Googling Africa

The tech giant is diving into the continent -- but are Africans interested?

The Google office in South Africa is no different from the Google office in Washington -- from the outside. Tucked into a sprawling, high-tech office park in Johannesburg, Google's hip, young Africa team has taken the company's beanbag-chairs-and-jeans culture global. But in practice, their mission is different -- and far more difficult. They're out to prove that Google can be an African verb.

Since 2007, the American search giant has entered the African market head first, establishing offices in Lagos, Accra, Johannesburg, Dakar, and Kampala, with its largest presence in Nairobi. It has placed a premium on improving access to the Internet and importing its well-known suite of applications (Maps, Gmail, Books, Chat) to African users. It has held six "G-Africa" gatherings designed to build the brand among local webheads, most recently in Kenya, with another planned for Cape Town in November. But despite all the money and attention Google is pouring into the continent, some developers and engineers here say that the company doesn't quite "get" Africa. Within the vibrant, competitive, and decentralized African tech space, Google is going to have to do more than just show up.

Just as other multinational companies have discovered in recent years, Google knows that there is a lot of money to be made in urbanizing, newly wired African markets. In June, consulting firm McKinsey concluded that rates of return on investment in Africa are higher than in any other developing region. Since then, global banks and corporations have brokered regional mergers and acquisitions worth more than $15 billion.

When it comes to Western tech companies, Google is unmistakably ahead of the curve. While Finnish Nokia and Canadian BlackBerry have offices and research centers in Africa, Silicon Valley darlings like Apple, Facebook, and Twitter don't have a single warm body on the continent.

This commitment to Africa has produced some exciting firsts. Google Earth's high-resolution satellite imagery was central to the recent excavation of new hominid fossils in South Africa. Browsers in Ethiopia, Zimbabwe, and Senegal can search in the Amharic, Shona, and Wolof languages, respectively. "The whole goal of the Africa team is to make the Internet an integral part of African lives," says Bridgette Sexton, a Google development manager who helps organize the G-Africa program.

In many ways, Google is well suited to the challenge. An Internet company can circumvent bad roads, casual corruption, and limited purchasing power -- the traditional barriers to doing business in Africa. In a region where there are 10 times more cell phones than desktop computers, Google is piloting its recently announced "Mobile First" strategy, with strong results: The company recently took a prize from the Mobile World Congress for "best use of mobile for social and economic development" for creating Africa-specific applications like "SMS Tips," which answers questions on health or agriculture sent through text messages, and "Google Trader," which matches small businesses and buyers in real time. "Everyone in Africa is a power phone user," says Stefan Magdalinski, head of Mocality, an online directory for businesses in the region. "No matter how [simple] your phone is, you know every feature, every application, and you use every one."

Local programmers are making their own contributions. Alex Nyika, a 26-year old Ugandan programmer, developed "iChecki"-- a real-time, GPS-based tracker for Nairobi's notoriously unpredictable public transit "matatu" vans -- as an app for Google's Android phones. Although the Android operating system trails emerging-market leader Nokia in Africa, American competitors Apple and Microsoft are even further behind.

Google hopes to consolidate that advantage by training more African designers in Android protocols. "These are the guys [who] will create the companies that will be our Facebooks and Googles," says Tidjane Deme, Google head for Senegal. "We try and give them tools to bring content online." At G-Kenya, Joe Mucheru, head of the Africa practice, announced that programmers like Nyika can now join the global Android Market.

But when it comes to translating this advertised openness into a connection with local designers and consumers, the company has hit some snags. "You're not thinking of Africa if you're going to launch an Android phone for over $100," says Erik Hersman, a Nairobi-based technologist who recently hosted a group of 25 Googlers at the iHub, a shared office space for local programmers and entrepreneurs. "They launched Android Market, but there's no Google Checkout for us to receive money. It's a huge hole that almost all the tech companies have in Africa. They globalize, but they don't engage."

Take Gmail, for example. Globally, the service has trailed those provided by Yahoo! and Microsoft. Magdalinski suspects it's just too complicated for African modems. "Gmail is always loading with flashy chat and all this JavaScript," he says.* By contrast, "Yahoo! loads fast -- it works on a shit modem in an Internet cafe." (As in the United States, users can opt to load a stripped-down in-box, but new applications like Google Chat to SMS -- rolled out in Senegal, Ghana, and Kenya this year -- require using the clunkier version.)

Likewise, Google proudly unveiled digital maps of several African cities that had never been well cataloged -- even driving a red, camera-mounted Toyota Prius around certain cities in South Africa to create "Street View" maps in time for this year's World Cup. But in practice, Google has left out wide swaths of African cities -- the Kibera slums of Nairobi, most notably. Google's "Map Maker" permits users to fill in the blanks, but has yet to account for the visual orientation ("bear left at the Tusky's roundabout") more familiar to locals than Google's gridded logic. And, despite partnership with the Grameen Foundation and South African telecom MTN, the prizewinning Google Trader has barely made a dent in challenging existing classified services. A search for a used car, for example, turns up only 17 ads over the last six months.

"I'm a huge Google fan; I have Google merchandise and a Google coffee cup," says Rob Spokes, head of Quirk Marketing, a leading South African web-services firm. "But there's very little scope for development here." Stafford Masie, head Googler in South Africa who left the team for personal reasons last year, says, "There's no imagination" on the ground. "I couldn't do what I wanted there." (It took Google six months to replace Masie's successor, Stephen Newton, who quit in May.)

Then there is the issue of whether African techies need or want Google around. In mid-2009, Google approached Teresa Clarke, then a managing director at Goldman Sachs and proprietor of "They made me a pretty generous offer," says Clarke. But she ultimately turned them down, preferring to develop her own news site. Clarke is still in contact with Google about future partnership, but others are spurning Google more definitively. Jessica Colaco, a self-described "technology evangelist" in Nairobi who manages the iHub says, "I want to be Jessica Colaco, not Jessica who works for Google.... I'd rather do my own thing."

Maybe this is part of the reason why Google isn't yet making a profit in the region, and the focus on social services carries a whiff of corporate social responsibility. Google rebuts that its push is part of a short-term strategy for innovation and a long-term strategy for, well, world domination. "It's a volume play," CEO Eric Schmidt told me in September -- a response to the overwhelming numbers of Africans coming online. Google's piecemeal withdrawal from a market of 340 million Chinese web surfers makes Africa's 500 million mobile web users a worthwhile consolation prize."We are not positioning ourselves as a charity or NGO," says Julie Taylor, one of Google's 50-plus employees in the region. "Africa is the last frontier for the Internet."

There is definitely space for Google in Africa. The company wouldn't share projections for profit outside South Africa (which makes money), but "the economic opportunity of the Internet both for Africans and in the longer term for Google is significant," says Taylor.

And of course, not everyone is giving Google the brushoff. Loren Bosch, a sales director for Internet Solutions, one of the oldest information-and-communications-technology solutions firm in Africa, welcomes Google's incursion. "We're excited about all those guys coming here. The more of them enter the space here, the better the environment will become and the more resources are available in the market," he says.

To succeed, Google has to live out its biggest selling point: its openness to new ideas. The company has spent millions contrasting its open-source, free-web, access-for-all vision with its more reticent American competitors. But, Deme told a gathering in Washington, "We're still doing what I don't like. We're going there and telling them what to do." Now it must make good on the promise to be innovative and adaptive, even willing to change its model -- rather than simply export it -- to Africa. If not, the company will go down with every other misguided incursion in African history, something that's not lost on the Googlers themselves. "There's a difference between California and Africa," says Sexton. "You have to be a local company if you're working here."

*This sentence was updated to correct an editorial mistake in a quote.



The Return of Globalization

As the G-20 finance ministers gather in South Korea, trade is returning but currency wars are brewing. Can they agree to cooperate before protectionist urges tear them apart?

As the G-20 finance ministers gather in South Korea this weekend in advance of November's big meeting, they will surely notice that globalization is back -- almost. The trajectory of world trade over the last two years looks V-shaped: a drop of 12.2 percent in 2009 followed by a projected gain of 13.5 percent in 2010. Cross-border financial flows are recovering: After more than halving from $1.3 trillion in 2007 to $500 billion in 2009, net portfolio flows to emerging markets will rise to some $700 billion this year. Global foreign direct investment is soaring to $1.2 trillion this year, after plunging from $2 trillion in 2007 to $1 trillion in 2009.

Yes, practically all G-20 countries engaged in protectionist measures of some kind during the crisis -- less than 5 percent of world trade was spared one form of interference or another, estimates Global Trade Alert, an independent monitoring initiative. But the overall damage was orders of magnitude less than perpetrated by the beggar-thy-neighbor protectionism of the Great Depression. International commitments made over the past 60 years to liberalize world trade and finance -- defended by thousands of proponents of free markets ensconced in industry, academia, the media, and governments -- preserved the open global economy.

But we are not home free. The foundations of globalization are at risk. And when the full G-20 summit begins next month, shoring it up should be at the top of the agenda.

Emerging economies from Brazil to China are engaged in currency warfare to promote their exports. Washington threatens tariffs against Beijing on the diplomatic battlefield. In the United States, widening U.S. trade deficits (likely $450 billion in 2010) are a familiar precursor of protectionist impulses that spur calls to keep imports out and jobs at home. Poll after poll shows that free trade has become deeply unpopular among blue collar and college-educated, white-collar workers alike. Trade is now practically synonymous with the much-feared outsourcing that scared Americans when John Kerry ran for president, pledging to blast Benedict Arnold companies that send jobs abroad. President Barack Obama's slogan is only slightly different: Stop tax breaks to companies that ship jobs overseas. Even Republicans, once a reliable force against protectionism, at best mutter misgivings.

The specter of trade barriers and currency wars create uncertainties for global companies at a time when they should be investing to revive the global economy. But financial markets are also beset with question marks about new regulations. With countries from Asia to Europe elbowing for an edge, legitimate fears are spreading about global regulatory fragmentation and favoritism for domestic financial operators. Some emerging countries are flirting with capital controls, a failed but politically appealing experiment from decades past.

Rules on foreign direct investment and sovereign wealth funds are also in flux. Advanced and emerging country governments have crafted rules to restrict foreign purchases of domestic assets on highly subjective "public order" or "economic security" grounds. A good example is Germany's 2009 Foreign Trade Act, which enables the government to block any acquisitions of stakes in German businesses if the purchaser is a non-EU person and if the transaction threatens the public order or safety of the German state. Russia and China are in a league of their own. Only days before stepping down as president in May 2008, Vladimir Putin signed a law restricting foreign investment in 42 sectors ranging from oil and gas to fishing and publishing. China has notoriously sought to keep foreigners from "critical economic sectors" over which it wants to retain state control, such as the automotive, chemical, construction, electronic information, and science and technology sectors. Such measures all too easily ricochet around the world in the form of retaliatory barriers.

Such policies may have short-term political benefits, but there are no good alternatives that come close to generating the benefits that emanate from freer economic exchange. A Peterson Institute study shows that the U.S. economy alone has gained $1 trillion annually due to globalization in the postwar era and stands to score another $500 billion per year from future policy liberalization. Matthew Slaughter of Dartmouth College's Tuck School of Business has found that for every job outsourced from the United States, almost two are created in America, and that the prime globalizers -- U.S. multinational companies -- pay up to 24 percent higher wages in the United States than do non-globalized firms.

The oft-demonized globalized capital markets are a force of great good, inspiring financial development and entrepreneurship the world over. Peterson Institute fellow William Cline's survey of the literature concludes that general financial openness boosts growth by about 1 percent annually for industrial countries, and 0.5 percent annually for emerging countries. Openness to foreign direct investment contributes about 1 percent annually to growth in industrialized countries and 1.4 percent annually to growth in emerging countries. Globalization has also been among the best foreign-aid programs the world has ever known: The World Bank has found that when it comes to stimulating growth, globalization has a direct, one-to-one relationship with poverty reduction.

Globalization has many drivers, from the logic of comparative advantage to economies of scale and scope, new technologies, and the spreading of high research and development costs across larger markets. But a good share of globalization -- at least a third by most measures -- owes to better policy, including trade and financial liberalization. The paradox is that just when open markets are needed to revive growth and employment, voters are turning against pro-globalization policies.

Meeting in Seoul this November, G-20 leaders have an opportunity to reinvent themselves as agents of globalization. Such a Herculean agenda is not only urgent to safeguard the gains of globalization in the 21st century; it is key for giving the group a fresh sense of purpose in the post-crisis world. It is most fitting for a body whose members make up 85 percent of the world economy and are among globalization's greatest beneficiaries.

Yet the G-20's recent record does not inspire confidence. The litmus test for the group's effectiveness is coming now as the crisis-induced urgency to cooperate dissipates. At the first post-crisis summit in June in Toronto, the group, including and in particular Obama, struck out: The leaders opted for political convenience and backslid on their prior commitments to conclude the Doha trade round, coordinate financial regulations, and get tough on imbalances.

The G-20 can in Seoul improve its batting average through five commitments to build stronger bases for globalization:

First, global imbalances and trade deficits in the United States and countless other countries like Australia, Britain, France, and India need to be curbed. Perhaps the rise of materialistic Asian middle classes coupled with a young army of frugal Americans will, over time, propel a grand correction from the bottom up. But there is no time to wait and see. The G-20's worthy growth framework, approved in 2009, must succeed, and it will do so only if countries around the world take serious unilateral policy actions: a real commitment by China and other East Asian countries to channel money into household demand, a burst of infrastructure spending in Africa and other poor developing regions, and a sharp correction of gaping U.S. budget deficits. Currency warriors that go to battle without these supporting policies must understand that theirs is a suicide mission.

The second policy priority must be to conclude the languishing Doha round, the surest way to inject new vitality to the world economy and markets. But thinking must start now about streamlining the clogged multilateral system. The engine of multilateral trade liberalization in the past six decades, the World Trade Organization (WTO) has grown, to borrow a phrase from the New York Times' Thomas Friedman, "hot, flat, and crowded." Unlike in the 1940s, trade talks now tackle multiple issues among a record 153 members. The WTO needs to drop rules that inhibit faster deal-making among coalitions of the willing.

Third, financial regulatory coordination remains critical in a world where banking is global yet rules are national. Complete harmonization is next to impossible. What's needed instead are compatible and nondiscriminatory rules. The G-20 must address pending issues head-on -- common principles for jointly managing failing multinational banks, coordinated clearing and supervision of over-the-counter derivatives, and agreed-upon auditing standards and accounting rules. Longer-run transparency requires sturdier peer reviews, along the lines of the WTO's trade policy reviews. Otherwise the Financial Stability Board, the supposed grand regulatory coordinator, risks fading to a wallflower in global finance.

Fourth, cross-border investment is crucial for forging new trade ties and generating jobs. But there's no global code of conduct for reviewing foreign investments. Based on a handful of principles, such a code would apply to investments tinged by national security and strategic asset concerns. For their part, emerging-market sovereign wealth funds must not become vehicles for advancing state capitalism -- and they must dispel suspicions that they are just that through greater transparency, better communication, and adherence to rules of good conduct.

Finally, U.S. leadership in catalyzing new commitments is vital: No other country is able or willing to shoulder the burden. But to lead abroad, America must reform at home. The fiscal gap needs to be closed by replacing public spending with private investment. But a new policy paradigm -- call it Capitalism 3.0 -- is also needed to defeat the gnawing sense of precariousness among American workers. The new system should marry security with labor mobility. Health insurance and home mortgages should not be reasons for people to stay put after their jobs have disappeared. Lifelong worker training programs are in order.

Economic integration is a fabulous force and one of the best agents the world has known for spreading growth and prosperity. But globalization is not automatic: For it to flourish in the 21st century, the G-20 has to step up to the plate and play ball, something in each member's enlightened self-interest. Seoul offers a chance to get started on redesigning the rules of the game.

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