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Harnessing the power of the 4th Industrial Revolution
Dated: Wednesday, February 21, 2018

Thought leadership article by Mark Phillips, USB MBA Alumnus

Growth is a key issue of our times. In the 20th century, the world benefitted from unparalleled economic growth. The economic Harnessing the power of the 4th Industrial Revolution.pngprosperity and activity was largely driven by rising debt levels, favourable demographics and profligate use of scarce resources. Today, the backdrop to our uncertain economic future is set with fragile and complex economic conditions that are now sometimes a silent background to all debates. A decade later, the official response to the global financial crisis was a policy of devising deferral strategies based on the assumption that government spending, low interest rates, and the supply of liquidity to money markets would create and foster economic growth. In 2018, inflation for the most part remains stubbornly low and conditions in the real economy have not returned to normal.

Over the past two decades, some of the world’s fastest-growing countries were from Africa. The commodities boom is partly responsible alongside favourable demographic patterns. But the growth also has a lot to do with the manufacturing and service economies that African countries are beginning to develop. The big question is whether Africa can keep that up if demand for commodities drops. For a look at the boom in Africa and the 1.2 billion rising middle class opportunity, do so as multitude of foreign investors have done and fly into Abidjan, the capital of the Ivory Coast. Visitors arrive in an air conditioned hall where a French style café sells beers, snacks and magazines. There is advertising everywhere and the taxi into the city smoothly crosses over a six lane toll bridge. Yet just years ago, the Ivory Coast seemed like a lost cause.

“Over the past two decades, some of the world’s fastest-growing countries were from Africa. The big question is whether Africa can keep that up if demand for commodities drops.”

Many believe that fortune favours the brave. When it comes to investing in Africa, this saying holds true. The irony of investing in Africa is that it is both one of the world’s most difficult regions in which to do business and also perhaps it is most entrepreneurial. In no other part of the world does such a large share of the population rely on their wits and their trading abilities to get by. However, a successful industrialisation programme requires many things that Africa still lacks. Many believe that manufacturing in Africa is only for the brave. In Nigeria it makes up about 10% of GDP. In South Africa, it accounts for 13% of GDP, down from 20% in 1990. In comparison, in Thailand the equivalent figure is 28%. Furthermore, Africa’s inter-trade suffers from dismal infrastructure and corruption. This lack of internal trade explains why Africa remains poor, and why it has failed to create big firms that straddle national boundaries.

South Africa seems well placed to invest elsewhere on the continent. As an example, the private sector has access to capital, infrastructure and skilled labour, but a substantial chunk of the population are as poor as any Africans. South Africa is a country of so many contrasts it is perfectly possible to create a convincing portrait of success and prosperity since 1994. Unfortunately, it is equally possible to create a negative portrait of a country in trouble. Ben Turok explains that the country’s present condition is marked by several factors that manifests itself in a lopsided economy vis-à-vis a relatively small tax base, state employment being critical for development, and the state being an enabler for development yet corruption is widespread. Furthermore, as Ralph Mathekga highlights, after two decades of democracy, the patience for South Africa’s persistent inequality is wearing dangerously thin.

The 4th Industrial Revolution is not just about technology and business. It’s about society. Its scope, speed and reach are unprecedented. To some extent, society is now writing the code that will shape our collective future.

The structure of the economy still excludes the majority of the population from key production areas. In order to unlock this country’s potential requires capacity to ensure that programmes and initiatives are well monitored and not hijacked by interest groups. The World Economic Forum asserts that world is changing and companies must adapt. The 4th Industrial Revolution will eliminate millions of jobs and create millions of new ones. This phenomenon is the manifestation of a broader technological trend: the internet is entering the spaces we live in, and is becoming the internet of things. As a result, many aspects of urban life are being rapidly transformed – from energy to waste management, from mobility to water distribution, from city planning to citizen management. In times ahead, the revolution is the greatest transformation human civilisation has ever known. The process is transforming practically every human activity – the way we make things, the way we use the resources of our planet, the way we communicate and interact with each other as humans, the way we learn, the way we work, the way we govern, and the way we do business. 

The 4th Industrial Revolution is not just about technology and business. It’s about society. Its scope, speed and reach are unprecedented. To some extent, society is now writing the code that will shape our collective future. The forces of change will result in the seamless integration of the virtual and the physical worlds that is the giant leap seen today. Also, as cities are changing quickly and we are in the midst of rapid urbanisation, the concept of smart cities is emerging. The ray of light is that the 4th Industrial Revolution will bring about very substantial changes to the social base. However, striving for inclusive growth is about the disruptive and revolutionary role of technology. Therefore, what can we do to make sure as many citizens as possible benefit from the 4th Industrial Revolution? And, how could this paradigm ultimately play a role in the development of developing economies like South Africa, and across the African continent?

Carlo Ratti identifies key trends that could usher in a new era of urbanisation across Africa – data collection for social change, mobility and traffic congestion, innovation anywhere, infrastructural shortages, the sharing economy, and the ethical economy. Subsequently, across the continent there is a potential gold mine of knowledge skills and business networks that if mobilised, could solve many of the continents current challenges. We can learn from the past and lay the conceptual foundation for an inclusive society. One may envision an open society that aims to unite the principle of the free market with that of fair distribution of prosperity. This vision is more important today than ever before because it points out the way to an inclusive form of capitalism and to a sustainable model for economic and social well-being. They key is that the business of business should not just be business. Shareholder value alone should not be the yardstick. Instead, we should make stakeholder value, or better yet, social value, the benchmark for private and public sector performance.

Leaders in both private and public sector will have to come to grips with the 4th Industrial Revolution, which is redefining entire industries. As the past few years has demonstrated, leaders must be responsive to the demands of the people who have entrusted them to lead, while also providing a vision and a way forward, so that people can imagine a better future. The 4th Industrial Revolution presents the opportunity of ‘reshoring’ by bringing production closer to the consumer. This could improve the chances of industrialisation in developing economies. South Africa has a unique opportunity to look at new technologies with a view to the niches we can occupy, the benefits we can by job creation and at how to minimise the negative impacts. Joe Kaeser explains that the 4th Industrial Revolution runs on knowledge and we need a robust concurrent revolution in training and education. Here, both government and business must join forces to provide workers with the skills and qualifications they need to participate in the digital and smart economy.

The process of technological innovation, including the growth of crypto-currencies, are rapidly reshaping some of the core functions of policy and strategy direction. In the complex and ever-changing environment there must be no place for defensive postures. Vishnu Padayachee and Bradley Boris argue that in a changing world, conventional notions of policy and strategy are, and of what they should do, face a number of challenges. The World Economic Forum identifies key challenges – coming to grips with the use and potential of technologies, building a dynamic and inclusive multi-stakeholder governance system, restoring global growth, and reforming market capitalism by restoring the compact between business, government, and society. Therefore, the debate and collective action by both public and private sectors must be guided by one overriding objective to improve the quality of life of the many South Africans who need the impact of positive change on employment, investment, and growth.

Mondli Hlatshwayo explains the decline in industries and the implementation of technologies that lead to retrenchments, unemployment and poverty require a multi-faceted response and not only the social and economic strategies. There is a need for progressive public-private partnerships to consider collective responses where declining industries present opportunities in the 4th Industrial Revolution. Consequently, we face challenges in terms of food and water security, climate change, energy, demographic shifts, healthcare, financial health, education, skills and technology. Of course there are also global scarcity, geopolitics, conflict, and the issue of quality of life. Therefore as leaders in both public and private sectors, we must provide visionary leadership and creative solutions suited to the context. We need the ability to embrace emergent technologies that support productivity and to be able to leverage connectivity and collaboration to open up possibility.  All this requires shared meaning and purpose, social cohesion, and a strong culture passionate about improving the lives of future generations. ​