Digital revolution good for small businesses, not so much for job security - Davies

Johannesburg – The SA economy must brace itself for the radical and disruptive change the digital industrial revolution will bring, according to Minister of Trade and Industry Rob Davies. 

Davies was delivering an address o the future of the economy at a Progressive Business Forum breakfast on Sunday morning, part of the ANC’s 54th National Conference at Nasrec. 

Davies spoke on the future challenges the SA economy would face.

“[We must] set ourselves on a higher level of economic growth. As we do that we must understand there will be radical change or disruptive change in production as a result of profound technology changes, in the form of the digital industrial revolution or the fourth industrial revolution,” he said. 

READ: The Fourth Industrial Revolution - An African perspective

He said digital disruption would have to be confronted alongside radical economic transformation.

The industrial age winds down 

Davies said that during the industrial age, industry was at the “head” of value chains. Now, however, industrial firms are subordinate to digital firms.

The implications are profound. 

“It means that the barriers of entry to small enterprises could well be lowered as the quantum of fixed capital requited of enterprises would go down as they use digital technology, build on digital technology, innovate around digital technology,” said Davies. 

However, it also means that workers, to stay competitive, will have to master digital technology. This requires post-school education and training. 

READ: Ramaphosa warns workers to prepare for mechanisation storm

Davies argued that digital revolution would affect some developing countries which have sought to industrialise by means of cheap labour costs.

As an example, Davies noted that German clothing and footwear company Adidas has moved its production from Asian countries back to Germany because technology such as 3D printing and robotics had lowered production costs in Europe.

“I think we have to adapt ourselves to this reality,” he said.

This disruptive change is not only affecting manufacturing, but also the services industry and trade, he added.

Disrupting trade

Davies said that around 85% of the cross border transactions of firms such as media giants Google, Facebook, Apple, Amazon and Alibaba are digital. 

These transactions do not carry tariff charges.

Davies noted that countries were under pressure from the World Trade Organisation to sign the Digital 2 Dozen agreement, which focuses on how the trade of digital goods and services would take place globally.

But he argued that the ability of countries to develop their own digital industrial policies would be "significantly and seriously" constrained under the agreement. 

This then requires discussion on what SA and the continent wants as a digital industrial policy framework. He assured the business forum attendees that a "stream of workers" at the Department of Trade and Industry were working on this.  

"Industrialisation and moving up the value chain will require us to engage with this huge technological change that is happening. If we don't, we will find ourselves not being able to use this as a force for good," he said. 

He said that while new technologies have the ability to improve human life and create opportunities for entrepreneurial development, they could also support the proliferation of monopolies. 

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