[Civsoc-mw] {Disarmed} from Brookings.

[cammack at mweb.co.za]

What do automation and artificial intelligence mean for Africa?

 <https://www.brookings.edu/author/gaurav-nayyar/> Gaurav Nayyar Tuesday,
July 16, 2019 Brookings Brief.

During the last four decades, manufacturers all over the world have
outsourced production to countries with lower labor costs. American,
European, and Japanese firms moved a lot of their production to developing
Asia and Latin America, first helping countries like Malaysia and Chile,
then others like China and Mexico, and then others like Vietnam and
Bangladesh. Today, Chile and Malaysia are high-income economies, China and
Mexico have become upper-middle, and Vietnam and Bangladesh have reached
lower-middle-income. Africa's turn was supposed to be next. 

Author

 <https://www.brookings.edu/author/gaurav-nayyar/> 

 <https://www.brookings.edu/author/gaurav-nayyar/> Gaurav Nayyar

Senior Economist, Finance, Competitiveness and Innovation - World Bank

 <http://www.twitter.com/Gaurav__Nayyar> Gaurav__Nayyar 

But the latest round of technologies seems to be dealing Africa's economic
prospects a serious blow. Adidas, the German sporting goods company, has
established "Speedfactories" in Ansbach in Germany and Atlanta in the U.S.,
that use computerized knitting, robotic cutting, and 3D printing to produce
athletic footwear. Foxconn-the Taiwanese firm known for producing Apple and
Samsung products in China's Jiangsu province-recently replaced 60,000
factory workers with industrial robots. By reducing the importance of wage
competitiveness, robots in "smart factories" can completely change what it
takes for a place to be competitive in the global market for manufactures.
If high-income economies are reshoring production, this could slow down and
even reverse the migration of newcomers from Africa in global value chains.
The case of China, which is rapidly automating to address declining wage
competitiveness, is potentially even more important given recent
expectations of an
<https://hbr.org/2017/05/the-worlds-next-great-manufacturing-center> en
masse migration of light manufacturing activities to economies with lower
labor costs, such as those in Africa.

Not so fast

The opening plenary session at the
<https://www.csae.ox.ac.uk/conference-2019/csae-conference-2019> Centre for
the Study of African Economies (CSAE) conference in Oxford this March
discussed what automation and artificial intelligence (AI) mean for Africa's
economic prospects ( <https://www.youtube.com/watch?v=sRbKsVzduik> watch
online). I highlighted three reasons why the diffusion of robots in
higher-income countries does not spell the end of labor-intensive
manufacturing-led development in Africa.

First, automation is not happening across the manufacturing sector, and
industries characterized by a low intensity of robot use will remain a
feasible entry point. This includes a range of commodity-based manufactures
as well as labor-intensive tradable goods such as apparel, leather, and
footwear.   <https://openknowledge.worldbank.org/handle/10986/27946> Recent
foreign direct investment (FDI) patterns in apparel and leather products
point to the continued migration of economic activity to lower-wage
locations. China and Eastern European countries such as Bulgaria, Hungary,
and Romania actually experienced a decline in the number of greenfield FDI
projects in 2011-15 compared with 2003-07, while Ethiopia, Indonesia,
Serbia, and Vietnam experienced increases. FDI may still be migrating from
China to lower-middle-income countries in Asia and Africa and from higher-
to lower-income countries in the Europe and Central Asia region. 

Related Content

 
<https://www.brookings.edu/blog/africa-in-focus/2019/07/08/strategies-for-jo
bs-in-africa-in-the-digital-age/> 

 <https://www.brookings.edu/blog/africa-in-focus/> Africa in focus 

 
<https://www.brookings.edu/blog/africa-in-focus/2019/07/08/strategies-for-jo
bs-in-africa-in-the-digital-age/> Strategies for jobs in Africa in the
digital age

 <https://www.brookings.edu/experts/brahima-coulibaly/> Brahima Sangafowa
Coulibaly

Monday, July 8, 2019 

 
<https://www.brookings.edu/research/how-industries-without-smokestacks-can-a
ddress-africas-youth-unemployment-crisis/> 

 <https://www.brookings.edu/search/?post_type=research> Report 

 
<https://www.brookings.edu/research/how-industries-without-smokestacks-can-a
ddress-africas-youth-unemployment-crisis/> How industries without
smokestacks can address Africa's youth unemployment crisis

 <https://www.brookings.edu/experts/john-page/> John Page

Friday, January 11, 2019 

 
<https://www.brookings.edu/opinions/africas-alternative-path-to-development/
> 

 <https://www.brookings.edu/search/?post_type=opinion> Op-Ed 

 
<https://www.brookings.edu/opinions/africas-alternative-path-to-development/
> Africa's alternative path to development

 <https://www.brookings.edu/experts/brahima-coulibaly/> Brahima Sangafowa
Coulibaly

Thursday, May 3, 2018 

Second, market size also matters for attracting manufacturing FDI, and the
size of African markets is increasing. Large emerging economies such as
Brazil, India, Indonesia, Mexico, South Africa, and Ethiopia experienced an
<https://openknowledge.worldbank.org/handle/10986/27946> increase in the
number of greenfield FDI projects in the manufacturing sector during 2011-15
relative to 2003-07. This suggests that the consideration of
efficiency-seeking FDI notwithstanding, market-seeking FDI linked to demand
considerations will likely continue to thrive. And African countries will
stand to gain, given their expanding markets.

Third,  <https://openknowledge.worldbank.org/handle/10986/27946>
manufactures are much more important for trade within Africa, which is
indicative of opportunities in lower-price, lower-quality market segments.
In 2014, the share of all manufactured products in intra-Africa trade, at 43
percent, was roughly double the share of Africa's exports to all trading
partners. Further, most manufacturing industries have seen large increases
in their intra-Africa trade shares between 2000 and 2014, thereby underlying
the promise of exploiting this market segment. There is the related
opportunity serving low-quality, lower-price market segments in lower-income
countries outside Africa.

What to do

As automation and AI raise the bar for what it takes to succeed in
export-led manufacturing, the feasibility agenda is at the heart of
expanding the set of available opportunities. The broad challenges in this
feasibility agenda can be represented by
<https://openknowledge.worldbank.org/handle/10986/27946> competitiveness,
capabilities, and connectedness (3Cs). As new laborsaving technologies
reduce the importance of low wages in determining costs, African countries
will need to meet more demanding ecosystem requirements in terms of
infrastructure, logistics and other backbone services, regulatory
requirements, trade restrictions, and so on to make export-led manufacturing
a viable growth pathway.

This places a premium on the "competitiveness" of the business environment
and the "connectedness" to input and output markets. The alternative-using
digital technologies to produce traditional goods-has a higher bar too, in
terms of information and communication technology (ICT) infrastructure,
skills, management practices, regulatory framework for the data ecosystem,
and intellectual property rights. This premium on the country's
"capabilities" to harness the digital economy defines the World Bank Group's
Digital Economy for Africa (DE4A) initiative, which places digital
connectivity, skills, and entrepreneurship at its core.

Gather more evidence

In sounding a warning and identifying some opportunities, the opening
plenary panel at the CSAE conference highlighted the importance of plugging
knowledge gaps in theory, empirics, and policy. This includes, first and
foremost, crafting better theories of structural transformation. Is
export-led manufacturing the only pathway to growth? Or is the conventional
process of structural change from agriculture to manufacturing and then
services not as relevant as in the past?

On the empirical side of things, there might be much to learn from
firm-level data that go beyond sector boundaries. As the line between
manufacturing and services is increasingly blurred, do services constitute
an increasingly large share of value added and employment for
"manufacturing" firms? What constrains technology adoption by firms across
business functions in different sectors?

On questions of policy, there is a need to identify regulatory frameworks,
which can enable African countries to leverage labor-intensive production
processes while unit labor costs remain low relative to the price of
automation technologies.

Predicting the pathway of technology and what it means for Africa's economic
prospects is hard. But this plenary panel at the CSAE conference sounded a
note of cautious optimism. Evidence that uncovers new insights and
distinguishes fact from fiction can help countries prepare better.

 <https://www.brookings.edu/blog/future-development/> Future Development 

This blog was first launched in September 2013 by the World Bank in an
effort to hold governments more accountable to poor people and offer
solutions to the most prominent development challenges. Continuing this
goal, Future Development was re-launched in January 2015 at brookings.edu.

 <http://blogs.worldbank.org/futuredevelopment/> For archived content, visit
worldbank.org >

*	Copyright 2019 The Brookings Institution

 


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