This blog was updated on April 5.
Rapid technological advances are bringing major changes to workplaces around the world. In the U.S., this has been a source of both joy—for those able to work from home thanks to advanced video technology and the internet of things (IoT)—and sorrow for those who lost their job due to advanced robotics. Predicting the impact of new, Fourth Industrial Revolution (4IR) technology on employment opportunities around the world is now a growth industry. But how relevant is the technology, and to a large extent the experience of rich countries, to Africa’s current problems and choices?
Nonresident Senior Fellow - Global Economy and Development, Africa Growth Initiative
Senior Fellow - Global Economy and Development, Africa Growth Initiative
Professor and Executive Director - Thunderbird School of Global Management, Arizona State University
Distinguished Fellow - Stanford University
In our recent report, we take a hard look at this question. Focusing on Africa’s current economic development challenge—how to speed up the process of economic transformation—we examine the potential of 4IR technology to support and accelerate this process. A reasonable expectation might be that 4IR technology has a lot to contribute since technological innovation has been one of the main drivers of economic growth and development since the invention of the steam engine and electricity. However, our report argues that for Africa, the key policy question is not “What can 4IR technology do for Africa,” but rather “What are Africa’s productivity bottlenecks, and could 4IR technology help relieve them?” In other words, for the owner/operator of a business or farm, the question is not “What about robots?” It is “What is my current productivity problem, and if I used this technology would it produce a quick and specific response to this problem?”
From this perspective, we do share the excitement of some for the potential of 4IR technology to help farms and also formal and informal firms in Africa to reduce production costs, grow their markets through productivity improvements, and increase employment and earnings.
- We are most optimistic about the service sectors, where 4IR presents an opportunity for technology-enabled new products and processes. Demand grows with income, so opportunities abound as African countries restart the economic growth process. In many service sectors where formal firms and employment dominate, technology mostly complements rather than substitutes for labor, so technology adoption should lead to the creation of new formal wage jobs for young and educated jobseekers. In the large nonfarm informal sector (63 percent of total employment), adoption of 4IR technology could also lead to improvements in job quality (e.g., earnings, income security)—for example, through the use of online marketplaces and platforms to find customers and meet their needs efficiently and safely.
- In the agricultural sector, by reducing information frictions which increase risk, 4IR technology could support productivity gains, an increase in farm earnings, and a reduction in rural poverty, as well as bring important environmental benefits. But first, long-standing risks inhibiting technology adoption need to be overcome, leading us to conclude that technology-enabled agriculture will not be a feature of small- and medium-scale farming in Africa very soon. Technology adoption will not lead to a large expansion of employment, as this sector has been losing its share of employment for years owing to better opportunities elsewhere.
- In the manufacturing sector, which has recently expanded its share of output and employment in sub-Saharan Africa’s low- and middle-income countries, 4IR technology may open new opportunities for smaller-scale production for domestic and regional markets. But the sector is not likely to continue increasing its share of employment, because when applied to manufacturing, 4IR technology is labor-saving.
Although we find ourselves much less worried about robots and job losses than some other analysts, our analysis does leave us concerned with the long-standing obstacles to technology adoption that already exist in Africa. Without innovation, producers will lose market share to the rest of the world. But new technology is an investment and will be adopted only if a producer has access to markets to sell their products and services and can get the needed complementary inputs (including services such as electricity and transportation of goods to market) at a price that results in a competitive product. This makes all the more urgent issues such as: (i) building, operating, and maintaining infrastructure, including information and communications technology infrastructure; (ii) deepening the financial sector to reduce the cost of financing new investment; and (iii) reducing barriers to regional trade. To ensure success, the public and private sectors will have to work together on strategy and implementation.
Conscientiously shaping public policy that guides technological growth to maximize benefits and minimize costs for all will be crucial for success.
Africa urgently needs employment transformation—growth in the employment share of wage jobs. This will take time given the current rate of labor force growth. Africa cannot afford to let the bright, shiny object of new technology divert its attention from needed measures to support earnings growth in the agricultural and nonfarm informal sectors—household farms and firms. Conscientiously shaping public policy that guides technological growth to maximize benefits and minimize costs for all will be crucial for success. Countries need comprehensive, effective, and implementable strategies that will address the various challenges in their country context, while ensuring inclusion. Policies focused predominately on supporting and catering to the high-tech sectors will exacerbate inequality, an undesirable result.