SA, jobs, and the 4th industrial revolution

The fourth industrial revolution is, by now, widely predicted to bring with it disruption and displacement, including job losses caused by automation and artificial intelligence.

Beyond South Africa's 27.2% current unemployment rate, the rest of the continent faces significant infrastructural and educational challenges, making it one of the regions most at risk.

In South Africa, government is already tackling this issue. It recently appointed an inter-ministerial task team to lead SA’s fourth industrial revolution strategy. Trade and Industry Minister Rob Davies said a few months ago that there would be "serious winners and losers" as a result of the fourth industrial revolution, and the country needed to prepare to reap the benefits, or be burdened by the negative consequences.

But it's also true – and Davies noted this – that while technological changes can benefit the country, unskilled or semi-skilled people are going to find it more difficult to get jobs.

Unskilled labour gets automated first

A recent report by the Organisation for Economic Cooperation and Development notes that the occupational groups that have the highest chance of becoming automated typically do not require specific skills or training.

Talent development and up-skilling will therefore be crucial not just for SA, but the entire continent, to build a more inclusive economy and reduce inequality.

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But education systems require massive investments, particularly in key subjects in the sciences and technology. David Meads, the president of Cisco Africa, recently wrote that in the context of the 4th industrial revolution and its disruptive effect on all economies, the development of digital skills in particular will be paramount to transition the population from low-skill and low-pay jobs to high-skill and high-pay jobs.

In this, the role of Development Finance Institutions (DFIs), such as the Land Bank and the African Development Bank, will be key.

These institutions are mandated to have a developmental impact in the markets in which they invest, alongside the requirement for sustainable returns. They are typically majority-owned by national governments and source their capital from national or international development funds or benefit from government guarantees.

Prioritise bankable tech projects

For these institutions, right now, there should be an emphasis on bankable projects in the tech space, including improving Africa’s connectedness, and perhaps crucially, preparing future generations for a world in which tech skills will make the difference between success and failure.

Over the years, such investments have proven to be the key driver of significant economic growth elsewhere in the world. The four Asian Tigers (Hong Kong, Taiwan, Korea and Singapore) have been some of the fastest growing countries in the world in recent times.

Some of the main factors driving their growth has been human capital development, including significantly upgrading the educational standards of the workforce and investing in research and development. This is a model that Africa, with the assistance of DFIs, should be looking to emulate.

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In addition to an investment in skills development, there must be more support of and investment in the ICT sector. This sector has the potential to boost economic growth, productivity and employment and drive Africa forward by enabling innovation, spurring new business models and improving the delivery of public services.

Andy Baldwin, area managing partner at EY, has pointed out that over the last 150 years, Africa has been transitioning through the phases of economic development and maturity; from an agrarian society, to the development of extractive industries, and now the journey into manufacturing and i-services.

However, with increasing economic development and maturity, parts of the continent need to begin the transition to a digital-based economy.

What isn't automatic? Change

Baldwin reminds us that we cannot assume that this transition will happen automatically.

Policy makers and businesses both have a role to play in supporting innovation in Africa – policy makers by encouraging the growth of technology hubs, establishing strong legal frameworks and improving the quality of education systems, and businesses by investing in infrastructure and operations within African markets.

Africa is home to some leading fintech developments and we should be harnessing those skills and ideas to boost our growth. Academics and civil society actors must also attend to the role of new technologies in developing countries. 

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And, of course, DFIs should must step forward to play their role in driving this conversation. Speaking at a recent seminar hosted by the Development Finance Centre at the UCT GSB, Tshepo Ntsimane, the head of metros and bankable cities at the Development Bank of Southern Africa (DBSA), highlighted the importance of infrastructure development and education in driving Africa’s growth. (The DBSA focuses on four primary and three secondary infrastructure sectors which include energy, transport, ICT and water. The secondary sectors are education, housing and health.)

The future can be bright. However, this will depend on how well we work together. If we focus on improving our education system and preparing for the 4th industrial revolution with an emphasis on 'African solutions for African problems', there is no reason why the continent cannot reach many of its developmental objectives and realise its full potential.

Professor Nicholas Biekpe is the director of the Development Finance Centre and MCom Development Finance Programme at the GSB.