SA urged to promote gig economy as unemployment takes toll

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 12 Feb 2020

While South Africa’s unemployment rate remains in the doldrums, analysts believe the “gig economy” can alleviate the problem of joblessness in the country.

This after Statistics SA yesterday released unflattering unemployment figures.

According to Stats SA, the official unemployment numbers for the fourth quarter of 2019 remained unchanged at 29.1% – the highest rate since 2008 – compared to the third quarter of 2019.

Gig worker refers to independent contractors, online platform workers, contract firm workers, on-call workers and temporary workers. Gig workers enter into formal agreements with on-demand companies, for example Uber, to provide services to the company’s clients.

The gloomy Stats SA results further indicate the number of discouraged work-seekers increased by 62 000 and those who were not active in the labour market for reasons other than discouragement increased by 45 000, resulting in a net increase of 107 000 in the number of those who were not economically active.

Flexible labour pools

Jon Tullett, senior research manager for cloud and IT services at IDC, comments: “Technology is the glue holding the gig economy together – it builds the platforms which enable the agile and flexible matching of supply and demand, and the analytics to optimise it all.”

He says the gig economy reduces friction, making it easier for temporary workers to access customers. “It similarly makes it easier for employers to tap into flexible labour pools. Reduced friction should ideally increase economic activity.”

Tullett adds government can help the gig economy by reducing barriers, like artificial limits on trade – such as Uber has faced with taxis.

“Government can also help by clarifying the role of gig workers to ensure they are not exploited by employers. And it can stimulate local platforms so they can compete with global rivals and so the country isn’t paying an offshore handling fee with every transaction.”

However, Tullett points out worker exploitation is a major concern since gig workers are often left without employee protection or benefits, and may have unexpected costs to absorb like equipment maintenance or insurance.

Jon Tullett, senior research manager for cloud and IT services at IDC.
Jon Tullett, senior research manager for cloud and IT services at IDC.

Entrepreneurial spirit

Arthur Goldstuck, MD of Word Wide Worx, says the gig economy is already assisting with unemployment, particularly in the public transport space, where Uber and Bolt have had a massive impact on the ability of professional drivers to keep working even if they don't have a formal job.

However, he says, there are really two kinds of gig economy – piece work that requires people to do any odd job going; and the skilled gig economy that requires very specific qualification, talent or ability.

“In between, there is tremendous opportunity for the gig entrepreneur, but that in itself requires a specific kind of entrepreneurial spirit. Not everyone is born with it, and not everyone can develop it. This means the gig economy is great for some, but it’s not a cure-all for unemployment.”

According to Goldstuck, the gig economy is entirely premised on technology that allows work-seeking platforms to thrive online.

“In effect, the gig economy is a sub-sector of the platform economy, which enables all organisations and individuals to participate in the broader digital economy. That means, however, that if you are not digitally included, you cannot be economically empowered by most gig sectors.”

On government’s intervention in the gig economy, Goldstuck says on the one hand, government can support the gig economy directly by giving tax breaks to people who gain employment in this way, or those who offer employment locally, depending on the scale of what they offer.

On the other hand, he notes, government can give that economy a boost by increasing digital access.

“This requires vigorous attention being paid to issues like digital migration, spectrum allocation, and enablement of the connectivity environment in general. Given the regulatory sloth around spectrum, with more than a decade of opportunity already wasted, it is difficult to see this happening.”

Active engagement

ICT veteran Adrian Schofield says: “We are beginning to see ‘apps’ where workers can register their skills and availability, and potential employers can seek them out.

However, he says, the problem of scale arises. “If the employer needs the immediate availability of a worker with specific skills, there must be a pool – even a small one – of available candidates in reasonably close proximity. The process of engagement must allow for an interview and reference check, if appropriate. Before technology, we went to labour brokers.”

Schofield says SA already has a significant portion of the population engaged in generating income in this fashion – mostly on the basis of local networks and personal links.

He explains that many of these casual workers are probably included in the ranks of the “unemployed”, as they remain below the radar of the formal economy.

“The gig economy is today’s phrase for a sector that has existed for centuries – short-term work opportunities for those who are available and have the requisite skills. Technology can make it function more efficiently, in the same way that technology enabled ride-hailing to impact the taxi industry.”

Lulama Qongqo, investment analyst at Mergence Investment Managers.
Lulama Qongqo, investment analyst at Mergence Investment Managers.

Beating poverty

Lulama Qongqo, investment analyst at Mergence Investment Managers, comments that the gig economy can help uplift a significant amount of people without formal education out of poverty, “but I caution that people still do need to educate themselves in one way or another to be able to participate in the gig economy”.

The gig economy enables people who don’t have access to a network to get an opportunity purely on the basis of what they can deliver versus who they know, says Qongqo.

She notes this has decreased the barrier to entry for a significant amount of unemployed residents in SA.

“It also encourages innovation as the Internet community has a culture of information-sharing and is made up of a lot of self-taught problem-solving individuals from all over the world.”

However, the rise in gig employment has not come without trade-offs, she points out.

Increased mobile phone penetration is key for the gig economy to thrive. “The deflation in smartphones has made it accessible to more people in Africa and hence enabling more online work, education and business activity.

“The second leg which is lagging is data deflation. SA’s Internet is much more expensive relative to other countries, and that means it is still more expensive for people in SA to participate in the gig economy relative to people in other countries.

“Lastly, Internet quality also determines the ease of participating in the gig economy – hence, faster and more reliable internet is key.”