Adding AI as a factor of production could make a R1 trillion difference for SA

22 October 2018 4 min. read

In a new report, global management consultancy has argued for the addition of artificial intelligence (AI) and affiliated technologies to the list of factors of production when analysis the South African economy, alongside the traditional categories that span capital, labour and the impact of innovation termed as total factor production.

Much has been made of the impact of AI on the employment scenario across the globe. Individuals operating in labour-intensive sectors are currently worried by the likelihood of their jobs being replaced by robotic technology in the near future. In South Africa, the scenario is particularly worrying.

The unemployment rate in the country stands at a staggering 28%, while the youth unemployment rate stands at an even higher 36%, which is particularly worrying given that 50% of South Africa’s population is under the age of 30. Moreover, a large portion of the employed population works in labour-intensive industries such as mining, which constitute a major part of the country’s GDP.

The AI growth model

As a result, Accenture estimated earlier this year that South Africa was at the risk of losing as many as 5.7 million jobs to automation in the near future, which is more than a third of the total jobs in the country. The firm’s recommendation to resolve the employment issue is to increase the speed of learning amongst South African employees to work with technology.

Doubling the rate of learning currently prevalent in the country would, according to the firm take the number of threatened jobs down from 5.7 million to 2.5 million by 2025. Now, the firm has emerged with a list of recommendations to realise the economic potential of integrating AI into various industries.

The firm has proposed an entirely new economic growth model, one that includes AI as a factor of production. The new report terms AI as “a capital-labour hybrid,” which offers a mechanism to speed up essential processes beyond the realm of human capabilities.

South Africa's GVA in 2035

An example of this is the application of machine learning – an essential component of AI – to legal reviews, wherein a machine would be able to review 1,000 legal documents in a few days, while a group of human beings working together are likely to take more than six months to complete the same task. 

In order to demonstrate the true potential of such enhancements across industries, the firm presents comparisons of the estimated growth rate in South Africa’s Gross Value Added (GVA) till 2035 without integration of the latest AI technology and the anticipated growth rate with AI integration. 

The difference is a whole percentage point. Without AI as a fourth factor of production, South Africa’s GVA is expected to grow by 3.5% to just over R9.1 trillion by 2035, whereas the GVA growth rate with AI integration stands at 4.5%, taking the economy to a value of R10.5 trillion by 2035.

AI's impact on South African industries

Within AI, the firm identifies three primary categories of enhancements. The first is intelligent automation, which, as per the report, entails “the ability to automate complex work tasks that require agility and adaptability.“ An example of this is new robotic technology that involves machines with depth perception abilities that can navigate safely around a warehouse. 

The second category is “labour and capital augmentation,” which is closely associated with the firm’s recommendation to solve the issue of unemployment. Employees have the potential to learn new skills to work in collaboration with AI to maximise the value added.

The last category listed by the firm is that of “innovation diffusion,” which accounts for the domino effect of innovation that AI facilitates across all industries. The example employed by the report is that of driverless vehicles, which embody a range of innovative implements such as radar systems, trackers, cameras and algorithms.