Tech novelty will spur Vision 2030

Dr Dennis Magaya
President Emmerson Mnangagwa’s vision of a middle-income economy by 2030 is pragmatic and the call to action “Zimbabwe is open for business” is befitting.

The key question is: which economic model should be used to get there?

This article argues that the two major economic drivers — mining and agriculture — alone may fall short of delivering Vision 2030 in a world where the technology and innovation encapsulating the Fourth Revolution pumps steroids in economic growth.

A third disruptive growth driver is required to overcome legacy problems and leapfrog development cycles.

Zimbabwe was the region’s breadbasket in the 1990s when agriculture contributed 9-15 percent of GDP, 20-33 percent of export revenue and livelihoods to 70 percent of the population.

Agriculture remains the economic backbone, contributing 10 percent to GDP last year.

So, even if technological innovation now drives life, food security will always define life.

Mining also remains a key economic pillar. Zimbabwe has the second-largest platinum and chrome deposits, and is the fifth-largest lithium producer in the world.

In 2017, mining revenue topped $2,3 billion, 13 percent of GDP and 70 percent of export revenues.

Thus Vision 2030 has to leverage on agriculture and mining, and add a third indispensable sector — digital innovation.

Africa requires an economic model that countervails the legacy of colonisation and slavery, which affected the continent’s development milestones.

Africa missed the First Industrial Revolution due to slavery, then the Second Industrial Revolution happened during colonisation.

The Third Industrial Revolution happened when African countries were fighting for independence.

Now Africa is now well-positioned to take advantage of the Fourth Industrial Revolution, which is driven by innovation and technology.

Zimbabwe, therefore, needs an economic model that leverages traditional leadership, culture and values while developing Western democracy.

A model that leapfrogs the missed development cycles and historical imbalances requires more than just agriculture and mining.

Mining, agriculture and digital innovation could be ideal for driving Vision 2030.

This creates a future-proof and generationally inclusive shared vision.

Digital technologies are at the core of global poverty reduction strategies.

Digital assets, information and knowledge goods drive value in the Fourth Industrial Revolution economy.

As such, for Vision 2030 to be realised, Zimbabwe should be ready to transform, process and use digital sources of value.

In any event, failure to bridge the digital divide will cause Zimbabwe to fall victim to global inequalities and text book-type Third World vicious poverty cycles.

The largest digital socio-economic impact is in financial services, education, health, retail, agriculture and e-government.

A digital economy relies on technology to address service delivery challenges, information asymmetries and market gaps in these sectors.

The Internet’s contribution to the economy as a fraction of total GDP is called iGDP.

Senegal’s iGDP is 3,3 percent and Kenya 2,9 percent, comparable to France and Germany. South Africa and Nigeria’s iGDPs are 1,4 percent and 0,8 percent respectively, although there are Africa’s largest economies.

Africa’s iGDP is 1 percent.

This means there is scope for Zimbabwe to leverage on Internet technologies to drive economic growth.

While Zimbabwe seeks to reduce the current unemployment rate, digital technology has changed the definition of an employee because consumers now sell to other consumers in the digital economy, interchanging producers and consumers’ roles.

Amazon, eBay, crowdfunding and blockchain are typical digital market places.

Estimates suggest that about 34 percent of the US workforce participates in the digital economy; this will rise to 43 percent by the year 2025.

African platforms such as MultiChoice for media and Upwork for outsourcing are growing rapidly.

In Zimbabwe, mobile money subscribers, agents and merchants have blurred roles of consumers and producers.

Digital peer-to-peer exchanges and shared economies reduce barriers to entry, unit prices and maximise resource utilisation from national, regional and global users.

The shared economies blur the lines between formal versus informal sectors, producers and consumers, and employers and employees.

So, the Zimbabwean Industrial Policy, Trade Policy and SME Policy for Vision 2030 should leverage on digital innovation.

Zimbabwe should develop an Innovation Policy as an integral part of the Vision 2030 National Development Plan.

Africa takes a cautious approach to innovation-driven growth because the initial dollar value impact on GDP is small.

It is unsurprising that policy-makers are, therefore, persuaded that big infrastructure projects such as transport, water, and electricity are a key ingredient for the structural transformation required to unlock the value from impactful innovation.

Unfortunately, this waterfall approach to development has been disrupted by the digital Fourth Industrial Revolution.

Development components now happen in parallel and not in series.

Zimbabwe should use innovation to modernise its infrastructure so as to make it innovation-ready.

In fact, innovation shortens the time for infrastructure changes to reach 2030.

An analysis of the US’s top-valued companies for the past 100 years shows that Zimbabwe’s Vision 2030 industrialisation policy should necessarily be centred on digital innovation.

In 1917, the top five valued companies were US Steel ($46 billion), American Telephone Company ($14,1 billion), Standard Oil ($10 billion), Bethlehem Steel ($7,1 billion), and Armor & Com ($5,8 billion).

Fifty years later, the top five were (IBM $258 billion), American Telephone and Telegraph Company ($200 billion), Eastman Kodak ($177 billion), General Motors ($171,2 billion) and Standard Oil ($106 billion).

Another 50 years later, in 2017, the list top five were Apple ($898 billion), Alphabet ($719 billion), Microsoft ($644 billion), Amazon ($534 billion) and Facebook ($518 billion).

In short, the most valued companies changed from resource-based to technology-based.

Zimbabwe can attract these high-value corporates and foreign direct investment by adopting a similar model.

Digital innovations usually take a breathtakingly short time to drive GDP because they use shared global platforms and economic models to scale up.

A Rubiem Innovation analysis proves that a digital innovation model can deliver results within the set time-frames envisaged by Government.

For cars, it took 62 years for them to reach 50 million users, electricity 46 years, television 22 years, ATM 18 years, computers 14 years, mobile phones 12 years, internet 7 years, Facebook three years, Twitter two years and Pokeman Go 19 days.

Zimbabwe’s industrialisation policy should go beyond reviving industries like NRZ, Ziscosteel, Zimasco and agro and mining companies whose business models have been disrupted already.

We need to identify specific industries that have potential to rapidly scale up in partnership with other countries or corporates in order to share innovation, investment, and research and development costs and risks.

But can an economic model which is not linked to a resource or agriculture really succeed?

A 2016 World Trade Organisation report on the world’s 10 most traded goods rates Germany, whose trade in cars was valued at $1,35 trillion, at number one; followed by the US (refined petroleum) at $825 billion; and Hong Kong (integrated circuits) $804 billion.

It is important to note that although the US traded the most refined oil, it is not the world’s leading oil producer.

It is the same with Switzerland, which traded the most gold, but doesn’t have gold mines.

Zimbabwe — a landlocked country with a limited domestic market — should use digital innovation to expand the agriculture and mining value chain services to a global market and, most importantly, to transform the economic model into something completely different.

Countries like Israel have transformed their economic models to focus on technology and innovation, agriculture and resources.

A small domestic market and unfavourable geo-politics forced Israel to focus on competitive innovative products.

South Africa has a diversified economy and in 2014 ICT’s contributed 2,7 percent to GDP, which was relatively bigger than agriculture.

South Africa’s overall ICT market is expected to reach $21,4 billion by year-end and $23,4 billion by 2021.

The Asian tigers leveraged on ICT to transform their economies.

Also, Rwanda is one of the most successful cases of a landlocked small country that has built a world-class economy leveraging on ICT.

R&D

The digital innovation economic model depends on how advanced are Zimbabwe’s research and development (R&D), and science and technology policy.

R&D determines capacity to absorb or adapt technology and innovation to local context for rapid scaling up.

Africa’s struggles to leverage leapfrogging technologies and innovation are due to limited R&D investment.

The 2012 Zimbabwe Science and Technology Policy focuses on biotechnology, ICTs and indigenous knowledge systems.

The policy requires GDP expenditure on R&D (Gerd) to be at least one percent of GDP.

Zimbabwe’s Gerd was 0,12 percent and 0,76 percent of GDP in 2009 and 2012 respectively. Africa’s average Gerd is the lowest of all developing regions at 0,1 percent.

Developed economies are at 3-4 percent. The global average is 0,4 percent.

Zimbabwe can start digital innovation by developing an ICT skills base leveraging high literacy, which creates both a domestic market and source of labour.

The Home Affairs Ministry can offer incentives, citizenship or residents’ permits to foreign ICT experts, professors and R&D staff.

Zimbabwe’s agriculture research centres are in bad state due to lack of capitalisation, but these can be readily converted into agriculture software development points.

The entry point of digitisation is through the telecommunications sector.

Zimbabwe’s telecommunications revenue in 2017 stood at $1,1 billion, and the investment over the past five years was $1 billion.

Zimbabwe has to develop technology for local consumption.

Technological innovation must be accessible in cost, the skills required to use it, availability and meeting a widespread need.

A major contribution to Zimbabwe’s economic distortions is the informal economy, which contributes up to 60 percent of the total.

If this large informal sector is formalised through digital innovations such as electronic payments, the benefit could counteract volatile commodity prices.

Digital innovation can be funded through recalibrating the present resources.

The telecoms sector presently pays two percent Universal Services Fund, one percent Innovation Fund and five percent Health Levy.

This comes to $88 million yearly from revenues of $1,1 billion.

If Government budgets one percent GDP as Gerd, this results in a resource allocation of more than $250 million.

Government can also ring-fence duty on ICT products to fund innovation. Digital innovation companies can also be listed on the stock exchange.

 

Dr Dennis Magaya is CEO of Rubiem Innovations, and writes in his personal capacity. Feedback: [email protected], +263717770666 , Twitter @Dennis_Magaya, @Innovatihub