The continent must not lose the momentum of its growth
SINCE the turn of the century, Africa has been one of the fastest-growing regions of the world, spurred on by the commodities boom and the adoption of new technologies, especially mobile phones and online services. That growth has proved resilient: Even the fall in oil prices has failed to dent the dynamism of sub-Saharan Africa, which is now growing faster than in the first decade of the century.
With the emergence of new technologies enabling the Energy and Fourth Industrial Revolutions, Africa now has a historic opportunity to tackle challenges such as access to electricity and the mismatch between regional supply and demand, as well as to create an ecosystem that supports entrepreneurship, builds domestic markets and encourages the brightest and best to stay at home and play their part in their countries’ future success.
Having the world’s most youthful population and solid economic fundamentals, Africa is now in the best possible position to benefit from the digital revolution.
Africa’s ongoing economic development will undoubtedly be achieved by leapfrogging outmoded Western models of industrialisation. How this will come about is best illustrated by the continent’s power challenge.
Today, some 600 million people in sub-Saharan Africa lack access to electricity. Even in major urban centres, businesses often have to contend with power interruptions and must maintain expensive and polluting fossil-fuel generators. Nearly half of the businesses in Nigeria and roughly a third in Angola and Egypt say access to electricity is a major challenge, and firms in all three countries say that power outages cost them 5 to 10 percent of annual sales, according to the World Bank.
Until recently, solving Africa’s power problem would have taken decades and required massive investment in generation and grid connections. Today, however, new technologies are bringing reliable and sustainable power within easy reach. The most promising solutions for Africa are microgrids powered by sunlight or wind.
These systems, which can either stand alone or be connected to a larger grid, have yet to make big headlines, but utilities and businesses are increasingly turning to them to provide power for all manner of communities and applications.
Microgrids They are ideal for isolated or island communities with no grid connection, like the new system on Robben Island, off the coast of Cape Town, which will power the former prison, now a museum, where Nelson Mandela spent years in jail. Renewablespowered microgrids can help improve grid stability and offer a clean and efficient alternative to traditional generators. At the same time, renewable energy now often proves to be the most economical solution for new electrification projects.
Going forward, the cost of key technology components, such as solar arrays and battery storage, will continue to decline as a result of economies of scale and innovations in materials and manufacturing.
On the industrial side, Africa’s focus should clearly be on the significant mismatch between regional supply and demand. This is best addressed by developing Africa’s manufacturing base and increasing its productivity levels.
Today, incomes and consumer spending are growing faster than manufacturing output, leading to rising imports of many types of goods that could and should be made within Africa, including cement, food and beverages, petroleum products and processed goods, as well as more sophisticated products such as cars, chemicals and machinery.
Hence, there is an enormous opportunity for manufacturers in Africa to serve the substantial demand generated by their own markets, before they begin to think about exporting beyond the continent’s shores.
The immediate goal should be to keep more of the production value chain within Africa. Exports of goods manufactured in Africa have been rising by about 2.5 percent annually since 2000. But exports produced in other regions have been growing faster, with the result that Africa still accounts for less than 1.5 percent of manufactured exports globally. China, by comparison, increased its share from 4.5 percent in 2000 to 15 percent in 2014.
Rather than exporting raw materials and importing finished goods, the economies of sub-Saharan Africa need to develop integrated regional value chains, founded on the development of better infrastructure, more effective use of local human resources, and greater support for private enterprise.
Here, new technology offers the means not only to scale up production and drive productivity at existing enterprises, but also to unleash a new generation of entrepreneurs, who can build the companies and industries of the future.
The internet revolution in telecommunications and financial services has already shown that Africa can leapfrog older and more established technologies.
While few households are equipped with a landline telephone in sub-Saharan Africa, more adults own cellphones in South Africa and Nigeria than in the US, according to a study by the Pew Research Center. In East Africa, mobile banking is a particularly common use for cellphones, and the practice has been adopted at a much higher rate than in more developed markets. Now, with the digital revolution in industry, Africa has a similar opportunity to make rapid progress in industrial production.
Businesses can make use of big data and connectivity to remotely monitor machines, plants and facilities, reducing downtime and increasing yield, and to develop new business models that rely on digital technologies to overcome distance and operate across borders.
Indeed, only by taking advantage of the benefits of automation, renewable energy, data analytics, cloud computing and other new processes will Africa be able to build robust industries capable of withstanding the competition they face today from lower-cost, higher-quality rivals in other parts of the globe.
Industry – and manufacturing, in particular – builds and runs the machines that enable agriculture and other sectors to become more productive. It provides the materials and tools to build and operate infrastructure. It raises people’s incomes and opens up new opportunities for growth in the service sector.
Manufacturing drives innovation, accounting for up to 90 percent of private-sector research and development spending. By harnessing the complete value chain, and building a strong manufacturing sector with the help of technologies associated with the Energy and Fourth Industrial Revolutions, we may find the African century is finally at hand.
Even the fall in oil prices has failed to dent the dynamism of sub-Saharan Africa, which is now growing faster than in the first decade of the century.