Editor’s note: In part one of the conversation, Arnold, Liz and Daniel discuss the investment climate in the East African region in light of the coronavirus pandemic.
Arnold Kwizera: Today our conversation is about the industries and ideas in the world beyond COVID-19. We are still a little bit worried about what COVID-19 is and what kind of economic impact it will have on the world. Many experts have predicted that we may fall into some form of recession and now looking back at some of the lessons picked from as far back as […] 2008, when the first global recession happened, did we learn enough?
With us today is a panel of experts; Mr. Daniel Bwambale, an administrator and aviation expert and Liz Muange, a YELP fellow who works with SUEDE. Liz, thank you for joining us. For those watching us wherever you are, please use the hashtag #COVID19Reset to be part of the conversation. We want to thank our partners today, the LéO Africa Institute in collaboration with the McNulty Foundation.
Now Daniel, I [want] to start with you. Our conversation today is about these industries of the future, post-COVID-19, but let’s start by talking about the impact of COVID-19 today; digitization. What’s going to change in regards to how the world has been functioning and in particular East Africa, post-COVID 19?
Daniel Bwambale: Thank you. We had the impact on just the digital space, I think that the verdict is still out, but just from the micro-level; how much we’re consuming via data, how much we need—for example, those that have children in particular schooling systems where Zoom is being used as a tool in the classroom environment, even health-wise, the number of apps launched officially and unofficially between March and now is astounding…
So I think digitally, the impact is huge currently and we are now thinking [about] how to synthesize the information we already have, how do we bring it together, how does it make sense to an official sitting behind a desk to know that this entity functions this way and do we have that information in the first place?
So, I think, the impact on digitization is quite huge. We even have tourism taking place [virtually]. That is how far good or how bad things can go.
Arnold Kwizera: I can see that you’re moving two or three steps forward [laughter]. So, Daniel, when you look at the digitization you’ve been talking about; the number of applications that have been launched; we are already moving to the future. Now let’s go a little bit backwards, [the LéO Africa Institute] has been organizing conversations on the future of work; there has been talk and conversations on [why] things like STEM education need to be boosted. Is this the wakeup call that we should have [had] earlier?
Daniel Bwambale: Yes, we tend to procrastinate a lot because we always have a fallback plan which is the multilateral institutions; the international community which is basically Northern and Western Europe [and] the USA. So, we procrastinate. Before these people push us into doing something, we think “Well, so we have this plan but someone has to fund it.”
There are things we’re looking at right now that are so stark, like: “Why didn’t we do this before?” The future of work conversation should have happened and should have helped change the curriculum set up of all countries in East Africa probably 10 or 15 years when other countries were getting on with the AI Speed 1-1.
We should have been talking about the fact that our population is on such a[n increase] that by 2050 we shall have 1.3 billion Africans living in cities. If we are having 1.3 billion Africans living in cities, will it still be the same: half of those riding Boda Bodas – 500 million people riding Boda Bodas, or shall we have to retool and change the way that we are setting up all these young people for the future?
You are talking about something to do with work itself; work has changed. The Industries you have today can have a 10-acre space having two people; only security and robots.
Arnold Kwizera: [interjects] Yeah, but Daniel that’s what I’m talking about; so, what happens to the people that don’t have the skill sets to be re-skilled and move forward? What happens to the people that have previously invested in the industries [of the past]? How do you translate that into a post-COVID-19 scenario? What happens with the coming in of more efficiencies?
Daniel Bwambale: So, what happens is, you can either re-tool and have these people go back into the world of making software because automation is there and needs […] highly skilled individuals.[…]
Arnold Kwizera: Liz! Thank you for joining us, I want us to start from the numbers as of this morning: 10.2 billion Kenya shillings which is more than $10million has been taken off the Nairobi Securities exchange alone. Through FDIs investors are taking the money out and they seem to be very sceptical about Africa at the moment, East Africa to be more specific. What’s the investor appetite looking like right now?
Liz Muange: Thanks Arnold. You’re definitely very right [because] with a situation like COVID-19, it’s a pandemic and its very uncertain in terms of what the outcome will be, so a lot of investors are [hedging their bets] and holding onto them with the hope that they can come back in.
But I think that is a normal reaction because I was reading an article that even personal savings are being withdrawn for example from SACCOs because people want to be able to have the money with them, [since] they don’t know for how long the situation will last.
So it’s pretty common and other types of investors, for example, the private equity funds that have invested in companies, you are also waiting to see what the effect of this pandemic will be before they can actually rely on the financial projections they have done and be able to invest in companies. So I think it’s a normal reaction and depending on how soon the economy can open, how soon the vaccine is found, how businesses can be able to adapt to working in a COVID environment, that will kind of be the indication as to when the economy can open up and how investors will invest in future.
Arnold Kwizera: Liz, when you look at things like the informal sector and how much of an impact it has; the lack of data which show that we don’t have the mechanism to know how much the informal sector is actually making or how much it should be given in order to help it bounce back. Now 70% of employed people in this region are in the informal sector. How are we going to bounce back? How do we enable the informal sector to bounce back?
Liz Muange: I think that’s a very good question. In my article, I singled out the informal sector—the urban informal sector because, if you look at the urban areas, there’s a lot of semi-skilled and low skilled workers who are actually contributing quite a lot when it comes to [providing] all services as well as participating in the trade because if you look at the market, look at all our key markets where we go shopping and get food, that’s an informal market.
So when you talk about data, it’s interesting in the [sense] that impact investors have not really invested in the informal sector as it should have because this is now the sector that is affected by COVID and is the one that drives our economy in a sense.
Getting data about informal trade, about cross border traders has really been a challenge, it’s not something that has been discussed now, it’s actually something that we’ve been trying to look into; how do we formalize cross border trade, how do we formalize the informal sector? I think it’s becoming pretty clear now during this COVID environment that we need to be able to understand these businesses; can we can formally register these businesses, know where these people are located, even where they live because a lot of them also operate in different places, markets move, hawkers move and all that and when you look at it from the standpoint of COVID, because they are the ones who should really benefit from whatever welfare the government will provide because they are the ones who- the risk of them not being able to do their work during lockdown is high but then it’s going to be a bit difficult to be able to give this assistance to them directly mainly because they move around.
So, I think data in essence- what’s interesting is we are seeing the Government really trying to cope; even just being able to track the victims of COVID; trying to track and trace the people who have been around them and it’s interesting that (even) when we live in this technology, it’s still a challenge for them to be able to do that so as Daniel [Bwambale] mentioned I think the need for having good and accurate data and being able to collect it and use it to make useful information is going to be quite tricky, and that this information as we have seen during COVID can be used for so many different things.
Arnold Kwizera: Daniel, I think you can pick it back off from that. How important is data going to be? Is it going to be more important than oil even more so, translation of it?
Daniel Bwambale. Yes, data is a big deal. If you read Kai-Fu Lee’s “AI Super Powers”, data is basically the next space war. So, that is how important it is. Oil is not as important as data especially because oil is on its way down just like manufacturing is getting automated.
Now, Liz has mentioned something important. Of course, we all agree that data is so important, but then, how do we connect it? A common example we tend to forget because it is, ironically, in the public health space is the HIV/AIDS pandemic. To test and know and to get data from these people had to be tied to a benefit.
What was the benefit? Receiving ARVs. So, we are not able to collect data from the informal sector because we have not tied the collection of the data to the benefit they are going to get. We collect data to either know about crime or to tax them and then don’t provide services to them, so they think any effort at the collection of data is more of state overreach. Instead of thinking; when the state collects this data, they are giving us a bank that will give us low-interest loans so that we scale up. So, I think that is the next step each and every smart government should look at. To collect data, they need to tie it to a benefit so that that data is valid and we get these people responding more cooperatively.
Arnold Kwizera: Daniel, data allocation and collection is still an issue for many of our African countries. Let’s take a step back and look at what has been working for us and what are the opportunities for us as a continent. All the way here from Kigali to you in Kampala, Liz in Nairobi as well. One of the things that was supposed to be happening this year is the African Continental Free Trade Area agreement. It was supposed to be operationalized this year on the 1st of July.
Africa is the continent that trades in itself the least of all continents in the world. We trade more with the rest of the world than with ourselves. Could this COVID-19 [pandemic] be the opportunity for us to bring back trading within ourselves and open up the borders for some of our countries?
Daniel Bwambale: I think this is actually true. You see, your question started with data and how it can be collected. We just need to look at Kigali, Kinshasa, Bujumbura, Dar Es Salaam and Dodoma, Kampala and Nairobi. What has been the impact of the mobile money platform in those countries?
This is an informal sector–basically it stems from the lack of a banked population which was deemed by the people in the investment world as people who may never understand banking. They are understanding banking perfectly; the amounts of money transacted over these platforms is stupendous and how much is saved is also absolutely astounding.
Now, when you come to ACFTA, why [mobile money] was successful is it has a benefit; they give loans, the money is safe, they can transact and it is a platform that opens up all kind of possibilities. ACFTA as a network—COVID has shown us that nationalism is the last resort for every country.
However, for Africa, we are actually—the whole of southern Africa could be taken for one nation. Of course, politics is a little murky but even the politicians know that a hungry person would kill them. So, we are talking about the life of a person, the life of a nation. If we don’t operationalize ACFTA and, related to it, a single Africa air transport market, then we are going to lose the benefit of the lessons we have learned during COVID which are; one, we need to be more resilient, two, always stock up for a rainy day, [and] three, always have efficient supply sources because right now we are suffering a single source failure. Our source is China, and we are failing to even manufacture because we can’t get the raw material from China. You can imagine a continent as rich as Africa depending on China.
Arnold Kwizera: [interjecting] Isn’t that opportunity in regards to things like the supply chains to mov[ing] away from China and may be spread them across the various African countries.
Daniel Bwambale: Absolutely. There is no reason [why] if you have a tile making factory in Bugesera (Rwanda), you should have to get the raw material from China. You could easily get it from across Uganda or across Tanzania. Or there is no reason why Nigeria imports rice from Mexico when there is Benin or South Sudanese import shoes from China when there is Ethiopia. So, we just need to operationalize the ACFTA because that single source failure has really cost all those economies a lot; some are going to go into negatives, unfortunately.