The Next Big Arenas of Competition: Challenges and Opportunities for Africa and the Global South

By Busani Ngcaweni

Director-General of the National School of Government in South Africa

The McKinsey Global Institute’s report, The Next Big Arenas of Competition, is a timely and ambitious exploration of industries set to shape the global economy over the next two decades. The report identifies what it calls 18 transformative arenas. These are industries that are characterised by exceptional growth, dynamism, and innovation. The report estimates that these industries could collectively contribute up to $48 trillion in global revenues by 2040. While the report makes a compelling case for the transformative potential of these arenas, its assumptions and conclusions reveal a persistent bias in how Africa in particular and the Global South in general continues to be marginalised by western think tanks like McKinsey, the OECD, among others.

Before we discuss the shortcomings, let us first reflect on aspects of the report that are insightful. We will the proceed to offer a short critique, contextualising the marginalisation of the Global South within a broader historical framework of Western-centric knowledge networks. We cannot avoid a reference to the disruptive nature of Trump administration’s rapid re-industrial agenda on some of the report’s fundamental assumptions.

McKinsey, a firm with a difficult recent past in South Africa after the state capture episode, categorises future industries into three groups: continuing arenas (such as e-commerce and cloud services), which are already well-established; spin-offs (such as artificial intelligence services), that emerge as sub-segments of larger industries as well as emergent arenas (these include shared autonomous vehicles and nuclear fission. The latter, according to the research, represents entirely new frontiers. The industries mentioned are characterised by three critical features: technological breakthroughs, significant investments to sustain innovation and expanding markets, the McKinsey argues.

The analysis useful for identifying opportunities in innovation-driven economies. As mentioned, it provides useful insights into the conditions that facilitate rapid industry growth, offering a roadmap for economic agents such as investors and policymakers. In a sense there are takeaways about structural transformation, a process of industrial upgrading into more sophisticated productive activities, as we see in references to metrics such as market share dynamics and investment flows.  

While the report offers a useful frame for understanding global industrial trends, it largely reflects the priorities and perspectives of developed economies – as drivers of the global economy. It bases this on factors such as availability and access to capital, advanced infrastructure and established innovation ecosystems. Of course, Africa and the broader Global South lags behind on these.  

There would have been nothing wrong for the think tank to declare that their focus is on industries and companies concentrated in North America, Europe and to some narrow extent, parts of Asia. Although some of the identified arenas such as AI, modular construction and renewable energy have been identified by other reports including those of the African Development Bank as presenting structural transformation opportunities for Africa, this is not treated as a frontier in the report. Even the IMF with its history of marginalising Africa has made some references to these arenas as posing growth potential. There are cases of technological adapting in Agriculture is some Africa and Latin American countries. Robotics is a growing frontier for industrial production. Yet there is less attention paid to these in the report.

Potential of the burgeoning informal economy – which in fact is transiting into formal, alongside the demographic dividend, is de-emphasised. Yet these are key propellers of innovation and initiative. It gets worse; not much attention is paid to the possibilities of Africa industrialising through the beneficiation of critical minerals. This is a major shortcoming. Western think tanks need to explore this lest they be perceived as continuing the trend of seeing Africa only as supplier of natural resources. This is consistent with a 2023 report of the IMF which said Africa should not try to beneficiate to industrialise but rather let multinationals do so. There is also a dynamic rapid urban transition that is not being considered in the report.  The report primarily references policy frameworks from the Global North while overlooking industrial policies from developing nations such as China, India and Brazil. Again, this gap is not coincidental, it is part of metanarrative of similar projects that downplay knowledge systems and experiences of the Global South.

By not rigorously engaging with Africa and the Global South in the report, the trajectory of industrial growth is assumed that it will mirror and track that of the Global North. There is no suggestion that Africa can catch up. Of course, there are serious barriers to entry that developing countries are facing. There might limited in digital infrastructure and low human capital formation, even regulatory (and property rights) constraints. But there is more to African economies than this old caricature. It is all about reimagined futures. References to growth of semiconductors and electric vehicles cannot be accelerated without supplies of cobalt and lithium mined in Africa. If there is commitment to create value chains within Africa, the storyline might change.

This change can result in improved socio-economic conditions of the people of Africa. Take modular construction mentioned in the report, for instance, it can revolutionise affordable housing in Africa’s rapidly growing cities. Again, it is omitted as a frontier for transformation. Image Africa’s renewable energy potential. It is treated tangentially. We do well to acknowledge that in the financial services sector, for example, Africa has been making significant leaps. This is an example of how other arenas can be approached, as growth frontiers for Africa and the Global South in general.

The underrepresentation of Africa and the Global South in this report reflects a long-standing tradition among Western think tanks to treat these regions as peripheral to global economic narratives. Historically, the Global South has been framed as a supplier of critical inputs like minerals, labour and agricultural commodities which are necessary for industrialisation in the Global North. This infantilisation permeates the study which has biased in its general framing of the Global South. Africa is largely presented as a consumer market rather than an innovation hub. This framing overlooks technological advancements emerging from the continent.

For instance, African-led innovations like M-Pesa’s mobile banking revolution and AI developments in Kenya and Nigeria are notable but absent from the report. In fact, the E-Governance in Africa: Progress and Prospects report published by the Russia’s Higher School of Economics in the second half of 2024 does a better job. It maps e-governance initiatives across Africa, demonstrating frontiers of technological innovation and modernisation of public services using AI powered tools. This increases the rates of productivity and access to services. Even leading publications like the Economist and Nature which are often biased against China has published reports detailing technological advances in China which have resulted in major structural transformation of the economy. China leads in research and development, patents and in the production of new energy products that are driven by AI. India is also a major player in the technology frontier.

The assumptions underpinning the report are also increasingly vulnerable to geopolitical shifts. With Donald Trump’s administration prioritising a reindustrialisation agenda in the United States, global supply chains will be reconfigured. Efforts to reduce dependence on foreign resources, particularly from politically unstable regions, could disrupt the dynamics of industries like semiconductors and EVs. Further, while the report assumes that increased internet access and mobile penetration will drive economic inclusion, it does not sufficiently address deeper structural issues such as digital literacy, affordability constraints and financial inclusion challenges in the Global South.