How to get low-skilled South Africans into jobs

For the digital revolution to make a dent in South Africa’s unemployment, it has to provide work for a wide range of skills, with a particular focus on lower-skilled South Africans, says South Africa in the Digital Age (SADA).

SADA is an initiative set up to develop a forward-looking economic strategy in the digital age. It is a joint venture by University of Pretoria’s Gordon Institute of Business Science (GIBS), Genesis Analytics and the Pathways for Prosperity Commission.

Its core mandate is to answer the question: what are the income-generating opportunities for South Africans in the digital revolution? The group has published a report which maps out several pathways for the country to create income-generating work in the digital age, detailing the practical actions required.

One such pathway entails unlocking demand for low-skilled labour through digital platforms.

The digital economy not only provides opportunities in the tradable sector; it also creates new jobs and incomes at scale in the domestic economy. Many of these jobs have fairly low skills thresholds.

The main driver is the rise of digital platforms, SADA said.

Whilst global platforms such as Uber, Airbnb and Amazon are the most prominent, there are upwards of 90 digital platforms operating in the real economy in South Africa (i.e., facilitating the exchange of tangible goods, services and labour). At least half of these have been developed locally, it said.

“Digital platforms are rewiring entire sectors of the domestic economy. Platforms make it much easier for buyers to interact directly with sellers and make pricing more transparent and competitive.

“Customer rating mechanisms build credibility in ways that do not require the supplier to have a brand. In this way, platforms tend to improve service delivery,” SADA said.

All this has two important outcomes:

• Sellers are now instantaneously connected to customers who would otherwise not have heard of them: informal enterprises can now operate well beyond their immediate location and known circle.
• Secondly, platforms unlock latent demand for a host of services, including for low-skilled services where the majority of South Africans look to earn an income.

In this way digital platforms create new incomes and work opportunities, SADA said.

Taxi services provide an example. SADA estimates that more than 20 000 South Africans now earn a living through e-hailing services, an industry that was barely visible six years ago. The overall effect has been to more than double taxi services jobs in the country.

Other platforms also create opportunity. Airbnb directly and indirectly generates the equivalent of 22 000 income opportunities on an ongoing basis. On-demand cleaning-service platforms such as SweepSouth have created 3 000 income opportunities for previously unemployed and underemployed individuals in a year alone.

SADA has identified four areas of high potential for low-skilled jobs through these platforms: blue-collar task matching; transport and logistics; food and its delivery; and tourism.

“In all these areas, the platform approach brings in new players at often lower prices, disrupting the business models of incumbent operators.”

These platform business models often don’t fit easily into regulations created for the legacy business models. “Together, this creates the potential for conflict and stagnation. It is critical that legacy forms of business and regulation not throttle a large and dynamic source of future jobs,” SADA said.

Digital platforms distribution by function (% and by sector (count)

This does not mean that protection is unimportant. Responsive, appropriate regulation is the key, it said.

“Competition among platforms is critical for ensuring that the service providers working through platforms get a good deal. Successful platforms can gain considerable market power, which should not be used to exclude up-and-coming competitors or work to the disadvantage of either suppliers or customers.”

SADA has identified levers to ensure that the platform economy is inclusive.

Affordable data access is a must-have as it is throughout the digital space. Specific to platforms, upskilling of supply-side participants and providing financial services to them would greatly expand the circle of beneficiaries.

Fourth, the design of the platforms has a great bearing on their impact. The market for digital platforms in South Africa is still immature, mainly because it caters for middle- and upper-income consumers.

“In order to achieve significant scale, platforms will have to develop business models that are relevant to low- income consumers. And the best platforms would allow their participants to graduate over time to higher- value forms of income generation.”

Selection of digital platforms with potential to unlock demand for low-skilled labour

Read: Is this a blueprint for mass job creation in South Africa?