When Africa transitions to knowledge economy (2)

AT THE PERIPHERY OF global economic future stands Africa. As a continent, Africa is yet to begin any serious attempt to grow, develop and compete on the global economic turf in the future. There are a multiplicity of factors for this bleak outlook. Strategic Intelligence mentioned earlier is a core aspect of Africa’s predicament. Taken in isolation and on an individual basis, there is not much basis for comparison between an African country and countries such as Canada, the US, the UK, Germany, China, Japan or Australia. In particular, a shift in emphasis and directions of the technologies that will power the economy of the future has left Africa in a vulnerable position and a competitive disadvantage. Concerns about climate change and global warming have led the world to lay more emphasis on climate smart and climate-friendly technologies. But African countries are not among the countries at the forefront of this shift in emphasis. Rather, they remain as markets for the products of such technologies. In ridiculous cases, they become mere dumping grounds. 

Taken as a whole, Africa still remains uncompetitive when compared to those countries earlier mentioned. It begins with  Africa’s comparatively low investments in critical sectors that will drive the future economies. According to Eurostat’s Government budget allocations for research and development (GBARD), covering a period from 2012 to 2022, the total government budget allocations for R&D (GBARD) across the EU stood at €1176,368 million, equivalent to 0.74 percent of GDP. The government budget allocations for R&D at EU level stood at €262.7 per person in 2022, a 47.2 percent increase compared with 2012 at €178.5 per person then. Population of the EU was estimated at 448.4 million people on January 1, 2023. For clarity of emphasis, Gross domestic spending on R&D is defined as the total expenditure (current and capital) on R&D carried out by all resident companies, research institutes, academic community, the military and health sector. In 2021, the ratio of US R&D to gross domestic product (GDP)was 3.40 percent of the GDP of $23.32 trillion that year. In 2023, the US 2023 population is estimated at 339,996,563 people at mid-year, equivalent to 4.23 per cent of the total world population. China’s GDP in the first three quarters of 2023 reached a total of RMB 91.3 trillion, approximately $12.48 trillion, for a July 1, 2023 UN population estimate of 1,425,671,352.India, now the most populous country in the world with one-sixth of the world’s population, according to the UN estimates, has reached 1,425,775,850 at the end of April 2023, and has thus overtaken China to become the country with the largest population in the world. India has reached the enviable status as it is the fifth in world’s GDP rankings in 2023, according to Forbes India. Moreover, S&P Global has projected a rise in India’s GDP from $3.5 trillion in 2022 to $7.3 trillion by 2030.

It is clear that Europe, Asia and North America are well positioned to lead in the economy of the future. For instance, electric vehicles are mostly manufactured in these regions. The increase in use will severely cut down dependence on fossil fuel consumption. Countries of Africa that depend on oil export will be terribly negatively impacted. Moreover, as electronic devices are now becoming more energy efficient and are increasingly dependent on renewable energy sources, less of electricity generating engines will be on demand. The continent of Africa is still backwards in the global value chains, receiving very low revenues on the exportation of primary commodities, particularly from agriculture and mining. As of April 2023, the GDP of Africa was estimated at roughly $3.1 trillion, the highest value since 2010 when it was approximately $2.1 trillion. And in 2023, Africa’s human population is 1.46 billion people. But, there is an evident mismatch between the population and the economy of the continent, especially from the backdrop of investments in sectors that can potentially grow its economy across the countries within the continent. China, for instance, has reportedly stepped up spending to replace Western-made technology with domestic alternatives as Washington tightens curbs on high-tech raw materials. The heavy expenditures on replacing computer equipment, on telecom and financial sectors are considered as probably the next target, as disclosed by people familiar with the industries. China is not leaving things to chance, however, in the on-going rivalries with the US as state-backed researchers have also prioritised the identification of digital payments as particularly vulnerable to possible Western hacking. This has led to an increase in emphasis on indigenisation of such technology. For instance, China has reportedly spent 1.4 trillion yuan —  $191 billion — replacing foreign hardware and software in 2022, according to First New Voice, an IT research firm. 

Dynamism, vibrancy and exponential growth of the Indian IT industry have shown the country’s capacity for innovation and technological advancement as it has transformed India into a global IT powerhouse and recognised worldwide for its technological prowess. India is now home to some of the world’s leading IT companies as many top-tier international tech companies — mostly home-grown and few foreign owned — have their headquarters at Mumbai, Pune, Bengaluru and Noida, essentially in the states of Maharashtra, Karnataka and Uttar Pradesh. As semiconductor industry continues to grow in relevance and revenues,  countries suchTaiwan, South Korea, US, China, Germany, Japan, Malaysia, the Netherlands, Israel and Ukraine are well positioned to lead in the world market, valued at $607,431.93 million in 2022 and projected to reach $1,028,797.04 million — approximately $1 trillion — in 2028, with a CAGR of 9.18 per cent during the period between 2022 and 2028.

The expanding use of semiconductors have made them very crucial to contemporary life and economy. Semiconductors are employed in the manufacture of various kinds of electronic devices, including diodes, transistors, and integrated circuits. They are of immense use now in aviation and warfare, especially for the manufacture of aircraft,  armoured vehicles and certain munitions. Many digital consumer products in everyday life such as mobile phones or smartphones, digital cameras, televisions, washing machines, refrigerators and LED bulbs also use semiconductors.

If these technologies are capital intensive and too expensive for state authorities in Africa to adopt and invest in, there are a plethora of opportunities in the information and telecommunications (ICT) industry the various countries can latch on to. The rapid and unprecedented expansion of GSM services and Internet coverage has opened a very wide array of opportunities for innovativeness and wealth creation, especially within the youthful population, more especially the educated. While government-led efforts and financial support would bring a quantum leap in outcomes and magnitude of impact, private initiatives have started making notable marks in the informal sector.  In Kenya, a Fintech collaboration led to the launching of M-PESA by Safaricom, the Kenyan mobile network operator, in collaboration with Vodafone in March 2007. The initiative, which responded to local needs of many in the economically vulnerable segment of the population by increasing financial inclusion, job creation and volume of transactions, quickly captured a significant market share for cash transfers, and grew to 17 million subscribers by December 2011 in Kenya alone. The M-PESA model has proved sustainable, has subsequently been copied and adopted by many countries, including outside Africa, paving way for variants in many countries.

Countries all over Africa are still grappling with three essential drivers of any vibrant economy, namely, infrastructure, enabling laws and market information. An area in the ICT industry where young Africans have great opportunities is in software development. To make an impact, problems to which solutions are provided by each software must be primarily locally relevant and their utilisation must be facilitated by official provisions in place. Their usefulness outside the immediate locality would confer greater appeal and market opportunities. A great deal of challenge facing such initiatives in Africa revolves around the weak, inadequate, outdated or non-existent legal frameworks that are expected to give a boost and copyright protection to producers, production and products of such initiatives. Another is the market prospect across the continent as individual countries operate under some distinct and often contradictory rules. The Africa-wide initiative that came on board recently was expected to proffer solutions to trade-related services-oriented endeavours. To begin with, in the present state of the World Trade Organisation (WTO) frameworks, the General Agreements on Trade is Services (GATS) has only limited disciplines on the liberalisation of trade in services. To increase Africa’s participation in the multilateral trading system, especially in services, and to be taken seriously at international negotiations and be heard loudly at the WTO negotiating tables, it needs to address its socio-economic development problems at individual country level and become economically strong. At the continental level, African countries need to give serious attention to WTO members’ implementation of the Protocol on Trade in Services, aimed at establishing a single market in services. This could reinforce the region’s largest economic integration agreement, which is the African Continental Free Trade Area (AfCFTA), which is expected to break national barriers to trade within the continent. 

Africa’s population represents around 17 per cent of the global population, but the continent’s contribution from an economic and trade point of view is negligible. Emphasis on agriculture and manufacturing, as presently done, will not provide a niche for Africa in the global economy. Acting alone, African countries are unlikely to make a notable impact on the evolving global knowledge-based economy during the era of the Fourth Industrial Revolution that thrives more on intangible products that drive increasingly more of humans’ economic endeavours. Challenges involving quality infrastructure and product standards are causing serious drags to the economies of African countries. In its GATS arrangement, financial services and logistics are among the 12 services of interest identified by the WTO. Any new agreement on trades in services by AfCFTA may make no appreciable difference without a clear understanding of the causes of restrictions on free movements of goods and services within Africa. To motivate and encourage home-grown innovations in Africa, those multilateral agreements and national policies must be in synergy and must provide enabling environments that will facilitate contributions to the economy at national, regional and continental levels. Enough of over-dependence on commodity exports which have increasingly kept Africa in vulnerable bargaining positions. Now is the time to change emphasis and attention to the knowledge economy. The groundworks must be done with utmost urgency and the implementation must begin without any further delay.

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