Digital technology: a key to unlock SA’s economic growth potential

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Vukani Mngxati | CEO | Accenture | mail me |


Government needs to take bold and rapid action to extricate the country from the economic quagmire in which it finds itself. The local economy is struggling to generate the growth needed to address high unemployment and inequality, as well as arrest the declining productivity that has eroded the country’s global competitiveness.

We need to accelerate economic growth to benefit South African society and the fastest, most effective way to achieve exponential growth is by unlocking digital value.

The impact of digitalisation

South Africa could generate R5 trillion in value over the next decade by implementing key digital initiatives, according to the findings of our recent research. The report’s findings, based on the analysis of the impact of digitalisation in South Africa according to the value-at-stake framework co-developed by Accenture and the World Economic Forum (WEF), affirm that South Africa has an unprecedented opportunity to maximise the impact of digital

What the country needs to unlock this value is a unified national digital transformation strategy that can guide the efforts and investments of all stakeholders. This will effectively power digital-led growth across sectors in accordance with President Cyril Ramaphosa’s economic growth plans, which he announced during his 2018 State of the Nation Address.

In terms of the local economy, the analysis revealed where South Africa can unlock over R5 trillion in value, with R1.4 trillion created in 2026 alone by implementing 96 digital initiatives across nine industries and five government services.

Digital transformation

In this regard, the value at stake from digital transformation across the five identified government services is over R2 trillion, with the digitalisation of public infrastructure maintenance, public administration, and healthcare able to add over R1.2 trillion to society over the next decade.

Digitally transforming South Africa’s government services will create the highest value for society through its impact on economic activity, employment, productivity and service delivery.

That equates to less time spent in queues, expedient administration that improves the ease of doing business in the country, and the ability to extend vital services such as healthcare and education into previously underserved markets.

Digital transformation within the nine identified industry sectors could also create over R3 trillion, mostly in net new value because of new products and services. Transformation across the financial services, agriculture and manufacturing sectors offer the greatest potential based on the research findings.

Greatest potential

And the majority of this value (68%) will come from the adoption of Internet of Things (IoT) and connected devices, artificial intelligence (AI) and digital platform technologies.

IoT and connected devices hold the greatest potential as these technologies will enable significant cost reductions, increase efficiencies and create new business models.

AI, combined with uniquely human capabilities, will deliver more than just efficiency – it will revolutionise how work is done, how customers interact with businesses and how citizens interact with governments. However, AI will demand new skills, the redefinition of jobs and a recalibration of business culture and leadership.

In addition, platform ecosystems can create a foundation for value creation by enabling new business models, strategies, and ground-breaking products and services, which will profoundly change the way companies engage with customers. There is still substantial room for South Africa to capitalise on the opportunity presented by the platform economy.

While each technology brings new capabilities and adds enormous value, it is ultimately the combined capabilities of these and other technologies that will create the greatest value.

In the agricultural sector, for example, the combined use of autonomous vehicles, drones, and sensors will enable precision agriculture that improves resource utilisation and increases yields, which is revolutionising the sector and delivers better value to citizens.

Barriers

There are, however, numerous barriers that impede South Africa’s digital transformation progress, which the 4IR Commission would need to urgently address to accelerate progress. These include outdated and complex regulatory frameworks, gaps in digital infrastructure and a lack of skills in the new.

To address these challenges, the focus should be on the six common success factors that emerged from the research, namely addressing physical and digital infrastructure, digital skills and training, transparency, regulation and policy, public-private partnerships and capital expenditure.

Skills development is particularly pertinent to address unemployment as it would empower citizens with competencies that are relevant in the new digital economy.

However, while the potential impact on unemployment is prolific, with the research estimating that digital transformation could create approximately four million jobs by 2026, there are concerns that an increasingly digitalised workplace could lead to job losses.

It is, therefore, essential to re-skill and retrain the country’s current workforce to ensure their relevance in an environment where AI is redefining jobs and digital transformation will create more jobs than it eliminates.

Augmentation

Technology will also augment human capabilities. This will make us more productive, with the ability to focus on the tasks where human emotion and intuition – characteristics that machines do not possess – can add the greatest value.

South Africa must, therefore, urgently undertake a countrywide skills development programme to address new digital skills requirements at all levels.

Immediate emphasis is needed on the curriculum taught at primary, secondary and tertiary levels to align the education system with the relevant skills that the youth of today will require in the dynamic digital economy of tomorrow.

Digital transformation will demand a recalibration of business culture and leadership. Legacy thinking remains a significant growth constraints. A shift in mindset is required among South Africa’s business leaders.

We need leaders who are brave enough to consider new business models and foster an innovation mindset within their organisation. This will ensure that they avoid becoming a victim of disruption by becoming market disruptors themselves.

Capital for investment

Collaboration between multiple stakeholders will also be required to craft and implement policy changes that embrace a digital-first mindset to encourage and incentivise digital adoption.

Both government and industry role players need to allocate capital for investment into digital technologies and infrastructure, in accordance with a unified plan, to plug gaps, expand coverage, and improve access and affordability. These public-private partnerships must also be nimble and responsive to adapt to rapid market changes.

To benefit society, the focus should also be placed on the future of work to identify which sectors will be impacted and when, and what programmes should be in place to support workers when potential retrenchments or corporate restructuring is announced.

The low-hanging fruits to exploit opportunities that can have the greatest impact in the short and medium term should be taken advantage of.

Digital technologies are key to address the fundamental socio-economic and developmental issues facing the country. Thankfully, the new government administration understands and recognises that digital transformation is a journey that requires a clear strategy and practical solutions.


 

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