You deserve to jump straight into the Fourth Industrial Revolution, head-on. It can be done. There is nothing to fear or hesitate.
The policy’s point of departure is recognizing that the biggest and best resource we have is the people, human beings, their ingenuity, thirst for knowledge, ability to learn, and the quest for progress. If your people can be tooled with fourth industrial revolution knowledge as well as the tools to perform, they can perform.
But we have been educating so many people and they are unemployed right now? What has changed? The fourth industrial revolution changes everything.
We are standing at the crossroads, presented with an opportunity of quickly catching up or never catching up, thus falling from the edge of the precipice. It is a do-or-die scenario. Now or never.
Previously, the financial and technical know-how needed to industrialize was an insurmountable burden. To even think of setting up a manufacturing plant, you needed tons of capital and an army of expert engineers.
But now the internet has changed everything. Knowledge and technical know-how can be passed around easily. It's now easier to migrate a thousand engineers from Seoul to Harare than it has ever been. A company in Vancouver can hire an engineer in Nairobi and vice versa.
Globalization has changed capital flows. It is now easier, more than ever before to access any financial market from anywhere. FinTech, DeFi, and blockchains are democratizing the capital-raising space. Private companies, sovereign nations, and individuals have a level of access to global markets that were unthinkable only a decade ago.
Capital can be raised. People can be trained. Progress can be achieved if we as a country have a high level of organization to make use of these two resource pools. The industrial policy we deserve is rooted in this realization. It’s rooted in the acceptance that whatever format of education we had before needs to be changed so that we adopt an education format geared towards the 4IR.
The thrust is on developing technological and organizational capabilities which will sustain a manufacturing-based technologically advanced economy.
The Industrial Policy you deserve has to be anchored around the following facets:
- Command Industrialization — Macro themes to be centrally-planned and directed with micro-themes left for the market economy.
- 4IR Technologies — Leapfrog an era of industrialization, jumping straight into the 4th Industrial Revolution.
- Specialized Focus — A laser focus on a few key areas where we can have the greatest competitive advantage.
- Avoiding the Import Substitution Industrial Policy Trap- we actively choose to focus on exports rather than being obsessed with imports. Instead of asking, what do we need to stop importing we ask ourselves what can we export to the world?
- Making use of outdated tech somewhere to bridge employment gaps in the short run.
Certain things cannot happen alone without government intervention. Industrialization cannot kickstart when left alone to the private sector. The default setting of the private sector is to import.
The government has to create conditions for the private sector to develop an entire industry. The state puts in place systems and conditions that allow the market economy to emerge and prosper
In that regard, the industrial policy (especially the one we deserve) is essentially a form of commandeering the economy towards a specific direction. It is exactly central planning at the highest level and a market economy at the levels below that. This is the best way to catch up and run ahead. An active role of the state is needed. A big push is required from the state in order to kickstart everything.
We have a labor force of 7 million. We need to convert a portion of it to a heavily tech-focused labor force. The Industrial Policy we deserve should be pivoted around creating a capable labor force, which will then flow into the creation of the relevant industries.
Fourth Industrial Revolution Technologies
Instead of developing slowly stage by stage, we leapfrog. We will endeavor to create a very advanced economy super-imposed on a very backward economy. We will then build bridges to migrate those left in the old economy to onboard into the new economy.
The overarching idea is to try and avoid a situation whereby the manufacturing sector starts to decline before the country fully industrializes. By leapfrogging we guarantee ourselves a place in the future global economy. We set the pace. We actively participate in structuring the supply chains of the global economy affected by the 4th Industrial Revolution.
The great thing about software-as-an-industry or as the foundational layer of the industry is that; it is by default integrated into global supply chains. If we train a workforce and we are not capable of deploying all of the workers into jobs within our economy, the workers can find jobs outside our economy and work remotely, thus still contributing heavily to the software industry and our GNP.
Essentially, we will view software technologies as an industrial base on its own, where value is not created from physical products but created out of thin air, from lines of code. Then we will add the production of physical products enabled by software advances to complete the industrialization process.
The portfolio of industries we chose to laser-focus on should not be conservative. It should have exciting new things that are risky because our extraction-based traditional economy (agriculture and mining) is already leaning towards conservative bets.
The overarching idea is to restructure the “loser” of an economy into a winner by propelling forward certain industries and raising the overall productivity of the economy.
We could choose to focus on any five of the following areas:
- Artificial Intelligence -building and deployment of models
- Blockchains — development of blockchain-based products
- Battery Technology — manufacturing of
- Renewable Energy— manufacturing of
- Semi-Conductor Chips — manufacturing
- 3D printing — mould production, manufacturing (printing) of goods
- Consumer Electronics — assembling
- Industrial Robots — manufacturing of
- Clothing and Textiles — human mass production and tech-enabled production
- Drone Technology — manufacturing of
In the absence of active interest from investors, the state would play the entrepreneurial role by starting up companies at the seed stage to be later disposed of in the private market. The role is just to kick-start the activity. It's an active move determined to lower the risk for global entrepreneurs trying an untried African country.
Another way to short-circuit the development would be to get the billionaires who are working in the selected places involved. Gather them in a meeting room and ask them what they want to get stuff done.
We will essentially give them an open check for writing their own rules as long as they are within a few environmental parameters.
Avoiding the Import Substitution Industrial Policy Trap.
Instead of the misguided Import Substitution Industrial Policy, the Industrial policy we deserve focuses on exports. We cannot create a self-sustaining economy in a globalized world and still expect to enjoy a high standard of living.
Someone somewhere is bound to produce something at a cost that is lower than ours. Instead of fighting to close borders and prevent that product from coming in and trying to stimulate our “perpetually infant” industries to a level where they can compete with the products produced by someone somewhere, we should rather look for something else that we have the best odds of beating the entire world at.
There has to be something we are better at, or we have to get better at certain things. Obviously using our diverse and blessed resource bases and training our labor force there will be plenty of things that we can get very good at to a level where we outcompete everyone in terms of cost and quality.
For example, no country in the world should be able to beat us in lithium-ion battery technology. We have the biggest and cheapest lithium deposits. We can also have the best brains or hire the best and brightest people from all over the world to engineer our production systems.
By laser-focusing on areas where we have the highest probability of winning, we will actually excel and win in those areas. The income we get from those areas (exports) will be more than enough to allow us to enjoy all the imported products we want. Instead of focusing on substituting imports, we focus on the export side. What can we do for the world? How can we be of help?
The import substitution argument is misguided in that the items to substitute will never be enough. Once you go down that route you end up in a never-ending iteration of banning the import of one product after the other.
Import substitution is a fight against the powerful forces of globalization and deflation. It is a war that a country could never win.
The worst effect of the import substitution industrial (ISI) policy is that it impoverishes the entire country by making sure that everybody pays a high price for locally manufactured goods when the rest of the world is enjoying cheaper goods.
If Country A can grow bananas at a cheaper cost, it only makes sense for country B to import from that country, as long as Country B is also good at something. If Country B tries to grow its own bananas to substitute the imported ones, its citizens can end up paying $5 per kg of bananas instead of $1,50.
Extrapolated over a wide range of products the effects of the policy are evidently disastrous. Imagine paying 30% more for cooking oil, 50% more for bananas, 70% more for blankets, 60% more for television sets just because of import substitution. Given the same level of income, residents of country B have way less buying power.
The Intention of the import substitution policy is good, but the logic is misinformed, the thought-process is poor. You don’t need to substitute all; you only need a few things you are very good at and globalization will reward you.
Before globalization, ISI seemed to work. Post -globalization, ISI is a very difficult proposition.
Making use of outdated tech to bridge employment gaps in the short run
For this one, we will lever on migrating SA business northwards across the Limpopo to manufacture in Zimbabwe. Old manufacturing tech can be imported into Zim. The industrial base to emerge from this will be transitory and act as a bridge between the highly-advanced tech-enabled economy and the old economy.
This part of the industrial policy is a copy-paste. Nothing new, nothing revolutionary, nothing exciting. Swindling away some manufacturing capacity from South Africa is not a remarkable feat.
An ambitious industrial policy of this magnitude requires an exceptionally-capable bureaucracy. This is the first line of capacity that has to be built. It is not a herculean task. Administrative capacity-building is an administrative job in itself. Admin can easily be sub-contracted to field experts.
The implementation of the Industrial Policy would be spearheaded by engineers and technologists. We should create a government agency with ministerial-level powers that we can call the Industrialization Lead Team (basically a bureau) that spearheads development. This would further be broken down into 5 steering committees comprising of 10 members each for a total of 50 members for the Lead Team.
The Industrialization Lead Team becomes the epicenter (from a governance perspective) of transforming the country into a tech-based economy. The rotating chairperson of the team would also be rotationally appointed as the Minister of Industry and Trade (or whatever title and powers there
It has to be noted that there is a trade-off between the development of a strong industrial base and the development of a vibrant financial services sector. A strong financial sector results in high real interest rates which are not conducive for creating an industrial base, because the industry has to finance production at those high rates, the hurdle is too high.
In terms of sequence, the industrial policy takes precedence over the “financial-hub” policy. We would rather re-create a South Korean miracle first before creating a Singapore miracle. In any case, due to the on-going disruption of traditional finance, a technological bet is in line with a financial bet as finance is drawn towards a tech-driven singularity.