HomeOpinionPiggy’s Trading & Investing Tips: R&D the common denominator

Piggy’s Trading & Investing Tips: R&D the common denominator

By Batanai Matsika

THE world has been changing at an alarming rate and technology has disrupted the way business is being done. The global economy has evolved into the 4th industrial revolution (Industry 4.0) while the Internet of Things (IoT) has taken centre stage.

This disruption has created opportunities for countries like the United States of America (USA), China and Japan that are leading the pace in terms of technological advancements.

However, it has created new risks for developing nations such as Zimbabwe that are lagging. The point is that in international trade, developed countries such as USA, China and Japan have a competitive edge given their focus on value-added products (tech products and manufactured goods).

Piggy contends that the competitiveness of any nation in the new global era is largely hinged on the degree of its investment in Research & Development (R&D). Developing countries (mostly in Africa) have limited manufacturing and value-addition capacity and exports are mainly mineral and agricultural resources (raw materials) that feed into the manufacturing processes in the developed world.

The risk here is that most developing countries may be left behind in this new wave of industrialisation and technological advancements.

The WEF Global Competitiveness Index 4.0 (GCI 4.0) provides a detailed map of the factors that drive growth and human development in the era of the 4th industrial revolution.

It is the product of an aggregation of 103 individual indicators that are organised into 12 pillars: Institutions; Infrastructure; ICT adoption; Macroeconomic stability; Health; Skills; Product market; Labour market; Financial system; Market size; Business dynamism; and Innovation capability.

Led by Mauritius (52/141), Sub-Saharan Africa (SSA) is overall the least competitive region, with 25 of the 34 economies assessed in 2019 scoring below 50 (Zimbabwe has a score of 20,8 and ranked 100/141).

Of particular interest are the country rankings in terms of R&D that are based on (i) scientific publications, (ii) patent applications, (iii) R&D expenditures (% of GDP) and (iv) research institutions prominence. The info-graph shows R&D scores and rankings for African countries.

Overall, while there is no Silicon Valley in Zimbabwe, there is need for value addition in key sectors such as mining and agriculture in-order to be competitive. Piggy strongly believes that agriculture can grow the economy while mining can generate the much-needed foreign currency.

There is need to increase capacity and productivity on farms and invest in the beneficiation of minerals.

That said, companies such as SeedCo International have invested significantly in R&D, enabling the businesses to expand in Sub Saharan Africa.

On the other hand, R&D and innovation are the main themes in Cassava’s investment case.

Piggy is also cognisant of Cassava’s other lines of businesses that have the potential to generate additional value for investors when macroeconomic fundamentals improve.  Piggy is a long term bull on Seed Co International and Cassava Smartech.

Matsika is the head of research at Morgan & Co and founder of piggybankadvisor.com. —  +263 78 358 4745 or batanai@morganzim.com/batanai@piggybankadvisor.com.

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