McKinsey Global Institute's Big Arenas Report Shows Bias Against the Global South

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. It identifies 18 transformative arenas:

- industries characterized by exceptional growth,

- ⁠dynamism and innovation. It estimates these could contribute $48-trillion in revenues by 2040.

Yet despite making a compelling case for the transtormative potential of these arenas, its assumptions and conclusions reveal a persistent bias in how Africa and the Global South continue to be marginalized by Western think-tanks.

McKinsey sorts future industries into three groups:

• Continuing arenas (such as e-commerce and cloud services) which are already well-established,

• Spin-offs such as Al services, that emerge as sub-segments of larger industries; and

• Emergent arenas (including autonomous vehicles and nuclear fission).

The latter represents new frontiers. The industries are characterized by three critical features: technological breakthroughs, significant investments to sustain innovation and markets.

The analysis is useful for identifying opportunities in innovation-driven economies and provides insights into the conditions that facilitate rapid industrial growth.

While the report offers a frame for understanding global industrial trends, it largely reflects the 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 Global South lag on these.

There would have been nothing wrong for the think-tank to declare that its focus is on industries and companies concentrated in North America, Europe and parts of Asia.

Though some of the identified arenas Al, 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 marginalizing Africa has made some references to these arenas as posing growth potential. The potential of the burgeoning informal economy — which is transiting into formal, alongside the demographic dividend, is de-emphasized.

It gets worse. Not much attention paid to the possibilities of Africa industrializing through beatification 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.

A dynamic rapid urban transition is not considered. The report primarily references policy frameworks from the Global North, overlooking industrial policies from

developing nations such as China. India and Brazil. This is part of a narrative that downplays the Global South.

By not rigorously engaging with Africa and the Global South, the trajectory of industrial growth is assumed to 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 for developing countries. There might be limited digital infrastructure and low human capital formation, but there is more to African economies than this old caricature. It is all about re-imagined futures. The growth of semiconductors and electric vehicles cannot be accelerate without cobalt and lithium mined in Africa.

If there is commitment to create value chains within Africa, the story-line might change.

The under-representation of Africa and the Global South reflects a tradition among Western think-tanks to treat these regions as peripheral. Historically, the Global South has been framed as a supplier of critical inputs which are

necessary for industrialization in the Global North. Africa is largely presented as a consumer market rather than an innovation hub, which overlooks its technological advancements. For instance, African-led innovations like M-Pesa's mobile banking revolution, and Al 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 Russia’s Higher School of Economics in 2024 does a better job. It maps e-governance initiatives across Africa, demonstrating frontiers of technological innovation and modernization of public services using Al-powered tools.

The assumptions underpinning the McKinsey report are vulnerable to geopolitical shifts. With Donald Trump's administration prioritizing re-industrialization in the US, global supply chains will be reconfigured. Efforts to reduce dependence on foreign resources could disrupt the dynamics of industries like semiconductors and EVs.

Further, while the report assumes that increased internet and mobile penetration will drive economic inclusion, it does not sufficiently address deeper structural issues such as digital literacy, affordability and financial inclusion challenges in the Global South. McKinsey can do better.

First appeared in the Sunday Times of 9 March 2025 -
https://www.timeslive.co.za/sunday-times/opinion-and-analysis/opinion/2025-03-09-mckinseys-crystal-ball-shows-bias/