Working Paper 36 - Information Technology and the Challenge of Economic Growth in Africa

The recent advances in information technology are becoming central to the process of socio-economic development. Information technology offers new ways of exchanging information, and transacting business, changes the nature of the financial and other service sectors and provides efficient means of using the human and institutional capabilities of countries in both the public and private sectors. The world is rapidly moving towards knowledge-based economic structures and information societies, which comprise networks of individuals, firms and countries that are linked electronically and in interdependent relationships. In an increasingly globalized economy, information technology is one of the key determinants of competitiveness and growth of firms and countries. Firms are becoming more competitive on the basis of their knowledge, rather than on the basis of natural endowments or low labor costs. It is becoming increasingly apparent that the role of traditional sources of comparative advantage (a large labor force and abundant natural resources) in determining international competitiveness is diminishing. The competitive and comparative advantages of countries are gradually being determined by access to information technology and knowledge. The comparative advantage that now counts is man-made, engineered by knowledge through the application of information. Since man-made comparative advantage can only be acquired by knowledge and brainpower, the newly emerging knowledge-based economic structures have far reaching implications with regard to labor markets and the roles of technical education, human capital formation and research and development in the process of economic growth. The evolution of the knowledge-based economy is expected to result in increasing the demand for skilled labor and reducing the employment prospects of unskilled labor. And within economies, enterprises would succeed only to the extent that their employees can access and use information and knowledge effectively. Information technology does not only determine the market share and profitability of individual companies in tomorrow's global economy, but it also has a huge impact on future generations of workers and on a country's economic prospects. What are the implications of information technology for the relative fortunes of nations? Countries that invest in and adopt information technology quickly will move ahead and those that fail to rapidly adopt information technology will be left behind. The views on the possible impact of the information revolution on African countries can be grouped in two opposing schools of thought. The first school predicts that as African countries incur an increasing 'technological deficit' the welfare gap between them and the industrialized world would increase. This school stresses that Africa risks further reduction in its ability to generate the resources necessary to accelerate its growth rate and reverse the trend of increasing poverty. On the other hand, the second school believe that information technology may actually help reduce the income gaps between rich and poor countries. In the words of Negroponte (1998): "the Third World five years from now may not be where you think it is. There have been many theories of leapfrog development, none of which has yet survived the test of time. That's about to change". The basic issue separating the two schools with regard to the impact of information technology on African countries is the question of whether Africa and other developing regions could, in the first place have adequate access to the global information Infrastructure, and hence to the information technology age. The prediction of the first school stems from the notion that, starting from an initial position of poverty, African countries would not be able to finance the investments in information infrastructure and computer hardware and software required to access the information technology age. This would, in turn, mean that they would risk increased marginalization in the global economy with severe competitive disadvantage for their goods and services, and hence for their development prospects. The prediction of the second school is based on the argument that the information technology, itself, would provide the means for countries to turn their disadvantages into advantages; adjust to the new ways of doing business; and, put in place the required infrastructure of telecommunications and information systems. This paper reviews Africa's development challenges in an increasingly information and knowledge-based global economy. It outlines the roles of knowledge and information technology in addressing these challenges and also discusses the strategies and policies that Africa and its development partners particularly the African Development Bank could adopt to accelerate the process of integrating the region into the emerging global information system. The paper is organized in five sections. Following this introduction, the next section examines the major developmental challenges facing Africa and what role information technology could play in overcoming them. Section III outlines the policies that would need to be adopted by African countries to improve their information accessibility and examines the initiatives taken by African countries in this domain. Section IV examines the role that could be played by the African Development Bank Group. The conclusion of the paper is provided in the last section.