Digitalization, Industrialization, and Skills Development

Abstract

Abstract The world economy is undergoing a period of structural and technological transformation, driven by the increasing digitalization of economic and social life. Digitalization is being experienced differentially across the globe, reflecting the different opportunities it offers as well as the particular challenges countries face in digitalizing their economic systems. This chapter looks at the opportunities and challenges of digital industrialization through the lens of the South African case. In South Africa, digitalization is occurring in an economy that has prematurely deindustrialized, where the digital capability gap in terms of digital infrastructures and skills is wide, and where organizations need significant investments to retrofit their existing systems. Despite this, South Africa has islands of excellence in which firms are embracing the opportunities provided by digitalization to achieve greater efficiency, process innovation, and supply-chain integration. These examples point to what is possible, while at the same time revealing gaps and shortcomings. The potential and shortcomings are evident both across firms (in terms of their investment rates) within global value chains (domestic firms; engagement with multinationals), and across public institutions and industrial policies. The development of digital skills in cross-cutting fields such as data science and software engineering, as well as transversal technologies in complementary services, are identified as particularly important. The chapter concludes with a discussion of the policy implications for South Africa and beyond.