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What is a knowledge economy?

Image courtesy jarmoluk, Pixabay (CC0).

The term 'knowledge economy' was coined in the 1960s to describe a shift from traditional economies to ones where the production and use of knowledge are paramount. According to the World Bank, knowledge economies are defined by four pillars. These are: institutional structures that provide incentives for entrepreneurship and the use of knowledge, skilled labour availability and good education systems, ICT infrastructure and access, and, finally, a vibrant innovation landscape that includes academia, the private sector and civil society.

Based on these criteria, all countries belonging to the Organisation for Economic Co-operation and Development (OECD) are moving towards becoming knowledge economies. But Africa is left trailing. On the World Bank's Knowledge Economic Index, the continent's score is only a third of North America's and half of East Asia and the Pacific's.

Lagging behind

Most of the world's biggest universities, academic publishers and patent applications hail from the global North. Look online and this pattern repeats itself: almost twice as many Wikipedia articles exist for topics related to France as for the whole of Africa. Online directories of geographical names and features are particularly threadbare for African regions. Clearly, African countries are lagging behind as both creators and users of online knowledge.

The lack of infrastructure in many African countries does not help the situation. Despite a thicket of undersea cables that have been lying along the coast of Africa since 2009, a World Bank Connecting Africa report from 2013 points out that access to high-speed broadband for the average African citizen remains patchy at best. It goes on to say that the continent also lacks the level of computer literacy needed to drive a knowledge economy.

There are signs, though, that this trend may be changing.

The number of African countries with official strategies to improve access to the internet rose from 32 in 2007 to 48 in 2011. One example is Kenya, where the government hopes to make ICT companies account for 10% of GDP by 2030 through its Kenya Vision 2030 plan, using a mixture of business incentives and infrastructure development. This vision has given birth to numerous centers for digital innovation around the country and a technology park dedicated to ICTs in the capital. Nairobi's iHub brings together young entrepreneurs with investors and potential partners. It boasts more than 16,000 members, and the organizers say that more than 150 companies have begun life within its walls.

Elsewhere, there are other positive examples. Kigali in Rwanda, Lagos in Nigeria and Accra in Ghana all have their own dynamic start-up scenes where companies have launched mobile apps, education websites and consumer payment services, to name just a few. Many of these examples involve skills in programming, business administration and engineering - employment areas that bring better wages and build local human and technical capacity.

Scraps of knowledge

But there is another, less glamorous side to the knowledge economy - microwork.

Microwork involves breaking down complex data-driven activities into small parcels that can then be farmed out to employees. This can involve transcribing audio or video clips, categorizing images for search engines or updating databases. In short, it's anything that machines are still not very good at.

It is low-skilled and low-paid, which is why companies in need of such services often look towards developing nations to subcontract the work. According to Mark Graham, a senior researcher from the Oxford Internet Institute, it is this sector that African governments and businesses are positioning themselves towards.

Unfortunately, in places where there are limited possibilities for learning and job progression, microwork is usually paired with low job security and poor working conditions. "Is it that much different to working in a garment sweatshop?" asks Graham. "It's too early to say if this is good for development, but there are worrying signs."

There also remain other clear obstacles to the development of knowledge economies in Africa. Despite improving internet penetration - both fixed and mobile - Africa's ICT infrastructure is impeded by sporadic electricity supply in many areas. And there is another, more fundamental barrier. Literacy is essential for effectively accessing the troves of information that make a knowledge economy possible. Yet as nearly 40% of African adults are illiterate, a large part of the population cannot participate in the knowledge economy in any meaningful way.

Trust is another big issue, says Graham. Most clients within the knowledge economy are based in the West and often equate African firms with unreliability and corruption, which makes them hesitant to enter into business deals.

So, rather than aiming to snare big international contracts, African companies should focus locally, Graham recommends. Using knowledge, he says, is all about cultural context, so knowing their markets gives firms a competitive advantage that international providers lack.

The knowledge economy holds great promise for developing countries, but depending on the availability of infrastructure and human capital, this promise can turn into a mirage. The economic ideology of creating economic growth through boosting knowledge cannot be applied thoughtlessly. Before jumping head first into the knowledge economy, developing country governments need to take stock and ask themselves whether such a system is achievable, and indeed desirable, for their country.

This article is republished from SciDev.net (CC BY 3.0). This article has been shortened; the original version is available here.

Read more about the knowledge economy in this editorial from SciDev.net: 'Africa's knowledge economy isn't simply about data'.

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