People 'n' Issues

Business slow to automate

July 23rd, 2015
While the majority of organisations worldwide are planning to automate business practices, with some jobs being discontinued as a result, less than a third of SA businesses are considering this course of action.

This is according to a new Grant Thornton International Business Report which researched the scale of technology’s influence on business.  The report highlighted that 56% of firms globally, and 31% of SA companies, are already automating or may do so in the coming 12 months. 

“The local situation is different for many reasons – including the high number of unskilled people, making it difficult for employees to operate more advanced machines or computers,” says Michiel Jonker, director: IT Advisory at Grant Thornton Johannesburg.

The Grant Thornton International Business Report (IBR) provides insight into the views and expectations of more than 10,000 businesses per year across 36 economies worldwide.  Research for this IBR Automation report is drawn from datasurveying 2,571 executives in 36 economies during February 2015.

Jonker adds that a failing government education system is not preparing young people for jobs in the 21st century, which is also referred to as the ‘second machine age’ and this is a major cause of the unacceptably high percentage of unskilled labour in this country.  Many matriculants cannot be considered for skilled employment, not to mention tertiary education, after school because of the poor quality education system in South Africa (e.g. low standards and pass rates).   

“Even if unskilled people get jobs, they are only trained to work in a specific sector,” he continues.  “If there are no longer any jobs in agriculture, for example, workers cannot simply move to the secondary sector as they do not have the required skills.  Unlike in the western world, where employees’ education background is a strong foundation, enabling them to move more easily between sectors, in SA the majority of workers are simply unable to jump from one sector to another – hence the occurrence of structural unemployment in South Africa.”

Jonker explains that structural unemployment is when unemployment for individuals lasts longer than usual due to issues in an economy, or a lack of skills across various industries which prevent workers from ‘cross trading’ their abilities. It’s when there’s a fundamental ‘mismatch’ between the skills which workers have vs those required and urgently needed in an economy or country.

Commenting on the IBR report, Steven Perkins, global leader for technology at Grant Thornton International, said: “In this digital age, businesses are looking to technology at an ever-increasing pace. Post-financial crisis, firms continue to strive for greater efficiency and better productivity. But fifty years on from PCs going into mass production, costs of capital are low while labour costs increase. As businesses consider whether to invest in staff or machines, for many, the latter is becoming the more cost-effective option.”

Despite this, the research reveals that 66% of SA businesses are not considering automating any business functions in the next 12 months, while only 3% might consider this.

“But automation will have to be introduced if we are to be globally competitive,” says Jonker.  “And there are several factors that will start driving automation here at home.  We face extraordinarily high labour costs, very low productivity and – compared to other countries, including the BRIC countries – entry salaries of young people are extremely high.

 “In addition, if we want to compete globally, we will have to play according to global rules. Productivity is extremely important for competition, which means that we have no choice but to automate.”

He notes that capitalism continues to demand maximisation of process, increasing output and decreasing input, all benefits offered by automation.

Jonker also affirms that there is a school of thought with a strong argument for rapid adoption of technology, as countries that do so benefit from higher per capita income than those that don’t.

“The Harvard School of Business revealed in a series of research papers that the rate at which nations adopted new tools hundreds of years ago strongly affected whether those nations are rich or poor today,’ said Jonker (Report by Associate Professor Diego A. Comin and colleagues).

“Technology is definitely an initiator for permanent change in society,” says Jonker.   “Research conducted by the World Bank entitled “Building broadband: Strategies and policies for the developing world” claims that a 10% increase in broadband penetration could raise GDP growth by 1 to 2% in low- and middle-income countries – a figure which is more than the impact which broadband penetration would have in high-income countries.”

Jonker emphasises that although this statistic is very much debated by different parties, and that it certainly differs from country to country, we cannot escape the fact that technology is causing change and bolstering globalisation – causing further problems for the South African economy and labourers with their low productivity (as globalisation means global competition, placing pressure on the labour market to be more productive).

Grant Thornton’s IBR findings also suggest that opportunities will arise for workers to assume new roles and responsibilities created by an increased use of technology. Globally over half of automating firms (54%) expect to redeploy workers in other areas, with 28% saying that workers will be trained to operate new machinery.

In South Africa, the IBR research revealed that 44% of firms that have automated, or intend to, said their people would be trained to use the new machines, while 32% expected automation to lead to a reduction in their organisation’s head count.

Jonker says the world will soon see new jobs that do not exist today and that automation will make people become redundant faster.

“We’re already seeing this in the IT environment where the ‘cloud’ is taking away certain traditional IT jobs,” he says.

“SA needs to accept that automation is going to happen, and that innovation will be key for economic growth.  We need to start encouraging our young people to consider jobs that cannot be replaced by automation.  They must design those robots, rather than going into occupations that will be replaced by robots.   For example, the introduction of more automation into the world is going to unleash many ‘dark forces’ that will exploit the enhanced level of system and data integration which will arise between millions of different parties, companies and systems. There is already a huge shortage of cybersecurity experts globally, and the upcoming generation will have to fill this new gap, especially if they want to live in a relatively safe world.

“Chances are extraordinarily high that it will be the repetitive (routine), uncreative jobs which will be automated. Certain parts of the world have already seen a decline in routine manual labour as well as cognitive jobs. It is only non-routine manual and cognitive jobs that are safe, as robots are not good at non-precision tasks – but only for now,” Jonker concludes.

Leave a Reply

Your email address will not be published. Required fields are marked *

4 + 6 =