Where GE and Africa Meet Trends and Opportunities for Innovation in Africa

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1 Where GE and Africa Meet Trends and Opportunities for Innovation in Africa GE Africa Innovation Centre Background Paper 1 September Glenhove Road Houghton Estate Johannesburg South Africa Tel

2 Where GE and Africa Meet Trends and Opportunities for Innovation in Africa GE Africa Innovation Centre Background Paper 1 September 2016 The GE Africa Experience is a digital and interactive experiential centre, providing a journey through GE s history to it position today as the world s premier industrial company. The journey includes a comprehensive examination of contemporary mega-trends impacting on the African operating environment. For GE Sub Saharan Africa, these are mega opportunities. 1. Socio Economic Trends Inclusive Economies Fast Growing Economies Demographic Dividend Engine of Entrepreneurship Economic growth and poverty reduction have transformed Sub-Saharan African countries in recent decades. Today a population boom, demographic dividend and thirst for entrepreneurship is set to accelerate the region s transition and empower its populations. Sub-Saharan Africa is emerging as a continent of opportunity. This is the African Era. Fast-Growing Economies Africa is the world s fastest growing continent. GDP is expected to grow by around 6% per year through 2023.Thanks to this strong economic growth, the share of the population living in poverty has fallen below 50%. However the continent is home to 75% of the world s poorest countries. To continue to lift its populations out of poverty, African nations need to diversify their economies to create longterm growth and sustainable work opportunities for future generations. The Demographic Dividend By 2025 Sub-Saharan Africa will be home to one-quarter of the world s under-25 population, and the world s largest workforce. This large number of working age population can translate into accelerated economic growth. The key to this is the investment in appropriate education and skills development. The Engine of Entrepreneurship Sub-Saharan Africa has high rates of entrepreneurial activity. It has 27% of the Total Early Stage Entrepreneurial Activity Index, which represents the percentage of working-age individuals starting or running new businesses compared to 8% in the European Union and 11% in North America. Entrepreneurship is key to work opportunities, economic growth and innovation across the region.

3 2. Urban Transition Urban Africa Rising Middle Class Powering African Economies Mega Cities Workforce of the Future Sub-Saharan Africa is on the cusp of a great change. Urbanisation is happening at a rate never before seen. Cities are growing, driving creativity, innovation and empowering citizens. Urban Africa By 2050 more than half of Africa s 2.2 billion people will live in urban areas equivalent to the population of China. Well-planned urbanisation brings opportunity, and across the globe people are likely to live longer and healthier in urban areas. Given the timely arrival of Africa s urban transition, there are real opportunities for embracing efficient urban models that effectively meet the needs of residents. Rising Middle Class Driven by urbanisation and economic growth, middle-class households in Sub-Saharan African economies are set to grow to 40 million by Rising spending power brings with it increased demand for consumer goods and services and consequently emerging and expanding industries - helping to fuel the economy, and providing work opportunities and investment. Powering African Economies Sub-Saharan Africa needs to ensure a steady, sustainable supply of electricity to power its growth. Electricity generation will need to almost double by 2040 to meet per capita demand. Sub-Saharan Africa has abundant renewable and non-renewable energy sources. Continuing to invest in steady and reliable electricity generation is key to higher productivity, health and education for households, communities and countries. Mega Cities Half of the world s fastest-growing cities are in Sub-Saharan Africa. At the turn of the century Africa had just one mega city an urban area with a population of 10 million or more. In the next 20 years another seven will join the mega city category. In the same period, it will go from having three cities with a five-million-plus population, to twelve. To realise the urban dividend, countries will need to expand access to key services and plan for cities new in size and scope. Workforce of the Future Sub-Saharan Africa is expected to expand its workforce by more than the rest of the world put together by To create enough work opportunities for its rapidly expanding population, the region needs to diversify its economy, boosting manufacturing and service industries. At the same time, the gap between skills created by the education systems and those needed by industry need to be closed in order to meet future demand.

4 3. Technological Innovation Industrial Internet Enabling Technology Accelerated Industry and Manufacturing The rapid pace of technological innovation is set to transform economies and lives around the world. Supporting, fostering and embracing innovation is key to help Sub-Saharan Africa embrace enabling technologies to fulfil its potential. Industrial Internet The Digital Industrial Era combines the efficiencies of the industrial age with the accelerated advantages of digital technologies such as Mobile Telecommunications, Cloud Computing and the Internet of Things (IoT). Telecommunications Infrastructure and wifi access in particular has been recognised as both a basic human right and a means to leapfrog and uplift underdeveloped societies. Across the globe, sensors are emitting terabytes of valuable data - from aircraft engines, turbines, and locomotives, to healthcare equipment and other industrial machinery. Better mining, management and analysis of this data can be harnessed to predict performance, ensuring enhanced efficiencies across all industries and social structures. GE s Industrial Internet leverages telecommunications infrastructure and digital technology hardware and software, cloud storage and digital platforms to ensure enhanced efficiencies across industries, and, in effect, uplift entire communities, while accessing remote and inaccessible sites. Enabling Technology Technology is helping to solve some of Sub-Saharan Africa s most pressing challenges. Healthcare The combination of mobile technology and healthcare - mhealth - is providing better access to information, improving healthcare service delivery and saving lives. Education Access to Wi-Fi and telecoms services; Smaller, faster, and cheaper hardware and devices; digital and e-learning tools and applications are driving new models of education and expanding access to formal education and training. Energy Prices for renewable technologies are falling. Decentralised microgrids are bringing power to off-grid and remote areas. Accelerated Industry and Manufacturing Sub-Saharan Africa has the opportunity to harness cutting-edge technologies and emerging digital trends to leapfrog to an era of accelerated economic growth and enhanced industrialisation. There is opportunity to harness telecommunication infrastructures, digital connectivity and advanced manufacturing techniques, new production methods like 3D printing and advanced materials production. Industry and manufacturing could become a sustainable catalyst for economic growth and employment.

5 4. Infrastructure and Regional Connectivity A Closer African Region Aviation Takes Flight Connected Intelligence An ever-closer region is key to accelerating growth. Whether through infrastructure, cultural exchange or economic trade, interconnectivity can lead to transformative progress A Closer African Region African economies have grown at rapid rates over the past decade. However, the continent s inter-regional trade remains low, pointing to an important, but underexploited, source of growth. Enhancing regional trade can help build new markets, and increase efficiency. The importance of regional integration is being felt across the continent, and African leaders have called for a free trade area by Aviation Takes Flight The African aviation sector has one of the fastest growth rates globally. Passenger numbers are expected to reach 280 million in In addition, the aviation industry is expected to create close to 1 million jobs over the same period. Currently 80% of air traffic to Africa is on non-african airlines, presenting new avenues for growth. Rail on Track With a total length of about 56,000 km, the railway network in Sub-Saharan Africa accounts for only 2% percent of the total length of the railway lines operated worldwide, representing ample potential for growth. Sub-Saharan railways have a good average haulage, adequate for developing efficient freight railway transport. Rail is five times more efficient in emissions and fuel consumption than road or air, making it an important factor in sustainable mobility. Developing the region s freight transport is key to boosting intra-regional trade, which could connect economies and form a more connected Africa. Connected Intelligence Technological innovation is changing the shape of the traditional workplace. 60% of jobs that will exist in the next decade don t yet exist today. Mobile telecommunications allow the global workforce to be present at work, but absent from the workplace. And trade occurs in virtue markets, while modern technology has introduced marginalised markets and workforces into the mainstream economy. What GE calls the Global Brain the collective intelligence of human beings across the globe integrated by digital communication networks will grow exponentially, unlocking innovation and transforming economic opportunities across Sub-Saharan Africa.

6 5. Natural Resources Africa's Energy Potential Unlocking Hydrocarbons The Global Age of Gas Vast Mineral Reserves Sub-Saharan Africa is blessed with a wealth of natural reserves. With resources more than sufficient to meet future and present need, the sustainable management of these resources can be a key driver of development. Africa s Energy Potential Sub-Saharan Africa has more than enough energy resources to meet its needs. At current levels of production, the region has recoverable resources of oil sufficient for around 100 years; coal for over 400 years; and gas more than 600 years. Despite these resources, over two-thirds of the population does not have access to modern energy. The ultimate challenge is turning these resources into production, thereby unleashing the potential of the region s economies. Unlocking Hydrocarbons Between 2010 and 2015, nearly 30% of global oil and gas discoveries were made in Sub-Saharan Africa. At current levels of production, the region has recoverable resources of coal sufficient for over 400 years. Volatile commodity prices present ongoing challenges for oil and gas operators. However, embracing new digital technologies to achieve insights and more efficient production solutions is the key to remaining competitive. The Global Age of Gas Sub-Saharan Africa s proven gas reserves have increased 80%in recent years. The region could outpace Russia as a global gas supplier by Natural gas emits less CO2 than coal when burned for power generation and could be a cleaner source of power for Sub-Saharan Africa s growing economies. However, over 1 trillion cubic metres of gas has been wasted through flaring. This volume could power Sub- Saharan electricity needs for more than a decade. Vast Mineral Reserves Sub-Saharan Africa holds a substantial portion of known global mineral reserves including, gold, cobalt, copper, uranium, iron ore and coal. The commodities down-cycle has highlighted the continuous need for new productivity gains in the industry. Companies that embrace innovations in water, energy and Industrial Internet technology can unlock hidden productivity gains for more efficient and competitive operations.

7 6. Sustainability Leapfrogging to a Clean Energy Future Food Security Sub-Saharan Africa has the opportunity to ensure that sustainable strategies are central to the way it develops whether sustainable agricultural development, attracting foreign investment, or sharing knowledge to empower local communities. Leapfrogging to a Clean Energy Future Sub-Saharan Africa, like the rest of the world, needs an increasing amount of energy. Rising to this challenge will require greater efficiency, adaptability and sustainability, which can be achieved through the adoption of digital solutions. Prices for renewable technologies are falling, and are now competitive with fossil fuels. In addition to mitigating climate change, renewables improve energy security and can be deployed in a decentralised way, bringing much needed power to off-grid and remote communities. Sub-Saharan Africa could seize the opportunity to leapfrog other nations into a new era of power generation. No other region has more abundant or less utilised renewable energy potential. Food Security Virtually all Sub-Saharan African countries have strong agricultural potential. The region will need to increase crop production by 260% by 2050 in order to feed its projected population. The region s success in achieving food and nutrition goals depends on the quality of the policies and strategies in the food and agricultural sector, the inclusiveness of economic growth, and the degree of economic integration and interconnectedness. Foreign Direct Investment Africa is the world s fastest-growing region for foreign direct investment(fdi). In 2015, FDI flows to Sub-Saharan Africa increased by 5% to US$42 billion. Foreign Direct Investment is an important driver of investment, employment opportunities and foreign exchange. However, the exchange of intellectual and technological capital is perhaps its most valuable input to the longterm growth and development of Sub-Saharan Africa. Further information: kathy.berman@ge.com