IT systems within large enterprises have done wonders to improve the efficiencies, resulting in great cost-savings, yet with unquestioned social effects.
In his book Rhodes & His Banker, Richard Steyn narrates the founding and the early years of the bank we now know as Standard Bank. In the mid-1800s, with capital raised in London, the maverick founder John Patterson established its operations near what is today Gqeberha, to take advantage of the booming wool trade fuelled by Britain’s industrial revolution. As with many maverick founders, proper systems and processes were not put in place, resulting in reckless lending and generally unsustainable banking practices. With the collapse of the wool price and the uncertainty of their investment, the shareholders decided to appoint 34-year-old Robert Stewart as the general manager to oversee the bank’s operations.
What Stewart found was bad. Branches were acting entirely independently and recklessly, giving out loans to members of management as well as to their friends at non-commercial rates, as well as neglecting the necessary controls for a responsible banking institution. He set about replacing managers, as well as instituting bank inspections wherever the bank operated to ensure that the established practices were adhered to. To go from one town to another, the various inspectors would travel by horseback or similar modes of transport at the time.
Today, such methods would seem primitive and archaic. Bank branches are run centrally, with bank tellers and administrators acting as subservient extensions of automated banking core systems. Branch numbers have become redundant, because bank accounts are no longer held at branches, but centrally on the common technology platforms. And what happened to the various people employed in the middle layers that interfaced between the branch level and head office? They may be redundant.
Another story is told about the early days of Shoprite in the biography of Whitey Basson, by Niel Joubert. Whitey Basson is narrating what would happen when they would run out of chicken at one of their stores:
In those days we didn’t have cellphones, but we would put Johnny on the road with a truck full of chickens. He was only twenty minutes away from any Shoprite branch – ready to deliver chicken wherever it was needed. He was in contact with Laura via walkie-talkie as well.
Now, Shoprite has its own distribution centers with IT systems integrated from the distribution center to the store and to head office, to always have instant information of what is happening in the store. What happened to the various people employed in the middle layers that interfaced between the store, the distributors and head office? They may be redundant.
Now, the intellectual descendants of Adam Smith may argue that those whose roles are made redundant now have the freedom to pursue other economic activities, making the wider economy more productive. Yet, perfect skill transfer is a theoretical myth. And even if achieved, it would be hard to start something new and compete with the large enterprises, without the financial muscle to implement the efficiencies that the larger enterprises can implement. One can see it with the failure rate of small enterprises in South Africa who try and compete with the larger companies. Where does this leave the middle class jobs? They may be redundant.
Does this mean that large enterprises should not adopt these technology systems to improve efficiencies? Of course not. Without the automation and controls introduced by banking systems, all our deposits would be at risk, and the general financial infrastructure of the country would be fragile. If supply chain efficiencies weren’t brought in by retailers, costs of goods would be even more expensive, rendering them unaffordable for many. In addition, in an international playing field, the loss of cost competitiveness of local enterprises would result in an even further erosion of jobs and loss of income as whole businesses become unsustainably redundant.
Despite the uncertainty of success, it would be responsible for individuals to continually upskill to meet the demands of a changing world. It would also be socially and economically responsible for enterprises, governments and civil society organisations to invest in the upskilling, training and establishing of those whose skills and services are increasingly threatened by newer technology. This would ensure the enterprises continue to have a growing customer base, and the burden on the government and civil society isn’t increased by economic inactivity.
Cover picture by NJR ZA – Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=7869211
Patrick Kayongo 