By Mike Montgomery
When Elon Musk announced that he plans to build the world’s biggest ion battery to power to South Australia, it was a sign that the state truly has made a stunning turnaround.
Things looked grim for South Australia back in 2013, when GM announced it would stop manufacturing cars in Australia as of fall 2017.
Adelaide, the biggest city in South Australia, had prospered after World War II as a manufacturing hub for automobiles, appliances and textiles. Local industry was protected by high tariff walls — as high as 54 percent for automobiles in the 1980s. In Adelaide, the largest employers were tied to the auto industry.
That shattering 2013 announcement was a wake-up call, according to Jay Weatherill, South Australia’s premier. “It was a signal moment for us,” he says. “It’s been the impetus for massive change.”
Weatherill decided to pin the state’s future on tech and innovation rather than go looking for a volume-based manufacturing industry to replace GM. In fact, he started looking to make South Australia the next Silicon Valley.
As more cities look to reinvent themselves in the wake of factories closing, Adelaide is an appealing model. The first step was a review of commercialization and venture capital investments in South Australia. The news wasn’t good. The state received less than 0.2% of the venture capital investment in Australia. The review also found that a lack of coordination between government departments and agencies hindered private investment opportunities.
The solution was to spend money to make money. Weatherill used state funds last year to establish a $38 million venture capital fund to promote innovation, attract new VC and encourage tech companies to move to South Australia. The state also committed money to support new businesses from conception to product development and early commercialization, and gave more money to the local university’s innovation incubator to underwrite initiatives in the advanced manufacturing and engineering spaces.
South Australia also has invested in promoting its agribusiness sector and developing private export markets in high-quality foods, particularly to serve the exploding middle class in Asia. “Our wine and food are attracting huge investment from overseas,” says Andrew Cullen, managing partner of Deloitte in South Australia.
Weatherill also hired American transplant Tom Hajdu as his “Chief Advisor on Innovation.” Hajdu — founder of both music production company tomandandy and Disrupter, a Los Angeles-based startup incubator — says the state needed to upgrade its infrastructure to attract new tech businesses and the jobs that come with them. He led the effort to make Adelaide the first international city to join the Smart Gigabit Communities Program, which in part requires members to install sensors throughout the city and develop applications to connect those sensors and the data they collect to the cloud. So-called “gig cities” also have high-speed internet that is up to 100 times faster than the national average. The SA government paid $3.5 million for the upgrades.
But the biggest sign that the economy has turned the corner came in May, when all of South Australia’s efforts to modernize paid off. The Australian government picked the state as the primary location for its new defense shipbuilding program. Australia committed $66 billion to build submarines, frigates and offshore patrol vessels for the Australian navy, and to upgrade and modernize Adelaide’s existing naval shipyard. The government also will open a school in Adelaide to train shipbuilding workers.
Building and maintaining the next-generation naval fleet is expected to bring in 5,000 high-skilled, high-tech jobs, as well as thousands of other jobs in associated industries. South Australia won the bid in part by focusing on how it has morphed from rust belt to 21st century city.
“South Australia is a next generation state,” says Hajdu. “It’s the center of the new digital economy.” If Elon Musk agrees, you know it must be true.
Mike Montgomery is the Executive Director at CALinnovates.
This piece was originally published on Forbes.