The WEF panels on the 4th Industrial Revolution, and Infrastructure Long-term Investing and Development featured some global heavy hitters both in the public and private sector. These amongst others included President Kagame of Rwanda, Deputy President Cyril Ramaphosa of South Africa, Graça Machel Founder of the Foundation for Community Development (FDC), Akinwumi Ayodeji Adesina, President of the Africa Development Bank, Dominic Barton Global Managing Director of McKinsey and finally our very own Colin Dyer – President and CEO of JLL The objectives were to discuss the steps Africa should take to better position itself to take advantage of the 4th industrial revolution.
To understand the concept of the 4th Industrial Revolution, I turned to the book of the same name by Klaus Schwab – the founder of the WEF. Klaus Schwab states in his book “I believe that today we are at the beginning of a fourth industrial revolution. It began at the turn of this century and builds on the digital revolution. It is characterized by a much more ubiquitous and mobile internet, by smaller and more powerful sensors that have become cheaper, and by artificial intelligence and machine learning”. For Schwab the 4th Revolution is an extension of the 3rd revolution which gave rise to the development of semiconductors, mainframe and personal computing, and the internet. The difference however is in the fusion of these technologies and their interactions across physical, digital and biological domains. Key examples in the physical domain include 3D printing, advanced robotics and autonomous vehicles (soon to appear in Dubai as taxis). In the digital space, digital innovations have led to the “internet of things” (IoT) – that is the interconnectedness of services, products, places etc. and people across internet based platforms. Examples include Uber and remote monitoring for supply chain. Finally, genome projects and synthetic biology research that will ultimately allow for customized organisms by writing DNA are examples of the biological domain.
Another key characteristic of the 4th revolution is the speed of adoption and rate of diffusion across geographies which are occurring at a much faster pace. For instance, whereas the 1st revolution spindle took 120 years to permeate outside of Europe, the internet has achieved the same goal across the globe in less than 10 years!
Unfortunately, not all regions of the world have been equal beneficiaries of these various revolutions. In Africa specifically, many people still do not have access to electricity (2nd revolution) or the internet (3rd revolution), and both are essential if Africa is to become an active participant in the interconnectedness of the 4th revolution. So how do we close this gap and prepare the future for Africa? Infrastructure is the main challenge. Starting with electricity for instance, 45 million people in Africa do not have electricity even though the continent has the capacity (solar, water, gas etc.) It is imperative to accelerate access to universal electricity and organizations such as the Africa Development Bank with its 12.5 Billion USD commitment to its “new deal on energy” project are taking the right steps in this direction. Broadband access is critically important and cost efficient solutions should to be adopted. In addition, Africa as a whole needs to begin making investments in R&D in order to expand its capacity for innovation and entrepreneurship.
A number of these projects will require foreign direct investments (FDIs) to come to fruition. According to Colin Dyer, real estate Infastructure and the quality of the environment are all intertwined. There is 700 Billion USD worth of investments in quality real estate stock across the world with less than 10% in Africa – majority in South and North Africa. Equivalently, Africa accounts for less than 4% of the global FDI. Why is FDI so important? Looking at the China and India examples, FDI was instrumental in transforming those economies. Africa thus has to create an enabling environment with bankable projects that can in turn attract the FDI required to address its infrastructure needs. To accomplish this, Africa will need to overcome 4 key challenges:
- Transparency and reliability of project data – Information on key lines items such as costs, returns, purchase and sales prices, lease obligations etc. have to be accurate and readily available
- Judicial – These systems should ensure the enforcement of due process in a timely fashion
- Bureaucracy – eliminate the ‘red tape’ and ease access to pertinent information for real estate project such as land title, perfections, site surveys etc. through the use of technology
- Reduce corruption – By incorporating improved processes, transparency increases which enhances accountability by public and private sectors, thus reducing corruption
Mr Barton of McKinsey echoed similar sentiments. For Africa to attract FDI’s, Africa needs to find bankable projects and adequately market them. Pension funds for instance with 360 billion USD for investments are largely understaffed – with only about 200 people worldwide. As such it is important for Africa to be proactive and market the opportunities to these funds.
Another key element for this accelerated infrastructure transformation is decisive leadership on the government level. South Africa and Rwanda stand apart as good examples of how leadership can aid in this process. Deputy President Cyril Ramaphosa of South Africa explained that the transformation of South Africa began 21 years ago post-apartheid, where the existing infrastructure was concentrated to favour a minority. The newly democratic government immediately devised a National Development Plan focusing on infrastructure. The government set up an infrastructure co-ordination program that concentrated all infrastructure projects under one umbrella to assure co-ordination across the different sectors (water, road, air etc.) and agencies. To achieve financing, the government developed a multi-pronged approach raising both debt and partnering with the private sector through innovative PPP relationships e.g. independent power producers that sold to the national grid. The result has been phenomenal. Over 4.3 million homes have been built and 20 million homes now have electricity. There is also the multiplier effect of increased economic activity and job creation that has lifted sections of the society out of poverty.
The Rwanda government is currently going through its own rapid transformation process thanks to the leadership of President Kagame. The government has established an “internet for all” goal where it’s seeking investments in broadband technology. For Kagame, this development goals is about more than money, technology and policies. It’s about the people and the lives that they live. Good policies promote both social and economic development of the people. Rwanda is also seeking investments in the institutions that will avail the knowledge and skills required to use the internet.
For these institutions to exists, it’s important that investments in education take place. According to Mr Barton of McKinsey, there is a need to revolutionize the education system in Africa with the use of technology. Graça Machel of FDC, also expressed the same sentiments. Children are still being taught the same way as they were about 50+ years ago. There is thus a need for education reform in order to prepare the younger generation with the skills and capacity required to embrace the 4th revolution.
Unlike the first 3 revolutions, it is important that no one is left behind particularly African women. Ms. Machel expressed that women should take part in developing the infrastructure and in creating wealth. “This is not a humanitarian objective, it just makes business sense.”
“Optimism about Africa’s prospects is the best opposition to adversity” states President Kagame. In order to ensure that the continent is not playing catch up when the 5th industrial revolution rolls in, it is important for the continent to take active steps and close the gap during this 4th revolution phase. A relentless, impatient ambitious attitude is thus needed to accelerate the necessary infrastructure transformation.