The 4th Industrial Revolution is here: driverless cars, 3-D printing, and Artificial Intelligence are the future. These innovations deliver the promise of better and more convenient lives to many. But they also disrupt the way in which we used to do things, including the way we work.
It is true that automation is a threat to many jobs, especially the unskilled ones more easily be replaced by machines and computers. In South Africa, unemployment stands at 27.7%—or 36.6% when including those who have given up looking for work. In South Africa, low-skilled jobs are already hard to come by, so the 4th Industrial Revolution is a daunting prospect for many of South Africa’s adult population.
Should we worry? Let’s look at the opportunities. Economic growth has been slowing in the country since 2013, and we only expect a small rebound in 2017: 0.6% growth compared to 0.3% in 2016. This is below the rate of population growth, so South Africans are becoming poorer on average. And, as the world economy finally emerges from the shadows of the global financial crisis of 2007, South Africa risks lagging behind with growth below that of its peers.
According to the World Bank’s 10th South Africa Economic Update, “Innovation for Productivity and Inclusiveness,” one reason for these disappointing economic growth rates has been falling productivity. We estimate that declining total factor productivity (the efficiency with which an economy employs labor and capital) has cost the South African economy 0.7 percentage points on average since the financial crisis.
South Africa has a decent track record of translating growth into jobs, and this fall in productivity has therefore been an impediment to job creation. The country’s National Development Plan calls for the creation of 11 million jobs by 2030. Given its disappointing growth since 2012, this is unlikely to happen. But fostering productivity growth would help South Africa get closer to that goal.
In the Update, we look at innovation as a source of productivity growth.
Does innovation replace jobs? Another recent World Bank study, “The Effects of Innovation on Employment in Developing Countries: Evidence from Enterprise Surveys,” says innovation generates jobs in countries or sectors further away from the technology frontier, as is the case in many parts of South Africa’s economy.
Technology adaptation, rather than necessarily bringing new products to the world, holds great potential for growth and jobs in South Africa. It is an area where South Africa could make further progress.
As we explain in our Update, the South African high-tech sectors are those that tend perform better with respect to generating employment. This means that, on average, innovation is good for South Africa and South African jobs. Greater innovation, through entrepreneurship, the adaptation of new technologies from across the world, and an enabling business environment—including faster and cheaper internet—would thus be good area for policy to focus.
Curious to learn more? Read our 10th South Africa Economic Update on Innovation for Productivity and Inclusiveness.