By fostering a demand for new types of services, globalisation has the potential to positively impact employment in developing countries. Nonetheless, technological advancements might result in job losses, a trend illustrated by two case studies conducted on the South African economy and the labour market sector.
The Development Policy Research Unit at the University of Cape Town, a partner of the Untangled project, has released two working papers that delve into the effects of globalisation and technological advancements on South Africa’s insurance and Business Process Outsourcing (BPO) sectors.
A case study of the BPO services sector shows that globalisation has played a pivotal role in the creation of new employment opportunities and has the potential to reduce inequality in South Africa – a country dealing with one of the world’s highest unemployment rates, exceeding 30 percent. The authors of the study demonstrate that this positive outcome was achieved through a collaboration between the government and various social partners. Together, they attracted substantial foreign investment into the sector and managed its growth by leveraging the country’s comparative advantages, such as lower operating costs for businesses, a highly skilled workforce, and cultural affinity with other English-speaking countries.
“A key discovery is that globalisation presents opportunities for growth in the service sectors of developing countries like South Africa,” said Zaakhir Asmal, Research Officer at the Development Policy Research Unit (DPRU) at the University of Cape Town. “However, in order to maximise the gains and ensure inclusive growth, stakeholders must take a coordinated approach that targets specific outcomes, such as job quality and upgrading skills.”
The paper highlights several critical challenges that must be tackled to facilitate the continued growth of the sector. These include addressing spatial inequality and improving working conditions.
In the case study examining the impact of technology adoption within the South African insurance sector, it becomes evident that technological innovations are likely to result in job losses, while the impact on job quality remains uncertain. The authors analysed the changes taking place in the sector, driven by the entry of new Insure Tech startups that integrate big data and AI into their operations and product offerings. The paper reveals that with the influx of disruptors and the increasing prevalence of technology in the sector, significant skill gaps start to emerge as a major concern for insurance companies. This requires reskilling and changes in organisational culture that can bridge the knowledge and technology divide in the workforce.
The authors’ findings underscore a concerning trend: technological innovation is likely to widen inequality in South Africa, as it benefits individuals with highly developed skills, often from more affluent socio-economic backgrounds. In light of these observations, it becomes clear that the technological innovation in the insurance industry needs to be carefully managed, with appropriate policies implemented to ensure that the benefits apply to everyone in society, not just a few.
Allen Whitehead, C., Asmal, Z. and Bhorat, H. (2023). Co-ordination to support inclusive growth in developing countries in the context of globalization: The case of the business process outsourcing sector in South Africa. Development Policy Research Unit Working Paper 202307. DPRU, University of Cape Town.
Asmal, Z., Bhorat, H., Martin, L. and Rooney, C. (2023). Technological Change and Workplace Innovation in the Insurance Sector in South Africa: Disruption with the Potential for Social Good in a Developing Country Context? Development Policy Research Unit Working Paper 202306. DPRU, University of Cape Town.