Initiative for digital economy strategy plots way for job creation
Many areas remain inaccessible to most South Africans, SA in the Digital Age finds
Last year was one of hype about the fourth industrial revolution (4IR) in SA. There has been talk of the potential for new technology as a “silver bullet” solution for SA’s development challenges.
But people have found it difficult to reconcile this rhetoric with the very real challenges in SA — intermittent power supply, a poorly performing education system and the reality that many South Africans are unable to access economic opportunities at all.
Despite these challenges, SA is already embracing digital and other technologies to create positive change in a number of areas. But this remains nascent and vulnerable, and has not scaled to the extent needed to change the course of the country’s development path. Many of these areas remain inaccessible to most South Africans.
This was the finding of SA in the Digital Age (Sada), a multi-stakeholder initiative to develop a forward-looking digital economy strategy for the country. It is convened by Genesis Analytics in partnership with the Gordon Institute of Business Science and the Pathways for Prosperity Commission at Oxford University.
Sada has identified three concrete areas in which digital and other technologies can create income-generating work for South Africans. It found that new technologies hold real opportunities to unlock value and turn the tide on unemployment when applied in the right context in SA.
SA is also well positioned to become a frontier technology hub for the region
Globally traded services relate to new forms of services that can be delivered digitally anywhere in the world using information and communications technology (ICT). SA has a small global business services sector that is only generating about 50,000 export-facing jobs. But the potential of the sector is huge — an additional 500,000 jobs can be created over the next 10 years, mainly by tapping into previously unexplored international markets, growing the personal and social services segments, developing digital and ICT outsourcing capabilities, and expanding the country’s share of the business process outsourcing (BPO) sector in current markets such as North America and Australia.
Another area with significant potential is the scaling of digital platforms that can absorb low-skilled labour. There are more than 90 digital platforms facilitating the exchange of goods, services and labour in SA. Many have business models that require the participation of low-skilled labour, and therefore have the potential to unlock demand for workers drawn from this segment of the population. These platforms have the potential to increase demand for workers in the domestic services, artisanal trade, transport and logistics, food preparation, and tourism sectors by improving efficiency and reducing costs.
SA is well positioned to become a frontier technology hub for the region. Though these frontier technologies are likely to be produced in other parts of the world, it is their application in local business models through which value is unlocked.
SA has the potential to become a specialist in applying new technologies in sectors where it has a traditional advantage — such as mining, agriculture or financial services — and for these business models to be exported to the region. In doing so, SA can capture much of the value that would otherwise be exported to countries that have successfully achieved this already, such as India, and support a vibrant digital economy with the associated growth in jobs.
Universal digital inclusion should be achieved so that all South Africans can access economic opportunities in the digital economy
While these are real and tantalising opportunities, they are not a silver bullet. There is work to be done to ensure that these opportunities are enabled and scaled. Furthermore, if these opportunities remain closed to the South Africans that are already locked out of the economy, scaling them will not address the vast inequality in the country. It is imperative that these opportunities are accessible to as many South Africans as possible.
The following factors are required:
- Universal digital inclusion should be achieved so that all South Africans can access economic opportunities in the digital economy. Digital inclusion goes beyond simple access to the internet to cover meaningful usage of digital products and services and the economic and social impact that follows. Achieving this will require the steep price curve in mobile data tariffs to be addressed, for digital usage to be included as a requirement across all basic education curricula, the shifting of government service delivery to online platforms, and developing a digital small business sector in SA.
- The human capital challenges should be solved so that South Africans are adequately equipped to participate in the digital economy. This will require addressing the critical skills shortage by improving the work visa application process and keeping the list of critical skills updated and relevant, channelling government funding to where it has the most impact through a refreshed sector education and training authority (Seta) system, institutionalising digital skills development in the private sector, and creating a flexible accreditation framework that recognises new forms of digital learning.
- The right type of government support to enable the rapid growth of an inclusive digital economy. Labour and competition laws should be modernised to recognise the new forms of business in the digital economy, and the regulatory bottlenecks that are preventing digital businesses from scaling should be addressed. Serious attention should be given to addressing the country’s global competitiveness in a world in which all companies, wherever they are based, are essentially direct competitors. It is also imperative that the government establish an intragovernmental digital innovation team with a clear mandate to set strategic directions for the country.
- An innovative business sector that can translate new technologies into digital business models, and export these into the region. This will require unlocking the demand for digital innovation in corporations, which still have a legacy preference for purchasing from large suppliers rather than smaller start-ups. Equity funding models should also be reassessed to accommodate the underserved need for seed capital and early-stage funding for innovation. SA’s competitive advantages in digital should be identified and key offshore markets in which we have a competitive advantage should be penetrated.
• Nyati is CEO of Altron, chairs the Sada advisory board and the ICT committee on the Presidential Public-Private Growth Initiative