precipitated the massive market turmoil. Currency union is not a smart idea, especially for Africa with trade shocks and mineral dependent.

We posted a blog last  year and many people have written asking why I think what happened in Greece and EU could apply to Africa. Interestingly, I have attended African Union congress and made presentations supporting a single currency in Africa. My point has been that a single currency could open the fragmented African market to more global trade. I still think it is a fair idea, if the continent does it well. Even during my talk in the congress last year, I made it clear that the path I envisage to be the best way to implement this single currency is transitioning the regions into Knowledge Economic Communities where they will be atomic economic unit of nations connected with modern technologies and entwined by knowledge workers. In other words, Africa must develop its infrastructure and train its manpower to compete in this knowledge century.

It will benefit Africa if Ghana, Senegal and Nigeria share resources and establish joint technology clusters with university networks than using policy to force them to use one ECOWAS currency. Nigeria has never properly managed its budgets and its balance sheet is cyclical, being a nation with more than ¾ of its foreign earnings coming from hydrocarbons. Its population dominates the ECOWAS region. In any scenario, the trade shocks which are experienced in Nigeria will slowly affect the ECOWAS region under a Regional Economic Community. The scenario in Africa is just too risky; the biggest nations are the most irresponsible ones in terms of financial management. So, they will be the ones that need help; and that is a problem. In EU, they have the big nations, at least acting financially responsible . Germany is there, France is there; and with all the problems in PIIGS (Portugal, Italy, Ireland, Greece and Spain), there are strong partners watching. In Africa, the small must have to watch the big. And remember that South Africa’s debt profile is similar to Greece.

In the short-run, there could be marginal welfare gain under a single currency in Africa. Even Rose’s idea that currency integration improves economic growth is debatable within Africa. The CFA zone has used a single currency for ages and yet remains one of the major under-traders in Africa. Banks collapse in Africa because of the incompetence of central banks to supervise them (I agree not only in Africa). The recent problems in Nigerian banking sector where trillions of naira was lost to bad loans would have affected the ECOWAS region badly. Why this problem remains solely a Nigeria problem is because the country has control over its monetary policy and can use it to solve this problem.  Under one currency, it cannot work that way as they will lose autonomy over the currency.  Those changes made by the Nigerian central bank to stabilize the banking sector would not have been possible.  The pitfall of currency integration is very huge. The benefits come in cents, but the consequences in dollars.

I remain confident that Greece would not have gotten into this situation where its bonds have fallen and its ability to pay debts eroding, if it has not been part of the EU.  Also, those cheap loans it got in the good old days would not have been possible in the first place without the EU membership. According to Bloomberg BusinessWeek, euro zone unemployment rate for Feb 2010 is at 10%- a record for the zone.  One wonders where this single currency is leading the region.

As a young Lagos banker, I worked in one of the best managed banks in Africa-Diamond Bank Plc. I learnt something in banking before I moved to semiconductors; you need to watch your loan or debt profile constantly and continuously.  African nations will not do that. They will continue to borrow until they bust. And when their central banks cannot work the magic, their sovereign debt will potentially destroy their national economies.

Learn something from me: If United States has been in a currency union with Mexico and Canada while losing control over the US dollar, their fate would have been similar to Greece’s. But with the control of the dollar, the US sovereign debt will dent them, but will not cripple them. They have control over the currency, and they will survive this skyrocketing debt with the right legislation. Two years ago when the global crude oil price crashed, Nigerian government devalued its currency from N118 (to USD) to N145 overnight to enable it meet its obligations to local debtors. An ECOWAS currency union would have made that oil crash a bigger trade shock for Nigeria.

In summary, there is a very fundamental tool every nation needs to take control of its destiny in this globalizing world. You need to be on top of your currency. It is no joke that the most important tool that enables China to compete is its currency and the person that manages it is the most vital person in the new China which has since overtaken Germany as world’s largest exporter. If they lose control of that currency, China will fail. I am thinking that globalization makes currency union a bad idea.  You need speed to react and act which unions will deprive you. The barriers which currency integration wants to solve will dissolve as technology improves. In the near future, it will not matter what currency you have in your bank.

The fusion of economies by technology will break those barriers online through homogeneity in e-commerce. It would be a bad idea for Africa to pursue currency integration now; it makes no sense in the long-run. We need to stop it and focus on strengthening our infrastructure and manpower. You cannot build a union that depends on hydrocarbons and minerals when the world is running on knowledge. At least in Africa, we worry over bank’s loan/debt profiles; reversing that to sovereign debt will destroy our economies. And a single African currency under one supranational bank will guarantee sovereign debt crises in Africa.

Originally written April 2010

Internet-Enabled Home Consumer Devices Shipment To Grow 50% In 2011

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Tekedia Editors
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Owing to the overwhelming popularity of Internet connectivity in consumer electronic devices, there will be 50%  in the growth of shipments of Internet-enabled consumer devices in 2011. According to IHS iSuppli, a market research form,  Internet-enabled consumer electronics device shipments in 2011 are anticipated to reach 241.2 million units, up from 161.0 million units last year and 108.3 million units in 2009. Driven by the popular Apple iPad tablet, which is evolving as the center of the connection universe, this sector is expected to grow  continuously at least, over the next five years.

 

This is evident as during the past several years, the consumer electronics industry  entered the era of the connected home, a new and exciting phase that offers users the promise of access to their digital content anywhere throughout the home; whether the media is on a computer, a smart phone, or outside the home.

 

It is expected that  in 2015 , these internet home connected devices will hit 780.8 million units. Increasingly, each Internet-enabled consumer electronics device is vying to become the center of what is known as the digital living room, aggregating content throughout the home and serving up movies, television programs, videos and music.

 

Of course, the industry is still at infancy and the recent turmoil in the market could actually affect consumer behavior and move some of these devices to discretionary spending.

Pros And Cons Of Four Primary Methods Of Mobile Internet Access

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Tekedia Editors
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There are four major ways of accessing the web within the constructs of mobile  broadband segment. They are USB dongles, mobile hotspots, embedded modules and embedded chipsets. The pros and cons for each tool are discussed below:

 

USB dongles typically were used in conjunction with notebooks and netbooks, providing flexibility for use on multiple devices. However, the arrival of media tablets and other consumer electronics with embedded Wi-Fi capability saw the emergence of the mobile hotspot, a battery-operated device using a 3G or 4G network as backhaul for data traffic.

 

In comparison, an embedded module or chipset solution incorporates mobile broadband functionality at the board level, providing the convenience of a solution that does not break, become lost or get stolen—while allowing for optimal performance of the mobile device in which the embedded solution is used.

 

Of the various ways to enable broadband access for consumer electronics devices, mobile hotspots and embedded chipsets are the fastest-growing methods, growing 25 to 50 percent faster than the overall market. Key to their growth is the capability of mobile hotspots to combine data access for multiple devices while staying at the forefront of technology, as well as the flexibility of design enabled by chipset solutions in devices.

 

By 2015, the majority of mobile broadband devices will utilize the 4G wireless standard known as long term evolution (LTE), in line with consumer demand for faster speeds and, perhaps more important, lower latencies or delays from their mobile broadband networks.

 

Growth in mobile broadband devices will drive an explosive increase in mobile data traffic, causing carriers to rapidly rethink their strategies for network and service deployments as well as data monetization. And as new players target the mobile device market, existing players at every node of the communication value chain will need to continually evolve their business strategies. Failure to do so in this dynamic market, with continually changing paradigms, will cause even well-established players to be relegated quickly to marginal roles.

Executive Summary Of A Proposal Just Out To Africa’s Newest University – Ask Famicro For Your School

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Tekedia Editors
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Executive Summary

This proposal articulates a strategy for infrastructural development and training in microelectronics and embedded systems at the university level. Microelectronics has been recognized as the most pervasive industry in the world that has impacts in all areas of human endeavors. It drives medicine, energy, entertainment and indeed all key industrial areas of the 21st century. Researchers have observed that appropriate diffusion of microelectronics enhances economic activity, and helps transition ICT industry in developing economies from consuming to creating. As organizations and schools drive to become global leaders in technology creation, microelectronics must necessarily be the anchor for that development.

 

There are many opportunities developing microelectronics provide to institutions:

–          Help the nation in developing core knowledge manpower for the 21st century

–          Facilitate international collaborations

–          Expands the national economy by infusion of new ideas and knowledge capital

–          Drives the emergence of technology clusters and hubs

–          Helps create new companies and reduce unemployment

–          Transitions the ICT sector to become creative with value creation capability

–          Opens a new opportunity for the SMEs

–          Brings the world’s engine of wealth to Nigeria and modernize education

 

We propose the budgets in stages, starting with an embedded systems lab and then progress to integrated circuit design. The cost implications and associated activities are provided. In the second part of the proposal, we present the training associated with this proposal after the setup of the lab. The training section presents all the required trainings needed to develop a deep core knowledge base to staff, students and professors.

 

For more about this, read this complete one.

The Design Of Nations – The Foundations Of The Global Modern Economy

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Tekedia Editors
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About five hundred years ago, generations that lived apart did not experience any major change in their standard of livings. Global productivity was very low and man was generally poor. Yes, there were empires and kingdoms, but on average the world was on static economic expansion.

 

But with emergence of mass penetrated technology, things began to change. The industrial revolution was a quintessential moment in modern history. Technology brought productivity and man became richer. Standard of living on average improved. It remains till today that when technology penetrates en mass in any economy, national productivity improves, and living standards advance.

 

There is another caveat to this argument. Intellectual property right (IPR) is a cardinal part of this productivity.  Without it, technology will not improve and innovation is stalled. The old world was an era of absence of IPR and that contributed to a no small measure to the lack of wealth creation. Sure, people invented things in arts, engineering, but there was no wealth created. Lack of IPR prevented meaningful market success in one major way. It prevented the pursuit of innovation since ideas could be stolen and commercialized with no penalty.  The return to innovation was very low. That was why the world had many Inventors and few innovators.

 

Yes, we read about inventors that developed nearly all the engineering principles in use today. They had ideas, bright people and created prototypes. They were celebrated as icons and legends. But many died very poor. They could not transition from inventors to innovators, not because of market issues, but because lack of IPR made it difficult to attract funding since there was no guarantee to success. No funding, no mass commercialization and no human impact. In our contemporary time, the legendary venture capitalists will tell you that if you want to get them involved, you need to have a protected intellectual property.

 

Two things changed the world: technology and most importantly IPR. Between the two, IPR was more important. Why? Without it, we would still be celebrating inventors with no impact on human lifestyles (just note that I respect inventors; I am one myself since I have filed my own patents).

 

That brings me to the African challenge. In many parts of the continent, the IPR there is still like the one that existed 500 years ago. It does mean that Africa cannot prosper, if my logic is correct, until they get a practical and working IPR.  It does not matter how much aids and loans they get from foreign agencies. Without IPR, nations cannot innovate and without innovation, any economy dies a natural slow death. IPR is the catalyst that drives national technology policy, making it implementable and sustainable. You cannot have a better technology policy than a strong IPR. With strong IPR, inventors could become innovators. Without it, everyone sits on his/her ideas and the nation suffers on productivity.

 

In essence, Global Productivity = Technology + IPR, and productivity translates into good standard of living. When nations cannot create technology, the LHS of the equation suffers. Also, if they have no IPR, that suffers more. See the reason why Africa is not making progress? It is an illusion when boys and girls in Accra, Lagos, and Nairobi use pirated foreign software, and think they are smart. They never know that it would have been better if their nations have laws to prevent such illegality. With such laws, they have an opportunity of not needing those foreign software by developing their own and selling them locally, profitably. In the absence of the IPR, they cannot do business because immediately they release software in the market; it appears in all shops illegally. After three months, they close their shops! It is a vicious cycle that makes innovation difficult in Africa since no guaranteed return exists. Why invest your hard earned money when there is no law to protect your creations? Why do research? You see why our businesses prefer to import and distribute than create things?

 

Last year in Lagos, I hosted a workshop for some technology entrepreneurs. Everyone wanted to know how to improve the business climate. I was not interested in the electricity problem. I told them that the biggest problem is lack of IPR in Nigeria. When boys hawk Microsoft Vista for N300 (about $2) openly and no one arrests them, no major creative business can incubate in that land. I told them that without a strong enforceable IPR law, someone will eat into their ideas and they may not succeed, especially if they plan to start making things.  My advice to the group was to ask government to enforce existing laws and enact new ones where applicable. I told them it would be difficult for them to have international partners since no one can risk his/her IPR in Nigerian market. Sure, who cares what he says?  Alas, one emailed me few days ago explaining how IPR issues prevented him from concluding a partnership with a Chinese firm.

 

Let me stop now.  In conclusion, Africa must strengthen its IPR even as it pursues new technology policies.

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