With the emergence of new technologies enabling the Energy and Fourth Industrial Revolutions, Africa has a historic opportunity to tackle challenges such as access to electricity and the mismatch between regional supply and demand, as well as to create an ecosystem that supports entrepreneurship and builds domestic markets.
Having the world’s most youthful population and solid economic fundamentals, the continent is in the best possible position to benefit from the digital revolution. This will be achieved by leapfrogging outmoded models of industrialisation.
How this will come about is best illustrated by the continent’s power challenge. Today, some 600m people in sub-Saharan Africa lack access to electricity.
Even in major urban centres, businesses often have to contend with power interruptions and must maintain expensive and polluting fossil-fuel generators. Until recently, solving this problem would have taken decades and required massive investment in generation and grid connections.
Today new technologies are bringing reliable and sustainable power within easy reach. The most promising solutions for Africa are microgrids powered by sunlight or wind. These systems have yet to make big headlines, but utilities and businesses are increasingly turning to them to provide power.
Renewables-powered microgrids can help improve grid stability and offer a clean and efficient alternative to traditional generators. Renewables also often prove to be the most economical solution for new electrification projects.
On the industrial side, Africa’s focus should be on the significant mismatch between regional supply and demand. This is best addressed by developing the continent’s manufacturing base and increasing its productivity levels.
Today, incomes and consumer spending are growing faster than manufacturing output, leading to rising imports of many types of goods that could and should be made within Africa, including food and beverages, processed goods and more sophisticated products like automobiles, chemicals and machinery. There is an enormous opportunity for manufacturers in Africa to serve substantial demand generated by their own markets.
The immediate goal should be to keep more of the production value chain within the continent. Exports of goods manufactured in Africa have been rising by about 2.5% annually since 2000.
Yet the continent still accounts for less than 1.5% of manufactured exports globally. Rather than exporting raw materials and importing finished goods, the economies of sub-Saharan Africa need to develop integrated regional value chains.
New technology offers the means not only to scale up production and drive productivity at existing enterprises, but also to unleash a new generation of entrepreneurs. The internet revolution in telecommunications and financial services has already shown that Africa can leapfrog older and more established technologies.
While few households are equipped with a landline telephone in sub-Saharan Africa, more adults own cell phones in South Africa and Nigeria than in the United States, according to a study by the Pew Research Center. In East Africa mobile banking has become a part of daily life for millions.
With the digital revolution in industry Africa has a similar opportunity to make rapid progress in industrial production. Businesses can make use of big data and connectivity to remotely monitor machines, plants and facilities, and to develop new business models that rely on digital technologies to overcome distance and operate across borders.
Industry, especially manufacturing, builds and runs the machines that enable agriculture and other sectors to become more productive. It provides the materials and tools to build and operate infrastructure.
It raises people’s incomes and opens up new opportunities for growth in the service sector. Manufacturing drives innovation, accounting for up to 90% of private-sector research and development spending.
By harnessing the complete value chain, and building a strong manufacturing sector with the help of technologies associated with the Energy and Fourth Industrial Revolutions, we may find the African century is finally at hand.