The Nobel prize committee recently recognised the enormous value of disruptive innovations as a historic agreement was struck in the Middle East. How are these related events relevant to SA?
The status quo entrenches incumbents, whereas advances expand opportunities benefiting laggards. Until about 50 years ago, most wealth creation happened in Western countries. Then trade agreements leveraged technology-induced reductions in trading costs to pummel global poverty, mostly through the spectacular rise of Asia.
Now more than ever, resource endowments stifle development. Most of today’s commodity-exporting countries are poor due largely to patronage and corruption blocking innovation and global integration. Such characteristics have long thwarted development in the Middle East and Africa.
Emulating how the UK and Japan pioneered industrialisation in Europe and Asia, the United Arab Emirates (UAE) developed paths to transcend reliance on commodity exporting. Conversely, Sub-Saharan Africa still lacks a role model.
Whereas many Middle Eastern governments are monarchies with cultures moulded by religious traditions, most Sub-Saharan African countries are democracies where political parties must leverage or straddle tribal loyalties.
Israel is home to the Middle East’s most dynamic economy, but bigotry has stymied its regional integration. The plight of Palestinians had long been exploited by the region’s rulers as it improved domestic and regional unity through fanning hatred of a shared enemy, Israel. This distracted from the region’s inequities.
Rulers of resource-rich countries can firm up their grip on power by fuelling bigotry — until they seek global economic integration beyond supplying raw materials. The UAE, Saudi Arabia, Qatar and Bahrain are now rejecting hate to embrace innovation. They have attracted AI data centre commitments leapfrogging industrialisation. Kuwait and Oman are exploring similar options.
Before the industrial era prioritised hydrocarbons and strategic minerals, land ownership was central to agricultural output and wealth accumulation. Today’s rapidly evolving phase of the information age prizes commercially astute innovations and stable jurisdictions.
The ANC’s mix of BEE and localisation policies has entrenched the world’s most severe youth unemployment crisis, while its international relations prioritise Iran, Russia and Hamas. Beyond attributing blame, the navigation challenges from here are extreme.
The ANC aligns with anti-Western and African countries despite all other regions being more advanced for having integrated into the rapidly evolving global economy. Sub-Saharan Africa now accounts for two-thirds of the world’s extreme poverty, up from just more than 20% in the mid-1990s.
The job creation potential of expanding Africa’s regional integration is meagre. About 98% of the world’s discretionary income resides beyond Sub-Saharan Africa.
Arab leaders are embracing innovation, risk-taking and global integration to move beyond commodity exporting. Our diverse leaders accept the ANC’s irrational expectation that through localisation we can resolve our unemployment crisis.
Such thinking has led to most of those who were born in our first decade of democracy being persistently unemployed. This is the age cohort that in other regions spurs growth by raising productivity, often in new types of jobs with new tools.
While awareness that BEE is counterproductive is rising, localisation remains broadly accepted, and this ensures a grim future. China would still be poor if it had chosen localisation. Instead, it chose global integration and specialisation. Asia has flourished due to such pragmatism, and leading Middle Eastern countries are now overcoming their biases to pursue exciting new commercial possibilities.
Instead of integrating our young adults into the global economy, our various leaders promote trickle-down domestic growth: once the more affluent are even more affluent, there will be more jobs. This would sound dubious, particularly given the global economy’s ultra-competitiveness, even if our 10-million person unemployment queue was a 10th its size.
High job growth requires that our young adults add value within global supply chains. This is mostly about carving out niches in expanding sectors through developing specialised skills, such as humanising types of AI-driven interactions.
As progress in the Middle East and insights about disruptive innovations suggest, sometimes dramatic pivots amid much uncertainty are required.
• Hagedorn (@shawnhagedorn) is an independent strategy adviser.
