The Fourth Industrial Revolution (4IR) has completed its approach and is touching down hard: livelihoods are going to be impacted on an unprecedented scale. 

The same is happening across almost every industry. Banks are downsizing and closing branches, mining companies are buying more machines and employing fewer people, fast-food employees are rapidly being replaced by screens, machines are responding to calls and emails and even doing sales calls, traditional intermediaries (insurance sales, financial planning, travel agents, etc) are rapidly becoming obsolete and even in agriculture there is a high level of mechanisation that is reducing the requirement for manual labour.

But it’s not all doom and gloom. The World Economic Forum released a report in 2018 estimating that over 75 million jobs globally will be shed by 2022, but during that same period, 122 million new jobs will be created. The catch is, they will all be higher-skilled jobs.

As social investors, we have to be cognisant of these trends and stay a few steps ahead of the curve otherwise we could end up driving the wrong agenda entirely. We also need to be pragmatic and keep our expectations tempered by reality.

Out with the old, in with the radically new…

We are inundated with programmes that aim to stem unemployment through “skills development” and “capacity building”. However, programmes that seek to develop skilled labour to meet the demands of new markets and economies need to have real value propositions and show that they can upskill and reskill people, ultimately leading to meaningful income generation opportunities (not only job placement) for a new world.

Beyond programmes that seek to place youth into employment, there are also many social investors who provide bursary funding for tertiary study through traditional academic institutions. Funding academic tertiary study and providing access to universities for young people who would not otherwise be able to afford it, is, of course, important. 

However, the approach to bursary funding has to become less generic than most programmes at present. Social investors must carve out ever-deepening niches of focus in the tertiary education space, to align with new research, innovation and economic needs.

Entrepreneurship development

“Entrepreneurs are the backbone of our economy,” says every single politician. “Government doesn’t provide enough support for entrepreneurs,” says every single entrepreneur. The reality around entrepreneurship development lies somewhere between these two statements. 

Governments the world over have recognised the necessity of entrepreneurship development and have taken steps to promote it in national agendas, but how that support gets to the entrepreneur often leaves much to be desired.

The discussion of entrepreneurship is especially important as we move into the next phase of human development. Technologies are being developed that are closing down certain industries and opening up exciting new ones. In general, it is entrepreneurs who will be the first to walk through newly opened doors.

New businesses will emerge, but many of these may never become large-scale employers, and that’s fine. Funding for start-up businesses must be delinked from employment creation and GDP growth, and linked more closely to social impact, social health progress indicators, the United Nations Human Development Index (and other developmental indicators) and environmental impact. 

We need to move away from traditionally funded “wholesale” support of start-ups and entrepreneurs via large-scale incubators, and move towards purposeful and targeted start-up investments that are “fit for purpose” for the Fourth Industrial Revolution.

As part of the discussion around entrepreneurship, we need to be focused on the “gig economy”. 

The gig economy is essentially a labour market in which freelance work and short-term contracts are highly prevalent. In the US, a Wonolo report estimates that, with the current growth of the gig economy, by 2027 more than 50% of the US workforce will be “giggers”. 

A Forbes report from 2018 suggests that the gig economy is expanding three times faster than the US workforce as a whole.

Furthermore, the World Economic Forum now estimates exponential growth of platforms (such as Uber) through which free agents, casual earners, provisionals (those earning a primary income on the platform economy but seeking traditional jobs) and the financially strapped will seek an income. 

There need to be better models for developing and supporting early stage “giggers” as entrepreneurs and “consultants”. This includes basic income support mechanisms, tax incentives, micro-finance structures as well as a general suite of services such as medical aid and other financial products designed around the “gigger”.

Fasten your seatbelt

South Africa’s economy is in a very high risk position at the moment, as are most developing economies. We already have a badly imbalanced ratio of skilled to unskilled labour, and impending large-scale retrenchments in the near future are going to place tremendous strain on our economy. 

Covid-19 has had a dramatic impact on the labour market in South Africa, with an estimated three million people losing their jobs (significantly skewed toward manual labourers versus professionals). The types of employment that have been most affected are indicative of the longer-term impacts that automation and mechanisation are going to have on the local economy. 

In essence, expect turbulence.

As a country, how we navigate this turbulence is going to be one of the ultimate tests of our resolve. Without getting into the debate here, ultimately one of the largest challenges to the state may come from populism against the backdrop of uncertainty. 

How it deals with that populism will be critical to future prosperity. Our ability to reskill people will be paramount – can we reskill 10,000 miners into becoming software developers? Probably not, but that is the type of intervention we need in order to be able to ride out the storm.

A way forward

South Africa must rapidly and radically strategise for the very near future. 

Institutions that develop future skills need to be developed, scaled and tailored for the South African context, with urgency. Our biggest hindrance and greatest enemy moving forward may well end up being the data that we so desperately require. 

There are no multi-year, randomised control trials that we can rely on; there are no long-term proven initiatives. What we have is anecdotal evidence at best and a clear view of the impending market changes. 

What we need is a strong and evolving analysis of the future of livelihoods alongside bold decision-makers who are invested in the future. Stated simply: there are no low-risk investments and we need pioneers to lead the charge.

Against this risky background, we need social investors to play a crucial risk-mitigation role. Social investors must be able to work off the real and the imaginary to create new asset classes that are more reflective of the near future. They need to conduct thorough future analysis and be able to articulate the trends based on the signals with fair accuracy. 

And they need to substantially motivate for and drive capital in the (new) labour market. DM

Tshikululu Social Investments is dedicating time and resources to critically think about the Future of Social Investments. As part of this, it will be releasing a series of thought pieces for the rest of 2020 around the Future of Social Investing, with the express purpose of driving discussion in the space and to help inform our own strategies and work.