By Tawfik Hammoud, Lisa Ivers and Patrick Dupoux, Boston Consulting Group*
Businesses, governments and NGOs are all looking for ways to navigate and manage a new set of challenges, from geopolitics to the ecological transition , the rapid evolution of Generation AI , government debt, demographic decline and Generation Alpha . We call this the ‘5G world’.
Many of the solutions to the 5G challenges lie in Africa. While the continent still faces undeniable challenges, including being the region most affected by climate change, it also has enormous potential in renewable energy. It holds 40% of the minerals essential to the transition from a carbon-dependent economy; its arable land can ensure global food security; the Congo Basin and African lands have massive carbon sequestration potential; and the continent will have 2.5 billion young people by 2050, a considerable human capital.
Africa holds many keys to this 5G world
Geopolitics: With the outbreak of the war in Ukraine, the Sino-American decoupling and
the Middle East crisis, geopolitics has taken hold in corporate boardrooms. Bismark said that nations have no friends, they only have strategic interests. The current global fragmentation that has emerged over the last three years is a real opportunity for African countries. They have never had more freedom to choose who they do business with. Africa can remain equidistant geopolitically and insist on integrated investment roadmaps that include natural resources, but also biopharma, education, manufacturing or agriculture. A strong refocus on regional blocs is also an opportunity to accelerate Africa’s long-awaited economic, trade, political and logistical integration.
GenAI: Many believe that this technology will fundamentally change the course of human economic progress. It is exponential, not linear. The main forces behind Africa’s golden decade in the early 2000s were mobile phones and the internet. Just as the internet unlocked knowledge and commerce, GenAI will unlock expertise and productivity. Africa
needs much more productivity, across all sectors and all 54 countries. GenAI innovation is not limited to the US and China either. Countries like the UAE or France are becoming key players. No matter what sector you are in, you are now a de facto technology company. African leaders and CEOs cannot afford to be skeptical: they need to upgrade their GenAI skills, invest in data centers, reduce cloud computing costs, develop the right regulations and sign partnerships to ensure they do not miss this generational opportunity.
The green revolution is only just beginning. Africa has a key role to play, but it must do so on its terms. The cost of the green transition is immense: some estimates put it at $9 trillion a year. That money will have to come from somewhere, and the global private sector is now flush with cash. African governments should pay close attention to other countries’ green policies and how they can play their part in these new energy value chains. Given the impact that climate change will have on
Africa, adaptation and resilience must be a priority. In Africa, more than anywhere else, the green transition starts with food and agriculture, the continent’s largest investment opportunity. One-third of all food produced in Africa is wasted or lost. The percentage of agricultural land in Africa is irrigated is 1.5%, compared to 15-20% in Asia. The continent still imports $100 billion worth of food each year. The call to action is clear: invest in crops, customized fertilizers, storage facilities, processing units, transportation and integrated logistics. Energy is another urgent need: 600 million Africans lack access to it. Electricity is a real game changer for development. As with mobile technology, Africa can leapfrog yesterday’s energy systems and bet big on renewables, mini-grids, advanced geothermal, biomass and eventually small and medium nuclear reactors.
Global debt: Over the past few decades, public debt levels have been rising around the world. This has been amplified by the pandemic. While the
re are not many public coffers, there are many in private coffers: sovereign wealth funds, private equity funds, large family offices or large corporations. Africa’s development will be capital intensive, so new ways of mobilizing public and private capital are needed. What do private investors want? They say they want Africa to show a few years of macroeconomic stability and regulatory certainty. They want to see more bankable projects, less currency volatility, more liquidity in financial markets, well-managed portfolio assets, better governance and greater accountability of public officials. Essentially, they want the conditions to be in place to earn a good return. This is how Africa can reduce its high risk premiums, which are today higher than the actual risks observed. Africa must also continue to push for a reset of the global multilateral debt and credit system. With the youngest and fastest growing population, it is unfortunately the continent that is most capital constrained. Africa should be able
to sustain deficits and rely on debt to finance its next stage of development. The rest of the world must take this into account when renegotiating multilateral agreements.
Generation Alpha: In five years, 50% of Africans will be Generation Alpha (born after 2010) or, in other words, one third of the world’s Generation Alpha will live in Africa. The continent not only suffers from a significant shortage of capital, but also from a massive surplus of labor. This is an incredible demographic dividend, and Africa must not squander it. The call to action is first and foremost to invest in education and job creation. And to dare to invest in world-class higher education. Morocco is a striking example: several world-class universities have opened their doors in the last ten years, such as UM6P, one of the most ambitious projects in Africa. Moroccan digital skills are now so good that BCG has decided to relocate one of its largest AI hubs to this country. Another key aspect of Generation Alpha is to unleash the pow
er of women on the continent, especially their entrepreneurial power. Businesses have an important role to play in changing mindsets on this dimension. Finally, Africa can export its soft power and the creative industries of its youth to the world: there is today a global appetite for African culture, whether in food, fashion, arts, sports or music.
Don’t miss this moment
Africa has been going through a difficult time since the pandemic. But we believe it is time for it to take advantage of this ‘5G’ world. We are in the midst of a major geopolitical and macroeconomic reset, which has profound economic and societal implications. This creates a unique window of opportunity for Africa, where a bold course of action is needed. Parts of the continent are close to reaching an escape velocity, from which there will be no turning back. This year, 12 of the world’s 20 fastest growing countries will be in Africa. Many positive developments on the continent are being ignored and overlooked. It is up to African govern
ments and business leaders to set a bold agenda for the years ahead.
*Tawfik Hammoud, is Managing Director and Senior Partner;
Chief Client Officer and President, Industry Practices, Toronto, Boston Consulting Group
Lisa Ivers is Managing Director and Senior Partner; Africa Lead, Casablanca, Boston Consulting Group
Patrick Dupoux is a Managing Director and Senior Partner; Head of the Social Impact Practice for the EMESA region; Member of the Executive Committee of BCG, Paris Boston Consulting Group
BCG is a global consulting firm that partners with leaders in business and society to solve their most important challenges.
Source: Africa News Agency