Financial

Fourth industrial revolution can propel SA's economic growth

Read time 4min 20sec
Mike Schüssler, economist and founder of Economists dotcoza.
Mike Schüssler, economist and founder of Economists dotcoza.

Financially-constrained power utility Eskom's challenges could take up to 30 months to resolve, negatively impacting underground mining, manufacturing and the automation sectors in SA.

This was the word from Mike Schüssler, economist and owner of economic consultancy Economists dotcoza, speaking at a business networking event previewing the upcoming Africa Automation Fair 2019.

While the struggling power utility's crisis remains a growth inhibitor to SA's economy, Sch"ussler believes there are still opportunities amid the challenges.

"It could take anywhere from 18 to 30 months to sort out SA's power crisis, and this will hamper growth in the automation sector, as well as in power-intensive industries, such as underground mining and manufacturing, for some time to come," he noted.

In April, the International Monetary Fund lowered SA's gross domestic product (GDP) growth forecasts from 1.5% to 1.2% for 2019, according to Reuters.

Although the first quarter of 2019 would likely be a disaster, with corruption and state-owned enterprises taking some time longer to sort out, the GDP rate is likely to improve, added Sch"ussler.

"We can expect to start seeing growth after a few quarters. We're probably over the worst, and by 2021/2022, we could be back at 3% GDP growth."

In March, the state-owned power utility, which supplies about 90% of SA's power, was forced to repeatedly implement stage four load-shedding, due to a combination of factors, including a shortage of capacity, unplanned plant breakdowns and low diesel reserves.

Eskom is saddled with R419 billion debt, with the government promising it a R23 billion a year bailout over the next three years.

While the impact of Eskom's woes will be felt across a broad spectrum of industries, Sch"ussler believes some sectors would feel the effects less than others.

To mitigate the challenges, he noted power-hungry industries would likely look to alternative power generation and the fourth industrial revolution (4IR), which extends beyond technologies, and presents a shift from commodities-based economies and manual labour, to services-driven economies.

Investment in automation, he added, could help boost the manufacturing sector, with benefits for the country's overall economic growth.

"Automation is more than a machine; it is the future for the developed world, with opportunities driven by megatrends such as an ageing population, increased personal wealth and connectedness.

"The 4IR is personalised, service-driven and even recycled, so the economic focus is no longer only on commodities. South Africans are good adaptors of technology but hardly innovators. We may not compete at the highest levels in great numbers but we are quick learners and adapters," he explained.

While the pace of economic growth remains sluggish, there are positive signs in the manufacturing industry. According to Statistics SA, the industry rebounded in 2018, recording its highest annual growth rate in five years, increasing by 1.2% compared with 2017.

4IR opportunities

Also speaking at the event was Frikkie Streicher, business development manager at process instrumentation manufacturer Vega. He explained that automation and 4IR present huge opportunities for SA; however, there are challenges to overcome.

"Automation could address challenges across industries, boosting manufacturing production and reducing injuries in mines. Companies like ours have pushed the 4IR concept very hard, but the industry has been slow to invest, for several reasons.

"There are concerns about SA's political landscape, concerns about potential job losses and their impact on labour forces, and infrastructure challenges. Large-scale investment in smart manufacturing won't take place in an environment not perceived to be stable," he pointed out.

As many industries use outdated equipment due to funding challenges, SA is at a risk of being overtaken on the continent by North Africa and investor-friendly countries such as Ghana, Rwanda and Mauritius, added Streicher.

"It's unfortunate that we are failing to embrace advanced automation, because the opportunities are vast, especially in the South African context where we have lagged so far behind the world.

"SA needs to simultaneously create a stable landscape for investors, build out critical infrastructure and get our workforces up to speed to become globally competitive," he asserted.

Dave Wibberley, MD of software development firm Adroit Technologies, explained that SA should strive to become a world-class manufacturer. "We can put down intelligent sensors and cloud technologies, but unless a manufacturer is embracing world-class manufacturing models, eliminating waste and driving value flow, 4IR tools and technologies will not be truly transformative."

Africa Automation Fair 2019 will focus on the economic impact of Industry 4.0/the industrial Internet of things on South Africa and Sub-Saharan Africa. It will take place from 4 to 6 June.

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