In South Africa, the current level of digitisation and integration is expected to rise from 27% to 64% within the next five years, according to a study by PwC released this week.

This study found that industrial companies are digitising essential functions within their internal vertical value chain, as well as their horizontal partners along the supply chain.

"A high 87% of South African companies plan to introduce new digital products and data based services over the next five years. In addition, companies worldwide want to invest about 5% of their revenue annually on digitisation. Based on the industries surveyed, 5% of revenue corresponds to a total investment of $US 907 billion. A major focus of these investments will be on digital technologies like sensors or connectivity devices, and on software and applications like manufacturing execution systems," stated PwC in an announcement of the findings.

It was also found that companies are investing in training employees and driving requiring organisational change.

Pieter Theron, PwC Partner Advisory Services & Head of Industry 4.0, South Africa, reflected on the outcomes of the report. "The 2,000 companies that we surveyed, including the 61 in South Africa, are expecting to significantly increase their overall level of digitisation. While just 33% rate their company as advanced today, that number jumps to over 70% looking ahead to 2020."

Theron says at the end of this transformation process, successful industrial companies will become true digital enterprises, with physical products at the core, augmented by digital interfaces and data-based, innovative services.

"These digital enterprises will work together with customers and suppliers in industrial digital ecosystems."

Results also showed that on average, companies expect to reduce operational costs by 3.6% per year, while increasing efficiency by 4.1% annually. High levels of cost reduction are expected in every industry sector.

Short-term ROI

"Most companies believe they will see a return on investment (ROI) within two years or less for their Industry 4.0 projects. Just over a third of companies anticipate a longer timescale of three to five years," the report adds.

The survey found that data analytics is the driver for Industry 4.0 because 83% of South African respondents expect data analytics will have a significant influence on their decision-making processes in five years' time.

Tielman Botha, PwC Associate Director, Advisory Services, says: "The companies we surveyed understand that it's critical to have data analytics capabilities in order to successfully drive digital transformation. But there is still a long way to go before these reach the level of sophistication needed to really drive Industry 4.0 applications."

Results also indicate that challenges for building digital operations capabilities include a lack of internal digital culture and training (58%), and insufficient talent (40%). Digital ecosystems and broad use of data also raise important issues around cyber security according to the results.

"Our South African survey respondents raised concerns around cyber security breaches (53%); damage to company reputation and loss of trust due to data loss (47%); and liability risks through data loss (40%). Other issues like loss of IP and violation of regulation and laws on data security or data privacy are on the radar too."described a summary on more of the findings.