No country left behind: Sub-Saharan Africa in the Fourth Industrial Revolution

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The Fourth Industrial Revolution (4IR) is the new catchphrase for policymakers around the world and promises to become the new engine for economic growth. The developing and underdeveloped world may in particular see the 4IR as an opportunity to leapfrog through the stages of economic development, and the region with perhaps the greatest potential for doing so is Sub-Saharan Africa (SSA). Yet without a forward-thinking strategy adapted to the peculiarities of their own economic context, these countries may find themselves falling further and further behind in the development curve.

A new industrial revolution

The technologies of the 4IR — AI, robotics, biotechnology etc. — will increasingly blur the lines between the physical and the digital and exponentially increase the speed and efficiency with which we engage in the production and consumption of goods and services. Automation alone will add between 0.8% to 1.4% to annual global GDP growth, and AI could drive global GDP 14% higher by 2030 over 2017 figures.

With this promise comes also the potential for disruption. If the world’s leading manufacturing powers do not modernise their production processes and technologies, they risk falling behind. Thus the urgency in China, Japan, South Korea, Germany and others, reflected in the release of comprehensive 4IR strategy documents, to innovate and anticipate the impact of these technologies on society and the future of work. Countries with large and growing industrial bases (India, Philippines, UAE among others), if they can rapidly capitalise on emerging technologies, could use this opportunity to leapfrog their way up the leaderboard.

Yet perhaps the category of countries that have the greatest opportunity in front of them are the least-developed countries (LDCs) which have been “left behind by globalisation”. The core requirements for the 4IR are data, skilled human capital, an enabling environment and connectivity. SSA has many of the raw materials for the revolution but has yet to realise the full potential of these resources.

Sub-Saharan Africa’s potential edge in the 4IR

SSA has three major strengths it can capitalise on to jump into the 4IR: human capital, an untapped market for innovative applications and the absence of legacy industrial systems.

• Human capital: The population of Africa as a whole is expected to double by 2050 to 2.4 billion, with Nigeria, Ethiopia, DR Congo, Tanzania, Kenya, Uganda, South Africa and Sudan being among the top 10 countries contributing to that growth. At the same time, brain drain is an acute problem for the region, with an expected 34 million people immigrating by 2050. However, this diaspora itself presents an opportunity as well if source countries can present adequate incentives to young talent trained in robotics, AI, biotechnology and allied 4IR skills to return to their country of origin to train and educate a domestic workforce.

• Untapped market: SSA’s large population is also both a valuable market for homegrown innovations in 4IR technologies and a largely untapped source of data to feed innovation. For instance, mobile adoption in the region has risen from 25% in 2000 to 44% in 2017, and the resounding success of fintech services such as Safaricom’s Mpesa is a demonstration of the massive demand for accessible, innovative services. Supplement this growing mobile user base with a national biometric ID — as the UID did in India — and you also have the potential for the pinpointed provision of basic services like healthcare. Ethiopia, Rwanda and Kenya are among the countries that have announced or are in the process of implementing a national biometric ID.

• Structure of Production: For most LDCs in SSA, manufacturing is still in its nascent stages and forms less than 10% of GDP.

Country	Manufacturing as % of GDP	% Population employed in manufacturing
Ethiopia	4.5	14
Ghana	5.3	10.7
Nigeria	10.3	11
Tanzania	6.9	3
Uganda	8.7	4.4
Zambia	7.6	4.1

Source: WEF Future of Production Readiness Report (2018)

The upside of this economic structure is that most of these countries have the potential to leapfrog to advanced manufacturing and services, with little to no resistance from entrenched, outdated manufacturing structures. Realising the potential for manufacturing in Africa, there is no dearth of foreign investors willing to pour in resources to build up this sector: between 2000 and 2013, FDI flows into SSA increased six-fold to $45 billion and shows a shift from extractive sectors to manufacturing.

Fully-automated manufacturing may not be in the interest of all countries in this region, especially those with massive projected growth in the working age population, however 4IR technologies could instead be deployed for logistics management, accounting and other functions that augment but not completely replace human beings in the sector.

The factors highlighted above constitute pillars upon which 4IR can be built, but the countries of SSA must work to build the platform itself, namely through investment in critical infrastructure such as transportation, healthcare and efficient, accountable governance.

Addressing structural weaknesses in SSA

• Physical infrastructure: Several elements of physical infrastructure in the region remain underdeveloped. New technologies such as robotics and AI cannot function without an electric grid and ICT infrastructure, and increased production will not add to growth if products cannot be moved through a well-maintained transportation network. SSA, for instance, ranks lowest in the world terms of road and railroad density in the world, and the transportation infrastructure has in many cases not been able to keep pace with urbanisation.

However, the region has also seen an influx of infrastructure investment from partners like China, Japan and India who see the region as an engine for their continued growth. Nigeria, for instance, is one of the largest recipients of Chinese investment in Africa, most of which has been concentrated on energy, and increasingly, transport.

However, a major barrier for foreign investors has been corruption.

• Corruption: Bureaucratic inefficiency and the lack of political will are major hurdles for progress. The region as a whole ranked last in the 2017 Corruption Perceptions Index and is home to 5 of the 10 countries that pose the highest risks to business due to corruption according to the 2015 Corruption Risk Index.

Although investments may continue to flow in in the short-term, the shift in global energy trends will gradually make the risk posed to investors by corruption untenable. Given that a large portion of SSA’s exports and inward flows of FDI are still linked to extractive industries such as coal, natural gas and oil, the governments of SSA will need to greatly improve the ease of doing business in their countries in order to continue to receive much-needed FDI.

• Social net: An Industry 4.0 society requires a strong social net to support the workforce, particularly during the transition to new patterns of work. In the absence of such a net, large swathes of a given population will be unable to engage in productive and fulfilling employment. Yet, most of SSA has inadequate social protections and scores poorly on basic services such as healthcare coverage, with an average per capita healthcare expenditure of $37 and a severe shortage of healthcare professionals and sophisticated equipment for diagnosis. An Industry 4.0-ready social net would also need to encourage a workforce to undertake reskilling programs. Furthermore, investing in education initiatives with the support of the skilled SSA diaspora would enable a smoother transition to a new economic structure.

The 4IR is SSA’s opportunity to finally close the gap with its more developed counterparts. However, to do so countries must rapidly move toward an enabling ecosystem, including adequate infrastructure and efficient bureaucracy, that can also adequately support their population in making the leap to new forms of employment. Timely action is crucial to ensure the region leads rather than lags behind in the new industrial revolution.

• Development
• Developing and Emerging Economies
• Cyber and Technology
• Africa
• 4IR
• Fourth Industrial Revolution
• ICT
• infrastructure
• robotics
• Sub-Saharan Africa

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