Digitisation to unlock 1.2m jobs, ease SA’s unemployment woes

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Digitisation, machine learning and automation have the potential to create new jobs purely as a result of improved productivity.
Digitisation, machine learning and automation have the potential to create new jobs purely as a result of improved productivity.

Digitisation and automation could result in a net gain of up to 1.2 million jobs in SA by 2030.

This is according to a new report, “The Future of Work in South Africa: Digitisation, productivity and job creation”, from McKinsey & Company.

It notes that technology-related gains could triple SA’s productivity growth, more than double growth in per capita income, and add more than a percentage point to its real GDP growth rate over the next decade.

The report comes after the country’s unemployment rate climbed to 29% in the second quarter of the year, the worst recorded since 2008.

According to StatsSA, the country’s unemployment rate was 27.6% in the first quarter of 2019, meaning the rate has increased by 1.4 percentage points.

The South African economy also faced a downturn in the first half of 2018. Nonetheless, according to official StatsSA data released on Tuesday, the country’s GDP grew more than expected in the second quarter thanks to a recovery in mining and manufacturing.

Real threat

Speaking ahead of the launch of the report today alongside the World Economic Forum on Africa, Nomfanelo Magwentshu, a partner in McKinsey & Company’s Johannesburg office and co-author of the report, said while the threat of digitisation is real – and will result in significant displacement of jobs, especially in the manufacturing and retail sectors – McKinsey research demonstrates digitisation and automation are likely to result in a net gain in jobs.

“We expect to see an increase in both the number and quality of jobs, with a net gain of up to 1.2 million jobs across various sectors by 2030,” said Magwentshu.

“These gains are likely to come about as a result of productivity improvements, strategic infrastructure development and the evolution of technology. By leveraging these technology investments to improve productivity and innovation, South Africa has the opportunity to increase its competitiveness in key sectors and reignite growth.”

Researchers analysed a range of potential scenarios for the pace at which automation could affect job losses and offset this against the labour demand created by seven catalysts, including infrastructure investment as well as energy transitions and efficiency.

The research forms part of a global initiative by McKinsey on the future of work, focusing on how governments, businesses and members of the workforce can take action and adapt as digital technologies change the world of work.

Nomfanelo Magwentshu, a partner in McKinsey & Company’s Johannesburg office.
Nomfanelo Magwentshu, a partner in McKinsey & Company’s Johannesburg office.

Agesan Rajagopaul, co-author of the report and partner at McKinsey & Company, says: “Our analysis demonstrated that women in particular stand to gain from these shifts in the workplace, in part because factors traditionally considered physical barriers to women’s participation, such as working with heavy machinery, will be removed. Digital and Internet technologies will also make reskilling more accessible and enable flexible working.”

Public debate

McKinsey points out that much of the public debate about automation in SA and globally tends to focus on fears that technologies such as machine learning, artificial intelligence and advanced robotics will destroy more jobs than they create.

“But our research suggests that, while new machines will disrupt the world of work, overall, it will create more new jobs than those it destroys. A glance at history shows that technology has created large shifts in employment, but the increased productivity it ushers in generally creates many more jobs.

“For example, the introduction of personal computers from the 1980s destroyed an estimated 3.5 million jobs in the US (for instance, among typists), but created 19 million new jobs right across the economy,” the consultancy firm says.

In SA, McKinsey estimates digitisation, machine learning and automation have the potential to create new jobs purely as a result of improved productivity – which, in turn, could increase income levels, consumer spending, investment in construction and infrastructure, and spending on education and healthcare.

The firm says SA has the potential to create up to 4.5 million new jobs across many sectors as a result of productivity improvements, strategic policy implementation and the evolution of technology.

“We estimate there could be a net gain of more than 570 000 jobs in the healthcare and social-assistance sector alone, and a net gain of more than 260 000 jobs in construction.”

However, McKinsey says these gains imply significant workforce transitions in SA. “Against the 4.5 million potential new jobs created, we estimate that these technologies could displace 3.3 million existing jobs by 2030.

“When estimating job displacement, we looked at jobs at an activity level. Our analysis of work activities indicated there are few job types that are 100% automatable. For example, in data processing roles such as payroll officers and transaction processors, 72% of activities are potentially automatable,” says Magwentshu.

“Jobs in these roles will, therefore, not be completely replaced – but they might decline in number as fewer people are required to perform the same roles.”

Worst-case scenario

McKinsey points out the potential for technology-driven gains in employment – both the number and quality of jobs – is substantial.

Nonetheless, it says, in sectors such as manufacturing and retail, the jobs lost are likely to outnumber the jobs gained.

“In a worst-case scenario, those job losses would come on top of about 900 000 jobs lost through unemployment ‘momentum’ – in other words, the continued increase in unemployment if current trends in population growth and employment levels continue.

“We should also emphasise that the new, technology-enabled jobs will require higher skills levels than most of the jobs displaced. As a result, while automation will cause the demand for employees without matric to fall substantially, it will increase the demand for graduates,” the firm says.

“If workforce displacement from automation is not managed effectively, and the graduate conversion rate in the country is not improved, the result could be a significant increase in overall unemployment. South African businesses would be hurt by both a slowdown in consumer demand and a shortage of critical skills,” says Rajagopaul.

“With foresight and a commitment to act, South Africa can capture the opportunity offered by technology, manage the risks and ensure the gains are broadly shared.”

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