It is true that each new wave of digitalization speeds up business opportunities, bringing in new competitors and hordes of startups that individually or as a pack rip out juicy pieces of long-defended business models. The first wave of change came with the dot.com boom at the turn of the century. Mass adoption of technology by consumers, combined with the digital-native generation growing up into consumers with discretionary spending capacity and a different set of expectations, along with with global capital to invest have created an environment requiring nearly every business to transform or wither on the vine.
Heinrich Arnold, Chief Executive Officer of Detecon, the Deutsche Telekom Group’s management consultancy explained that the rapid advancement of the Digital Age, the confluence of social media, smart devices, Big Data and Cloud Computing, represents a massive opportunity for businesses. Data is at the heart of this opportunity. But as digital matures, we will also see new opportunities emerging for consumers to gain advantage from their data.
Heinrich Arnold noted that with digitalization, the world is currently undergoing a technology shock. This radical technological change is redefining the parameters of economic activity and transforming companies everywhere. This change is being triggered by the significant advances in the computing power of end devices, as well as by data centers and the surge in broadband connections. According to Heinrich Arnold this is leading to an increase, by orders of magnitude, in the capacities of browsers and operating systems and in the availability of data. In addition, the technological developments of the past two decades with regard to physical infrastructure, IT/cloud systems and web applications have led to a greater decoupling from each other. This also extends to the technical complexity that lies behind interfaces.
This encapsulation of technical complexity has boosted productivity and led to the creation of new systems and applications, besides making it much simpler to interconnect systems. It has thus become significantly simpler from a technological perspective to create large systems and platforms, and to achieve the performance of large systems and interconnect them across entire value chains via internet applications. This has direct consequences for trade and industry. The connectivity of IT systems across organizational boundaries has been simplified throughout the value chain. Technological feasibility accelerates the establishment of global platforms. The fact that large systems can be networked enables partnerships and ecosystems to be built.
Roman Friedrich from Booz & co. stated that ecosystems are a decisive factor in creating global reach. But for all the global attention paid to Silicon Valley, we must also note that it is far from being the only technologically relevant global ecosystem. Throughout the world, due to the linkages between players and their systems that have become possible, new centers of ecosystem innovation have sprung up. They reach from Berlin in Germany to Beersheba in Israel and Pudong in China.
Carlo Gagliardi, Senior Trainer at MCA Consulting in London strongly argued that in order to categorize this radical technological change and classify it based on its significance, a look at the technology shocks of the past is instructive. This reveals that Europe has already experienced significant technology shocks in the recent past that have redefined the parameters of competition. Consider the manufacturing industry in the 1980s, when computer technology made inroads into the field of mechanical engineering. Carlo Gagliardi noted that all of a sudden, low-priced manufacturers from Japan could compensate for mechanical precision with electronic means and achieve the quality levels of high-quality manufacturers at a fraction of the cost.
According to Carlo Gagliardi, the impact was serious and turned the entire sector worldwide, led at the time by machine builders from Switzerland and Germany, on its head. Many national economies that could not muster the required skills lost their machine tools industry. And even Swiss manufacturers could retain their hold only in niche areas such as specialized machine tools.
By contrast, a number of manufacturers in Germany were able to make the transition to computer-controlled machines, thanks not least to the competence of Siemens as a supplier of electronic control technology. Suppliers who were able to expand their portfolios in time to include digital techniques using machines relying on digital instead of mechanical controls survived the technology shock and could even expand their relative market share.
The technology shock of today is the Industrial Internet. Affected are all areas and sectors where technical feasibility gives birth to advances in performance that are measured in orders of magnitude. This requires many businesses to make fundamental changes in their processes, products, business models and value chains. While the first wave of digitalization unleashed in-house effects, triggered by the efficiency-enhancing potential of ERP ( enterprise resource planning) systems, the second wave of digitalization spans businesses via the Industrial Internet.
Roman Friedrich from Booz & co. asserted that the first digitalization project in Germany that spanned the entire value chain was a pioneering project for intelligent city logistics around the harbor of the city of Hamburg, started in 2011 by SAP, T-Systems and T-Labs, and the businesses operating in and around the port ecosystem. Besides logistics, another forerunner in the use of the Industrial Internet is the manufacturing industry, with projects for preventive maintenance and remote support. Incidentally, these are the applications most frequently displayed as examples at the Hannover Messe.
However, it is not just large industrial projects that stand out. The venerable brand Vorwerk showed with its Thermomix how a physical product can be successfully extended using digital techniques. As Roman Friedrich noted these examples confirm a fundamental hypothesis: It is entirely possible to expand existing business models digitally without having to invent new ones from scratch.
One of the biggest risks any business faces today, however, is complacency when it comes to the digital revolution. Business leaders need to recognise what is happening and react. It is increasingly said that organisations need to “innovate or die”. Leaders must think about how they can embrace the opportunities which emerging technologies present. Failure to do so will leave businesses very exposed to competitors or new start-ups disrupting the status quo.
Innovation in the global economy
Hub of Africa Addis Fashion Week
Hub of Africa Addis Fashion Week (HAFW) announced that it will hold its annual event from January 26 to 30, 2022 at Hyatt Regency.
An institution that continues to promote the fashion and arts industry in Ethiopia at its establishment HAFW gives us an additional pleasure, and will be officially celebrating its 10+ years promoting the African fashion industry through its platforms over the years in the heart of Addis Ababa.
Fashion is a multi-billion Dollar industry, of which Africa only has a minute share. HAFW seeks to remedy this and has worked diligently towards this growth. Since 2010 its events are one of the most important platforms in developing the African fashion industry for designers, models, photographers, stylists and all stakeholders that are actively engaged in the extensively wider value chain of the industry.
Over the years, more than 100 African designers have participated and graced the HAFW stage. Opportunities that designers have gained include showing during New York African Fashion Week, Berlin Fashion Week, connecting with international buyers and media, and growing their brands to the global market.
This year, HAFW is also excited to present its inaugural Mentorship Program. This annual program seeks to connect emerging designers with fashion design experts (mentors) to facilitate knowledge transfer, develop future leaders, and provide every opportunity to guide their successful and rewarding career in the fashion industry.
The new Adwa song writing competition
Jazzamba School of Music in partnership with Jubilee Events & Entertainment, Fendika Cultural Center and Laphto Mall, announced the launch of the New ADWA Song Writing Competition.
The organizers said that this competition is an opportunity for young musicians and songwriters to build and grow their musical passion, which falls in line with the vision of Jazzamba and to nurture and inspire the next generation of musicians and to guide the development of Ethiopian music into the future.
“At various points in the past, Western artists have produced events in Africa; now it is our turn to take the lead.” says one Jazzamba board member.
This initiative comes at a time when the #NoMore movement is bringing people together to support Ethiopia. This competition adds to this movement by providing up-and-coming musicians the opportunity to compose an original song that reminds us of how the Battle of Adwa represents freedom for Ethiopia and Africa and supports peace and unity, love and harmony.
The organizers also said that they are encouraging the youth to collaborate together and compose a song; an original musical composition and original lyrics. “This is a huge opportunity for Ethiopian youth around the world to work on their teamwork skills, writing and storytelling,” a statement from the organizers read.
The winning song will be judged by prominent musicians and singers. “It will express feelings of peace and unity, love and harmony and provide an opportunity to take pride and ownership in being Ethiopian/African. This song will be sung and produced by some of the biggest names in the Ethiopian music industry and released to the public,” the statement further reads.
Jazzamba was founded in 2008 by some of the top musicians in the Ethiopian music industry at that time. It has graduated nearly 300 students between 2008 and 2018. Jazzamba operated the Jazzamba lounge until it was closed in 2015 due to a fire at its location in the Taitu Hotel. Since then Jazzamba has re-registered as a local NGO and has been rebranding with the intent to re-open to music students in 2022.
The Opportunities in the Transport Sector in Ethiopia
By Yoseph Getachew
With a population of 110 million people, Ethiopia has one of the most underdeveloped transport and logistic sectors in the world, according to the World Bank’s 2016 Logistics Performance Index (LPI) which ranked the country 126 out of 160. The sector faces many challenges in Ethiopia, including a historically very limited private sector involvement (foreign and local) and a lack of integration between government entities, especially the Ministry of Revenue and Ethiopian Shipping and Logistics Services Enterprise (ESLSE). Nevertheless, the sector has significant growth potential by virtue of expected growth in the wider private sector economy (from a low base), expected increase in demand from production sectors for professionalized logistics services, a growing middle class and continuing GDP growth.
Sector Growth Opportunities
Even though the sector has its challenges, it has significant growth opportunities driven by the following factors:
Liberation of the logistics sector The government initiative to allow foreign investors to participate in the sector is expected to create growth as foreign investors eye entry into the country. There are big international players ready to come to Ethiopia including Dubai ports giant, DP World, which is taking the lead after signing an MOU with the Ministry of Transport to invest $1B in an effort to create a trade and logistic corridor from Ethiopia to Berbera in Somaliland.
Expected growth of the agriculture sector The Ethiopian government is emphasizing the potential of the agriculture sector. Since 2019, 121,356 hectares of irrigation schemes have been developed in order to increase productivity and production. Similarly, different initiatives are being taken by the government to create growth opportunities for the transport and logistics sector as products will need to be transported from farmers to the market more efficiently.
Expected growth of the industrial sector Despite the related regional disputes, the country is finalizing the Great Ethiopian Renaissance Dam (GERD) which is expected to help resolve the power shortage in Ethiopia and support industrial growth. In conjunction with this, Ethiopia has also built 13 industrial parks throughout the country which require a modern logistics route to move raw materials and ship end products to customers.
The African Continental Free Trade Agreement (AfCFTA) In time, the agreement will open doors to the regional market as African countries move to open their borders for more trade within the continent.
A growing middle income, urbanization and food (inefficiency, price inflation, logistics chain) There is a large potential in the agricultural goods transport sector since the country is experiencing huge food inflation (22.3% in April 2021) and urban population growth of 4.78%. There is a growing need for efficient logistics services as the market in cities such as Addis struggles to get products efficiently, which could be one big step to solve part of the food inflation challenge the country struggles with. To provide some perspective, 100 kg. of teff is sold for an average price of ETB 5K in Addis Ababa and the same quality product can be bought for ETB 4.2K outside Addis from farmers directly.
Current State
Currently, the sector is dominated by the government with only a handful of private companies in freight forwarding and the logistics space. The sector lacks smooth integration (between government entities and between government entities and the private sector) and expertise which is causing significant inefficiency. For instance: it takes 40 days to clear inbound goods from seaports in Ethiopia, whereas middle-income countries clear within 3 days on average; and, Ethiopia’s total logistics cost compared to GDP stood at 26% but the middle-income average is between 10 to 15%, showing the country still has a long way to go.
The inefficiency in this sector is also affecting the competitiveness of other critical sectors such as exports. For instance, to transport a P20-foot container of garments from Ethiopia to Germany costs 247% more than from Vietnam and 72% more than from Bangladesh. Even when we compare Ethiopia with neighboring countries such as Uganda and Rwanda who are also landlocked, we see that Ethiopia is behind. In 2016, Ethiopia’s LPI was 2.38 and ranked 126 among 160 countries worldwide, whereas Uganda and Rwanda had 2.58 and 2.97 LPI scores and were ranked 58 and 62, respectively.
Government Plan and Regulatory Framework
Through the Homegrown Economic Reform agenda, the government aims to transform Ethiopia into an industrialized, lower-middle-income country by 2030. The private sector has a paramount role in making this a reality. The government has made significant changes specific to the transport and logistics sector under the new investment laws, which allows foreign investors to participate in packaging, forwarding and shipping agency services (which was previously reserved for domestic investors), railway transport, cable transport, cold-chain transport and freight transport with a capacity of more than 25 tons. But some areas are still closed for foreign investors. For example, per the new investment laws, international air transport service is only allowed in partnership with the government. In addition, foreign investors can only invest in domestic air transport service, cross country public transport service with a seating capacity of more than 45 passengers, and urban mass transit service in partnership with domestic investors without holding majority membership interest.
In addition to the improvements to the investment law, the government plans to mobilize ETB 3T ($73B) of investments into the sector over the next ten years in partnership with the private sector. This coupled with the improvements in the investment law will be integral to the growth of the sector for the next decade.
The Future of Logistics in Ethiopia
The sector is marked with challenges and lags behind other countries. But the government is determined (and has little choice) to enable the private sector to address the county’s rapidly changing demographic and logistical demands which is why the sector’s growth potential cannot be ignored.
You can reach the writer via jcgetachew@gmail.com
