Hope for SA economy: Thinking ahead to Fourth Industrial Automation technologies

Hope for SA economy: Thinking ahead to Fourth Industrial Automation technologies

After years of slow grow, South Africa may be over the worst, and could start seeing growth by 2021/22. This is according to leading economist Mike Schüssler, who was addressing a VIP breakfast briefing in Johannesburg recently, ahead of Africa Automation Fair and the Connected Industries Conference.

Mike Schüssler
Image: IOL

Schüssler, owner of economic consultancy economists.co.za, said the 1st quarter would likely be a disaster, with corruption and SOEs taking some time longer to sort out. Eskom’s challenges would remain a growth inhibitor too, he said. In industries such as mining, Schüssler expected a continuing drop in employment figures for the next two years– partly due to automation, but mainly due to the fact that commodities markets had changed and Eskom was not preforming well at all.

He did not expect South Africa’s gold and platinum sectors to return to being the GDP contributor they were in the 1970s and 1980s.

However, he was cautiously optimistic about South Africa’s growth prospects: “I think we can expect to start seeing growth after a few quarters. We’re probably over the worst, and by 2021/22 we could be back at 3% GDP growth,” he said.

To help spur this growth, the country needed to be tougher on crime and labour protests, and ease tax and legislation that hampered small business growth. “A profit motive is what enables businesses to grow – if a business doesn’t make a profit it simply can’t create jobs. So the government needs to reduce the risks of business investment and reduce the red tape in the way of small business growth,” he said.

For industry, the hope of a return to growth means this is the time to start thinking ahead to Fourth Industrial Automation technologies and the broader ecosystem, he said.

Schüssler said the Fourth Industrial Revolution era extended far beyond technologies, and signalled a shift from commodities-based economies and manual labour, to services-driven economies. “The Fourth Industrial revolution is also mainly a services revolution,” he said. “It’s not just about industry, but also how you sell things, transport things and more – it’s a services thing.”

Changes wrought by this revolution included a significant increase in the number of people working in services and a drop in the number of people working in manual labour intensive industries. “In the past 27 years alone, the number of people employed in agriculture has dropped from 44% to 28% globally, yet agricultural output has increased. Meanwhile, the number of service workers has increased from 31% to 49%.”

The Fourth Industrial Revolution is personalised, serviced-driven and even recycled, so the economic focus is no longer only on commodities,” he said.

The Fourth Industrial Revolution and associated services revolution presented significant scope for innovation and new business growth, delegates heard. Marius Smit, General Manager: Technology & Business Events at Africa Automation Fair organiser Reed Exhibitions, noted that there were clear signs of new opportunities for manufacturers and a range of other sectors in the Fourth Industrial Revolution.

Africa Automation Fair 2019 will showcase Industry 4.0 innovations to drive efficiency, productivity and cost benefits, he said, with leading sponsors such as Honeywell and Rockwell Automation highlighting their solutions to fast-track industry into the Industry 4.0 era.

The Africa Automation Fair 2019 exhibition held mi June in Johannesburg showcased technologies, solutions and models for next generation manufacturing. Running alongside the fair, the Connected Industries Conference at Africa Automation Fair 2019 focused on the economic impact of the Fourth Industrial Revolution (Industry 4.0 / IIoT) on South – and sub-Saharan Africa, and how to bring this technology shift to South Africa.

A long and bumpy road ahead

A long and bumpy road ahead

As we are about to draw the curtain on what has arguably been one of the most tumultuous years in South Africa’s history it is difficult to find something to be cheerful

Bafikile Bonke Simelane, President, Master Builders South Africa

about as we approach the Festive Season, especially after last week’s grim and sobering Finance Minister’s Medium Term Budget Policy Statement (MTBPS) which has had mixed but largely negative reactions. The country is again facing the prospect of yet another credit rating downgrade.

Subsequent to his maiden MTBPS the Finance Minister announced that South Africa will unveil a stimulus package focusing on tourism and manufacturing to turn around the economy. It remains to be seen if this will be enough to kick-start the economy in a deep, meaningful and sustainable manner especially when revenue collection shortfalls are taken into account. The Minister also slashed the growth estimate to 0.7 percent from 1.3 percent.

While there was an expectation that there would be a revenue shortfall for the 2017 financial year, it was very concerning to note, that there was no clear plan on how the massive R50 billion shortfall would be filled. The Minister did confirm that only part of the shortfall will be funded by way of sale of shares in Telkom. It is even more concerning to note that the country’s contingency reserves would be utilised during this year and for the coming three years. These funds are generally only utilised when there is no other suitable alternative, which is certainly cause for alarm.

The downward revision of projected growth does not bode well for the unemployment rate of 27.7%. Given the current slow economic growth highlighted by the Minister, coupled with the high levels of political, regulatory and policy uncertainty, the Minister’s budget presentation has not painted a picture IN which local or foreign investors would have confidence.

Construction-specific statistics were also concerning, as reported by Elsie Snyman, the CEO of Industry Insights. The South African economy came out of a technical recession and grew by 2.5 percent in the second quarter of 2017, which was much better for all sectors of the economy, except the construction sector, which was the only sector to exhibit negative GDP growth in the second quarter.

This is largely in line with expectations, with Industry Insights project data, as well as building plans data from Stats SA suggesting a more depressed outlook for the foreseeable future which means continuing adverse trading conditions. Property Economist Erwin Rode is quoted as saying: “lack of vigour” may be the best way to describe the current performance across the full spectrum of property in South Africa. Sadly, we have to disagree with him.

Construction GDP declined by 0.5 percent in the second quarter, marginally better than the 0.8 percent decline in the first quarter. There has been a clear and robust downward trend in the construction GDP figures over the last 8-12 quarters, with growth declining quarter by quarter, and entering negative territory this year. According to South African Reserve Bank Deputy Governor Daniel Mminele, GDP growth was unlikely to be maintained at levels achieved in the second quarter when the economy emerged from recession. “We may not be in a recession, but it is quite doubtful that the 2.5% momentum of the second quarter can be sustained,”

It is clear that in 2018 we will still be grappling with the new normal characterised by VUCA; Volatility, Uncertainty, Complexity and Ambiguity.

It is against this background that we wish our members a safe and restful Festive Season in preparation for what in all likelihood will be yet another tough and difficult 2018 dominated by the pre-occupation of the aftermath of credit ratings and the 2019 general election irrespective of who emerges as the new President of the ANC at its 54th national elective conference.

Bafikile Bonke Simelane

President, Master Builders South Africa