Kathy Gibson reports – South Africa’s economy has suffered some near-mortal blows, but the future could be a lot more positive – and technology has a role to play in turning the country’s fortunes around.
Dr Azar Jammine.
Globally, despite many adversities, artificial intelligence (AI) stands out as one area of hope going forward, says Dr Azar Jammine, director and chief economist at Econometrix, speaking at the Datacentrix Showcase 2024.
“One of the big advantages of AI is that it can be embedded into just about any vertical market, he points out.
“Agriculture has been the fastest growing sector in the South African economy for some years – despite the fact that there are fewer farmers. And this is because AI is being used.”
Overall, however, the last few years have not been good for the local economy. Historically, our growth rates closely mirrored those of the rest of the world. But this has slumped alarmingly, with 2023’s GDP barely up to pre-Covid levels. By contrast, the rest of the world has added 15% growth to their pre-Covid numbers.
“The reason for this can be encapsulated in two words: state capture,” Dr Jammine says. “We had a change of regime, which most people didn’t even notice. The economy was growing at 4% to 5% per annum until the government decided to adopt a regime of state capture.
“That unfortunately led to a big increase in unemployment, and people have been steadily losing their jobs ever since.”
The question to ask is whether we can successfully leverage technology to alleviate the situation and improve employability.
Dr Jammine believes we need to first address inequality, and this will drive better economic outcomes.
“The decline in the economy is associated with a huge increase in inequality to the point where about 15% of the population accounts for 82% of what is spent in the economy – and 85% of the population accounts for just 18% of spend.”
The only way to tackle inequality is through education, he adds, and this is where technology – particularly AI – has a huge role to play.
Unemployment is inextricably related to education level, and this in turn tracks back to the racial divide, Dr Jammine explains. Better education outcomes also closely follow the amount of technology employed in schools.
“A lack of technology in schools is therefore part of the unemployment narrative.”
The statistics paint an alarming picture for our economic future: despite marginal increases in matric pass rates, the simple fact remains that only fewer than half the children who started school in 2012 ended with a National Senior Certificate in 2023. More worrying, just 3% of last year’s matriculants passed mathematics with 60% or more.
“So there is a just a small cohort of South Africans developing the skills to take advantage of technology,” Dr Jammine explains.
“But we have an opportunity to use technology, and especially AI, to encourage and facilitate the ability for more youngsters to develop their education and cognitive ability through mathematics.”
Providing connectivity is a good start, he says, but it’s not enough. “Sixty-seven percent of South Africans have access to the Internet, but they use it mostly for social networking and entertainment – just a tiny proportion are using it for education.”
But, while getting technology into schools and using it effectively is a big challenge, the opportunities are huge, Dr Jammine believes. “Imagine how the country could be transformed if we could educate the millions languishing in bad schools.”
The use of technology will be key in the broader economy as well. State capture has scuppered much capital investment over the last decade, and it’s now at a low of 12,7%.
At the same time, South Africa’s technology stature has failed to keep pace with the rest of the word, while both mining and manufacturing – the keystones of the economy – have both declined in absolute terms.
Our digitisation competitiveness as deteriorated, slipping down the rankings from number 48 in 2019 to 58 in 2023 – and performing worse than any other BRICS country.
“But the potential to take advantage of technology is enormous. We have good mobile phone penetration, and 75% of South Africans have smartphones. In terms of computer ownership and Internet usage, we are way ahead of the rest of Africa.”
The 2024 elections and formation of the Government of National Unity have helped to buoy enthusiasm, with a perception that corruption will be curtailed.
At the same time, increased co-operation between government and private sector is seen as a positive move, helping to mitigate the decimation of government capacity wrought by state capture.
The electricity supply outlook has improved markedly, with availability increasing from 50% to 70% over the last few months.
Overall, Dr Jammine believes we will see a steady increase in GDP over the next years. “And hopefully a lot of future investment will be in technology and AI.”
He does, however, sound a note of caution relating to the adoption of AI technologies. “Digitisation can lead to a major technology divide between the haves and have nots. We have seen that some take advantage of it to get richer as more people are left behind and the wealth pyramid gets steeper.
“This breeds resentment and leads to polarisation of the global economy, and in South Africa as well.
“In turn this leads to all sorts of pressures on governments to spend money at a time when public debt levels are at record levels. And this could end up with major problems for the world economy.”
On the other hand, AI could be used to generate new sources of economic growth, through automation and increased efficiencies.
“Thank goodness we have something to hang our hats on: technology and AI,” says Dr Jammine.