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E.Africa ripe for investors seeking digital innovation partnerships

NAIROBI (HAN) May 19.2016. Public Diplomacy & Regional Security News. The chief economist and member of the executive committee, World Economic Forum Geneva, Jennifer Blanke spoke to The EastAfrican’s Berna Namata about issues discussed during the WEF Africa meeting in Kigali.


This year’s World Economic Forum for Africa was held at a time when there is a lot of turbulence in the global economy, with African countries facing lower commodity prices and depreciating currencies. What do you see as the role of innovation and technology in managing these challenges?

If you think of the role of technology in driving growth, these are the things that look beyond the usual inputs and ensure that we keep growing.

Prices for commodities have gone down and the International Monetary Fund has just lowered sub Saharan growth prospects to 3 per cent this year after steady growth for 15 years.

It is time to make reforms that will allow Africa to benefit from technological transformation and to unleash its economies using digital transformation.

Despite the recent growth we have seen in the service sector, the majority of African countries continue to depend on agriculture. How can digital transformation lead to structural transformation that creates jobs?

African economies clearly depend on agriculture, and modernising agriculture would be a huge part of the story. Digital technology will have a large part to play in terms of knowledge sharing, and it is already making big improvements.

If you look at the movement in the services sector, if you look at the productivity numbers over the past 10 years, countries all over the world have experienced a decline in services productivity. Meanwhile, Africa is moving into services but not high productivity services. I see these new technologies unleashing a lot of things, like M-Pesa in Kenya.

If technology starts to allow people to have better access to finance, improved education, healthcare and more, these areas can gain from technologies in the services sector.

This would help to train people and move them up the value chain of human resource in Africa, and also create new job opportunities.

Inequality remains a big issue across the continent. How can countries achieve inclusive growth in process?

It is not just an African problem but a global problem.

When you look at advanced economies you see rising inequality. In Africa inequality has actually been going down, but not everywhere. Sub Saharan Africa is still the region with the highest inequality in the world.

The discussion on addressing inequality has been too narrow.

Often you will see people talking about taxation or maybe transfers to empower people, and that’s only part of the story. You have to tax well; you have to ensure that the transfers and subsidies make sense to the poor.

You need to talk about education.

Another factor that is not taken into account is access to finance for investment. You have to have a business environment that emphasises fighting corruption.

Corruption is basically people at every level of society exploiting the little power that they have over those below them. Corruption is terrible for both inclusion and growth.

There is a concern that as we push for digital innovation, this could deny people jobs especially in the developing world where we do not have a critical mass of highly skilled people. How can policy makers overcome this challenge in the process of digitalisation?

In the long term, there will clearly be a number of new jobs that we cannot even imagine. This will allow African economies to integrate into the global value chain and economies in a way that was never imagined before.

In the interim, there will challenges, and therefore, there have to be social protection safety nets with fair taxation policies, especially in countries that are extremely unequal.

There is so much talent in Africa, so how do you allow the continent to unleash its talent? African countries have to really work together.

The East African Community already has a sort of grouping that works relatively well. For other parts of Africa, it has been challenging, but, for this to work, regional integration of small economies is important.

The African Development Bank estimates that about 55 per cent of the sub-Saharan economy is informal. How do you see technology influencing the drive towards the formal sector?

What you want are businesses that can grow, not the creation of many small new companies that won’t grow. In a way, this is almost the same as the informal economy.

You want to have new ideas, new technologies coming up that can allow the unleashing of these ideas. And this is not an easy transition. If you cannot get the bulk of the economy to be formal, then you can’t get a strong base that will support the rest. You need technology that makes it attractive to start a business, easy to declare taxes, and to work.

And again corruption is a big issue, because you have to ensure that these companies do not hide their assets and evade tax.

What sort of digital innovation is required in the agricultural sector to achieve economic transformation?

Agricultural transformation goes beyond digital. Digital will be one of the tools used to tell farmers what prices to expect in different markets.

But you need the right kind of infrastructure to get there. You need the right kind of technology and machinery to exploit the economies of scale and improve productivity.

Larger farms can exploit economies of scale, and at the same time you don’t want to take people’s jobs away so you have to tackle this carefully.

Technology will be needed to upgrade quality of productivity, and this can happen through having good information and infrastructure.

It will require all African partners to work together to make this transition possible. There is no reason why Africa shouldn’t be producing massively and exporting.

Among the key themes at this year’s WEF is the so-called Fourth Industrial Revolution. But when you look at Africa, you still have a huge informal economy. How can Africa take advantage of the revolution?

All of those things are a threat and an opportunity at the same time. I get worried because we talk a lot about the Fourth Industrial Revolution and this is a phenomenon that is worrying advanced economies. For example, estimates predict that nearly 50 million jobs in the US could potentially be wiped out in the next couple of decades.

And then I wonder what this means for Africa. Does it mean that some of those jobs will come here? I think there is real opportunity for Africa to leapfrog.

Again if you go back and look at transitions over time, a lot of the jobs that are replaced are those that probably would be done better by robots.

That could be a real opportunity for Africa, but I think there is going to be a huge dislocation for some time.

Education is going to be key. What we are learning now is not going to be adequate for tomorrow. Obviously maths and science will be critical, but also adjustability and adaptability.

What do you think is the role of regional integration in development?

Overall, when you look at individual economies in Africa, sometimes they are not attractive in the minds of the investor. It becomes more attractive when investors are looking at a bigger market, and I don’t see rapid development without integration.

What are the prospects for the region?

I am quite convinced that East Africa is on the right path, as long as it is against the backdrop of good governance and peaceful transition of power. There will have to be some serious rolling up of sleeves to make the changes that need to be made.

With all these new tools in place, people see what is happening and they will demand better governance.

What do you think are the risks?

There are lots of risks, such as terrorism. But the one I am concerned about is income inequality. This is a problem around the world; especially when there is inequality at a time when we have better communication tools.




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