It is perceived that economic nationalism has slowed the meteoric rise of global trade. Since the Uruguay Round created the World Trade Organization (WTO) in 1995, trade of goods and services has become a dominant feature in global economic growth. As a result, hundreds of millions of people in developing countries have graduated from subsistence living to middle-class status. The accession of China into the World Trade Organization in 2001 accelerated both the volume and character of global trade. By 2008, Global Value Chains (GVCs) have come to explain up to 70% of global trade volumes.1 GVCs optimize comparative advantage across borders and have enabled innovation in trade logistics and services technologies, in addition to a general WTO commitment by member states to facilitate trade.
However, the renegotiation of liberal free trade agreements, such as Brexit and the reconsideration of NAFTA, and the concomitant shift of manufacturing jobs (on-shoring) back into developed economies have accelerated. In the latest WTO Report on G20 Trade Practices, $481 billion in new import restrictive measures were imposed by G20 members in 2018.2 This is the largest increase of such measures ever recorded by the WTO and six times larger than last year’s. Also, according to the World Bank, the growth in GVC’s has stalled.3 The WTO appears unable to broker more ambitious global agreements among member states, and there is a perceptible decline in confidence in the organization’s ability to evolve the rules-based global trading system.
The question of Africa’s ability to adapt to these shifting trends in trade must be analyzed in light of its participation in the global economy and its ability to adopt the tools to become more competitive in a world of rapidly evolving technology and supply chains. It should be noted that this analysis will concentrate on sub-Saharan Africa (SSA) and will disaggregate data accordingly, whenever possible. Africa has enormous diversity amongst its 54 nations and even among its regions. This chapter will examine the political economy of Africa’s trade and identify constraints and opportunities that will define its future, including the adoption of artificial intelligence.
Africa and Global Trade
Pliny the Elder is known for two contributions to global learning. One is the discovery of hops as an essential ingredient for brewing beer and the other for the phrase: “ex Africa semper aliquid novi” (always something new out of Africa).4
What is new about Africa has been the African rising story. While this optimistic narrative is a departure from the doom and gloom scenario of the past, there are storms on the horizon.
The first known evidence of trans-Africa trade dates from the 4th century BC, when the Axumite kingdom traded with the Ptolemaic dynasty of Egypt.5 Later, caravan routes emerged linking trading centers across the Sahel. Yet, African trade has been restricted by its physical and human geography, namely vast deserts, few navigable rivers, and dispersed population.
After centuries of slave traders and Portuguese explorers, European countries began to take a colonizing interest in Africa and by the end of the 19th century every sub-Saharan country but Ethiopia had been colonized by a European power. In 1885, the European powers divided Africa into an illogical array of scattered colonies. This “Scramble for Africa” was fueled by aspirations of global hegemony and a thirst for natural resources to fuel the industrial revolution.6 In some instances, these aspirations resulted in the establishment of settler communities. These colonial regimes built infrastructure to extract raw natural resources, which were then finished in the respective mother country, a “Colonial Value Chain”! Worse yet, colonists established state monopolies that ruled domestic markets and limited by law the emergence of a local business class. Local human capacity development was often limited to coopted elites recruited to administer (and police) these rapacious regimes.
The dawn of independence in Africa occurred from 1957 to 1975, when war-shattered European economies and global public opinion (including from the United States) coalesced to accelerate the exit of colonialism. Due to shortages in both human capacity and business acumen, the economic road to the Kwame Nkrumah’s “Political Kingdom” soon became a dead end. Perhaps as a product of the ideological tendencies of the Cold War era manifested by the adoption of “scientific socialism,” many of Africa’s early leaders eschewed business friendly policies in favor of command economies. One iteration of these doomed practices was the establishment of import substitution regimes, which aimed to create indigenous infant industries through high tariffs and impregnable non-tariff barriers against all imports, whether from neighboring countries or afar. These policies were an abject failure as the contribution of manufacturing to GDP at the beginning of the 21st century was the same as it was in 1970: 10%!7 In the meantime, local consumers were gouged, productivity plunged, and the schemes became vehicles for the destructive rent-seeking and clientelism that define many Africa economies today.
The 1970s saw the promise of independence fade into dysfunction, predation, and manipulation by super powers fighting proxy wars across Africa. South Africa, the continent’s most advanced economy, was roiled by Apartheid and the opposition to it, which spread beyond its borders and stifled trade.8 Nigeria, Africa’s most populous country, was riven by a succession of weak civil governments succeeded by oppressive military regimes, all marked by odious levels of corruption. Development assistance from multilateral and bilateral sources contributed to economic distortion9 and suffocating levels of indebtedness. As a result, Africa’s portion of global trade had fallen from 3.5% in 1971 to 1.5% in 1999 and consisted mostly of unprocessed goods.10 Adding insult to injury, Africa was largely left out of the global trade negotiations under GATT and WTO and thus unable to shape its own economic future. When coupled with the devastation of the HIV/AIDS pandemic, by the 1990s, Africa was on the economic ropes. Famously, in May 2000, The Economist published a feature on Africa entitled “The Hopeless Continent.”11 African trade statistics notoriously fail to quantify the size of the informal economy and the volume of informal trade of goods and services both internal and externally. A recent IMF study revealed that in Benin, Nigeria, and Tanzania about 65% of the economy is informal.12
Current Trade Situation
Nearly twenty years since The Economist declared it doomed, sub-Saharan Africa remains the most under connected region in the world. While absolute trade has increased, the region represents about 2–3% of global trade volume and intra-Africa trade accounts for about 11% of total exports as seen by the below chart comparing Africa’s leading Regional Economic Communities (RECs). These include the East Africa Community (EAC), Economic Community of West African States (ECOWAS), Southern Africa Development Community (SADC) and the Common Market for East and Southern Africa (COMESA). SSA represents Sub-Saharan Africa. This contrasts sharply with South America (22%) and Western Europe (70%).13 [See Figure 1]
Figure 1. African intra-regional trade, as a percentage of trade with the world14
Sadly, what little trade that has occurred remains in raw commodities, mostly agricultural and mineral products. Although economic orthodoxy has long concluded that open markets beget economic growth, our evaluation of World Bank data has shown that there is a very weak correlation between economic growth and merchandise trade. [See Figure 2]
Figure 2. Correlation Between GDP Growth vs. Merchandise Trade.15,16
The most compelling explanation of this is that most external trade from Africa is tied to raw commodities and offer few forward and backward linkages to the local economy. This is in contrast to intra-Africa trade which favors manufactured, fast moving, and consumer goods.17 There are many reasons for the lack of intra-African trade including:
- Weakness of physical and human infrastructure (more on this later)
- Small size of individual African country markets
- Residual tariffs and onerous non-tariff measures (NTM) on processed and semi-processed African products by both developed and emerging markets18
- Export constraints and other pre-border barriers19
- Absence of trade finance
- Institutional constraints on enterprise growth and inability to achieve scale
- Currency risk
- Corruption and rent-seeking clientelism
- Civil disruption
It is beyond the scope of this chapter to delve into each of the above factors, however a couple of items are worthy of note.
As mentioned earlier, prior to independence, physical infrastructure was designed to satisfy the security concerns of competing European powers and related commercial interests seeking access to Africa’s natural resource bounty. While multilateral and bilateral development assistance fueled a surge of investment in infrastructure in the early years of statehood, many of these investments suffered from poor design and lack of maintenance. In other regions, private investment in infrastructure provided higher yields. For Africa to enhance its trade competitiveness internally and externally, trade related to physical and human infrastructure must be enhanced. This is no mean task. In its most recent analysis, the Africa Development Bank has estimated that Africa needs approximately $170 billion per year in infrastructure investment development, of which 20% is available from African sources.20
Another obstacle is the resistance of foreign markets to open themselves to African value-added exports. These constraints can occur in the form of tariff biases. For example, cocoa is offered duty free access into the U.S. market, but chocolate is subject to duty. While meat products could enjoy access to European markets, Sanitary and Phytosanitary (SPS) measures thwart these opportunities, often at the behest of protectionist interests. And despite all the rhetoric toward South–South cooperation, China provides duty free access to fewer African products than the United Sates, and it only does so for those countries that fall under the UN’s least developed country definitions, thereby excluding the most export ready economies. Non-tariff measures equally restrict South-South trade and South-North trade.21
In order to partly remedy these deficiencies and respond to world opinion, G-8 countries have enacted several trade initiatives in the past twenty years, including the U.S. Africa Growth and Opportunity Act (AGOA) and the European Union’s Economic Partnership Agreements (EPA). AGOA was passed in 2000 and expanded upon the Generalized System of Preferences (GSP) by allowing over 6,000 items from qualifying sub-Saharan African nations into the U.S. market on a zero-duty and nonreciprocal basis. AGOA was supported by over $1 billion of trade-related development assistance, largely through USAID’s Africa Trade Hubs. This market access requires minimal compliance with various standards such as labor and human rights and general business norms. In 2015, AGOA was extended until 2025, when it is assumed that a more reciprocal agreement is likely. In the past few months, the Trump administration has indicated its intent to negotiate bilateral Free Trade Agreements (FTAs) with willing African nations. As seen in Figure 3, AGOA has achieved modest direct and indirect results. While total two-way trade between Africa and the United States has trebled between 2000 and 2017, the vast majority of the trade has been in petroleum or mineral related products with the most amount of manufactured and agricultural goods limited to a few countries. [See Figure 3]
Figure 3. Aggregate two-way goods trade between AGOA countries and the United States22
The EU’s EPAs are neither as generous nor comprehensive as AGOA. These agreements are an extension of the Lomé agreement of the 1980s and are available to all qualifying African, Pacific, and Caribbean (APC) countries. While they have much more generous provisions than the Lomé agreement, they also require qualifying countries (which include all but the poorest APC countries) to open their markets to European exporters. As seen in Figure 4, the results have been inconclusive. [See Figure 4]
Figure 4. EU trade in goods with Africa, 2006–2016 (in € billions)23
[i] Eurostat Database, available at https://ec.europa.eu/eurostat/data/database
One of the barriers to intra-Africa trade has been the evolution of a system of regional trade agreements with often conflicting and always confusing results. In order to define its own economic future and accelerate intra-Africa Trade, in 2018, the leaders of 44 African countries signed an agreement to establish the African Continental Free Trade Agreement (CFTA). This agreement aims to establish the world’s largest geographic free trade arrangement by 2019. When in force, the CFTA will remove trade obstacles such as tariffs, quotas, and NTMs to accelerate the flow of goods and services amongst member states. Such integration is also aimed at increasing Africa’s partnership in GVCs. So far, only 14 countries have ratified the agreement and Nigeria has voiced opposition to the agreement. While the achievement evidences a monumental shift in ambition, it remains to be seen whether this will be transformative as Africa’s supply capacity has always limited the impact of market access agreements.
One area where supply constraints have been less daunting is the services sector. Services are less limited by physical barriers and have been greatly impacted by the growth of telecommunication and internet access across Africa. The impact has been dramatic, and there is evidence of a positive correlation to GDP growth. [See Figure 5]
Figure 5. Correlation between GDP growth and services growth.24,25
According to a Brookings report, services exports grew six times faster than merchandise exports between 1998 and 2015.26 According to the World Bank’s most recent data, 53.2% of sub-Saharan African GDP is attributed to services.27 And in Ethiopia and Ivory Coast, the services sector grew respectively by 8.59% and 9.15% in 2016.28 Kenya, Rwanda, and South Africa have undertaken special measures to grow their services sectors and become knowledge based economies. Botswana has become the global center for diamond sales. However, services expansion is dependent upon access to media and the Internet, and some African countries have put constraints on access in order to suppress political dissent.
A key component crucial to fostering a prosperous economy is a country’s ability to develop its human capital, or the benefits people can provide, given their knowledge, skills, and work ethic, to an economy. Unfortunately, many African countries are far behind their developed counterparts in this area, greatly hurting their economy in the present and likely in the future. This can be attributed to the collapse of post-secondary education institutions, lack of STEM (Science, Technology, Engineering, and Mathematics) related programs, and the limited possibilities for those who are educated. Although there is some hope on the horizon for these struggling countries, they still have a long way to go.
It is no secret that many African countries, predominantly in sub-Saharan Africa, fall short in their academic programs (see Figure 6). Research by the World Bank found that fewer than half the secondary school students in these developing countries could meet the benchmark minimum, set by the Programme for International Student Assessment (PISA), and only 26% of South African students reached it.29 Not only do SSA countries struggle to meet requirements, but they also have difficulty getting young children into classrooms. It was estimated that about 30 million children in SSA (1 in 4) are not enrolled in school and that only 28% of youth are enrolled in secondary school.30 Such dwindling numbers of children in school can in part be due to the wealth inequality throughout Africa. Many marginalized groups do not receive the same opportunities as the rich in the area and therefore do not have the means to send their children to school. In sub-Saharan Africa, 68% of children from poor families lack education, compared to only 13% from rich families.31 This is generally due to the rich families’ access to privatized schools, which are overall better than the public school system, which is chronically underfunded and lacks qualified teachers. Research found that in seven SSA countries, 3 in 10 fourth-grade teachers had not mastered the language curriculum they were teaching. It is highly unlikely that children can learn in an environment where their teachers are not even comfortable with the material. Such disparities can be detrimental considering they lead to fewer skilled workers for the continent as a whole. The societal implications could be significant further dividing economies into haves and have nots. These patterns inevitably continue through adulthood and result in workers who cannot provide as much value as their better-educated counterparts, thus leading to overall inefficiencies.
An additional problem for Africa’s education system is that the students who are in school are not studying disciplines that are central to the development of the continent. Technological advancements are central to any country trying to increase its economic activity, which is why they need human capital to excel in this area and help the country prosper. However, most students who study at higher levels of education (secondary and post-secondary) specialize in the areas of humanities and social sciences, not STEM fields.32 This lack of STEM education can be attributed to a variety of factors including inadequate funding for science and technology, small numbers of professionals in the field, and a lack of priority compared to other issues such as poverty and starvation.33 The disadvantages presented are a huge contributing factor to the cycle of underdevelopment. Funds are consistently transferred to sectors other than STEM education and development because the returns on STEM investments are too long-term and there are more pressing priorities. This leaves STEM underfunded, despite its potential to drastically help the economy. Therefore, SSA countries are less likely to get the opportunity to develop further, even though this development can lead to huge benefits in the future if given the chance to grow. In order to improve the STEM areas in Africa, governments need to enforce policy changes and the expansion of educational systems. Through this, they can divide funds up to help those with short-term needs, as well as plan ahead for future prosperity. [See Figure 6]
Figure 6. Median percentage of students in late primary schools who score above a minimum proficiency level on a learning assessment, by income group and region34
Due to the economic downfalls for the majority of the continent, Africa is seeing a huge brain drain among those with higher education; qualified professionals are leaving their home country to pursue better opportunities in other countries, typically in the United States or Europe. Those who do receive a good education in Africa are often incentivized to leave for higher paying jobs, a better quality of life, or more opportunities in other countries, thus leaving their home country worse off. The loss of potential workers leaves Africa increasingly reliant on bringing in workers from outside countries, which then hinders building up local skills in the community.35 However, there has been progress as many Africans have begun creating and innovating products and presenting them at world conferences, such as HackForGood, an annual hack-a-thon partnered with Nigeria that helps teach students computer skills and challenges them to innovate computer products.36 More events like this need to be in place so that students can feel challenged to keep improving and get a sense of gratification that their hard work is being recognized and encouraged. Improved public policy and increased business development would make African countries better able to provide the means for their citizens to study STEM fields and want to stay to continue their work.
Despite all that Africa has stacked against it, there is hope for its developing countries. Africa has the fastest growing middle class in the world, with the potential to grow its labor force immensely. It has a huge population of untapped potential that could be fixed with innovations and proper allocation of funding. Two changes Africa needs to make are improving school systems and pursuing technological advancements. Innovation is crucial for an economy to prosper, and the way to do that is through improved technology. Access to communications technology has the ability to dramatically improve the efficiency across all countries and give people the means to connect to one another. Similarly, growing the education systems will allow students to get a better education and grow up to contribute to the community. Young adults will be better prepared to enter the workforce and have the tools they need to push the economy into a place that can be beneficial for all. These adjustments will not be easy, but if governments and citizens can come together and develop better policies at all levels, change can happen.
Investment: Africa Rising
A brief mention should be made of Africa’s changing investment landscape. The Africa Rising scenario has become a popular mantra over the past decade and a departure from the Natural Resource Curse scenario that dominated African inward investment for decades. With a growing middle class, a growth in demand in Asia for commodities, and a suite of economic reforms, Africa has once again become a more attractive investment destination. While currency and limits on repatriation of earnings still exist, private equity funds are searching for the higher yields that Africa can offer. Private investment and money remittances from the African diaspora now both exceed the amount of inward development assistance flows. China has made a contribution, first by its state-owned companies and now by 10,000 private companies operating in the continent.37 However, much of the Chinese capital is in the form of medium- and long-term debt or is bartered in exchange for access to desired natural resources. Surprisingly, according to EY, the United States is still the leading investor into Africa outside of the African continent as measured by the quantity of investments. Within Africa, South Africa and Kenya has become leading investors as they bring not only capital but also access to world-class capital markets. The Johannesburg Stock Exchange is the world’s fourth oldest capital market. Yet in many countries other than these, the institutional and regulatory environments remain challenged.38
Although low investment returns in the developed world have incentivized investors to look for opportunities in emerging markets, Africa has set up many obstacles to FDI. First, with the exception of Kenya and South Africa, Africa’s capital markets are weak and offer few opportunities for investors to find attractive exits or raise complimentary capital. Second, Africans need more ambition with regards to the reform agenda, especially as there is compelling evidence that coherent, predictable, and transparent enabling environments are a precondition for investment. The World Bank’s annual doing business survey provides ample evidence of an ongoing African reform agenda. While four of the world’s top ten reforming economies are located in Africa,39 six of the bottom ten countries in the ease of doing business rank are located in Africa.40 While some African countries benchmark against other African countries, the reality is that, in a world of GVCs, each country in Africa competes with not only fellow Africa countries but also emerging markets everywhere.
Automation & Artificial Intelligence (AI) in Africa
Enabled by artificial intelligence (AI), machines can learn from patterns in data and proactively improve themselves, bringing human-like cognition to industrial automation and disrupting modes of production and the delivery of services. Global investment in AI has rapidly increased to between $20 billion USD and $30 billion USD in 2016, with 90% allocated to research, development, and deployment, and 10% to acquisitions.41 Much of this capital comes from companies like Google, Amazon, and Baidu. But there is also a growing contingent of private equity and venture capital investors, which spent between $5 and $8 billion in 2016.42 While some recipients of these funds are building AI systems to filter emails and provide legal advice, others are applying automation and AI to improve agriculture and manufacturing.
The abundance of interest, capital, opportunities, and promises reminds one of mobile technology just 10 years ago. Will automation and AI do to African nations over the next decade what mobile technology did to them in the last one, fueling a dramatic rise in connectivity and unlocking significant gains in economic development? Like mobile technology and communication capabilities, will automation and AI permit African nations to dramatically increase their research, development, and production capabilities? Will automation and AI give African nations even more power to leapfrog the need for old-fashioned infrastructure and outdated strategies of industrialization?
Some see application of automation and AI in Africa as “a chimera, not a reality”—a thing hoped or wished for but in fact illusory or impossible to achieve.43 On the contrary, entrepreneurs, startups, and multinational stalwarts alike are already investing in identifying and putting together the policy, regulatory, and investment components needed to create an enabling environment for automation and AI to not only take root but to scale as well. This is especially true in Kenya, South Africa, Nigeria, Ghana, Botswana, and Ethiopia.44
African leaders, entrepreneurs, investors, and policymakers have the opportunity to leverage automation and AI to improve agriculture and manufacturing in particular. With greater productivity, efficiency, and safety, these high-growth sectors enabled by innovative technology and human capacity can advance sustainable development, maintain inclusive growth, and connect supply chains regionally and globally. PricewaterhouseCoopers estimated that AI technologies could increase global GDP by $15.7 trillion, a full 14%, by 2030, of which $1.2 trillion would be added for Africa.45 But these outcomes are not possible without considerable challenge and significant investment.
Critical components necessary for automation and AI to take hold are missing across most of the continent except in a handful of countries—namely Kenya, South Africa, Nigeria, Ghana, Ethiopia, and Botswana. For one, the lack of quality first-generation internet and communications infrastructure leaves little to replace and a heavy burden for mobile networks to process the computationally dense work of AI at scale.
Internet connectivity still costs too much for most people; and many of those that can afford it still complain of poor service. Plus, further improvements to human capacity are also required to speed uptake and adoption of the new features afforded to users by automation and AI. Finally, many African countries remain incapable of requisite reforms in the areas of data collection and data privacy, infrastructure, education, and governance.
But there are also opportunities at large and tools available to solve problems and accelerate progress. Mobile technology should be seen as the foundation for automation and AI. A youth culture of strong interest in business creation is a driving force of technology adoption and development, with many young entrepreneurs looking for global opportunities. Internet connectivity has nonetheless provided unprecedented access to information, partnership, and capital.
Automation & Artificial Intelligence in Agriculture
The Global Opportunity Network’s 2016 Report identified smart agriculture as the opportunity with the biggest potential for a positive impact on society—ahead of the digital labor market and closing the skills gap.46 After all, with 2.3 billion more people in the world by 2050, we will need to produce 70 percent more food than we do today amidst climate change, resource scarcity, and growing inequality.47
Nowhere are these pressures felt more sensitively than in Africa. Agriculture employs 60 percent of Africa’s workers and produces nearly a third of its GDP (see Figure 10).48 [See Figure 7]
Figure 7. Sectoral composition of GDP in Africa, 2000-201649
Until 2025, agriculture will create more jobs than the rest of the economy combined.50 Buoyed by the increasing demands of population growth and the increasing supply pressures of climate change, agriculture will continue to be a critical pillar of Africa’s economic growth and meaningful participation in the changing global trade landscape. As such, improving productivity and efficiency of agriculture and food processing is an important objective for countries in Africa, who can accomplish this goal with the help of automation and AI.
But the challenges are plenty. For one, there is more uncultivated arable land in sub-Saharan Africa than there is cultivated farmland in the United States, and that land needs to be utilized more effectively and efficiently.51 Barriers to accessing financing for modernization persist, so it remains difficult and expensive to do so. Young working-age people are leaving rural homes for cities, attracted away from farming to what are perceived to be more ‘innovative’ industries. Climate change, disease, and drought also remain formidable and will almost certainly become more severe in the future. Nevertheless, automation and AI can help solve these, too.
According to IBM, problems related to weather cause 90 percent of all crop losses. Artificial intelligence tools can help farmers analyze data like humidity, soil pH, air pressure, precipitation, temperature, and weather in real-time and help determine plant strength, predict the best time for planting and irrigation, and increase food production in a time when the world really needs it.
Powered by AI, satellite image analysis can optimize use of uncultivated arable land, recommending locations and schedules for planting, irrigation, fertilization, and harvest. Powered by AI, financial transactions can be more secure, and lenders can more effectively assess risk with less information in order to widen access to capital. Powered by AI, food processors and wholesalers can improve supply chain efficiency and increase profitability. Powered by AI, robots are also attracting significant agricultural interest, namely stationary robots, non-humanoid land robots, and fully automated aerial drones. Between 23 and 37 percent of the companies surveyed said they plan to make investment of this sort (depending on the industry).52
Who is Leading the Way?
Kitovu (Nigeria) – a web/mobile based decentralized fertilizer/seedling warehousing system based in Nigeria that matches the right inputs to different farm locations owned by smallholder farmers in distant pocket locations, using geo-location and soil data collected by the mobile app.
Syecomp (Ghana) – specializes in the acquisition, processing, analysis and synthesis of imagery from remotely sensed satellites and multispectral image data from drones to monitor field crops/vegetative status and identify and mitigate potential diseases across fields in Sub-Saharan Africa on farms in Ghana.
Yellow Beast (South Africa) – develops, manufactures, and installs an easy-to-use, precision micro-irrigation device, called Nosets Simplified Irrigation, senses and interprets the most favorable, in situ conditions in the soil-crop system, using known information on the crop and soil properties, and automatically irrigates the crop.
Automation & Artificial Intelligence in Manufacturing
Manufacturing represents almost a third of African countries’ GDP (see Figure 10). Overseas Development Institute data show that between 2005 and 2014 manufacturing production within Africa more than doubled from $73 billion to $157 billion, growing 3.5% annually in real terms.53 Uganda, Tanzania, and Zambia have achieved more than 5% annual growth in the recent past.54 Manufacturing exports from sub-Saharan African markets almost tripled between 2005 and 2015 to more than $140 billion.55 Foreign Direct Investment (FDI) in African manufacturing is increasing and increasingly comes from other parts of Africa.56 Manufacturing investments represent a quarter of all FDI in Mozambique and Tanzania and more than 40 percent in Rwanda.57 Indeed, The Economist calls Africa “an awakening giant” in 2014; and Irene Yuan Sun, author and consultant, writing in Harvard Business Review in 2017 considered Africa “the world’s next great manufacturing center.58,59 [See Figure 8]
Figure 8. Average annual growth in value of African manufactures exports by sector, 2005-2016 (%)60
Improvements to manufacturing through automation and artificial intelligence (AI) can accelerate diversification of African economies, increase resilience to economic and climate shocks, and decrease dependence on natural resource exports. Automation and AI have the potential to expand manufacturing capabilities for aerospace, military, medical, dental, textiles, and automotive, all high-growth, high-value sub-sectors. Egypt, Tanzania, Morocco, South Africa, Tunisia, and Kenya are stand-out leaders in terms of pro-manufacturing policy, incentives for investment, and environments for experimentation and commercialization of automation and AI in manufacturing.
In fact, Morocco has been able not only to diversify its economy into manufacturing, but also to move higher up into the value chain.61,62 In 2016 slightly more than 13% of Morocco’s total exports were textile manufacturing products, while exports of higher value-added electrical machinery and mechanical appliances represented nearly 18% of exports. Morocco adopted policies to develop its automotive and aerospace sectors, which are now starting to bear fruit. The automotive industry represents nearly 14% of its exports, and the aerospace sector has grown by 216 times over the last 16 years to reach about $443 million worth of exports, 2% of the total. This success was in large part the result of Morocco’s Plan d’Acceleration Industrielle, PAI), which aimed to modernize, stimulate growth, and encourage competition in key export industries including aeronautics, auto-industry, agro-industry, offshoring, textiles, and pharmaceuticals.63
Tunisia is another example of a country steering its economy away from oil and into higher value-added manufactured products. Some of its major non-oil exports were textile products and electrical machinery and mechanical appliances, representing about 22% and 31% of its total exports respectively in 2016. Similar to Morocco, it is also moving into the automotive and aerospace sectors. In 2016, they represented about 3.5% and 1.7% of its exports respectively.
In East Africa, Kenya is also developing its textile manufacturing capabilities. Over the last 15 years, this sector has increased its size 59 times. In 2016, its textile exports reached about $146 million, representing almost 10% of its total exports. Kenya is also expanding its automotive industry. Toyota and Volkswagen have invested in their own assembly plants in the country. In partnership with local companies, Hino Motors, Hyundai, and Tata Motors are also assembling their cars, trucks, and buses locally. Although this sector is still relatively small, locally assembled vehicles represent more than 50 percent of new vehicles sold, and Kenya’s automotive exports have grown more than 20-fold since 2001. The Kenya Center of Excellence in the Africa Center of Tech Studies and Kenyatta University helped incubate manufacturing in the country.
Automation & Artificial Intelligence in Other Growth Sectors
Occupational safety is a significant issue in Africa as most employed individuals work in informal sectors and for MSMEs generally without any form of occupational hazard prevention or control procedures, legal protection, or health care coverage. Over 59,000 work-related fatalities and 4 million non-fatal accidents occur across the African continent each year according to the International Labor Organization (ILO). Promising applications of automation and AI to robotics can protect and safeguard employees by going into dangerous spaces in mines, where they perform tasks such as scouting, operating drills, and capturing detailed information. Multinational mining company Anglo American, which operates mines in multiple African countries, suggested in Bloomberg in 2017 that “robots will run mines within the next decade.”64
Technologies powered by AI and automation can boost healthcare efficiency, freeing doctors to treat those who actually need in-person care and providing increased access for all. In addition, IBM Watson is partnering with Kenya Medical Supplies Agency and local businesses to monitor medical product supply chains. Services with intelligent chatbots interact with healthcare workers to submit supply chain data, which are analyzed by a trusted advisor to identify the causes of stockouts, preventative measures, and relevant resources to improve the availability of product by 50 percent. In 2016, the Rwandan government signed a deal with Zipline, a drone delivery service that delivers medicine and blood to otherwise difficult-to-reach areas and has put every Rwandan within 30 minutes of life-saving medical supplies.65,66
Finally, AI can help protect businesses’ financial security. AI programs such as Ayasdi can take massive data sets, discover discrepancies, and predict when financial hiccups will arise. As companies increasingly focus on improving their risk profiles in our interconnected world, AI security programs will become increasingly common. HSBC is already using Ayasdi to transform its approach to financial crime risk and protect against money laundering, fraud, and other threats. Debeers has implemented a Blockchain system that will track a diamond from a mine to a ring thereby giving granted certainty of origin.67
Automation and artificial intelligence (AI) require large amounts of data from which to find patterns and make predictions. While mobile phones and the growing popularity of social media and messaging applications across Africa have made data more readily available, there remain shortages and barriers. Even in countries where automation and AI hold promise, the quality, timeliness, and availability of data are often poor in quality or missing.68
In sub-Saharan Africa, Kenya leads in internet penetration, mobile density, and in trade in ICT services. Expanding internet access on the continent has led to a 25% increase in GDP, worth $2.2 trillion, and 140 million jobs.69 Even more fundamental than internet access, automation and AI no matter how innovative and disruptive still require basic ICT infrastructure, education, and improved cost and reliability of electricity.
Developing, Not Automating, Human Capacity and Skill
More than just big data, automation and artificial intelligence (AI) rely on significant know-how among its human adopters. No one knows for certain if productivity gains from automation will create more jobs than it destroys, as has occurred during previous technological shifts. The labor effects of automation and AI are often painted as a zero sum, but the truth is more nuanced. The Future of Jobs Report in 2018 predicts the loss of 75 million jobs by 2022 and the creation of 133 million jobs over the same period, for a net increase of 58 million jobs.70 In other words, innovative technology like automation and AI may create more jobs than it destroys.
Rather than displacing employees, machines can empower low-skilled workers and equip them to take on more-complex responsibilities.71 This, in turn, can help meet an urgent need for countries lacking widespread access to education and skills training.72 AI and web-based training programs, for example, could teach more complex skills to a low-skilled worker and respond by adjusting its settings as the worker expresses understanding and knowledge.73 This type of technology is especially applicable in countries like South Africa, where unemployment remains high and employers cannot fill vacancies due to a dearth of skilled workers.
Similarly, a World Economic Forum report suggests new technologies have the capacity to both disrupt and create new ways of working, similar to previous periods of economic history such as the Industrial Revolution, when the advent of steam power and then electricity helped spur the creation of new jobs and the development of the middle class. But workers and the systems that educate and train them need to be ready. Significant investment should be maintained in developing human capacity from primary school to university. For instance, backed by Google and Facebook, the African Institute for Mathematical Sciences (AIMS) has created the first dedicated master’s degree program for machine intelligence in Africa.
Way Forward to Enabling Automation, Artificial Intelligence, and Their Benefits
Will automation and AI fuel economic development and research as mobile technologies did in the past decade? Will they allow African nations to leap ahead, skipping traditional industrialization steps? The answers to these questions remain elusive, and in many respects it remains too early to tell. But for any chance at positive outcomes—that is, for African countries to fully leverage the power of automation and AI to change sectors like agriculture and manufacturing into globally-connected productivity powerhouses—governments and private sector alike must fully understand the advantages and consequences of this technology and deliberately respond to integrating it into national strategy.74
Government leaders should focus on three (3) key activities:
Increase financing of internet and communications technology (ICT) infrastructure development
Integrate technology education into curricula of primary and secondary schools;
Implement reforms to data collection and data privacy policies.
There is an urgent need to accelerate improvements to the agriculture and manufacturing sectors to increase their value alongside other efforts to diversify African economies, strengthen growth, and build resilience. Given the leapfrogging lessons of mobile technology on the continent over the last two decades, many African countries are positioned well to leverage automation and AI with agility and innovation. Automation and AI in agriculture and manufacturing would unlock tremendous value, connecting these markets to new regional and global marketplaces and allowing them to compete more efficiently and effectively. The challenge lies not in maneuvering these technologies as a vehicle but in ensuring that government, industry, and civil society contribute to creating an enabling environment.
Anthony Carroll serves as a vice president at Manchester Trade Ltd. Eric Obscherning is an associate consultant at C&M International.