New skills and targeted policies will enable our society to survive in a changing world
At the latest Richemont results presentation, Johann Rupert stated: “It’s a terrible thing capping students when you know many of their careers will not exist in the future.”
Unemployment in SA is at a 14-year high and the economy is in recession. Similar questions about the future are being asked in investment circles and by young job seekers: how do we grow the pie in order to reduce poverty and inequality?
Globally, we have witnessed a steady decline in the labour share of GDP but a closer look at the data reveals that low-skilled jobs are being replaced by automation as companies seek to extract efficiencies.
In addition, there is a growing trend to outsource support services, further weakening the bargaining power of less skilled workers compared to those permanently employed.
On the other hand, highly skilled jobs are becoming more sought after as the demand for services increases across the economy. The bottom line is that if a task can be mechanised, it probably will.
The technology revolution has already claimed some famous scalps. The market capitalisation of Amazon now outstrips that of the aggregate size of the seven largest traditional US retailers including Walmart, owner of SA’s Massmart. That said, Walmart employs four times more people in the US alone than Amazon does globally.
In SA, jobs in the primary sectors of mining and agriculture have been in steady decline with manufacturing employment remaining stagnant.
The only bright light remains the services sector, which has grown from 50% to 75% of the economy in just over a decade.
Proprietary research at Sanlam Investment Management shows a steady rise in productivity in the services economy, while the mining and manufacturing sectors have found it hard to improve productivity, leading to continuous job shedding.
The bad news for SA is that the robots are already among us, with several financial services companies having introduced robotisation to digitise and automate tasks that traditionally would have been the domain of the support services.
Robots work 24 hours a day, including weekends (as long as there is back-up electricity). They don’t get sick, don’t ask for salary increases and don’t go on strike.
In the South African context, we have also witnessed the trend of successful companies scaling up at a rapid pace to grab market share in their service niches. These are the companies experiencing high growth and creating jobs.
One example is Curro, which has added 127 schools and plans to grow to 200 schools within three years to service 80,000 pupils.
Another is Dischem, which listed on the JSE in 2016 and has grown to 108 stores from a single pharmacy in the south of Johannesburg in the late 1970s. The firm is planning to add 21 new stores in 2018 and is testing new formats.
Instead of adding to the unproductive public service wage bill, policies should incentivise entrepreneurs who display the ability to grow businesses in order to avoid a jobless dystopian future.
• Rassou is head of equities at Sanlam Investments.