This is part 2 of a 2-part series. We wrote a summary of part 1 on TechCabal, where we then invited people to read the full piece on our blog. Below, we are sharing the summary of part 2, and we have again written a longer piece here that we invite you to read.
In part 1 of this series, we got into the details of the unexpected challenges African countries face in creating enough jobs for the 500 million people joining the job market in the next few decades. We delved into the continent’s past reliance on extractive industries and the challenges to replicating Asia’s manufacturing-led growth. Essentially, we saw that the manufacturing-based, export-led growth model that most countries have used to generate prosperity since the first industrial revolution in England in the late 1700s no longer shows as much promise. The continent will have to reinvent new models for the current age and, in particular, fight the “non-demand” for African labor by using technology to expand what is tradable on global markets.
Now, in Part 2, we’re ready to confront the burning question: what kind of economic model is truly up to the task of putting 500 million people to work?
It’s no small feat. We’re talking about creating a new economic playbook, one that hasn’t been tested before. Can we reinvent manufacturing against seemingly insurmountable odds? If not, where else can we find a sector powerful enough to generate millions of high-paying jobs, surpassing the limitations of commodity agriculture and basic services? To answer this, we must first dissect what made manufacturing such a powerhouse in the first place.
Manufacturing isn’t just about factories and assembly lines; it’s a complex ecosystem fueled by technology, capital investment, and economies of scale, all of which drive relentless productivity growth. Critically, its output is often tradeable—exported, allowing countries to tap into global markets and break free from the constraints of local demand. But could these unique advantages be replicated elsewhere?
Any new economic model for Africa must meet five crucial criteria. First, it needs to be able to absorb a massive number of low-skilled workers. Second, it requires sustained long-term demand to support millions of jobs for decades. Third, it must leverage technology, capital, and scale for efficiency gains. Fourth, it must be able to target global markets through export opportunities to achieve a large enough scale. And finally, it needs the ability to “ladder up” into higher value-added activities to grow wages over time. Few existing models tick all these boxes, making our challenge all the more pressing.
While finding a perfect fit might seem elusive, we see promising possibilities in four key opportunity areas that we unpack in our longer piece. These are areas we feel have huge potential but don’t get enough attention in the broader discussion on economic policy. The potential of each area is illustrated by one or more investments from our portfolio:
First, we explore expanding what is tradable. Services are the largest sector of the African economy but are usually not exportable as they require in-person contact. Using technology to broaden our export base, and replicate the core strengths of manufacturing—labor absorption, productivity growth, scale, and learning. John Page at Brookings has a concept of “smokestackless industries” like advanced agriculture, tourism, outsourced business services, and ICT – these are a good starting point. But we should go further. What if we could transform traditionally non-tradable services into export-ready opportunities through technology? The global trend favors us; services trade is booming, driven by advances in digital technology. With lower trade barriers and Africa’s abundant, low-cost labor, the potential here is enormous. Imagine African workers tapping into global markets for services. We’re already seeing glimpses of this with companies like Terminal (advanced, cross-border logistics), KaFresh (patented spray to preserve high margin Ag exports during transport), Matta (largest marketplace in Africa sourcing minerals for export), Chargel (cross-border transport marketplace), Turnstay (stablecoin rails for tourism businesses), and HustleSasa (marketplace bringing Africa’s creative economy to the world) —companies in our portfolio that are reshaping what’s possible and bringing Africa products and talent to the global marketplace.
Next, we consider turbocharging export-led agriculture. Africa holds 60% of the world’s uncultivated arable land but contributes less than 5% to global agricultural exports. Something’s not adding up. Yields have been declining, and basic processing is often outsourced. But what if we focused on high-value agricultural exports for wealthier markets? Inspired by Asia’s earlier agricultural reforms, we see potential in advanced agriculture and horticulture. Technology can play a pivotal role in boosting processing, moving towards higher-margin exports, and integrating fragmented networks. KaFresh, with its patented organic spray that extends shelf life, and Yola Fresh, with its farm-to-table supply chain platform, showcase what’s possible.
Then, there’s reshuffling the deck for manufacturing. While some have written it off, we believe there’s still life in this sector. Manufacturing accounted for 11% of Africa’s GDP in 2023, down from 17% in 1995. But improvements are possible. We need to tackle trade and logistics inefficiencies, strengthen supply chains, address human capital deficits, and improve the business environment. Rather than focusing solely on training, we see more potential in applying technology to supply-side marketplaces and cross-border logistics. Companies like Matta, Terminal, and Chargel are already making waves. And don’t forget intra-African trade. The African Continental Free Trade Area (AfCFTA) could be a game-changer, but it needs to overcome its implementation hurdles.
Finally (and most controversially?), we explore enabling labour migration. Africa has a labor surplus while the rest of the world faces a labor shortage. This seems like two problems that, in theory, should solve each other. Economists like Lant Pritchett and Charles Kenny highlight the potential of labor-based migration as one of the best ways to break the “non-demand” problem. But there are challenges — e.g., political resistance in wealthy countries and competition from other developing regions. Despite the headwinds, the economic pressures are undeniable, and investments like our investment in NALA (the leading African remittances platform) are already tapping into the potential of remittances and connecting Africa’s global diaspora.
All these opportunities are related to the overarching concept of cybernetic commerce that DFS Lab has written about before (and which is core to our thesis). How can digital technology and AI augment people rather than replace them? In Africa, where capital is scarce but people are plentiful, leveraging technology to empower workers, businesses, and existing informal workers is critical. As Stephen Deng has articulated, “cybernetic commerce” is about augmenting people, not supplanting them.
Ultimately, Africa’s greatest asset could be its burgeoning population. If we can harness technology to connect African workers and entrepreneurs to world markets, we can unlock immense growth and create enough high-wage jobs. That is the unifying question driving our thinking at DFS Lab: how to connect African businesses to world markets to expand, grow, and create many higher-wage jobs. This key question will drive much of DFS Lab’s thinking for the coming years. This is merely the starting point. What awaits in the full discussion are the intricacies of the approaches, the nuances of each challenge, and deeper insights into the transformative role of AI and digital technology in shaping Africa’s economic future. Please click here to see our full analysis.
Jake Kendall is a researcher, investor, and policy expert focused on Africa’s digital economy. He is currently co-founder and managing partner at DFS Lab, a Research Fellow at Cambridge University Judge School of Business, and teaches at Sciences Po, with past roles spanning the Gates Foundation, World Bank, academia, and two years as an aquaculture extension agent in rural Zambia.
