View from the Middle East & Africa: Digital revolution must not ignore SMEs

One of the few aspects that the very diverse countries of the Middle East and Africa (MEA) region have in common is their desire for a strong manufacturing sector. While some countries see the solution to high unemployment rates in manufacturing, others aim to raise their export quota, and still others want to diversify their economy.

The United Arab Emirates, Saudi Arabia, South Africa and Kenya have been very successful with their strategies of developing a competitive manufacturing sector by setting up free-trade zones, attracting FDI or through intensive government support. In Gulf Co-operation Council countries, the number of employees in manufacturing doubled in the past decade to 1.6 million working in the metal, building material or cement industries.

On this bumpy (and expensive) road toward industrialisation of their economies, the MEA region has to deal with a new industrial revolution called Industry 4.0. As defined in the 2016 Middle East Industry 4.0 Survey published by PwC and the Global Manufacturing & Industrialisation Summit: “Industry 4.0 focuses on the end-to-end digitisation of all physical assets and integration into digital ecosystems with value chain partners.”

The report also says the Middle East has already started profiting from the great investment opportunities, new jobs and cost optimisations of the “industrial internet” or the “digital factories” of this new era.

I have no doubt that industrial manufacturing is already changing. For the MEA region, however, I would recommend that we first solve the immediate financing problems of the SMEs that represent between 80% and 90% of manufacturing factories.

It would also enhance the overall infrastructure in African countries to bring down manufacturing and trading costs, and make high-speed internet in all parts of the MEA region affordable and accessible for all parts of society. Once these and other basic problems of manufacturing are covered, then our region has a base from which to participate in and profit from Industry 4.0’s possibilities.

Mazdak Rafaty is managing partner of Ludwar International Consultancy and SME adviser to the joint Emirati-German Chamber of Commerce. Email: m.rafaty@lic-consulting.com