Africa needs to find ‘smart cuts’ to shorten its road to success
The most critical sector is likely to be agriculture, and, paradoxically, experts believe this may mean moving back a developmental stage in order to move two steps forward
Despite the fanfare and excitement around “the fourth industrial revolution” (4IR), the stark reality is that most countries in Africa are ill-prepared for this new phenomenon, having barely kept up with the first three iterations.
Consequently, the notion of “industrialisation” is a source of both great anxiety and excitement. On the one hand it represents the capacity for rapid, transformative and scalable growth, while on the other, failure to create economies and workforces fit for modern realities threatens to unleash grave societal consequences. However, the context under which Africa must industrialise is unique. Not only must it do so while simultaneously trying to democratise, it also faces an even more compelling threat — that of premature de-industrialisation.
Historically, the typical pathway of national economic development has been thuswise: low-value, agricultural economies evolve into high-value industrial ones. Manufacturing acts as the engine of GDP growth which subsequently enables the transition to an even higher-value, deindustrialised, service-based economy. Wealth created from each stage funds the evolution into the next.
Europe, the US and China exemplify this evolution, but regions that are still emerging — including Africa — have yet to complete this journey. Unfortunately, what was almost a natural developmental process for the US and Europe might not be so easy for Africa. Although there are a number of contextual reasons as to why this is the case, the most compelling of these is globalisation.
Globalisation commenced in earnest in the 1980s when western economies were in transition from the industrial- to the service-based stage. As global transport and communication prices dropped and free-trade agreements proliferated, Western de-industrialisation created a window of opportunity for China — which was at the same moment transitioning from agriculture to industry — to become the world’s workshop. What followed was the largest manufacturing boom in history.
The economies of scale realised during the Chinese manufacturing boom resulted in intense global competition in the sector. Manufacturing was no longer a domestic competency but an international competition. Laggard emerging markets were unable to compete with lower-priced Chinese products. As a result, they started to de-industrialise before they had been able to create enough wealth to evolve to service-based economies.
This phenomenon — known as premature de-industrialisation — continues to plague most African countries today. No longer able to compete globally in manufacturing, they remain in a limbo, struggling to find new ways of growth and ill prepared for modern realities.
With the status quo untenable, and further technological threats en route, it is clear that new measures should be taken by African nations to overcome the hurdles posed by this trend.
The reality of premature de-industrialisation means that conventional approaches to economic development will not work for Africa. Therefore, the continent needs to find “smart cuts” to deliberately shorten the path to success.
American author Shane Snow defines a shortcut as rapid but short-term gain whereas a “smart cut” is sustainable success achieved quickly through smart work. In simple terms, Snow argues that instead of following the conventional path to success, one should “hack” the ladder with sideways moves that skip rungs and use lateral thinking to find solutions.
The reality of premature de-industrialisation means that conventional approaches to economic development will not work for Africa.
The principle is particularly relevant in an African context, where Africa now needs to create more than 11-million jobs in the formal economy every year in order to absorb the number of young, working-age people entering the workforce, according to the Brookings Institute. Put crudely, there is no way that Africa can do this by following the conventional path of industrialisation.
So how exactly should the continent ‘hack the ladder?’
Given Africa’s heterogeneity, the route to overcoming premature de-industrialisation will vary by country. The most critical sector, however, is likely to be agriculture. And it is here that, paradoxically, experts believe the best bet may mean moving back a developmental stage in order to move two steps forward.
Nobel Prize-winning economist Joseph Stiglitz believes agriculture presents the easiest path to industrialisation and economic transformation for Africa. This view is echoed by AgribizSA economist Wandile Sihlobo, who believes there are compelling reasons backing the agricultural sector is a smart bet.
“First, the sector’s labour-intensiveness would help a great deal in easing pressure in areas with high unemployment. Second, the ease of entry is also a key factor given that some rural dwellers in some countries are largely unskilled and semiskilled. Third, most African countries have vast tracts of underutilised land that could be put into production if the governing laws are improved.”
To pull this off successfully, however, African agriculture will need to become more productive. According to the UN, German farmers grew 7,200kg of cereal crops for every hectare of land in 2016. Overall, farming is 0.6% of the German economy. Meanwhile, in Mozambique, which depends on agriculture for 25% of its GDP, farmers grew just 820kg per hectare, a little more than one-tenth of Germany’s yield.
Indeed, the continent has among the lowest agriculture yields in the world, making it ripe for positive disruption.
But a huge element upon which this transformation will depend is shifting the mindset around agriculture from a social sector to a commercial sector. Adopting an “agriculture as a business” approach is critical to unleashing its catalytic potential according to Debisi Araba, the regional director for Africa at the International Center for Tropical Agriculture.
“Agriculture is not about sustaining people just above the poverty line; it’s about turning them into entrepreneurs who can thrive, recognising the potential for this sector to lift millions out of poverty,” he argues.
Farmers in developed countries are typically more productive than those in poor countries because they use better technology and infrastructure and are subject to better and more commercial government policies. Africa could increase its productivity by focusing on mechanising key agricultural sectors, developing pan-African strategies for complementary production and intracontinental trade, and investing in agritech.
Agritech solutions are innovative technology approaches that increase the productivity, efficiency and scalability of agriculture. Many agritech startups have cropped up across the continent in recent years and there is growing venture capital interest in the sector, which is indicative of future value creation.
For example, Pula — an East African agritech startup — bundles insurance with fertiliser products. Pula helps farms that were previously uninsured to avoid the effects of bad years and remain viable for long-term growth, thus enabling long-term sustainability of farms. Twiga Foods, a Kenyan outfit, uses cellphone technology to match supply and demand, aggregating market participants and finding buyers for farmers’ produce.
This can increase market reach and decrease distribution costs for otherwise subscale and fragmented farmers.
Rather than representing a threat to the sector, 4IR technologies can be used to catalyse a shift to higher-value industries. Used intelligently, such endeavours could indeed help to generate greater access to economic opportunities for many people. It could also help to foster a healthier and better-educated workforce, which would in turn provide an important stimulus for industrial production.
The effects of successful policies in these areas would be mutually reinforcing, helping to create a cycle of sustained growth, reducing inequality and creating greater inclusion.
Africa has about 600-million hectares of uncultivated arable land, roughly 60% of the global total. As the US, Europe and China continue to develop, their agricultural output growth may well slow down. If Africa focuses on mechanisation, intra-continental co-ordination and sustained investment in agritech, there could be an opportunity for Africa to fill the gap — just as China has done for manufacturing during the past 30 years.
Africa could yet become the breadbasket of the world.
• Gopaldas is a director at Signal Risk and fellow at GIBS. Shivdasani is founder and CEO of technology company Giraffe.