Africa must embrace digital entrepreneurship to transform its economY

01Jun 2017
Muharram Macatta
The Guardian
Africa must embrace digital entrepreneurship to transform its economY

What must Africa do to bea part of this digital revolutionthat is sweepingacross other countries?

The stakes are high: failure to translatethe opportunity into tangible gainscould contribute to youth unemployment,political instability and widespreaddespair.

What must Africa do to bea part of this digital revolutionthat is sweepingacross other countries?

The stakes are high: failure to translatethe opportunity into tangible gainscould contribute to youth unemployment,political instability and widespreaddespair.

But if Africa can master the digitalrevolution, it could usher in a newepoch of economic transformation.There are at least five strategies thatcould help the continent do that.

Digital connectivity has the potentialto do for Africa what railroads did forWestern economies in the 19th century.The digital revolution is not just aboutcommunication. It is about recognizingthat information is the currency of alleconomic activities.

Unfortunately, despite the rapidadoption of mobile phones, Tanzanialags behind other countries in its useof core digital platforms such as theinternet. This is compounded by thehigh prices charged for critical digitalservices such as broadband.

Digital technologies need to bedefined as critical infrastructure andsupported as such. The high initialcost and low capacity utilisation ofundersea fiber-optic cables aroundAfrica shows that these investmentsshare the same attributes as railways,electric grids, roads, and water andsanitation.

In many cases the investments needto be made ahead of demand, whichmakes it difficult to rely only on theprivate sector. Smart partnershipsbetween governments and the privatesector are needed to expand the reachof digital infrastructure.

Otherwise the benefits will be limitedto pockets in urban areas, which inturn will widen inequities and hobblerural entrepreneurship.

Equally important are policiesthat give equal access to digitalinfrastructure. This should be guidedby the principle of net neutrality,which dictates that all internet trafficand users should be treated equally byproviders.

Such policies would be the same asthe rules that govern equal access toroads by all types of vehicles. Rules fordigital infrastructure that do not adoptnet neutrality would undermine youthinnovation by favouring incumbentindustries.

We must recognise the power ofexponential growth in digital platformsand harness them in time. This growthis also associated with remarkabletechnological diversification.New digital technologies are drivingadvances in fields such as 3D printing,drones, artificial intelligence, robotsand the internet of things. Digitalconnectivity has to be defined in amore comprehensive way that goesbeyond traditional communication.

Concerted efforts will need to be madeto train a new generation of indigenousyouths to ensure they are able tounderstand these emerging digitaltechnologies and grasp the associatedentrepreneurial opportunities.

As illustrated by the case of Rwandawith entrepreneurial education, theimpact of such training can be farreachingif started in high school.

Training in relevant engineering andassociated fields will help Tanzaniareap the digital dividends. Low levelsof engineering training need to beaddressed by our government andenterprises as a matter of urgency.

For example, half of Kenya’suniversity engineering courses are notapproved. Expanding opportunities foryoung people will need to be providedby making higher education relevant todevelopment needs.

The best way to reap the digitaldividends is to create goodsand services. The seeds of suchentrepreneurial activities exist inmany information technology hubsacross Africa. But most of these hubsdo not have what is needed to becomeeffective entrepreneurial ecosystems.Many of Africa’s hubs simply focuson creating start-ups. While this isimportant, it’s also preventing policymakersand investors from helpingmore established businesses to scaleup so they can compete regionally andglobally.

Digital entrepreneurship is emergingin various parts of Africa that havepreviously never been home to suchactivities. Young people are thereforeleft to operate without much guidance.

New mentoring activities will need tobe designed to foster entrepreneuriallearning.

An example of such an effort isthe Africa Engineering InnovationPrize by the UK-based Royal Academyof Engineering which providesmentorship to awardees. More of suchinitiatives, paying particularly attentionto the needs of women entrepreneurs,need to be created across the continent.Finally, current efforts to fosterregional trade integration providea unique opportunity to catch thedigital innovation wave. The spread ofterrestrial fiber-optic cables illustratesthe opportunities offered by continentwidedigital integration.

Unlike the colonial railway networksthat were used to move commoditiesout of Africa, digital networks wouldform new backbones for intra-Africantrade. They should be given priorityin all negotiations on regional andcontinental economic integration.The successful implementationof these strategies will require closecooperation between governments,industry, academia and civil society.To make it a reality, we will have tobuild national and regional capacityfor high-level ministerial coordination.The only way of doing that is withthe direct engagement of the currentAfrican heads of state and governmentas champions of innovation.

We do not produce and consume thesame things that our near-subsistenceancestors did. In 2017, 40 kilocalories aday in basic grains wouldn’t do anyonemuch good.

Meanwhile, analogues to commongoods and services that we nowconsume would have been absurdlyexpensive in the Agrarian Age. And inmany cases, such analogues couldn’teven be considered.

Tiberius Claudius Nero could nothave dined on strawberries and creamduring the first century BC, becausenobody thought to put those twoitems together until the Tudor courtierCardinal Thomas Wolsey’s cooksserved it in the 16th century.

In 1606, there was only one personwho could sit at home and watcha bloody audiovisual drama aboutwitches. His name was James Stuart,the king of England and Scotland.He had William Shakespeare and theKing’s Men on retainer.

Today, more than four billion peoplewith smart phones, tablets, andtelevisions enjoy a form of on-demandentertainment that was once reservedfor absolute monarchs.

To take one more example, therichest man in the early nineteenthcentury, Nathan Mayer Rothschild,died in his fifties from an infectedabscess. Had he been given the optionto hand over all his wealth for one doseof modern antibiotics, he probablywould have done so willingly.

So, it is actually misleading to saythat a typical person today is 20times richer than his or her AgrarianAge predecessor, because consumerchoices now extend far beyond thegoods and services that were broadlyavailable back then.

People today enjoy not justabundance, but an unprecedentedvariety of choices, which constitutes asignificant boost to overall wealth.But this is largely an estimate of howwe have improved at making barenecessities for the world’s poor; it doesnot measure how much our lives havebeen enriched by higher productivity.

We owe much of this enrichment toinnovations that have fundamentallytransformed human civilization. Theseinclude flush toilets, automobiles,electric power, long-distancecommunications, modern informationprocessing, and so forth.

We seem to be living in anaccelerated age of revolutionarytechnological breakthroughs. Barely aday passes without the announcementof some major new development inartificial intelligence, biotechnology,digitization, or automation. Yet thosewho are supposed to know where itis all taking us can’t make up theirminds.

At one end of the spectrum are thetechno-optimists, who believe we areon the cusp of a new era in which theworld’s living standards will rise morerapidly than ever.

At the other end are the technopessimists,who see disappointingproductivity statistics and argue thatthe new technologies’ economy-widebenefits will remain limited.Then there are those – the technoworriers?– Who agree with theoptimists about the scale and scopeof innovation but fret about theadverse implications for employmentor equity? What distinguishes theseperspectives from one another is notso much disagreement about the rateof technological innovation.

After all, who can seriously doubtthat innovation is progressing rapidly?The debate is about whether theseinnovations will remain bottled up in afew tech-intensive sectors that employthe highest-skilled professionals andaccount for a relatively small shareof GDP, or spread to the bulk of theeconomy.The consequences of any innovationfor productivity, employment, andequity ultimately depend on howquickly it diffuses through labourand product markets. Technologicaldiffusion can be constrained on boththe demand and supply sides of theeconomy.

Take the demand side first. In richeconomies, consumers spend thebulk of their income on services suchas health, education, transportation,housing, and retail goods. Technologicalinnovation has had comparatively littleimpact to date in many of these sectors.The two sectors in the UnitedRepublic of Tanzania that haveexperienced the most rapidproductivity growth since 2005 are theICT (information and communicationstechnology) and media industries, witha combined GDP share of less than 10per cent.

By contrast, government services andhealth care, which together producemore than a quarter of GDP, have hadvirtually no productivity growth.The supply-side problem facedby developing countries is moredebilitating. The labour force ispredominantly low-skilled. Historically,this has not been a handicap for lateindustries, so long as manufacturingconsisted of labour-intensive assemblyoperations such as garments andautomobiles.

Peasants could be transformed intofactory workers virtually overnight,implying significant productivity gainsfor the economy. Manufacturing wastraditionally a rapid escalator to higherincome levels.

Technological revolutions in termsof their likely economy-wide impact;electricity, the automobile, airplane,air conditioning, and householdappliances altered the way thatordinary people live in fundamentalways.

They made inroads in every sectorof the economy. Perhaps the digitalrevolution, impressive as it has been,will not reach as far.

Ultimately, it is the economywideproductivity consequencesof technological innovation, notinnovation per se, that lifts livingstandards.

Innovation can co-exist side-by-sidewith low productivity (conversely,productivity growth is sometimespossible in the absence of innovation,when resources move to the moreproductive sectors).

Techno-pessimists recognise this;the optimists might not be wrong, butto make their case, they need to focuson how the effects of technology playout in the economy as a whole.