Leapfrogging South Africa to the

4th Wave

Rabelani DagadaDevelopment Economist

Presented at the launch of Time, Space and Pace, 1 October 2010

Lecture’s Agenda1. What are the waves?

2. The shift to knowledge work

3. Where is SA in all these?

4. Revisiting the 3rd and 4th Waves

5. Conclusion

#1

What are the Waves?

Waves are major economic milestones

Economic Revolutions

The 1st Wave• The 1st Wave took place 10 000 years ago and was mainly constituted by

mining and agriculture.

The 2nd Wave

• The 2nd Wave is known as Industrial Revolution, started around 1850.

• It remains one of the most important periods of development in human history.

• The 2nd Wave was a fundamental shift from primary forms of production (agriculture and mining) to manufacturing.

The 3rd Wave• The 3rd Wave is the era of Information and Communications Technology

(ICT).

• This era is dominated by the services sector.

The 4th Wave• The 4th Wave is what the Development Economist, Rabelani Dagada refers

to as BroadCom.

• No country has reached this Economic Revolution yet.

#2

The Shift to Knowledge Work

From Physical Assets to Knowledge Assets

• There is a move towards knowledge than physical substance.

• Within the context of Knowledge Economy, knowledge is an asset – the main contributor to economic activities.

• Knowledge Economy is where knowledge is key resource.

Knowledge Workers• Knowledge Economy is driven by Knowledge Workers

• Knowledge workers are members of labour force whose skills are primarily intellectual rather than manual.

• They create and apply knowledge rather than doing physical work

• Knowledge workers don’t deal with repetitive actions

• They perform unique actions that require complex decision making

What Drives Knowledge Economy?

• Information and Communications Technology (ICT).

• Globalisation of economic activities.

• Knowledge Economy is actually a major character of the 3rd Wave.

#3

Where is SA in All These?

• SA is still entrenched in the 1st Wave

• We are doing extremely poorly in the manufacturing sector

• The Knowledge Economy is a still new concept in SA

President Kgalema MotlantheState of the Nation Address, 6 February 2009

• It is in this context that the Accelerated and Shared Growth Initiative (AsgiSA) is being implemented, ensuring that all the critical blockages such as infrastructure bottlenecks, integrated industrial policy and programmes, the skills challenge, regulatory gridlocks and efficiency of government services are addressed in a focused and systematic manner.

• Our economy has become more open, and since 1994 it has steadily become integrated into the global system. Our financial institutions are a force of good example which has somewhat sheltered us from the global economic storms.

• Yet, the extent of their reach within our society remains far below expectations. Our economy remains largely reliant on mining and agriculture for exports. Except for the services sector, we have not seen a large enough expansion in critical sectors, especially manufacturing.

The Royal Bafokeng KingEnthronement Speech, August 2003

• The King urged his people to embrace the Knowledge Economy.

• He warned that at some point the mineral deposits will be depleted.

• Since then Bafokeng have embarked on the diversification of their investment portfolio.

• Investment on the services sector is growing steadily.

Policy Analyst: Moeletsi Mbeki

• He is critical of the fact that, in 2007, SA became a net importer of agricultural products.

• He argues that SA has allowed its manufacturing to decline steadily since 1994.

• The export of raw materials has rapidly increased.• The upshot, he points out, is that SA is now exporting raw materials that are

processed into goods in other countries and then imported back into SA.• In 2005, base metals and minerals products accounted for 71% of SA’s

exports to China.• In that same year, machinery and car components, textiles, and footwear

accounted for 64% of all of China’s exports to SA.• We’re de-industrialising as a country and as an economy.• This has negative impact on our job growth.

Source: Independent Newspapers. 2009. Sunday Independent. Johannesburg

Policy Analyst: Moeletsi Mbeki

• That’s why unemployment is very high.

• More than 12 million people are living off social grants.

• The notion that this government has managed the economy well is a total myth.

• It has been party to help shrink the economy.

• Whatever the faults and failings of the outgoing administration, “the problem is that the incoming crowd know even less.”

• Would you let the guy who hasn't finished primary school run a country with this level of sophistication.

The Defender of the SA Constitution: Zwelinzima Vavi

• The structure of the economy remains mineral dependent.

• Petrochemicals, mining, basic iron and steel make up 69% of total exports, and are highly capital and energy intensive.

• Overall unemployment rate in SA was 31% in 1995 and increased to 39% in 2005.

• Among emerging markets, SA has the lowest labour force participation rate• 25% of the SA’s population lives on grants.

• The economy is reproducing poverty and the state throws the money at the problem without intervening to promote manufacturing.

Cosatu. 2010. A Growth path towards full employment. Johannesburg

#4

Other Challenges in SA

• Labour laws are perceived to be rigid and they repel investors.

• Telecoms deregulation has left SA 10 years behind the rest of the world.

• One household in Singapore has more bandwidth than any of the SA banks.

• SA children are left behind their Asian counterparts.

#4

Revisiting the 3rd and 4th Wave

• SA has jumped the 2nd Wave and went directly to the 3rd Wave.

• SA is doing fairly well in the 3rd Wave.

• SA has the most sophisticated electronic and mobile banking industry in the world.

• SA was the first country to introduce wireless signals which used to link a point-of-sale credit card reader into the banking system.

• One in six of Google searches in SA happened on the cellphone. This is the highest ratio of Google search on a cellphone in the world.

• Cellphone uptake in SA is over 100% of the population.

• The type of mobile commerce which occurs in SA man not happen in a cellphone backward country like the the USA.

• From the first day of cellphone inception in SA, digital technology (as opposed to analogue) was used.

• SA was the first country in the developing countries to embrace the Global System for Mobile Communications (GSM).

• Phone-shop concept.• Concept of subsidized handsets.• Quicker methods for erecting base-stations.• Palm tree cellphone tower.• International roaming, fax, and data communications.• Voicemail and emergency services.• Cellphone mall. A cellphone Disneyworld (Vodaworld)• A SA company was the first to install a cellphone base station on the highest

point in the world at Mount Kilimanjaro in 2001.• Wireless ATM services.

Other SA Innovations Thanks to Alan Knott-Craig

Characteristics of The 4th Wave

• More companies are knowledge-based, e.g. Naspers, Multichoice, and KPMG.

• Cloud computing and mobile commerce will be enhanced.

• Broadband will become abundant and cheaper.

Characteristics of the 4th Wave

• Telephone call cost will fall by more than 50%.• Your mobile phone and home will be a fixed rate – eat as much you want.• The mobile device will dominate.• Broadband will be everywhere, and very cheap.• Most new ‘appliances’ will come network ready.• Communications will be available everywhere.• The video phone will be standard.• Converged data networks will be high volume.• Convergence of devices (phone, camera, video recorder, tape recorder,

mini-PC, mini-TV, your TV/DVD controller, your banking terminal, tracking device, and navigating device).

Characteristics of the 4th Wave

• Advanced convergence of technologies.• Wireless will have more speed.• Home communication will be simplified.• You will be able to watch the crooks while away from home.• Office communication will be simplified.• Communication everywhere, anytime.• Everything will be mobilised.• Management of utilities will be automated.

Africa is Rising

• SA will benefit from the attention given to Africa.• The African population is growing.• There are 900 million consumers in Africa.• China and Japan populations are ageing.• The one child policy in China will drive investment away.• China is largely an export market; this does not attract investors.• Property laws in Asia will drive investments to Africa.• There are lots of broadband projects that are currently underway

ConclusionThis presentation available online at: http://presentations.wits.ac.za

You can also contact Rabelani Dagada at: Rabelani.Dagada@wits.ac.za

Thank You