Is Tech Africa's New Oil?
Well, Not Just Oil, but the Natural Resources That Have Long Been The Continent's Primary Source of Wealth
Is D. Barry right?
He might, he might not. First, let’s answer a question whose answer directly impacts how big of a role tech will play in Africa’s future.
Will Africa ever realize the full potential of its oil/natural resources?
Pessimists will tell you that the continent is under a resource curse—where those with too much often have the least. They will echo Inferno, a poem by Dante Alighieri.
Abandon all hope ye who enter here.
Better yet, they’ll advise, “take the first flight/ship out of the continent. Run like your life depends on it, and do not let something small like the possibility of death while crossing the Atlantic deter you.”
Optimists, in contrast, will reveal to anyone who will listen that African countries are only one good leader away from prosperity. They will maintain that the next century belongs to Africa—that the continent is the next significant growth market.
Let’s look at the facts.
Africa has:
30% of the world’s mineral reserves
90% of the world’s chromium and platinum
40% of the world’s gold
Largest reserves of the world’s diamond, cobalt, uranium, manganese.
12% of the world’s oil reserves
8% of the world’s natural gas
65% of the world’s arable land
To put it in perspective, with 65% of the world’s arable land, Africa could feed the world if it so wished.
More so, the growing demand for clean energy could position the continent as the largest source of clean energy technology.
A 2020 World Bank Group report noted that by 2050, the world will need more than 3 billion tons of metals and minerals such as cobalt and platinum to power solar, wind and geothermal energy.
As if that is not enough, modern economies need Critical Raw Materials (CRM) such as cobalt and manganese for defense, aerospace and security operations.
So, yes, optimists are not far off when they say the continent can become the next significant growth market.
Here is another sobering fact though: the World Bank and the IMF have stated that growth in Sub-Saharan Africa (SSA) has stalled.
In 2019, IMF cut its growth projections for SSA to 3.5%, while World Bank cut its projections to 2.8%. Things have only gotten worse in 2020 and 2021, thanks to Covid.
Apparently, pessimists aren’t that far off either!
Why Hasn’t Africa Been Able to Harness the Full Potential of Its Natural Resources
In a recent interview with France 24, Ngugi wa Thiong’o noted something poignant.
The real reckoning of Africa’s colonial past is when African countries can control their resources and make things with their raw materials, then exchange with the west and any other country based on equal give and take.
He is not wrong, but here is the thing, it’s not that easy. It sounds simple, common sense even. Right? African countries should add value to their raw materials, make better deals and voila, an era of prosperity and bliss will dawn.
The first hindrance is made up of the usual suspects—corruption, bad leadership/greedy leaders, unfavorable policies and political instability. Many have repeatedly discussed these hindrances, and we do not need to rehash them.
What is more critical is something Vuyo Mjimba articulated in an article for an online journal—The Conversation Africa. He noted that even if corruption, bad leadership and unfavorable policies were no longer issues and African countries could add value to their raw materials, they would struggle to compete with the established systems.
Take the case of steel, to use steel to manufacture washing machines for global markets, a country would need to either establish its own brands and outcompete established ones, such as Samsung, Defy and Hisense or supply these popular producers with components.
Vuyo Mjimba
The same thing applies to Cocoa in Ghana. How does Ghana even begin to compete with Mars Wrigley Confectionery and Ferrero Group when they have already established brand loyalty in the global market?
Not to say that it is not doable, but…
Beyond competition, these four economic factors are also an issue:
The strong currencies that plague resource rich-countries often hinder other exports
The volatile prices of resources prevent African countries from enjoying steady growth
The resource extraction process does not create many jobs for the country, which leads to high unemployment rates.
Take Nigeria, for instance, against a population of 206 million, the oil industry which is worth approximately $340 billion, only employs 65,000 direct employees and has created 250,000 indirect jobs.
To add a bit of context, Safaricom, a Kenyan tech/telecommunication company that is definitely not worth what the oil industry is worth in Nigeria, has created more than 500,000 indirect jobs.
The foreign private companies contracted to mine the natural resources in most African countries often exploit the countries in search of maximum profit.
These hindrances, while solvable, require time and a hell of a strategy. So yes, Ghana finding a way to compete in the global chocolate market is doable, but what are African countries supposed to do in the meantime?
That is where tech comes in!
Why Tech Might Have an Upper Hand Compared to Natural Resources
Tech Creates Jobs and Reduces Unemployment
If the big 4 tech companies (Apple, Google, Amazon and Facebook) are anything to go by, well-realized tech can at the very least employ over a million people.
In a continent where a third of the over 420 million youth aged 15-35 are unemployed, and the other third are vulnerably employed (can lose the job any time), 1,000,000 jobs are nothing to dismiss.
For a more local context, consider Safaricom, the example used above.
Safaricom has created over 500,000 jobs. How many jobs would 1000 Safaricoms, or rather, 1000 such companies create? 1000 x 500,000 = 500,000,000. Apparently, more jobs than the continent needs!
Tech Has a Low Barrier of Entry and Unlike Natural Resources, One Cannot Appropriate Tech for the Few Elite
Tech is open to anyone, and one does not need to deal with a million barriers to be successful.
All you need is an idea, skills and a whole lot of determination. You do not need to know someone who can connect you to someone else, as is often the case when looking for opportunities in most African countries.
The fact that tech is open to anyone also means wealth is not limited to the elites. To underscore how accessible tech is, here is the story of Solomon Gachugu, a techpreneur in Kenya who started a multi-million IT business with zero capital and self-taught tech skills.
Often, people will cite lack of capital as a reason not to attempt. As Solomon has proven, all you need is to identify a problem that you can solve.
At minute 15, Solomon says something powerful:
My entire life in business, I have been penetrating where I find a problem, and I try to find the solution.
Tech Can be the Impetus for Growth and Compensate for Where Natural Resources Have Lagged
History has proven that different countries have used different factors as the impetus for growth. Saudi Arabia is one of the top 20 economies in the world purely because of oil.
Japan is also one of the top economies, ranked as the third-largest consumer market globally. The difference is, Japan got to where it is because of technology. Japan is consistently ranked as among the most innovative countries.
See, in an ideal world, Africa would be like Saudi Arabia. Nigeria’s economy would rise purely because of oil. DRC would essentially be the king of the world thanks to its natural resources. Kenya’s coffee would be as famous as Starbucks. Let’s be honest, though, that ship has sailed.
The only recourse left is tech. There is no sailing of ships with technology because it is ever-changing and it evolves. Most important, tech is specific. What it can do to solve the issues in the continent is very different from what it has done to solve the issues in the world, simply because problems are unique to a region.
Until natural resources catch up, tech can be the impetus for growth in Africa. The beauty of it is that tech thrives in the private sector and focuses on solving consumer needs. So, while there isn’t much an average African can do about corruption and greedy leaders, one can very easily solve some of the continent’s perennial problems using technology.
Tech Will Help Build the Foundation for Harnessing the Full Potential of Africa’s Natural Resources
We noted above that at the moment, adding value to Africa’s raw materials is not as straightforward as it seems. What’s possible is using technology to build industries that service the mining sector. This will help grow the capacity until the continent can get to a place where it can add value and successfully compete on the global market.
It is not an alien concept. Industries that service the mining/extractive industry are known as backward linkage industries. A good example is what Zambia is doing with the mill ball factory near the Sentinel copper mine.
Mill balls are used for crushing the ore during the extraction process. Before Zambia launched the plant in 2018, all the mining companies imported the mill balls from China.
Similarly, in Kenya, Kipya Africa Limited is a knowledge solutions provider in the extractive and energy industry. They use technology to provide technical research, specialized training and technical and non-technical manpower.
That goes to show that the number of industries that can be built around the extractive industry are varied and limitless. Also, the United States has proved that this is a strategy that can work. The US is one of the leading suppliers of mining inputs in the world, and it took them only 30 years to go from no mining inputs to a global leader!
Tech Does Not Cause Neglect of Other Sectors, by Its Very Nature it Touches All Sectors
One can use tech in almost all the other sectors and add meaningful value. Fintech is a result of using tech in the financial sector, agritech is tech in the agriculture sector and telemedicine arose from injecting tech in medicine.
Flutterwave, a fintech company founded in Nigeria, is now worth 3 billion dollars. Approximately 900,000 businesses worldwide use Flutterwave to process payments in over 150 currencies. It goes go show how much value tech can add to any industry.
Tech is Inexhaustible
The nature of the extractive industry is that natural resources are exhaustible. At some point, Nigeria is not going to have oil anymore. What then?
It is a well-understood model that the more you extract, the poorer you become. That is unless you use the proceeds of the extractive industry to invest in the other industries!
Tech, in contrast, is inexhaustible and can be molded and changed to keep adding value!
Conclusion
So, is tech Africa’s new oil? Well, yes!
Yes, because its potential to transform the continent is greater than that of natural resources. Yes, because tech grows from the private sector and in a continent where the leadership has failed its citizens, again and again, the private sector might be the only path to alleviating poverty.
Yes, because it does not have to be one or the other—tech can transform the continent on its own, but it can also work with the extractive industry for greater impact.
But that is just one person’s opinion, someone who happens to have a background in tech. Your opinion is just as important. What do you think?
While at it, share this post so we can change the narrative together. Africa is Not an Afterthought, and tech will go a long way in helping prove that!