The Fourth Industrial Revolution (4IR) is continuously punted by leaders in government and industry as one of the main solutions to drive economic growth which in turn will lead to job creation. But up until now, the country has failed to create jobs on a mass scale, even when its Growth and Domestic Product (GDP) numbers were at their highest under former president Thabo Mbeki’s era.
The critical question to ask in the South African context is how much time we have left before the underclass will revolt.
The country’s unemployment rate is now at 29% – a record high since the global recession in 2008 – and the Gross Domestic Product growth for the year has been forecast at just above one percent. The increase in unemployment in the second quarter of this year have mostly been in the formal sector such as finance, mining, and transport. In the financial sector, many of the job losses are a result of 4IR, as banks continue to replace employees with digital technology. This movement from humans to machines is and will be experienced across all sectors.
It is a grim reality. Despite the hike in numbers of the working-age population, unemployment is increasing in both the formal and informal sector. And while there appears to be more of a concerted effort by stakeholders to deal with the country’s job and inequality crisis, and foreign direct investment is at its highest in the five years, it is unknown what the knock-on effect will be, and how long it will take.
Dr. George Friedman, who is the Chairman of Geopolitical Futures and spoke at the Digital Economy Summit hosted by 4IRSA recently, warns that if the country does not deal with poverty and unemployment soon, there will be an uprising.
“… just like human beings, countries have more than one interest to pursue or problem to resolve. South Africa’s number one problem currently is not how to handle the 4IR. Instead, it should attempt to prevent an explosion from the large underclass hungry for some solution
to their day-to-day struggles, but which they are not getting,” he said.
“There is no silver bullet. The critical question to ask in the South African context is how much time we have left before the underclass will revolt?”
He says the country has to balance a “strange” three-way split: it must find a way to monetise its low-wage opportunities in a world hungry for low-priced goods, maintain the previous new technological invention – the microchip – while also imagining what 4IR can bring to the future. At the same time, the country needs to remember that technology is the response to necessity, and not imagination. Friedman says that while imagination is a wonderful thing, in business one must develop and produce things that people need. South Africa must, therefore, be disciplined in its thinking on 4IR.
Friedman’s views on how to boost the economy and create employment, are not popular amongst many unions, who punt for decent work. For decades employees have been underpaid, and in many instances replaced by casual workers who are willing to earn less, even when companies have reported high-profit margins and bosses receive what is considered exorbitant bonuses. But Friedman argues that because there are many uncertainties as to the country transitions to the digital economy, it needs a adopt a cautious approach.
“In the case of South Africa, few of the new technologies will immediately benefit the vast numbers of the country’s impoverished society, most of whom have no immediate way out of poverty. One of the fundamentals of modern capitalism is the geopolitical reality that we must produce and export low value commodities to grow a sluggish economy,” he says.
China, Japan, Germany, and the United States are cited as examples where this approach of taking advantage of a competitive edge by exporting low-value products that are produced through cheap labour, worked. Friedman believes that because of the structure of capitalism, South Africa is uniquely suited for a similar model. He believes that solutions offered by the World Economic Forum on 4IR are valid to Europe and America, but they may not be relevant to South Africa.
“From a geopolitical point of view, the impact of technology on economies and classes differs greatly. 4IR can open up huge possibilities for South Africa, provided it recognises lessons from other countries since it cannot afford another round of disappointment,” he says.
“The country must embrace new technologies while developing a large-scale business sector consisting of responsive and agile small enterprises, which government must support through policy and regulations that will allow them the freedom to manoeuvre. The South African government must also provide businesses with contracts, and not grants.”
Friedman says that by optimising low-cost labour, South Africa will be able to replace countries in the market such as Vietnam, which has moved up the ladder. He also advises that it is a good time for businesses to identify their liabilities and turn them into an advantage. On the state’s role in 4IR, he says it needs to be limited as governments are not agile. At most, it should a facilitative role that will allow growth to occur casually and fast.
Although Friedman’s suggestions are not palatable for many, and the country has so far basically moved in the opposite direction, it is essential that South Africa heeds his call to develop solutions according to what is required.
“The previous industrial revolutions have had multiple impacts on people from different contexts and classes. The peculiarities of each country will therefore influence the development of appropriate responses to their problems. The critical issue in South Africa is upward mobility, which technology must facilitate rather than widening the gap between people at different levels of society. Part of the 4IR package is an acknowledgement that what comes next is unclear, and that the package we craft must meet our needs.”
By: Amy Musgrave