The 4th industrial Revolution, a watershed moment for Africa’s development.

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February 26, 2020

The 4th industrial Revolution, a watershed moment for Africa’s development.

Statistics show that since 2000, Africa’s GDP has grown by 4.6% annually, on average. Africa’s domestic demand has been the key driver of the growth performance accounting for 69% of annual growth between 2000 and 2018. This is reflected in the demand for processed food which is growing 1.5 times faster than the global average, while the demand for many other products such as vehicles, manufactured metals and industrial machinery, is expanding faster than the global average, making it a good opportunity for local firms to grow in size and productivity.

Similarly, start-ups in Africa have also increasingly emerged with the top three activities relating to information technology and communications (ICT) and internet services; digital applications and softwares; and the creation of audio-visual content and broadcasting. The emergence of such tech start-ups in the continent raised over USD 1.2 billion in equity in 2018, up from USD 560 million in 2017.

Against this background, the African Union Commissioner for Economic Affairs, Prof. Victor Harrison, notes that the rapid growth in the tech sector is an indication of a positive shift towards the 4th Industrial Revolution which the continent, if it prepares itself through adequate policies and readiness of the private sector, could enormously benefit through industrial development, digitalization and greater integration, which in turn would result in greater opportunities for our growing youthful populations. Aspiration 1 of the continental development Agenda 2063 promote a “prosperous Africa, based on Inclusive Growth and Sustainable Development” that can only be achieved through the active participation of African nations, Regional Economic Communities (RECs) and key stakeholders such as the Private Sector, to harness the full benefits of the Industrial Revolution. The 4th Industrial Revolution is expected to create up to USD 3.7 trillion in value to manufacturing firms across the globe, with enormous benefits for users. The impact of the technology has so far been felt in the breakthrough advances recorded in sectors such as healthcare, agriculture, energy, education and telecommunication.

In the lead up to the 4th Specialized Technical Committee (STC) Ministerial meeting on Finance, Monetary Affairs, Economic Planning and Integration under the theme “Leveraging the 4th Industrial Revolution to address Youth Unemployment in Africa”, set to be held in March 2020 in Accra, Ghana, Prof. Harrison notes that despite the encouraging economic growth, there is need for policy discourse that looks into exponential potential of the 4th Industrial Revolution. “The African Union is looking at how we can harness the demographic dividend of the youth and the 4th industrial revolution is a good catalyst for this. Currently, only about 3.1 million jobs are created each year on the continent compared to the over 12 million young people in search of employment. How do we address this gap? We need to commit ourselves to adopt new interdisciplinary approaches that speak to our present and future needs”, he stated, adding that the Ministerial meeting would present an opportunity for the policymakers to address the macroeconomic deficits as well as adopt approaches that can accelerate Africa’s growth and development.

The discussions on the 4th Industrial Revolution also build on the implementation of the African Digital Transformation Strategy that was adopted at the recently concluded African Union Summit. The strategy is seen as a leapfrogging opportunity for the continent to fully adopt technologies such as artificial intelligence, robotics, block chain, drones, wearable technologies, 3D printing, Big Data, and software-enabled industrial platforms. However, in order for the Digital Transformation Strategy to be successful, affordable, accessible and reliable infrastructure are critical and imperative to achieve an inclusive digital transformation. It also complements existing initiatives and frameworks such as the Policy and Regulatory Initiative for Digital Africa (PRIDA), the Africa's Accelerated Industrial Development Action Plan (AIDA); the Programme for Infrastructure Development in Africa (PIDA); the African Continental Free Trade Area (AfCFTA); the African Union Financial Institutions (AUFIs); the Single African Air Transport Market (SAATM); and the Free Movement of Persons (FMP) to support the development of a Digital Single Market (DSM) for Africa, as part of the integration priorities of the African Union.

Improving the business environment by strengthening industrial linkages plays a major part for the continent to leverage on the 4th Industrial Revolution. The Ministerial meeting will also address the structural deficits under the regulatory frameworks that support the technological development and advanced manufacturing. This will be complemented by discussions on the Financial Technology (Fintech) companies which are providing digital solutions to financial services sector such as mobile money and whose successes have been recorded in trade facilitation. The African Union Commission Acting Director for Economic Affairs Mr. Jean-Denis Gabikini, underlines the nexus between the regulatory and governance frameworks and the growth of the emerging technologies in production. He states, “the 4th industrial revolution is a deal-maker for our bulging youthful population because we can already see the scale and speed at which technology is transforming traditional socio-economic sectors, promoting Africa’s integration, stimulating job creation, erasing the digital divide and eradicating poverty. It is important that both the public and private sectors keep pace with advances in technology, address the new regulatory frontiers and environment to support the digital transformation achieve its full potential.”

As demonstrated in the African Union Commission flagship economic report Africa’s Development Dynamics 2019, African countries cannot replicate past approaches to industrialisation, due to the evolution in the development landscape. The productive transformation continues to be influenced by a variety of factors. For instance, the manufacturing sector increasingly depends on service and other sectors such as information and communications technology (ICT), marketing, transport and distribution. Such services counted for 40-42% of the value addition in Egypt, Ethiopia and Kenya in 2015. Globally, services support functions make up between 25% and 60% of employment in manufacturing firms. These indicators therefore reflect the overarching need for governments to focus on strategic value chains besides manufacturing.

The upcoming Ministerial meeting is therefore crucial in setting the tone on the impact of the 4th Industrial Revolution in Africa and on how African leaders and policymakers can harness the impact of technological advancement to create a future-driven inclusive society aiming at reducing unemployment amongst African youths. This will include assessing the continent’s readiness to absorb the shocks of the ‘4th Wave,’ in order to harness the opportunities of the digital era guided by public policy, legal and regulatory frameworks that are up-to-date, flexible, incentive-based and market-driven to support digital transformation across sectors and across the continent regions. Regarding Industrialization on the continent and Africa’s readiness to fully participate in the 4IR, it is important that African leaders, policy-makers and business leaders also identify specific production structures and indicators lacking in their respective countries. This will help identify the areas of major concern and provide a clearer indication of where African Union Member States stand in terms of readiness, so as to develop strategic mitigating tools to address the challenges.

The meeting will also identify the drivers of change and their likely consequences over the next half century, and propose policy choices and the role of the private sector to enable Africa to fulfil its potential in the years ahead. In addition to discussions on the theme, the STC will also discuss African Union statutory issues with Experts and Ministers from Ministries of Finance, Economy, Planning, Integration and Central Banks. Topics will range from the status of Regional Integration, the establishment of the African Union Financial Institutions (AUFIs); progress made in the implementation of the first ten year plan of Agenda 2063; the Digital Transformation Strategy and the African Continental Free Trade Area (AfCFTA) amongst other economic integration topics.

A number of side events will also be organized, on the margins of the STC, with partners such as the IMF, Afreximbank, ATAF and Stats Sweden, to discuss relevant areas to the theme of this year’s STC such as the fight against Corruption and Illicit Financial Flows and the promotion of better governance structures and mechanisms in order to mobilize greater domestic resources; the importance of FINTECHs and Digital payment systems in supporting the settlement of cross border payments and thus supporting the successful operationalization of the AfCFTA; taxation of an African Digital Economy and finally the contribution of migration to economic growth in Africa. The

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