The World Bank’s forecasting models delivered a blow to South Africa last week. Some would argue that we were already on track for a recession before the coronavirus pandemic, which has necessitated a national lockdown. South Africa was already heading into a crisis following a recession in the second half of 2019 and the return of load-shedding at the start of this year. Yet, the halt in economic activity has worsened this outlook.
The World Bank forecasts that South Africa’s economy will contract by 5.2%, and this will be the worst year on record in a century. Even more worryingly, this forms a baseline of the bank’s expectations, which assumes that lockdown measures will be lifted by the middle of the year. Yet, already in June, our numbers of infections and deaths have steadily increased, placing doubt on the likelihood of lockdown lifting anytime soon and making the 5.2% contraction an optimistic view.
The debate now, of course, is what we do once things return to some semblance of normalcy to kick-start the economy. It has long been argued that one of our biggest economic faults is that we have a plan – and a good one at that in place – but little has been done in the way of implementation.
The National Development Plan (NDP) serves as our country’s economic blueprint. The NDP was formulated in 2013 with objectives to be achieved by 2030. The central objectives are to stabilise the political-administrative interface, make the Public service and Local government administration careers of choice, develop technical and specialist professional skills, strengthen delegation, accountability, and oversight in government, improve interdepartmental coordination, strengthen local government and achieve the developmental potential of state-owned enterprises (SOEs).
Arguably, we have strayed away from much of the NDP’s goals in recent years. For instance, according to the NDP, there would need to be about 5% economic growth to make so much as a dent in the growing unemployment rate, which is sitting just under 30%. Yet, the economy has not grown by more than 2% annually since 2013. Even before the lockdown, notwithstanding political changes and efforts to lure investment into the country, it struggled to increase momentum. For a while, this also came as South Africa struggled to hold on to its final investment-grade rating from Moody’s Investors Service.
Moody’s downgraded us to junk status during the national lockdown citing the deterioration in South Africa’s fiscal strength and structurally low growth. Following the Reserve Bank’s interest-rate announcement for 2019, the credit rating agency stated that the country’s high unemployment, income inequality, and social and political challenges had proved to be substantial obstacles to the government’s plans to raise growth and contain fiscal deficits. This is crucial if we are to go about achieving the goals set out in the NDP.
Ultimately, the goals of the NDP are to reduce poverty, inequality and unemployment. Tapping into the benefits of the fourth industrial revolution (4IR) could be the key. To many, this could seem counterintuitive. We’re embracing a new era but at what cost? How many workers will be replaced by machines? How does this change the makeup of industries and professions? However, as our challenges mount and we inch closer to the 2030 deadline, the NDP remains a crucial policy document, perhaps more vital now than ever.
When the Presidential Commission on the 4IR (PC4IR), of which I am the deputy chair, started, our central guideline was that the NDP should be seen as the foundation of South Africa’s approach to the 4IR. This means that our policies, strategies and plans should seek to advance the goals of inclusive and shared growth. The PC4IR developed the eight recommendations, which aim to address the need for technical skills, as outlined in the NDP.
For one, the government needs to prioritise a redesign of the human capacity development ecosystem to link our entire pool of potential employees into productive and decent work. We need to develop a comprehensive view of the entire human capital system and the leverage points which can be accelerated by 4IR. The Human Resources Development Council should work with the PC4IR, the education system and the Digital Skills Forum, to inculcate 4IR skills such as communication, logical and numerical skills, coding, thinking computationally, holistic approach to problem-solving. This is an initial step to address the scourge of unemployment and developing technical skills. For one, it addresses some of the concerns around job losses that will accompany that 4IR. In an era where technology is proving itself a viable candidate for many jobs, upskilling and reskilling with a focus on the requirements of the 4IR is pivotal.
There is also a fundamental need to develop “The National Artificial Intelligence (AI) Institute” that focuses on the application of AI to health, agriculture, finance, mining, manufacturing, and government, as well as regulations, would be responsible for keeping abreast of and support capacity building. This would spur the industrial and research applications of AI. Establishing a platform for advanced manufacturing and new materials will help revitalise the primary sectors of our economy, which have come under immense strain in recent years.
Manufacturing is the country’s fourth-largest industry and contributes 14% to the gross domestic product (GDP), making it a significant job creator and imperative for South Africa’s global competitiveness. In the context of the 4IR, however, it needs to be supported by a state-led research initiative to grow the manufacturing sector, develop and apply new materials through the technologies of the 4IR with electric cars, for example. Of course, to strengthen the government, particularly the local aspect, there needs to be view to securing and availing data to enable innovation.
This is important in building e-government services across sectors such as health, agriculture, transport, security and justice. This could be achieved through the creation of the National Data Centre which consolidates the available computational power and creates a national data centre that will become the national data repository for all of our data, including health data. This can be done alongside existing data centre companies. However, cybersecurity needs to be bolstered to safeguard the public.
We need to look at the generation and delivery of energy, the extension and improvement of water infrastructure and health and educational infrastructure to create a coherent and comprehensive infrastructure network. The first step would be for the government to develop a comprehensive set of infrastructure priorities for the country with achievable timelines based on the NDP. However, this needs to be done with urgency as infrastructure is integral to the 4IR.
As outlined in the NDP, there needs to be greater coordination to ensure implementation. In this regard, the PC4IR has recommended the establishment of a 4IR strategy implementation coordination council in the presidency which will coordinate government departments responsible for 4IR related programmes. In addition to this, the council will coordinate initiatives across the public and private sectors, labour and academia. This will require resourcing and budget allocation aligned to the mandate to ensure that there is a single point of coordination with government departments for the council.
Of course, to make this happen, we have to incentivise future industries, platforms and applications of 4IR technologies cognisant of the country’s precarious fiscal position. This means that companies should be incentivised to use 4IR technologies to improve South African competitiveness. These incentives should include tax breaks and support for research and development using organisations such as the Council for Scientific and Industrial Research, Technology Innovation Agency, National Research Foundation, South African National Space Agency, Medical Research Council, and the Agricultural Research Council. This would support the acquisition and application of advanced technologies in the manufacturing of goods and delivery of services.
Finally, with these immense changes, there is a need to review, amend or create policy and legislation. To ensure our legislations are in line with the 4IR, parliament should look at all our legislation and update them in line with the 4IR. This would require the legislature and the state executives to be trained to become 4IR and science-literate to implement changes. In particular, the generation of intellectual property rights stands out in this context as the principle of a creative and knowledge economy implies the rapid production of new technologies, artefacts and processes for commercialisation and scale. This will include re-looking at our tax laws so that they bring platform companies such as Uber and Airbnb into our tax regime.
What is clear is that the NDP remains the appropriate policy framework for South Africa. Of course, this will require a post-corona review, which ensures we reach our goals by 2030. As the clock ticks, we must play a game of catch up, which focuses on implementation. In the words of the economist Theodore Levitt, “Ideas are useless unless used. The proof of their value is in their implementation. Until then, they are in limbo.” Let us not remain in limbo.
Professor Tshilidzi Marwala is the Vice-Chancellor and Principal of the University of Johannesburg. He is the Deputy Chair of the Presidential Commission on the Fourth Industrial Revolution.