Africa and the 4th Industrial Revolution: Opportunities for leapfrogging

THE theme, “Africa and the 4th Industrial Revolution: Opportunities for leapfrogging?” cuts neatly across all the African Development Bank’s High 5s: Light up and power Africa; Feed Africa; Industrialise Africa; Integrate Africa; and Improve the quality of life for the people of Africa.

Our rich and fruitful exchanges from two years ago and the work done together since then to “transform African agriculture through industrialisation” has prepared the ground well for this year’s conference theme on how Africa can best reap the benefits of the 4th Industrial Revolution.

Korea is the only economy in the world that has grown at an average annual rate of more than 5 percent for 50 consecutive post-war years, making it the 11th largest economy in the world today.

But Korea and Sub-Saharan Africa had exactly the same level of per capita GDP in 1967, equivalent to a meagre production value of US$156 per person.

Korea had no natural resources except the genius, creativity and hard work of its people, no particular geographic advantages, little human capital and an infrastructure that had suffered what had seemed to be irreparable damage from the war.

Unlike other successful countries whose industries are still often dominated by low-cost manufacturing, Korea was able to quickly upgrade its industrial base, moving rapidly from agricultural transformation into low- and high-tech sectors, and now easing into the post-industrial economy.

It is a powerhouse in sophisticated consumer electronics, biotech and robotics and green industrialisation.

Economic diversification has allowed Korea to resist domestic and external economic shocks. Seoul has become a global entertainment centre and one of the world’s capital cities in creative industries.

There is a real opportunity for Africa to draw instructive lessons from Korea’s remarkable path to economic glory and for Africa to create jobs and promote inclusive economic transformation through domestic manufacturing and a commodity-based industrialisation process.

Exploiting Africa’s opportunities for industrialisation involves adding value to domestic products, soft and hard commodities and developing productive twoway linkages to the regional and international value chains.

While Africa has enjoyed strong economic growth for almost two decades, it has not seen a commensurate rise in industrialisation.

On average, African industry generates US $700 of GDP per capita, less than a third of that in Latin America at US $2 500 and barely a fifth of that in East Asia at US $3 400. In addition, African exports consist of low-tech products and unprocessed natural resources that represent more than 80 percent of exports in many of the continent’s largest economies.

Africa still accounts for just 1,9 percent of global value-added in manufacturing - a share that has not risen in decades despite the economic resilience evidenced by the GDP performances.

This is why we must be careful about using the leapfrogging phrase extravagantly. It only works if the leapfrogging is comprehensive rather than merely a way of expressing that we have access to new technologies without having to understand the old ones.

Human capital cannot leapfrog in the same way. Skills must be acquired; they cannot be grafted on where technology sometimes, can be. But all technology needs an intelligent and well-trained human workforce.

Africa’s industrialisation would be a win-win for the world. It would help raise productivity by spurring technological progress and innovation while simultaneously creating higher-skilled jobs in the formal sector in advanced economies.

Africa’s industrialisation would also promote linkages between services and agricultural sectors, between rural and urban economies and among consumers, intermediates and capital goods industries.

It will also make the prices of manufactured exports less volatile and susceptible to long-term deterioration than those of primary goods and also help African countries end their dependence on primary commodity exports.

And let’s face it, an economically developed African continent would be a major blessing for global peace: it would reduce the number of conflicts and magnitude of disorderly migrations in the world, if only by offering further options when international trade or political tensions need to be dissipated.

Africa’s partnership with Korea through KOAFEC is a powerful example and motor for generating co-prosperity and for building social peace among the nations of the world. There can be few higher callings than these. Korea’s exports to Africa increased from US$892 million in 1990 to an estimated US$13,3 billion in 2017. Korea’s imports from Africa also increased from US$383 million in 1990 to peak at US$11,7 billion in 2014 before declining to an estimated US$5,4 billion in 2017, mainly because of declining trends in natural gas and petroleum products trading.

Some of the major trends in Africa-Korea trade reflect a very positive evolution: Korea’s investments in manufacturing in Africa have evolved from only US$1,1 million in 1990 to over US$180 million last year. Much more can be done to open new opportunities for win-wins between Africa and Korea.

The 4th Industrial Revolution offers such opportunities. Many African countries are increasingly embracing innovation and utilising ICT to deliver public services and engage in decision-making processes. Well known and well respected African entrepreneurs lead the field with large multinational companies and brands, but a new wave of young African entrepreneurs are launching successful start-ups on digital platforms in several sectors and boosting e-commerce on the continent.In spite of this, there are only limited gains in productivity and economic growth. While the Internet contributes up to 3,7 percent of GDP on average in many advanced economies, it contributes only 1,1 percent to Africa’s GDP, according to the Internet Society. This suggests that the Internet is being used primarily for consumption in Africa rather than for enterprise or production. This must change.

With the rapid spread of ICTs and the emergence of robotics and artificial intelligence, Africa also faces an urgent need to transform its education models in order to prepare for a future that is already challenging the continent.

The 4th Industrial Revolution will destroy many routine, low-skilled jobs that robots can perform more cost-effectively. But it will also create a wide range of new jobs provided that both the public and the private sectors devote more resources to learning.

The continent needs to be strong in research and development. And this is a significant challenge. According to UNESCO, regional averages of GDP shares committed to R&D are 2,1 percent for East Asia and the Pacific, 2,4 percent for North America and Western Europe and a vanishing 0,4 percent for Sub-Saharan Africa.

Africa stands to reap significant gains and improved efficiencies by moving faster towards an Internet-enabled economy.

According to McKinsey, the Internet can deliver productivity gains in Africa in the education, healthcare, financial services, agriculture, retail and government sectors, of about US$148 billion to US$318 billion per year by 2025.

ICTs have also revolutionised the financial sector through mobile banking and services, further promoting financial inclusion. ◆ Akinwumi Adesina is president of the African Development Bank. This article is reproduced from the African Executive

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