Artificial Intelligence and its Implications on African Business

Technology has changed in bounds within the past 100 years, and the last 10 years has seen technology with emphasis on Artificial Intelligence becoming a key component in Business.

Artificial Intelligence and its Implication on Africa

The growth of Artificial Intelligence has seen the technology playing a developing part in different sectors of industry which range from Agriculture to the motor industry with some retail sectors taking it up. The thrust of AI is about efficiency and cost saving whilst doing away with certain components of  human weaknesses to create a leaner labor provision, well at least that is what it may appear to be. However, it is important to note that AI brings with it new efficiencies which have not been seen in our human recorded history. Driver-less cars and shopping experiences are all but a taste of the level of efficiency that AI will bring to the industry. However as good as the technology is what are the implications to Africa?

If AI brings cost effectiveness can the business compete.

The African business is about labor and employment of people. Whilst most economies have gone full circle in the employment of citizens, Africa’s main mantra has always been about FDI bringing in opportunities for jobs. If one is to check on an African political rally before presidential elections, the talk is about how more jobs will be created. We are not saying that the western and eastern world do not say the same things but however the emphasis is more in Africa. With more jobs comes a huge Labour cost in the financials. So in the income and expenditure statement of most companies there tends to be more labor costs with some accounting as far as 20-50% of the total expenditure that the company has to contend with. The knock on effect in this case is the profit margin and the cost of production. The cost of production is high, the product price will be high. This may mean a higher or lower profit margin but whichever the market presents the cost of the goods or products increases to a point where it is debatable with regard to the market accepting the product.

So if a company based in Africa has a labor force whose total expenditure is 40% of the total overheads, resulting in a product costing $40 whilst a competing import after duty costs $34, the implication is significant with regards to viability. AI can bring with it a level of cost effectiveness where efficiency is increased and the Cost of Poor Quality (COPQ) is drastically reduced such that the margin for a product is higher hence more value for the shareholder is realized. Can the business in African which is not using technological competencies such as AI managed to export its products to a market zone whose local industry is based on AI?

Looking at labor alone is not a complete picture but serves as the biggest component of expenditure for most companies in Africa. A look at how AI is being used in different sectors of the world reveals how efficiencies are being harnessed such as Agricultural robots as noted by who note that “Companies are developing and programming autonomous robots to handle essential agricultural tasks such as harvesting crops at a higher volume and faster pace than human laborers.   ” Where the agricultural sector lies in an African context is on how much capital the industry can harness to develop such technologies in its processes. The question will however rise as most people in Africa are largely dependent on the land and how it is utilized. To then employ technology which subtracts the need for human labor might prove to be socially detrimental to those who rely on the land for their income. Here lies the issue, in an economy whose industry is more labor based how do companies balance social profit within the pursuit of economic profit.

Mckinsey notes on one of their articles that “Highly developed economies with high per-capita GDP and rapidly aging populations will soon rely on AI-based automation to power the productivity gains necessary to achieve GDP targets.” The pressure in the economies is about having a good GDP that supports the population, whilst other nations may pursue it through the use of AI, other nations may require that labor force to be the main driver for economic development.

Will AI create a poorer Africa?

If one region has a greater competing economies of production whilst the other is still looking for FDI to help spur infrastructural development then to what extent can Africa enrich itself. The focus for most African countries is the development of infrastructure which includes roads, institutions, dams and more physical “natured” developments. Sustainable development is still a pipe dream for most African countries as their dependency on Aid and their trapping on world debt makes their development nothing short of a balancing act between meeting payment requirements and social peace. The ironic thing is that most citizens are worried on the availability of bread whilst other are thinking how do we get to Mars. The gulf between the so called first world and the previously labelled third world is not just in economics but in technological advancement.

Africa is more sensitive to poverty than the developed nations as African countries import most of their goods. A walk in any “retail store” reveals the extent of dependency which varies from the Coca Cola product to the Nivea product. Most aspects of products bought for consumption are imported which includes entertainment such as the English Premier League, where it is common to see an African child wearing a Manchester United or Liverpool jersey in favour of the local football jersey. Such is the extent of the current imbalance of economics that AI is just another cog in the system of differentiation between developed and not so developed countries.

This article is not saying AI is bad but rather pointing out that Africa cannot compete unless if it hauls itself to the same level of technology based productivity. The same can be said for all the different industrial ages where the gulf in development has been apparent for all to see. If a continent is still struggling with the building of a sufficient road network, it is behind in the information network, at what point will it catch up with the intelligence network? AI is that new network that is moving the world to the next level of social interaction, economic development and ultimately human quality of life. The ability to build this network will determine who is where in the race to economic gain.

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