SA needs innovation to capitalise on growth promised by new era
Public-private investment partnerships in skills development are needed for this to happen
Among other imperatives, local industrial manufacturing, including SA’s heterogeneous metals and engineering (M&E) sector, needs innovation to spur industrial growth.
The public has not often viewed machinery and equipment makers as leading innovators, despite the fact that over the years innovation in indus-trial manufacturing has had an enormous effect on society.
Automation has transformed factory floors and made it cheaper and faster to produce everything from cars to televisions. Smarter cutting tools are imminent and new technologies for wind turbines and electrical grids are laying the foundations for a shift to cleaner energy.
The recent uptick in agricultural output has been largely supported by innovative equipment and processes, which have made farming more efficient. A growing body of work highlights a strong correlation between innovation and industrial growth at the macro level and also between innovation and firm revenues at the micro level.
Many studies report that the most innovative companies are growing significantly faster.
The difference for industrial manufacturing companies was dramatic, with the most innovative recording growth levels more than four times those of the least innovative companies.
CONTINUOUS GOVERNMENT SUPPORT IN THE FORM OF FINANCING SCHEMES WILL BOOST SUCH INITIATIVES.
However, some of the extant bodies of knowledge also acknowledge that not even the most innovative companies will replace their old products and processes with new ones.
This highlights the need for companies to continuously measure the effect of innovation through the vitality index, among others, while also delineating weaknesses and areas for improvement.
Although it is difficult for businesses to build a strong, innovative culture, the pay-offs are high for those that succeed.
Innovation is a much-needed catalyst in manufacturing, including in the M&E subcomponents, especially given the slow evolution in production processes over the years. However, even with the slow progress some companies in the M&E cluster have stepped out of their comfort zones and are becoming pacesetters in innovation and technology.
Some casting companies have embraced modern manufacturing, thus becoming more capital intensive and benefiting from using innovation and technology to improve productivity, quality and the bottom line. But despite these success stories, the M&E cluster is generally considered a laggard in innovation when compared to the more glamorous vehicle-related sector, making the case for modernisation more apparent.
The rapid growth in next-generation technologies presents an opportunity for companies to move with the times by aligning with modern technological developments.
Extant tools to be embraced and adopted include the industrial internet of things, the fourth industrial revolution, artificial intelligence (despite its snag of not being able to explain its own actions), robotics and deep learning (plus big data).
Although these technological threads may never quite converge into something greater than the sum of their parts, analysed separately they offer a glimpse into the varied pioneering tools available.
Pioneering concepts in industrial manufacturing should, therefore, be driven and propagated to a tipping point, as the experience of all globally successful companies underscores the fact that success depends on consistent innovation in order to stay ahead of competition. While innovation presents an opportunity for improved production, the caveat is the potential negative effect on jobs.
Human jobs are being replaced by mechanisation due to advantages to companies, ranging from nonpayment of remuneration and benefits, low probability of machines making mistakes through to robots working full production over longer hours.
The prospect of shedding jobs through automation in the short term compounds the existing trade-off between innovation and employment. This catch-22 situation can only be corrected through higher levels of investment, production, capacity utilisation and more modernisation, as solutions of complementing capital with labour are found.
The opportunity exists to expand capacity and ensure that the right skills are developed and absorbed.
The government has identified acute skills shortages and focus areas to improve on relating to technology development in science, technology, engineering and mathematics.
Effective collaboration between the private and the public sectors, including the various government agencies such as the sectoral education and training authorities (Setas), is also important.
Enhanced collaboration could yield excellent results in driving innovation and providing top-end solutions.
While skills development initiatives will address existing challenges, continuous government support in the form of an industrial innovation financing scheme will help boost pioneering initiatives. The scheme can be complemented by an assurance that the inventors’ intellectual properties will be protected.
Accordingly, support from the private sector in preparing the youth of SA for the industries of the future is also vital. There should be a heavy focus on technology and innovation to ensure a mastery of the relevant learning curves. For every investment, a larger proportion should be directed to technology and development because the next frontier is in the digital world.
Conversely, there is a need for experienced manufacturing industry leaders to mentor and guide our erratic youth towards proficiency, in line with an African maxim that the youth can walk faster but the elder know the road.
The Steel and Engineering Industries Federation of Southern Africa supports innovation in the M&E cluster through the annual Seifsa Awards for Excellence. The federation is piloting an online course in contract price adjustments to complement the current brick-and-mortar offering. These initiatives are in line with reigniting industrial manufacturing.
Innovation as a concept presents an opportunity and a threat, appearing to be an oxymoron of sorts. Still, proactive thinking towards totally embracing innovation — including new cost-cutting technologies, benchmarking standards and methods and expanding research and development – will ensure that companies capitalise on the opportunities, while minimising the threats.
SA’s unemployed but qualified youth, its political will and stability and improving domestic demand are all appealing to international investors. How-ever, success depends on the willingness of companies to take risks and embrace innovation to ensure a bright future for all South Africans.
• Ade is Seifsa chief economist.