Sustaining the African Middle Class: Leveraging Green Technologies and the Fourth Industrial Revolution

By Camaren Peter

Africa’s rapid urbanisation, steady economic growth and growing – but precarious – middle class is cause for optimism, yet critical developmental challenges persist. Leveraging the overlap between green technologies and the offerings of the fourth industrial revolution is key to stabilising the middle class and closing the vast inequality gap on the continent.

 

Africa is currently undergoing a ‘revolutionary’1 urban demographic and spatial transition that has significant implications for economic growth on the continent and the globe. The emerging – mainly urban – African ‘middle class’ is central to this transition.2 The shape and form that this transition takes will largely depend on whether stable, consistent and sustainable growth and expansion of this middle class occurs in the medium to long terms. The question of what economic diversification trajectories can contribute to stabilising the African middle class is hence an important one. On a continent characterised by high levels of poverty, inequality, unemployment, food insecurity, and severe infrastructure and basic services deficits3, a socio-economically equitable and sustainable transition is required4. In this respect, the confluence between green technologies and systems solutions5,6, and the emerging offerings of fourth industrial revolution, hosts the potential to unlock new developmental and economic growth trajectories for the continent.

128 million households will transition to ‘middle class’ status by 2020, yielding a middle class that is set to grow from 355 million in 2010 to 1.1 billion in 2060.

Background

The “Africa Rising” narrative rose to precedence in the wake of the 2008 financial crisis, when the need for global growth necessitated accessing emerging markets. The optimistic outlook on Africa was predicated by significant increases in GDP growth since the 1980’s and 1990’s, with uniform spread of growth over sectors7. In addition, early projections were that 128 million households will transition to ‘middle class’ status by 2020, yielding a middle class that is set to grow from 355 million in 2010 to 1.1 billion in 20608,9. Moreover, the African labour force is projected to reach 1.1 billion by 204010 exceeding that of China and India11.

Underlying this growth is rapid urbanisation, with the continent’s highest performing 18 cities projected to achieve a purchasing power of USD 1.3 trillion by 203012,13.Africa exhibits the highest city growth rates in the world (i.e. above 4% between 1950-1990 and will remain at or over 3% to 2035-204014), with over a quarter of the 100 fastest growing cities residing on the continent15. Urban dwellers are set to increase from 400 million in 2010 to 1.26 billion in 2050, increasing its global share of urban dwellers from 11.3% in 2010 to 20.2% in 205016,17. Recent data puts African urban dwellers at 548 million and is likely to almost triple to approximately 1.5 billion between 2018 and 2050, constituting around 22% of the global urban population at that stage18.

Two critical and peculiar factors characterise urbanisation in Africa. First, that in contrast to the first wave of global urbanisation in the developed world, which coincided with the industrial revolution, urbanisation in Africa is unfolding largely with low levels of industrialisation19,20,21. Second, that 63.9% of urban growth – according to revised data published in 2012 – was occurring in small (54%) to intermediate cities (9.9%), that is; cities that range from under 500,000, and 500,000 to 1 million, respectively22.

With the majority urban condition being characterised by severe infrastructure and service provision deficiencies, the growth of small to intermediate cities presents a unique opportunity to leapfrog development and economic growth at relatively manageable scales23. In contrast to the development demands of megacities such as Lagos and Kinshasa, which are ‘locked in’ to patterns of spatial development that are characterised by high levels of slums and informality, small to intermediate cities offer the potential to work at manageable scales and still create wide scale impact.

This is not to de-emphasise the importance of larger cities on the continent, but simply to point to the opportunity that resides in small to intermediate scale cities to seed and catalyse broader scale developmental transitions. With average densities set to increase from 34 to 79 persons per km2 between 2010 to 205024, urban spatial development choices (i.e. infrastructures, technologies, urban design and planning) will likely prove critical in respect of what kind of foundation for economic growth is put in place. A low resource consumption and carbon intensive approach is necessary25,26.

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This is emphasised when considering that the African population is projected to grow from 1 billion in 2010 to 2 billion in 2020, surpassing 3 billion by 207027. Moreover, with 226 million of the African population between the ages of 15 and 24 years of age in 2015 (i.e. roughly 20% of the population, while around 40% are under 15), the “youth bulge” in Africa is projected increase by 42% by 2030 and to double by 205528,29. African youth constitute around 60% of unemployment in Africa30 yet will constitute a labour force that surpasses India and China by 2040, constituting 1.1 billion31. Clearly, an equitable transition that breaks with the history of poverty and inequality on the continent requires catering explicitly for this emerging force for change on the continent.

The question of the African middle class requires additional scrutiny in respect of transition. It is defined as people living on between USD 2-20 per day, constituting around 34% of the African population by 201032. Around 60% of this 34% live on between USD 2-4 per day and are referred to as the “floating middle class”33. With a remarkably small quotient of only 4% of people on the continent earning more than USD 10 per day (i.e. only 2% of the global middle class who earn between USD 10-100 per day) and about half living on less than USD 1.25 per day  34(i.e. below the global poverty line), Africa’s middle class is key to closing the inequality gap.

An enduring middle class ‘precariat’ is undesirable, as it mitigates against engendering socio-economic and political stability into the medium and long terms. Hence, the question of how to stabilise middle class household budgets is central to actualising an equitable transition that yields sustainable growth and diversification into the long term. In this respect, the vulnerability of poor and middle-class African households to the food-water-energy “nexus”35 is important to take into consideration.

The dependence of most African economies on imports is projected to increase in the food  and energy sectors. This in turn impacts their ability to save, service their assets, initiate and sustain entrepreneurial activities, and satisfy their basic needs.

With between 50 to 70% of household expenditure attributable to food36, water37 and energy38 (including transport39) costs, the nexus serves as an obvious intervention ‘point’40 through which household budget stability can be achieved41. Moreover, the dependence of most African economies on imports is projected to increase in the food42 and energy sectors43 (especially fossil fuels such as refined oil). These can combine, resulting in double and triple ‘squeeze’ effects that render households particularly vulnerable to exogenous changes in the availability and cost of related goods and services, periodically plunging them into poverty and near-poverty conditions.

This in turn impacts their ability to save, service their assets, initiate and sustain entrepreneurial activities (i.e. whether formal or informal), and critically, enjoy access to basic services and satisfy their basic needs. It also negatively impacts the ability of local authorities to collect revenues, which in turn increases their dependence on centralised political authorities; restricting their ability to engage in local development planning and implementation. This heavy dependence on central authorities generally slows local development down and renders it vulnerable to undue influence and corruption.

 

A sustainability-oriented infrastructure boom as a basis for growth and transition

The key opportunity for leapfrogging developmental and economic transition in Africa lies in what infrastructural and technological choices are made now in the course of the profound urban transition that the continent is undergoing. By targeting urban populations, greater impact per unit spend can be achieved, due to the higher densities of people and settlements in urban centres. By conceptualising urban centres and towns as ‘acupuncture points’ for leveraging transition, a significantly different set of developmental and economic diversification trajectories can be unlocked, especially when considering how areas of overlap between green technologies/solutions and the offerings of the fourth industrial revolution can be harnessed. The question of how this can be achieved is hence worth exploring.

African cities are typically characterised by the proliferation of slums and informal settlements, piecemeal planning, large infrastructure and service provision deficits, uneven and unplanned spatial development patterns, and high levels of informality in production, trade and service provision activities. The implementation of bulk infrastructure and technology provisions in this context is problematic, as it will necessitate ‘sweeping away the poor’44 through the inappropriate adoption of developed world styled urban master-planning. Not only will this likely encounter local resistance, it is also likely unaffordable as the escalating costs of bulk infrastructure provisions can prove significantly high, even over a short time period. 

Given these considerations, the decentralised and semi-decentralised offerings that green technologies offer, are particularly well suited to the African developmental context; both in urban and rural settings. Most households, whether urban or rural, largely lack access to reliable bulk infrastructures and service provisions. Supply is usually irregular, requiring parallel provisions by private and informal sector actors and agencies.

Decentralised and semi-decentralised offerings are suited to an “in-situ”45 approach to development in this urban context, primarily because; (1) they can exist independently of bulk infrastructures, (2) they can be scaled up to the neighbourhood scale (e.g. micro-grids linked to renewable energy technologies), and (3) they can ultimately be linked to bulk infrastructures if necessary. Moreover, green technology offerings are generally easy to install, service and maintain, requiring low levels of skills to roll-out; unemployed and un-skilled youth and others can play a key role in this kind of infrastructure roll-out.

There are exceptions such as large wind turbine technologies, which require highly skilled engineers to install and maintain, but many low-cost and low-tech green technologies exist and can be deployed in the African context. Green technologies that are suitable for the African context include the following examples; solar panels, solar water heaters, grey- and black-water recycling systems, biogas digesters, energy savings devices, energy savings companies, renewable energy micro-grids, small-scale wind and hydro energy technologies, urban agriculture and permaculture operations, agro-industrial processing, public transit systems, and waste recycling systems.

Rolling out these technologies, however, requires developing an appropriate skills base for implementation, as well as the financial, banking and credit services that low-income households require for absorption of these technologies. In this respect, the emerging and yet-to-emerge offerings of the fourth industrial revolution hold some promise. For example, platforms such as Blockchain and Etherium allow for new provisions to be developed that forgo the need for 20th century institutional infrastructures, (for example, in; training, skills development and certification, as well as financing, banking and micro-credit), significantly reducing the costs of providing these services.

Examples of appropriate 4IR offerings that can help support and catalyse rollout of green technologies and solutions include; financing, insurance, micro-credit and banking services; advanced revenue collection systems; sharing economy offerings; education and skills development; real-time data and information synthesis and analytics; data integration, visualisation and analytics; smart materials, smart systems; coordination of resource and other material flows; automation, 3-D printing, mechanisation and robotification; logistics, transportation, and planning and spatial development.

Additionally, a key opportunity exists in small to intermediate cities, which are largely growing along the corridors that connect larger urban metropoles. Here, the potential for innovation, learning and leapfrogging is greatest, as the risk is relatively lower than in larger urban metropoles. They can hence serve as ‘test-beds’ for implementation of new, customised systems solutions46 that adequately address local contextual specificities. Learning from innovation and implementation in these contexts can be harnessed to scale up efforts in larger urban locations, as well as in rural and quasi rural-urban settings.

 

What kind of transition?

In this model of development, a sustainability-oriented infrastructure boom that leverages green and fourth industrial revolution offerings to close “the twin deficit in infrastructure and inclusive finance 47” in Africa. Adopting decentralised and semi-decentralised infrastructures and technologies that lower the costs in the food-water-energy nexus, will help provide a stable foundation for additional growth and diversification. By stabilising the middle-class consumer base, other tiers of economic activity can take hold and grow.

Local authorities can then engage in more reliable revenue collection and be empowered to act locally without being heavily dependent on the influence of central governments. Moreover, if households are more dependent on decentralised and semi-decentralised infrastructures and technologies than bulk infrastructures, bulk infrastructure provisions can be freed up for entrepreneurial, agricultural and industrial activities. Critically, if adequate consideration and planning goes into how local systems can scale up – i.e. in near-seamless, nested scales – additional resilience can be achieved, buffering economic activities at different scales from exogenous change impacts.

It is also important that the African transition is predicated on absorbing the large youth bulge into employment by creating new avenues for large scale growth of small, micro and medium sized enterprises48 in both formal and informal sector activities, as well as increasing their appeal to investors49. A skills transition is hence required; one that targets the – majority unskilled, but tech savvy – youth heavily, but also targets unskilled, semi-skilled and skilled workers from other sectors that may face the prospect of increases in unemployment as robotification, automation and advanced data analytics systems replace them. A multi-level skills transition that is driven by clear and strategic decision-making, resource allocation and institution building is needed to boost innovation and the development of systems solutions that are customised to local African contexts.

Boosting local economic diversification through a sustainability paradigm that embraces the fourth industrial revolution has foreseeable benefits, in particular; improving the quality of life for African citizens and ensuring more sustainable and equitable use of resources. The potential exists to leapfrog the developmental trajectories that were adopted in the Global North, granting regional African economies a new footing upon which to diversify economic activities. Ultimately, seeing through this agenda will require that political stability is engendered through leadership that is bold, transparent, accountable, responsible and effective.

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Camaren Peter (PhD) is an author and Associate Professor with the Allan Gray Centre for Values-Based Leadership at the University of Cape Town’s Graduate School of Business. His research and practice is concerned with the grand challenges of the 21st Century. These range from political, technological and socio-cultural transitions, to powerful global change phenomena such as urbanisation, resource scarcity, ecosystems degradation and climate change.

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