There will be “serious winners and losers” as a result of the Fourth Industrial Revolution and South Africa needs to be properly prepared and positioned to reap the benefits, or be saddled with the negative consequences.

This was according to Trade and Industry Minister Dr Rob Davies who said that emerging technologies have the capacity to benefit humanity in all sorts of ways, “reducing low-skilled back-breaking useless toil and replacing it with something more satisfying”.

But Davies, who is part of the South African delegation in Davos for the World Economic Forum (WEF), warned that “in a world with inequalities, this requires high levels of technological literacy.

“We could be facing serious winners and losers and people are saying we don’t know yet,” he said. “We don’t know yet what the job implications are going to be. Lower skilled people are going to find it more difficult to get jobs, small businesses may find it easier to enter markets because the technology required may require less sunken capital to get into a line of activity.”

Davies cited the recent WEF report Country Readiness for Future of Production which listed South Africa at 45th in the world and first in Africa, just ahead of Egypt in 46th place.

“We are in the category called nascent,” Davies said.

Davies said that in terms of the BRICS countries, South Africa followed China which placed fifth, India and Russia which were 30th and 35th respectively, and Brazil which was 41st.

“There are a whole lot of things the reports cite which we take pretty seriously. Where we are good is on science and innovation and adoption of technologies, where we are not so good is on maths literacy, science education and skills development which I think we all already know.

“Government is looking at the implications of these technological changes and ensuring that our country is as prepared as it can be so that we can reap the benefits, while minimising the challenges. And there will be challenges and disruptions, there will be challenges because that is what this technology is all about. So we are learning about that.”

The WEF 2018 theme is a Shared Future in a Fractured World, and Davies said “many of those fractures derive from digital technologies that we need to wake up to”.

He cited the recent examples of sports brand Adidas moving some of its production back to its home base of Germany from low-wage economies in Asia “because they said artificial intelligence and 3D printing had reduced the cost of production more than the low wages”.

He added: “Amazon has launched a shop that is not just self-service tills, but no till at all. You walk in with an app, you take the stuff, you walk out and they charge your account. Now what is going to happen to people who are shop tillers? Many of our jobs are in service sectors and the whole sale and retail trade. What is going to happen?

“We have to smell the coffee and know that this is happening and we have to be prepared for it,” he said. “If we don’t, we are going to reap more of the negatives than the positives.”

“There are some really, really big questions that we are grappling with and will be grappling with in the decades ahead,” he said. “We need skills development and the right kind of skills.”

Davies said one of the WEF sessions he attended on Tuesday spoke of university students in Singapore who are studying English literature but being required to also do a course in digital literacy as part of their study programme.

“These are the things we are going to have to grapple with as we move ahead,” he added.

“How do we measure it to see how we can increase our performance and our preparation.”

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Manufacturing Transformation Set to Create a Two-Speed World

A new report launched on 12 January 2018 by the World Economic Forum reveals that only 25 countries are in the best position to gain as production systems stand on the brink of exponential change.

Recognizing the impact of the Fourth Industrial Revolution and emerging technologies on new production systems and business models, the Readiness for the Future of Production Report 2018, developed in collaboration with A.T. Kearney, provides a snapshot of today’s global production landscape along with potential responses.

The new framework is made up of two main components: Structure of Production, which measures a country’s scale and complexity of production; and Drivers of Production – the key enablers that position a country to capitalize on the Fourth Industrial Revolution to transform production systems. Recognizing that each country has its own unique goals and strategy for production and development, participants are assigned to one of four archetypes: Leading (strong current base, high level of readiness for the future); High Potential (limited current base, high potential for the future); Legacy (strong current base, at risk for the future); or Nascent (limited current base, low level of readiness for the future).

Helena Leurent, Head of the Future of Production System Initiative of the World Economic Forum, said: “Our work seeks to shape a future where new technologies in production systems help unlock human potential, tackle and solve challenges that have previously been insurmountable, and where all benefit. This report is intended to catalyse discussion between public and private sectors on the factors and conditions required, inform the development of modern industrial strategies, and define areas of collaborative action.”

Along with further qualitative analysis, the initial assessment reveals eight main findings:

1. Global transformation of production systems will be a challenge, and the future of production could become increasingly polarized in a two-speed world. The 25 countries in the Leading archetype account for over 75% of global manufacturing value added (MVA), while 90% of the countries from Latin America, Middle East, Africa and Eurasia fall into the low level of readiness.

2. Different pathways will emerge as countries navigate the transformation of production systems. Advanced manufacturing will not be the chosen path for all: some may seek to capture traditional manufacturing opportunities in the near term, while others will pursue a dual approach, or prioritize other sectors altogether.

3. All countries have room for improvement. No country has reached the frontier of readiness, let alone harnessed the full potential of the Fourth Industrial Revolution in production. While there are early leaders to learn from, these countries are also still navigating the early stages of transformation.

4. Common challenges within each archetype indicate potential future pathways for Leading, Legacy, High Potential and Nascent countries. Countries can learn from each other, while pursuing their own unique strategy.

5. Technological advancement brings the potential for leapfrogging, but only a handful of countries are positioned to capitalize. Lagging countries can potentially enter emerging industries at a later stage without the legacy costs of earlier investment, but only if they have the right set of capabilities and develop effective strategies for capturing leapfrogging opportunities most relevant to them.

6. The Fourth Industrial Revolution will trigger selective reshoring, nearshoring and other structural changes to global value chains. Emerging technologies will change the cost-benefit equation for shifting production activities and, ultimately, impact location attractiveness. All countries must develop unique capabilities to make them attractive production destinations and capitalize on these shifts.

7. Readiness for the future of production requires global, not just national, solutions. Globally connected production systems need not only sophisticated technology but also standards, norms and regulations that cross technical, geographical and political boundaries, to release efficiencies and make it easier to do business across global value chains.

8. New and innovative approaches to public-private collaboration are needed to accelerate transformation. Every country faces challenges that cannot be solved by the private sector or public sector alone. New approaches to public-private collaboration that complement traditional models are needed to help governments quickly and effectively form partnerships that unlock new value.

Johan Aurik, Managing Partner and Chairman of A.T. Kearney, said: “In a changing production landscape, each country will need to differentiate itself, capitalize on competitive advantages and make wise trade-offs in forming its own unique strategy for the future of production. Given the speed and scale of changes occurring in the environment, the new diagnostic and benchmarking tool can help raise awareness and sharpen a country’s response.”

Shaping the Future of Production System Initiative

This report is a key contribution to the World Economic Forum System Initiative on Shaping the Future of Production. The initiative brings together global leaders and decision-makers in seeking to address how the transformation of production systems, from R&D to the consumer, can drive innovation, sustainability and employment, to benefit all people.