The Fourth Industrial Revolution: An Opportunity For Africa

With the world economy at a standstill, African nations are literally holding their breaths. The loss of life on the continent has so far been limited, giving some hope that the region’s past experience dealing with health pandemics may buy it time to avoid the catastrophic infection inflection point that has laid bare the vulnerabilities of much wealthier regions’ economies and healthcare systems. As dire predictions of the expected economic fallout begin to emerge, it is more than ever incumbent on African leaders to formulate a vision of socio-economic development that prizes resilience and opportunity for its billion-plus citizens. With only limited successes from industrialization-led development over the past half-century, and the Fourth Industrial Revolution (characterized by the convergence of the physical, digital and biological) on the horizon, can today’s crisis provide clues for the crucially needed jobs of tomorrow?

Some Good News

In such dark times, it’s important to celebrate the little wins. Across the African continent, the reported loss of life due to the novel coronavirus has been relatively low. As of writing, the confirmed death toll has only just crossed 1,000 across the entire continent, with South Africa, Algeria and Cameroon representing approximately half of 21,000+ confirmed cases. Proactive government action across the continent in closing international borders and limiting air travel, as well as mass mobilization efforts, deserve praise and lend hope to the notion that Africa’s experience with infectious outbreaks is now providing a measure of adaptability.

Local, creative solutions to the innumerable challenges brought on by the virus and ensuing mass stay-at-home orders deserve recognition as well: a Whatsapp-based interactive AI chatbot offers advice and combats misinformation in five local languages in South Africa; protective equipment for medical personnel are deployed within minutes through drones in Rwanda and Ghana; and unsurprisingly, mobile money and cashless commerce appears to be surging. The services they enable - from delivery of relief funds to food - in a time of physical distancing, are proving nothing short of life-saving.

What these stories have in common is they reflect Africa’s early participation in what many are calling the Fourth Industrial Revolution. The 4IR - a term coined by World Economic Forum founder Klaus Schwab in 2016 - describes the rapid convergence of physical, digital, and biological. It is characterized by novel technologies that will fundamentally reshape the possibilities of production, the direction of globalization - and the strategy for socio-economic development.

Futurists and economists alike take the 4IR seriously, pointing to rapid advances made in technologies like artificial intelligence, drones and robotics, blockchain, 3D printing, and the internet-of-things. Lest we underestimate the possibilities of innovative solutions seeded in the Global South, it is perhaps a propos to recognize that while the US mails physical checks with significant implementation challenges as part of its COVID-19 response, innovations in direct cash transfer developed in the ‘Global South’ from organizations like GiveDirectly have stepped in to show what the future of emergency assistance in the ‘North’ should look like today.

Rethinking Industrialization

In many ways, Africa has already bucked economic doctrine. After decades of successive efforts to pursue industrialization modeled after Western and Asian societies, today’s contemporary developing economies may be "prematurely deindustrializing” - altogether skipping the ‘stage’ of development wherein agrarian-based economies develop export-oriented manufactured or processed goods, gaining valuable foreign currency by participating in sprawling global value chains.

“Africa is less industrialized today than it was four decades ago.”
Africa Renewal Magazine, United Nations Department of Global Communications

Rather than transitioning its large pool of informal laborers into the formal economy through the low-skilled, highly-repetitive tasks associated with factory work like textiles or electronics assembly, economists note that it is the service sector whose growth makes up an increasing share of employment, an unexpected curveball of modern globalization. Against centuries of economic history, and against the backdrop of decades of failure to compete significantly in global manufacturing and trade, should Africa be aiming to leapfrog traditional industrialization entirely?

This is not to paint a simplistic binary that points towards the wholesale abandonment of the pursuit of ‘traditional’ industrialization. In the current corona crisis, for example, countries with established manufacturing bases are able to rely on their own capacity for the production of critically needed personal protective equipment, from automobile factories reorienting towards ventilators in South Africa to textile factories producing masks in Kenya. The knock-on effects of a factory-base can also be measured in multiplier effects on the economy in terms of foreign reserves, and a form of social safety - even the health costs associated with factory work can be seen as necessary trade-offs if ‘bad’ formal jobs are considered better than ‘no’ formal jobs.

But the limitations of the traditional industrialization playbook must be seriously considered. Most of the conditions that allowed for industrialization to scale in the West, Japan and even China, are structurally absent for most African economies. Furthermore, the window of opportunity to play catch-up is not indefinitely open - while the competition of globalization directly pits African firms against other low-wage, large unskilled labor pools in Vietnam or Bangladesh, the robots of the Fourth Industrial Revolution are catching up. Given the pace of development in artificial intelligence-assisted robotics, analysis gives Kenya less than 15 years to develop its furniture manufacturing before the cost of production could be more cheaply re-onshored using robotic production to the US.

Source: ODI 2018

As the pursuit of industrialization, with its extreme capital intensity, has resulted in a debt crisis for African governments across the continent, all for a stagnant 10% share of manufacturing in GDP on average since 2008, it may be time to admit that 250 years after the beginning of the Industrial Revolution, traditional manufacturing is losing its ability to employ unskilled workers more productively than other industries.

Even before the current crisis, the debate on development through industrialization in the age of China and globalization was starting to boil. Now, with experts estimating the pandemic has caused the disappearance of up to a third of total jobs on the continent, the question of how to kickstart sustained job creation is more important than ever.

Should African leaders with overwhelmingly agrarian or informal workers in small to medium enterprises (SMEs) opt for the ‘factory-model’ of advancing labor cohorts into a ruthlessly competitive globalized trade regime? With successes limited to examples in South Africa, several North African countries, and more recently Ethiopia and Rwanda, this has historically proven a failed strategy for most - with decreasing prospects as the impending 4IR reshapes the global economy.

Should they instead aim to ‘skip’ traditional global value-chain export oriented factory development, doubling down on a service-led economy to employ the masses - so called ‘industries without smokestacks’? While this appears to be a global trend, prematurely industrializing economies from Senegal to South Africa are already service-dominated. Yet this has not inoculated them from deep unemployment - even while vacancies lie unfilled because of inefficient job matching mechanisms.

Distributed Industrialization

A third path emerges that clamors for policies encouraging distributed, relatively small-scale industrial development by local entrepreneurs leveraging the latest innovations in technology and business models tailored for local conditions. This model emphasizes the leapfrogging potential from technologies particularly suited to solving Africa’s unique demographic and topographic challenges - notably 4IR technologies, from drones to 3D printers.

“Small and medium-sized enterprises that engage in industrial processing and manufacturing are the most critical for the early stages of industrialization and are typically the largest job creators. They make up over 90 per cent of business worldwide and account for between 50-60 per cent of employment.”
United Nations, SDG9 (Infrastructure and Industrialization)

In this vision, a form of industrialization beyond crowded, urban centers becomes possible. Smart machines that offer the efficiencies of traditional factories’ scale economies are miniaturized and distributed across domestic value chains; capital cities’ economic primacy is lessened, and the economic drivers of urbanization themselves are reoriented. This approach would represent a fundamental shift in core-periphery relations, changing the economic calculus for aspiring carpenters, welders, grain millers, tailors, and the myriad other cottage industries which constitute the overwhelming majority of informal production today.

A similar ‘delocalizing’ shift is envisageable for the modern service economy - after all, managerial skills like logistics, marketing, and accounting are required for effective manufacturing at any scale. The same goes for professionalizing Africa’s massive agrarian economy, its fast growing tourism sector, and its high-opportunity creative industries (it is notable, for example, that aside from agriculture, Nigeria’s film & entertainment industry employs more people than any other.)

Industries Without Smokestacks

Three fundamental, familiar themes re-emerge that lay the foundation for a 4IR-ready - and crisis-resilient - economy. These are decentralized power sector investments, investments in digital connectivity and the digital ecosystem enabled by power, and lastly a pivot in traditional education systems from content to careers.

Firstly, a 4IR-resilient industrialization strategy recognizes that each of the previous industrial revolutions was predicated on fundamental shifts in energy consumption to power new forms of work - from wood and animals to coal and locomotion, from oil and planes - to renewables and robots.

Source: UNIDO 2017

Harnessing global alignment behind the mission of universal electrification (particularly momentum around mini grid deployment for half a billion) not only creates the basis for productivity gains from small-scale industrialization to scale beyond urban centers and into hard-to-reach hinterlands; the decentralized energy sector’s job creation potential - particularly among youth and women, across roles from installation to sales to project finance - is starting to gain recognition as one of the most significant on the continent. This combination of short-term and long-term alignment will be all the more timely post-COVID.

Digital connectivity, the ecosystem enabled by a modern energy layer, has already demonstrated its leapfrogging potential via mobile phones and mobile money - with a significant return on investment visible on the continent in today’s crisis. Recent World Bank analysis on the positive impact of better internet on jobs illustrate the potential of another inflection point in digital access:

“When faster internet became available in Sub-Saharan Africa, the probability that an individual is employed increased by 6.9 and 13.2 percent, respectively, for countries in different samples.”
Source: World Bank

For policymakers, taking such a tack invests precious resources and support for the informal economy. For job seekers - both those looking for skill-building opportunities, as well as those seeking to monetize on their skills - such infrastructural investments may also prove one of the most locally-appropriate forms of industrialization without smokestacks, when viewed through the lens of the more than 30,000 jobs created by Uber and its local ride-hailing competitors in 6 African countries, or the 22,000 jobs created by Airbnb in South Africa. Or companies like Farmerline, employing 200,000 farmers in over 11 countries to date; Lynk, which unlocks greater efficiencies in informal work through digitization, or Pariti, connecting African tech entrepreneurs to up-market freelance talent and capital.

To be clear, what communities need today is relief assistance from their governments - food, cash, tests, and treatment. But short of governmental ability to directly produce jobs for the masses post-COVID, prioritizing investments that boost the efficiency and productivity of labor opportunities in the immediate may be the most people-centered policy option available.

Focusing on internet accessibility, affordability, and speed (did someone say 5G?) not only strengthens digital inclusion platforms like mobile money, social media, and the gig/sharing economy - critically, it opens up opportunities to disrupt traditional education models inherited from an increasingly distant era where school was meant to develop compliant industrial-factory workers.

Indeed, it has become clear that a 4IR-ready workforce is not simply one with ‘better education.’ African countries already spend more per capita on education than the “internationally recommended level”; in fact, today’s youth are the most educated cohort of Africans in history, leading to the uniquely frustrating combination of weak education systems, overqualified students, and unfilled jobs. Like with manufacturing, the key to 4IR-looking education may be in leveraging technological opportunities for personalization at scale:

“We are witnessing some elements of “over-education” [in Africa] - but overeducatedness in the wrong way. Students may have learned a lot but not the “right thing” to get their foot in the door for the next opportunity. So a lot of folks are looking at matching mechanisms that identify much more targeted, more modular, bite-sized learning - just in time, just to close that gap. Everyone needs a sort of career ‘concierge.’”
Seth Trudeau, VP of Product, ALX

This dynamic partly reflects the truth - in developed markets as in emerging ones - that soft skills and social networks are equally if not more important for job placements than accreditations or even talent. Kate Kraft, an engagement manager at Entangled Solutions (a global education consultancy and venture studio) offers: “African governments - like most - have traditionally thought of education ending at 18 or 22. Today, with a skills half-life of about 5 years - the conversation is shifting towards K-to-Gray (kindergarten to old age). Life-long learning - emphasizing re-skilling and smart social networking - is the key to keeping up in an unpredictable world."

Some Scaffolding Required

Frankly, if the reality of economic catastrophe for the continent is as bad as some have projected, then we are truly in unchartered territories. Fortunately, we know that in an increasingly networked world, Black Swan events happen, and, if the 2008 crisis dynamic in which “platform startups” like Uber, Groupon, Whatsapp, Venmo, and mPesa gained momentum are any indication, it isn't unlikely that Africa’s burgeoning tech platform economies will spawn some breakout successes - black phoenixes emerging from the ashes of the crisis.

Focusing on local value development through the fundamental infrastructure of a modern society - power, connectivity, and productivity - can do much to catalyze the emerging sources of African job growth. Not turning completely away from globalization, necessarily - but developing a more nuanced exposure to its effects. In the absence of effective national and multilateral support - largely ineffective at providing jobs at scale over the past several decades of globalization without industrialization, the digital metropolises materializing in the cloud may prove instrumental to connecting millions of job-seekers to rewarding opportunities not only in the immediate post-corona recovery, when such connections will be so needed, but over the decades of Africa’s coming Fourth Industrial Revolution.