By Ofentse Mokwena
We are moving past the stage where economic recovery is pivoted around Covid-19.
As economic fundamentals between primary, secondary and tertiary sectors encroach on us, Africa’s GDP growth is expected to be around 4.7% in 2022, with services accounting for 63.6% of overall growth, and industry reflecting 22.4% of growth.
In the past 7 years South Africa’s GDP hovered around R4.4 and R4.5 trillion. Quarterly output has not exceeded R1.2 trillion, and the 0.7% contraction in Q2 reveals the fragile veil of Treasury’s Economic Policy proposal aimed to stitch into shape.
As speculation around Q3 results may be mounting, according to TIPS, government interventions need to be differentiated between those that overcome strategic blockages; those that aim to structurally transform sectors for increased inclusivity.
Primary and secondary sector ripe for innovation
It is clear that the primary and secondary sector underpin the contractions and show the importance of accelerating local industrialisation efforts.
The acceleration requires significant increases in economic complexity with lower hanging fruits including food preparation, packaged medicaments, processed plastics, wood and metals.
At a city level, this requires integrated economic zoning incentives for small and medium industries as technology increases their access to equipment, suppliers, and consumers.
While localisation is important, the World Trade Organisation reports that leveraging on participation in global value chains (GVCs) from natural resources or assembly, to higher value participation will filter through sectors (i.e. education, training) and interventions (i.e. beneficiciation, small business access).
Especially as cloud-inventory solutions become more accessible to enterprises, whether cloud kitchens, dark stores, social-media retail or similar, the upstream and downstream industrial fabric may become far more decentralised.
Digital services and skills industries boom
While the tertiary sector offers greenshoots of urbanisation especially as transport, storage, communication, finance, real estate and business services are green with growth.
From a GVC perspective, the service sector accounts for 50% of the global GDP, this is the premise for service-led development.
Centrality or proximity to high-activity areas like cities can contribute to increased output of small enterprises in the broader value chain, however this evidence is context specific.
With the R27bn inventory build-up in Q2, and household expenditure growth in health, transport, communication and restaurants the impact of e-commerce, fin-tech, and ridesharing all ripple into the next iteration of the services marketplace - especially in urban areas.
Some service sectors - like communication and information technology are not bound by geography, providing access to economic opportunities where internet access is available.
As in the case of India and the Philippines, and Africa, the cloudwork economy can enable access to earning opportunities but for low skill digital tasks in the short-run.
We are observing digital service industries emerge faster than skills can keep up, resulting in a large demand-and-supply gap in Sub-Saharan Africa for intermediate digital skills (i.e. spreadsheets, presentations etc.) and result in the importation of advanced digital skills (i.e. coding etc.), according to the IFC.
Digital entrepreneurship a key for economic development
By 2030, 230 million digital earning opportunities are expected to be created in Sub-Saharan Africa across the platform economy.
When considering the more commercial side, for digital entrepreneurship, the landscape is much greater. BCG estimates that by 2025, platform work will create earning opportunities for 1 out of every 15 unemployed youth in Africa.
Digital entrepreneurship for one, is a bi-product of lower barriers to entry, and the participatory nature of platform economies and the marketplaces they provide. The lower barriers to entry create an inclusive participatory economy that offers a variety of business models and approaches to growing SMMEs.
Marié Hattingh and team argue that digital entrepreneurship pulls in business, knowledge and institutional entrepreneurship and alters them through the digital skills and platforms they create or have access to.
The South Africa Digital Economy Assessment reveals an interconnection between access to finance, skills and market development. Financial technology services in Africa have exceeded the $6bn annual revenue base, the industry is set to expand its footprint to a broader array of services in the coming years with 8x growth rates if penetration reaches 13%, from the current 3-5%.
The ripple effects may yield new access to finance models that benefit digital entrepreneurs. Overall, the platform economy accelerates economic participation from SMMEs in the services sector, while providing market access opportunities for secondary and tertiary sectors.
If our economic policies are intended to gear South Africa for economic development, then leveraging on the value chain impacts of digital transformation can be a key lever to overcome blockages and transform sectors.
Ofentse Mokwena is the head of Public Policy for Uber South Africa.
BUSINESS REPORT