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Africa’s post-Covid-19 future: The role of innovation, technology and labour

By Karishma Banga

Innovation lies at the heart of Africa’s recovery. Digital technologies offer African economies an important pathway to recover lost GDP and create jobs. They can help mitigate economic losses across sectors by generating new employment markets, diversifying production, boosting productivity, revolutionising service provision, as well as increasing access to finance through mobile money.

Yet, digital innovation can only go so far if countries fail to take a proactive approach to closing the digital divide. Persistent gaps in technological access, education and internet coverage across the continent will mean the benefits of digitalisation and digital solutions will be concentrated in the hands of a few. As long as inclusivity remains an issue, rural communities, women, youth and low-income households will be excluded from the transformative potential of a COVID-19 recovery.

Untold global economic recession means building back will require significant effort and resources. According to the World Bank, following the outbreak of the pandemic, by the end of 2020 output in sub-Saharan Africa had contracted by an estimated 3.7%, a per capita income decline of 6.1%. Working hours across the continent declined by 7.7%, and an estimated 29 million African jobs may have been lost. Some segments of the economy have been hit harder than others – particularly the informal sector, labour-intensive manufacturing, and micro, small and medium-sized enterprises (MSMEs). Survey data from Senegal, Mali and Burkina Faso show that one in four workers had lost their jobs by the end of April 2020, and one in every two workers reported a decline in earnings, with the informal economy hit harder. Labour-intensive manufacturing, often dominated by MSMEs and women, has also been badly hit by the pandemic; in Kenya 30,000 formal manufacturing jobs have been lost.

To address these challenges, innovation must play a central role in leveraging inclusive solutions that meet the needs of the moment. Embracing opportunities will rely on exploring successful examples where digital technologies are already changing the nature of African economies. In the case of the potential of productivity-enhancing automation technologies, the scope for innovation to deliver a transformative post-COVID recovery becomes clear.

Across the world, digital technology and automation are reconfiguring labour-intensive manufacturing, particularly in the garments value-chain. Concerns regarding automation technologies replacing workers in the digital era do not reflect other industrialisation opportunities along the value-chain. For instance, CNC lasers in the A to Z factory in Tanzania have led to some job losses in cutting but increased overall productivity. The fashion laser cutting process lends itself to automation with offline computer-aided design and/or manufacturing systems that improve precision, accuracy, speed and output. With greater productivity capacity at this stage, more jobs are created for the next task in textile manufacturing: stitching. This requires higher-skilled techniques, which therefore spurs expansion and upskilling of the workforce. Evidence from Kenya and the South African apparel industry further suggests that productivity gains made possible through automation also lead to job-creation through the task chain.

Linked to digitalisation of the sector, manufacturing firms that took a digital response are faring significantly better than those that did not, proving that the pandemic has catalysed growth opportunities in e-commerce. However, there remain supply-side vulnerabilities that are limiting their expansion. Lack of delivery infrastructure and issues such as delivery worker shortages, delays in parcels due to cargo, air and transport disruptions, and increasing freight prices have curbed the growth of firms into the digital business-to-consumer (B2C) space. There are also regulatory gaps threatening safety online and consumer-confidence.

Thinking towards a sustainable recovery for Africa in the digital era therefore means managing e-commerce both inclusively and appropriately. This requires the development of African-wide regulatory frameworks and policies for e-commerce, payment platforms, privacy, data, online dispute resolution, and cyber-crime. These will be vital to developing a thriving eco-system of internet-based services that can provide both digital consumers and employment sectors with a conducive context for growth.

Digital access is the first step for firms to be able to shift their business online and implement work from home strategies, as well as for government to offer Govtech, HealthTech and EdTech solutions. Yet, average broadband speed declined during the lockdown by more than 20% in several African and Asian countries, and currently only 28.2% of African populations are using the internet. To enhance digital connectivity and access, the recovery must be rooted in extensive coordinated investments in digital infrastructure, such as continent-wide telecommunication networks. There is great scope for supply-side labour opportunities in the physical work of laying and maintaining domestic fibre-optic networks and new satellite links, to reaching ‘last mile’ users relying on use of copper wires, and cable modem links and wireless systems.

As businesses shift online and consumers work from home, demand for ICT and ICT-enabled sectors including finance, insurance, legal services and scientific research, is likely to increase and thereby create a new development opportunity. Cloud services and data hosting is another segment that holds significant potential. A post-COVID-19 recovery will therefore depend on expanding education, training and labour markets in these sectors – as they boast high growth markets, given the share of ICT and ICT-enabled services as a total of service exports is less than 20% in many African countries. A promising example of the new opportunities for a services-led transformation is the 3D animation market, which garnered a global revenue of $15.7 billion in 2019. Nigeria, Egypt, Kenya, Tanzania, Uganda, Ghana, Zimbabwe and Ethiopia emerged as leaders on the African continent as content producers as well as collaborators in animation, visual effects and the video gaming industry.
In the case of agricultural technology (AgTech), there is significant potential for job creation with the rise of digital platforms that increase productivity, diversification of functions, access to regional trade, and opportunities for women and youth. A survey of over 800 farmers in Uganda on the use of ag-platforms suggests that platformed farmers have higher access to formal work and productivity enhancing-services, such as trainings.

The African Continental Free Trade Area (AfCFTA) is a golden opportunity for economies in Africa to transform their supply chains and reverse the economic devastation caused by the pandemic, especially as global ‘lead firms’ will look to re-shore manufacturing tasks to increase resilience to future shocks. Digital skills are more important now than ever, so governments must equip the African workforce with digital literacy skills (and soft skills like critical thinking) through lifelong education opportunities with policies to support technical and vocational training.

Embracing sustainable industrialisation and diversification in the digital era in the context of COVID-19 requires African countries to take a proactive approach towards supply- and demand-side digital transformation. They can do this by effectively leveraging the AfCFTA agreement for a post-COVID-19 inclusive recovery. Targeted investments need to be made to close the gender digital divide in various areas, including access to basic services like electricity and Wi-Fi connectivity, and e-commerce and digital skills development. The AfCFTA can facilitate this through inclusion of specific cooperation processes and provisions within e-commerce protocols, such as digital training for women. Encouraging regional and cross-continental partnerships to develop large-scale infrastructure should go hand in hand with harmonising policy approaches across the region to help stimulate innovation.

Ultimately, digital technologies will make some jobs redundant while also creating new jobs in new sectors. Digitalisation can lay the groundwork for a transformative post-COVID recovery by offering a chance to reconfigure African economies towards a more inclusive, innovative, and internet-based trajectory which will be fit for the 21st century – and ready to fulfil the future needs of its young and diverse societies. – African Portal

This article is based on an essay from the African Center for Economic Transformation (ACET) and the Development and Economic Growth Research Programme (DEGRP) series ‘COVID-19: Essays on Innovation and Recovery for Africa’.

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