Africa needs to embrace digitisation​ - ICON
Posted on 18 May 2020 by Herman Singh
Emerging Market Business

It's the 80s rewind - but with internet

South Africa needs to seize the opportunities for digitisation which have emerged as a result of the COVID-19 crisis, in order to thrive in the new global economy.

Africa is riding the wave of digital opportunity as a result of the COVID-19 crisis. As consumers adjust to the new normal businesses must move fast to take advantage. The winners will be those who are most creative and agile in execution.

The COVID-19 pandemic has spared no business, industry or economy. Until there’s a vaccine that’s accessible to everyone, which is likely to be at least two years away, it will fundamentally reshape everything we do. Some changes will be temporary, but the impact on work in some industries will be with us for the long term.

The service industry has been particularly badly affected, since much of it is based on discretionary purchases. Face-to-face businesses will require a fundamental redesign in order to survive. Organisations need to find ways to pivot away from manual and non-remote services, to remote and cognitive services. This will ultimately result in customers getting the same value, with greater convenience and less risk.

There are three product tiers associated with consumer behaviour in the way they respond to crises. The first tier is survival. This is evidenced in the response to COVID-19 by a 519% jump in the sale of healthcare goods such as hand sanitisers and a 498% increase in sales of thermometers, as well as a rush on dried stock and non-perishables. The second tier is sanity products such as home entertainment services like Netflix. The third tier is recovery. As consumers adjust to the new normal and start to organise their lives around this, we are seeing a surge in the purchase of no-name value brands, and the switch from comprehensive insurance to limited insurance only. The market has definitely seen a downgrade in the types of products people are seeking, as well as a search for value, due to the massive disruption of wealth and unemployment.

Since the start of the COVID-19 pandemic, there has been a 50% cut in sales of discretionary and luxury items like fashion, watches and jewellery. Unilever and Procter & Gamble sales of shampoo and deodorant have also plummeted by 50%, as personal grooming takes a back seat because people are not leaving their homes. One side effect of the pandemic is that there is less emphasis on ego. There’s nobody to impress anymore.

Tourism, travel and hospitality industries are under tremendous strain. The airline industry is set to lose around USD750 billion over the next 12 months. US airports reported a decline in passengers from 2.5 million on March 26 2019 to 200 000 on the same date in 2020. Under the new measures airlines will need to put in place, such as booking only the aisle and window seats, the load factor will go down to 60-70% of full capacity. This is projected to increase the price of a plane ticket by between two to four times!

The new five-star hotel service will be ranked according to levels of automation, remote service, deep cleaning, distancing and isolation. This will have an impact on ambience.  Elevators will only be used for luggage. Imagine the impact on high-rise hotels? High-rise elevators and bell hops will be a thing of the past, as will hotel restaurants. It will be room service only, and even then, it will be a bot delivering the meal. Whilst those with access to the five-star experience fall into 1% of the world’s population, it is this tiny but wealthy segment which is most susceptible to COVID-19 due its impact being heavily weighted toward the older end of the population.

Some services will transition easily, such as switching from cinemas to drive-ins. It’s going to look a lot like the 1980s, but with Internet. Fewer malls and shops, more drive-throughs and roadhouses.

COVID-19 has provided a launch pad for e-commerce but the South African government has squandered a valuable opportunity here, with regard to limiting the range of products consumers can access through online shopping. Government itself hasn’t digitised rapidly enough and has traditionally been a poor executor of policy.

Whilst it is true that Africa faces many challenges in its transition to digitisation due to a host of factors including lack of connectivity, South Africa is much better placed than many of its neighbours to embrace digitisation. The country has the highest connectivity in Africa, the highest penetration of smart phones, and the highest consumption of data per person. And yet South Africans complain about what they don’t have. For example, the second-hand market for cell phones in South Africa is almost non-existent, whilst in the rest of Africa, it is thriving. South Africans need to change their mindset. Other African countries have built apps on very slim data use. Kenya has built amazing education systems on phones. The winner of the Nigerian mobile app of the year runs on a simple phone and has a very high retention rate.

There are so many opportunities for digital startups. Shopping malls have been slow to digitise, and companies such as One-Cart, which visits malls on the customer’s behalf, and delivers to their door, are making the most of this gap in the market. There’s going to be a huge swing to value as a result of the lack of disposable income. Every firm will be faced with the same challenge — how to save customers money and deliver more value at lower cost. It’s time to start thinking about costovation — innovation without cost, a term coined by Steve Wunker in his book Costovation: Innovation that gives your customers exactly what they want — and nothing more.

When there’s drastic change, such as that wrought by COVID-19, everyone goes back to zero. The winners will be those who are most creative and agile in execution.

Herman Singh is an adjunct professor at the UCT Graduate School of Business, the founder and CEO of Future Advisory and the author of the book Di-volution, available as a podcast on Spotify.

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