The 4th industrial revolution, otherwise known as the ‘Digital Industrial revolution’ or ‘Industry 4.0’, or simply ‘4IR’ is a broad term used to describe the ongoing global conversion of labour-intensive manufacturing processes toward incorporating robotics, artificial intelligence (AI), big data, customer service personalisation and other forms of digital innovation, pointing to a future where the knowledge economy and the manufacturing sector are in effect, inseparable. Like earlier industrial revolutions, those quickest to utilise these new technologies will reap the most benefit. Some estimates place the profits reaped by early adopting firms at almost 120%, with a measly 10% for those who only adopt these new technologies later on. Far from being at a disadvantage, Africa’s lack of legacy infrastructure might prove to be a key ingredient in securing its industries’ positions in the new global economy that the 4IR will bring about. Industrial growth in this context can be viewed through two key focus areas: the conventional development of an industrial base and the fostering of a local knowledge economy.
The new dawn for African heavy industry
Since the turn of the millennium African nations have enjoyed stable growth rates, with major regional economies often topping the charts as the fastest growing economies in the world. From the 1990’s onward China’s industrial boom fuelled a massive jump in commodity prices, driving African growth at a healthy 8% between 2000 and 2008. Service sectors, particularly finance, grew to meet this new demand. Although major economies like South Africa and Nigeria are presently struggling with slow growth rates, all signs point to the continent experiencing steady GDP growth through the 2020’s. Estimates place business-to-business spending in Africa at over US$600 billion by 2030. By that same year the African working age population will stand at over 1 billion and half the continent’s population will be situated in urban areas, perfectly positioned for the estimated 100 million labour-intensive manufacturing jobs Africa is projected to absorb from the far east by the middle of the century.
Governments on the continent are well aware of these opportunities. The African Union’s Agenda 2063 places heavy emphasis on the manufacturing sector as the key driver of growth in the coming decades. Traditionally, manufacturing in Africa has been focused around larger economies (Egypt, Nigeria, South Africa), but recent years have seen former industrialised states undergo economic transformation as well. Since 2012 Ethiopia’s capital, Addis Ababa, has adopted an ambitious plan to expand its manufacturing base, utilising its large population, low labour costs and access to maritime transport through Eritrea to build 14 industrial parks across the country. By February this year the project had created 64,000 jobs, chiefly in the leather and textiles industries. Morocco has pursued a similar policy under the auspices of its Industrial Acceleration Plan 2020, utilising its close proximity to European markets and competitive labour and transport prices to develop value-added industries for its commodity exports.
However, 4IR will inevitably lead to the redundancy of labour-intensive production and place a far bigger premium on technical and analytical skills. In South Africa, where both labour and transport costs are high, many manufacturers are looking to rapidly incorporate automation and digitisation into their production processes. This has in turn promoted growth in support industries which assist firms with making these types of transitions. Such support industries in turn rely on externalities like a healthy tech sector to help cultivate this essential know-how.
Seeds of the future: The African knowledge economy
The African technology sector has, given its infrastructural restraints, performed remarkably well. The proliferation of internet access on the continent has fostered a whole generation of young tech entrepreneurs, with new African start-ups accumulating vast sums of investor capital each year. Partech estimates that these inflows amounted to US$1.2bn in 2018 alone. The vast majority of these FDI inflows are bound for Africa’s big three economies – South Africa, Kenya and Nigeria. However, their share has been steadily decreasing as smaller nations begin to eke out their own niches. In 2015 the big three received approximately 80% of Africa’s inbound start-up investment, however in 2018 this dropped to around 61%. Read more...