Covid-19 has accelerated global adoption of 4IR and online shopping – can South Africa get up to speed?
Date: Oct 26, 2020 | 4th Industrial Revolution, News, Opinion Pieces
Professor Tshilidzi Marwala is the Vice-Chancellor and Principal of the University of Johannesburg. He recently penned an opinion article that was published in the Daily Maverick on 22 October 2020.
Globally, 34% of people appear to be shopping online more than they did before the pandemic. In contrast, only 16% of South Africans are shopping more online. There are many reasons for this: from the digital divide to apartheid spatial planning, there are large portions of our population who cannot adapt to online retail.
As the coronavirus pandemic spread throughout the world, there was a notable change in human behaviour. Of course, wearing masks, washing our hands more regularly, working from home and maintaining distance from our friends and family became commonplace.
But as the knock of physical distancing, lockdown and an impaired economy took hold, our behaviour as consumers began to change fundamentally. Though there have been shifts globally, honing into the South African case paints quite a different picture.
According to Borderless Access, a research and insight company, 34% of people globally appear to be shopping online more than they did before the pandemic. In contrast, only 16% of South Africans are shopping online more than before.
This, I would argue, is because of the inequities in our country. From the digital divide to apartheid spatial planning, online shopping is certainly not inclusive. There are large portions of the population who cannot adapt to online retail. Borderless Access also found that South Africans are avoiding high-end stores selling luxury goods more than their global counterparts.
Of course, this does not mean that there has not been a shift in behaviour. Rather, people appear to be buying in bulk and visiting physical stores less often than they did before. A survey conducted by McKinsey & Company found that although the rules have become less restrictive, consumers continue to be uncertain about the economy. Added to this is that the majority of consumers are feeling the financial blow and are delaying planned purchases.
This has certainly played out into retail sales and sentiment, albeit in the short term. According to the Bureau for Economic Research’s retail trade survey released last month, confidence fell to a 27 year low in the second quarter of the year. While this rebounded in the third quarter, the underlying business conditions have remained challenging and businesses have had to reconfigure their business models to survive. This is coupled with a fragile economy. Just this month, the International Monetary Fund (IMF) projected in a report that South Africa will see an 8% contraction in the economy in 2020 and lowered its outlook for next year.
I would argue that there needs to be a fundamental re-imaging of how our sectors work and how we configure our supply chain management. The fight now is to adapt to the context to stay relevant. This is timely because of the other global shift we see – the Fourth Industrial Revolution (4IR).
As we fundamentally move into a new era, the decisions we take now will remain relevant in the future. While the pandemic has undoubtedly changed our way of operating and forced us to introspect, we are also faced with a paradigm shift unlike any other we have witnessed before. The 4IR is here. No longer an intangible concept that could apply to the future, we are in the midst of this long-discussed transition.
The 4IR covers developments in artificial intelligence (AI), the internet of things (IoT), blockchain and robotics. Similar to the industrial revolutions that have gone before it, the 4IR is changing every facet of our society, from how we interact to how our industries operate and to the way we consume.
So, what is to be done? We see prolonged supply-chain disruption, but how do we subvert this? As Clayton Christensen, the US academic who coined the phrase “disruption innovation” puts it, “disruption is a process, not an event, and innovations can only be disruptive relative to something else.”
This is perhaps a moment to look at the re-industrialiation of South Africa. We should be looking local – not only to ensure that these disruptions are curbed, but that we play a role in revitalising critical sectors of our economy. This requires limiting the import of luxury goods in favour of imports that can be used for production.
Durban and Cape Town were once large hubs for textile and clothing manufacturing. However, with greater global availability and ease of supply chain management, cost became a significant factor and our policies in government put a nail in the coffin for the clothing manufacturing industry.
Already, intelligent automation is prevalent in the automotive industry, but the question is whether this can be expanded to other industries? The Department of Trade and Industry launched the Automotive Production and Development Programme (APDP) to replace the Motor Industrial Development Programme (MIDP) in 2012, and as an incentive scheme to make South Africa an attractive destination for manufacturing cars. As a consequence of this incentive, South Africa was, by 2016, exporting a record of 344,859 vehicles accounting for R171-billion in exports, and 15% of all exports. This is remarkable, considering that South Africa has faced premature deindustrialisation.
What is the MIDP version of the fast-moving consumer goods (FMCG) industry, and what would its implications on our exports be? Will automation in the textile industry, for instance, resuscitate it?
We are in the 4IR and adopting digital technology is a necessity. For example, chatbots can be used on websites to ease the purchasing process. These are predicated on AI and work effectively as an online concierge service. Then, of course, there is the adoption of omnichannel businesses to have a brick-and-mortar and online offering. Smartphone penetration in the country has increased substantially.
This is unlikely indicative of 91.2% of the population having such devices, with many having multiple devices. According to Statista, by February of this year, it was estimated that about 21 million people in South Africa use a smartphone, accounting for about one-third of the country’s population. There is scope here for mobile apps or mobile-friendly websites to tap into this market. But, there are some national challenges to overcome. South African data prices are notoriously high, and although telecommunications companies are now reducing these prices, it remains a challenge.
Moreover, the halt to the new spectrum licence, which is envisioned to increase internet connectivity, means that vast segments of the population remain unconnected. Given the challenges around financial inclusion, how can you ensure that consumers can use online platforms? FinMark Trust in 2018 observed that 90% of South Africans have access to financial services with 80% having bank accounts. However, many of these accounts are inactive with the bulk of South Africans using informal unregistered financial services.
Many of these challenges can be addressed. For instance, launching light versions of websites or apps which trim down on content requires less data. Elsewhere, partnerships with telecommunication companies can address access issues in outlying areas, with cheaper night bundles or free access for specific periods. This, of course, requires not only retailers but telecommunication companies to come on board.
The challenge of financial inclusion can be addressed by allowing cash-on-delivery options, given the gaps in financial literacy and distrust around banks.
Finally, we have to be aware of the alert consumer and respond to what is brought up in consumer forums. Consumers rate, complain, praise and can make or break a product. For example, the debacle with Tresémme and Clicks proved just how challenging such a fallout can be. We have seen a similar phenomenon with Dove, Pepsi, and Paul’s Ice Cream. As brands navigate this new normal, it is essential to consider what consumers want and how they might respond to the tactics of retailers.
In a sense, the pandemic has served as a way to test out new models. Retail and consumer spending are integral for an economy to grow. As we eke out ways to rethink the sector in the pandemic context, our view must be long term.
After all, if we get it right, we will remain relevant through the shifts that the 4IR presents.
Professor Marwala is the author of the book: Closing the Gap: The Fourth Industrial Revolution in Africa. Follow him on Twitter at @txm1971.
*The views expressed in the article is that of the author/s and does not necessarily reflect that of the University of Johannesburg.
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