What is a knowledge economy?

Stack of books africa knowledge economy
Copyright: Chris de Bode / Panos

Speed read

  • Most nations are chasing the elusive dream of becoming knowledge economies
  • But many developing countries are hampered by poor connectivity, illiteracy and lack of trust
  • There are initial successes in Africa, and the continent should exploit its local expertise

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The growing access to digital technologies could fundamentally transform developing economies.

The move from hunter-gathering to the age of farming and the dawn of the Industrial Revolution 12,000 years later mark seminal transitions in human history, lifestyle and wellbeing. Now in the digital age, our civilisation may be in the midst of another equally great transformation. The age of the knowledge economy.
In the past, an abundant labour force and exploitation of natural resources were the engines of growth. Now companies mine data, not gold seams, in search of riches. They harvest mobile apps rather than apples. Information is widely believed to be the future source of prosperity.
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. Academic institutions and companies engaging in research and development are important foundations of such a system. And so are those who apply this knowledge — the programmers developing new software and search engines to utilise data and the health workers who use data to improve treatments. Once knowledge has been picked up by these central brokers, employers and workers in more traditional fields may begin using information to improve their work environment, for example the supply chain efficiency of a small company or the harvesting of crops on a farm.
Underpinning it all are information and communication technologies (ICT). In a world where fast access to information is vital, internet availability rules. Governments looking to push their nations towards a knowledge economy put technology development at the heart of their strategies. In this sense, the prize for every country is to have its own Silicon Valley of internet-based start-ups and innovative small businesses.
But in reality the path to a knowledge economy often remains elusive. There is still no agreed definition of what a knowledge economy is. Indeed, it could be argued that such a system doesn’t really exist in any meaningful sense. After all, human cultures have always relied on knowledge to survive and improve their lives.
According to the World Bank, knowledge economies are defined by four pillars. [1] 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. [1]

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. [2] 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. [3] 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 ten per cent of GDP by 2030 through its Kenya Vision 2030 plan, using a mixture of business incentives and infrastructure development. [4] This vision has given birth to numerous centres 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 organisers 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, categorising 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 per cent of African adults are illiterate, a large part of the population cannot participate in the knowledge economy in any meaningful way. [5]

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 feature was commissioned to accompany a two hour online live debate on Africa’s knowledge economy that SciDev.Net will be hosting on 24 April from 1300 to 1500 British Summer Time (GMT+1). The debate, staged in conjunction with the Planet Earth Institute, will explore some of the myths, risks and rhetoric surrounding Africa’s knowledge economy. 


[1] World Bank’s Knowledge economic index (World Bank, 2012)
[2] Mark Graham The knowledge based economy and digital divisions of labour (Social Science Research Network, 1 January 2014) 
[3] Connecting Africa: An assessment of progress towards the Connect Africa Summit Goals (African Development Bank, May 2013)
[4] Kenya vision 2030: A globally competitive and prosperous Kenya (Kenyan government, October 2007)
[5] Joanne Roberts The global knowledge economy in question (Critical Perspectives on International Business, 2009)