Importing technology for economic growth

It is no secret that the South African (SA) economy is treading through rough waters of late, with increased interest rate hikes, exorbitant petrol prices and rising inflation – and according to analysts, tougher times still lie ahead. Although there is talk of some relief, with the expected decrease in the price of petrol and the expectation of new weighting changes to CPIX inflations, confidence in the SA economy is still faltering. In fact, according to a Market Sentiment Index (MSI)*, the index dropped another 18 points in June 2008 – its second consecutive drop of this magnitude – to 109 points from 127 points in the first quarter of the year, with June’s decline representing the index’s lowest ebb since 2002. People’s appetite in SA’s economic growth potential has been fairly steady for five years, peaking in 2006 but still maintaining high levels through 2007. In fact, at the end of November 2007, the index was standing very close to its all-time high of 147.

Despite the negative sentiments and the concerns about business conditions and personal economic circumstances – it is not all doom and gloom! The African Development Bank predicts Africa’s economy will grow by 6% this year and next, an acceleration from 2007, owing to the high oil prices and demand for commodities. Thus, despite the economic downturn and current ‘credit crunch’, Africa is set to flourish. As a result, it is essential to recognise that even in such an industry, we would starve the development of the market even further if we limited technology imports, as often it has been observed that ICT development and economic growth proceed together.

Technology change in any country is almost always a combination of access to foreign technological progress and domestic development. As such, countries that are open to the import of technologies are able to immediately take advantage of such innovation within local production, without having to ‘reinvent the wheel’. This in turn contributes positively to the growth of GDP, especially in developing countries.

Let’s take Open Source Software (OSS) as an example. Open source is free and supported by a large community of developers, facilitating advancements and innovation around the world. In fact, today the industry is moving toward the phase of using open source as the foundation for applications and according to Gartner**, in a few years’ time almost all businesses will use open source software – allowing for a broader range of IT adoption, lower entry into business (furthering job creation) and increased innovation – essential for SA. This technological diffusion serves as a channel for spillovers in research and innovation and consequently, has a direct input into domestic production and ultimately, economic growth. Not only does the public benefit from OSS in that it eliminates the economic loss which results from duplicated work but, if we look at European statistics***, increased Free/Libre Open Source Software (FLOSS) use may provide a way for Europe to compensate for a low GDP share of ICT investment relative to the US. A growth and innovation simulation model shows that increasing the FLOSS share of software investment from 20% to 40% would lead to a 0.1% increase in annual EU GDP growth, excluding benefits within the ICT industry itself – i.e. over Euro 10 billion annually. Imagine the possibilities for a developing nation such as SA!

In light of the above, it is crucial for our emerging country to remain as accessible as possible to imports, particularly those which embody technology, as while we all need to be proudly South African, we also need to be proud global citizens. By ensuring access to foreign innovation, we will not only increase the rate of domestic technological progress and facilitate local innovation, but we also contribute positively to the economy – something we surely need – wouldn’t you agree?

Dave Meintjes,
Chairman, Connection Telecom