Industrial policy options for Southern Africa
Possibilities and risks
There is a need to transform the underlying economic principles of the economies in Southern African countries to address the persistent challenges of severe poverty and unemployment. Julius Gatune and Deon Cloete examine the issue.
Two of the region’s strategies are the Southern African Development Community’s Vision 2050 and its Regional Indicative Strategic Development Plan. These highlight technology as a way to lead economic growth equitably and sustainably in a growing industrialised region.
But, in our view, these plans aren’t enough.
Historical drivers – such as poor governance and the legacies of colonialism – have kept the region’s potential locked in negative cycles. It’s true that the desire for industrial transformation exists. But the practicalities are not connected with real buy-in from power brokers. The result is low levels of implementation.
The Southern African Development Community (SADC) has set itself the goal of emulating the high-growth economies of the Asian Tigers. These include Hong Kong, Singapore, South Korea and Taiwan. But to achieve this, it needs to support infrastructure and economic diversification that takes economies away from primary commodities.
4IR AND GREEN ECONOMY
In our view, the co-incidence of two developments provides an opportunity for such a transformation. They are the emerging Fourth Industrial Revolution (4IR) and the green economy.
The 4IR represents the possibility of fundamental change through technological and scientific advances. The green economy can be described as a low carbon, resource efficient and socially inclusive approach to economic development.
A recent study by the Futures Programme at the South African Institute of International Affairs highlights a range of future scenarios for industrialisation in the region. These don’t predict the future. Rather they explore a range of uncertainties about regional industrialisation. They also identify challenges and opportunities.
The scenarios visualise how industrialisation in the region might evolve.
They were mapped from the viewpoint that the green economy and 4IR hold significant promise. They have the potential to boost industrial activity, transform socio-economic development and advance transitions while alleviating unemployment and inequality.
The scenario analysis provides plausible and possible alternatives for industrialisation. It also alerts decision makers to undesired pathways.
The main four scenarios are called Do-it-Yourself (DIY), Leapfrog World, Green Monopolies and Colonialism Reloaded.
RE-THINKING INDUSTRIALISATION
The 4IR paves the way for increased interconnectivity and smart automation. It does this by creating rapid and unprecedented changes to technology, industries and societal patterns.
But there’s been little exploration of its impact on the emerging drivers of industrialisation. These include rapid urbanisation, population growth, rising incomes, energy decentralisation, climate change and reducing dependence on carbon.
The interplay of the 4IR and other drivers is key to understanding the potential impact of industrialisation. Changes to income, behaviour and perceptions shape consumption and in turn demand-and-supply responses.
The demand for reducing industry’s dependence on carbon and the 4IR has set a new trajectory in technological disruption. This has been accelerated by the Covid-19 pandemic. And this, in turn, has forced the rapid adoption of digital tools such as artificial intelligence, robotics and new modes of work.
For countries in SADC, 4IR can be viewed as a double-edged sword.
On the one hand it presents opportunities. These include improvements in business productivity, banking the unbanked, formalising economies, creating new markets and improving public service access.
On the other hand it poses risks. These include automation at the expense of job creation and moving manufacturing operations to more advanced economies.
Aggressive adoption of 4IR could also deepen inequality by exposing the region’s unprepared skills base and outdated infrastructure to new technologies.
LEAPFROG
We called one of the desirable scenarios leapfrog world.
In this scenario countries leapfrog over classical barriers to rapidly adopt new technologies. This is achieved when the 4IR is governed through effective democratic principles.
Some examples include investments in blockchain, waste tracking and mapping technologies. These would help reorganise, for example, mining and agricultural value chains.
At the same time they would reduce negative effects on the environment. Blockchain can reduce barriers to entry. New competitors could come in – crucial for job creation.
COLONIALISM RELOADED
A possible (undesirable) future would be colonialism reloaded.
In this scenario the benefits of the 4IR are concentrated among a few well-connected multinational companies. Many industry participants are excluded from the green economy. This would reinforce current challenges such as poor technology infrastructure and low skills levels.
To avoid this, investments in the skills base are necessary to improve social and civic competencies. They must accompany investments in technology infrastructure to increase access to economic opportunities. This will turn the tide on the ever-increasing digital divide.
GREEN MONOPOLIES
Another – quite probable – undesirable future we termed green monopolies.
In this scenario there is a sustainable regional economy, thanks to a democratised and empowering 4IR. But the associated industries remain unsustainable.
The “green monopolised” industries dominate the economy. They use technology innovations to enhance their economic positions, spreading deep fakes at an unimaginable scale. This results in polarised communities, social unrest and unfavourable economic conditions.
Advancements in technology are in the hands of a few powerful monopolies without effective regulatory practices. This creates the ideal breeding ground for hacking, cybercrimes and corporate bullying tactics. Inequality deepens because profit is more important than people and the environment.
A green monopolies scenario will have the resources and political power to invest in technologies such as advanced robotics. This will create efficiencies and environmentally sustainable industries. But it will be at the expense of job creation.
DIY
Another probable future is the do-it-yourself (DIY) scenario.
This is achieved when technology empowers citizens. An example is 3D printing.
These kinds of technologies can help create self-sustaining villages independent of the larger economies. The democratised process provides the tools to create new products, leading to new industries.
But there are risks. These technologies also open the potential for counterfeit goods. And they can be harmful by emitting toxic particles.
WAY FORWARD
Industrialisation in Southern Africa will demand concerted efforts in four domains. These are: skills development and technology infrastructure development; dynamic innovation ecosystems; circular economy principles; and practical regulatory frameworks.
If properly harnessed, industrialisation can provide new pathways to achieve personal and collective economic wellbeing. Inequality can be narrowed. And marginalised communities can be at the centre of industrial development.
The fusion of technology and investment into skills development and job creation is critical. This is particularly important for the region’s budding youth population. – The Conversation
* Julius Gatune is a senior project consultant at the Maastricht School of Management, while Deon Cloete is the head: Head SAIIA Futures Programme at the South African Institute of International Affairs.
But, in our view, these plans aren’t enough.
Historical drivers – such as poor governance and the legacies of colonialism – have kept the region’s potential locked in negative cycles. It’s true that the desire for industrial transformation exists. But the practicalities are not connected with real buy-in from power brokers. The result is low levels of implementation.
The Southern African Development Community (SADC) has set itself the goal of emulating the high-growth economies of the Asian Tigers. These include Hong Kong, Singapore, South Korea and Taiwan. But to achieve this, it needs to support infrastructure and economic diversification that takes economies away from primary commodities.
4IR AND GREEN ECONOMY
In our view, the co-incidence of two developments provides an opportunity for such a transformation. They are the emerging Fourth Industrial Revolution (4IR) and the green economy.
The 4IR represents the possibility of fundamental change through technological and scientific advances. The green economy can be described as a low carbon, resource efficient and socially inclusive approach to economic development.
A recent study by the Futures Programme at the South African Institute of International Affairs highlights a range of future scenarios for industrialisation in the region. These don’t predict the future. Rather they explore a range of uncertainties about regional industrialisation. They also identify challenges and opportunities.
The scenarios visualise how industrialisation in the region might evolve.
They were mapped from the viewpoint that the green economy and 4IR hold significant promise. They have the potential to boost industrial activity, transform socio-economic development and advance transitions while alleviating unemployment and inequality.
The scenario analysis provides plausible and possible alternatives for industrialisation. It also alerts decision makers to undesired pathways.
The main four scenarios are called Do-it-Yourself (DIY), Leapfrog World, Green Monopolies and Colonialism Reloaded.
RE-THINKING INDUSTRIALISATION
The 4IR paves the way for increased interconnectivity and smart automation. It does this by creating rapid and unprecedented changes to technology, industries and societal patterns.
But there’s been little exploration of its impact on the emerging drivers of industrialisation. These include rapid urbanisation, population growth, rising incomes, energy decentralisation, climate change and reducing dependence on carbon.
The interplay of the 4IR and other drivers is key to understanding the potential impact of industrialisation. Changes to income, behaviour and perceptions shape consumption and in turn demand-and-supply responses.
The demand for reducing industry’s dependence on carbon and the 4IR has set a new trajectory in technological disruption. This has been accelerated by the Covid-19 pandemic. And this, in turn, has forced the rapid adoption of digital tools such as artificial intelligence, robotics and new modes of work.
For countries in SADC, 4IR can be viewed as a double-edged sword.
On the one hand it presents opportunities. These include improvements in business productivity, banking the unbanked, formalising economies, creating new markets and improving public service access.
On the other hand it poses risks. These include automation at the expense of job creation and moving manufacturing operations to more advanced economies.
Aggressive adoption of 4IR could also deepen inequality by exposing the region’s unprepared skills base and outdated infrastructure to new technologies.
LEAPFROG
We called one of the desirable scenarios leapfrog world.
In this scenario countries leapfrog over classical barriers to rapidly adopt new technologies. This is achieved when the 4IR is governed through effective democratic principles.
Some examples include investments in blockchain, waste tracking and mapping technologies. These would help reorganise, for example, mining and agricultural value chains.
At the same time they would reduce negative effects on the environment. Blockchain can reduce barriers to entry. New competitors could come in – crucial for job creation.
COLONIALISM RELOADED
A possible (undesirable) future would be colonialism reloaded.
In this scenario the benefits of the 4IR are concentrated among a few well-connected multinational companies. Many industry participants are excluded from the green economy. This would reinforce current challenges such as poor technology infrastructure and low skills levels.
To avoid this, investments in the skills base are necessary to improve social and civic competencies. They must accompany investments in technology infrastructure to increase access to economic opportunities. This will turn the tide on the ever-increasing digital divide.
GREEN MONOPOLIES
Another – quite probable – undesirable future we termed green monopolies.
In this scenario there is a sustainable regional economy, thanks to a democratised and empowering 4IR. But the associated industries remain unsustainable.
The “green monopolised” industries dominate the economy. They use technology innovations to enhance their economic positions, spreading deep fakes at an unimaginable scale. This results in polarised communities, social unrest and unfavourable economic conditions.
Advancements in technology are in the hands of a few powerful monopolies without effective regulatory practices. This creates the ideal breeding ground for hacking, cybercrimes and corporate bullying tactics. Inequality deepens because profit is more important than people and the environment.
A green monopolies scenario will have the resources and political power to invest in technologies such as advanced robotics. This will create efficiencies and environmentally sustainable industries. But it will be at the expense of job creation.
DIY
Another probable future is the do-it-yourself (DIY) scenario.
This is achieved when technology empowers citizens. An example is 3D printing.
These kinds of technologies can help create self-sustaining villages independent of the larger economies. The democratised process provides the tools to create new products, leading to new industries.
But there are risks. These technologies also open the potential for counterfeit goods. And they can be harmful by emitting toxic particles.
WAY FORWARD
Industrialisation in Southern Africa will demand concerted efforts in four domains. These are: skills development and technology infrastructure development; dynamic innovation ecosystems; circular economy principles; and practical regulatory frameworks.
If properly harnessed, industrialisation can provide new pathways to achieve personal and collective economic wellbeing. Inequality can be narrowed. And marginalised communities can be at the centre of industrial development.
The fusion of technology and investment into skills development and job creation is critical. This is particularly important for the region’s budding youth population. – The Conversation
* Julius Gatune is a senior project consultant at the Maastricht School of Management, while Deon Cloete is the head: Head SAIIA Futures Programme at the South African Institute of International Affairs.
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