South African business hampered by skills conundrum

Systemic constraints are holding back South Africa’s economy and playing havoc with efforts to jumpstart growth and employment. The latest labour force figures from Statistics SA released during August paint a bleak picture of official unemployment rising

These figures come at a time that seismic shifts in mining labour relations are being felt and which could reverberate around other sectors. These concerns, combined with sluggish economic growth, have contributed to a general sense of business unease that is reflected in the Grant Thornton International Business Report (IBR) research data for the second quarter of 2013.

Business optimism as measured by this study has declined steadily from 74 points in 2007 down to 44 points according to these latest results.

“There has been a significant shift in outlook and business sentiment over the past quarter, with business leaders no doubt plagued by both economic uncertainty and the conclusion of labour negotiations this year - specifically in the mining sector,” comments Ian Scott, Managing Partner, Grant Thornton Cape Town.

The study reveals a cautious optimism weighed against the realities of operating in the current economic and political climate. Even though national elections are still some way off there is evidence that businesses are holding off on investments and expansion.

“It is painfully ironic that we have chronic levels of unemployment, yet organisations are constrained from growing their business, and the economy, because we lack the right skills. It is even more painful that these discrepancies could have been dealt with through prudent labour market policies and a more inclusive dialogue between labour, unions and employers,” says Scott.

The IBR report reflects this lack of skills in key industries that require a higher value employee, with the healthcare and technology sectors reporting the greatest concern for a lack of skilled labour. Sectors that have long suffered a lack of engineering qualifications such as manufacturing and construction report that this is still a serious constraint as well.

One area that has to be of concern to government given the growing negative sentiment about service delivery is the alarmingly high lack of the necessary skills in the utilities sector.

“The concern for us is that these are very real, structural issues that have to be addressed, and with some sense of urgency. The outcomes of long-term solutions to these problems are only likely to become evident some way down the line, so the challenge for government is to find immediate solutions that can be applied in the short term while building for the long term.

“Business needs the confidence to grow and invest in resources, specifically human resources, and that confidence is clearly lacking. The survey results show that business has a surprising propensity to create jobs, with nearly half of respondents indicating that they increased their headcount in the past year compared with only 17% cutting staff numbers,” says Scott. “Therefore if the right foundations are put in place with the right skills available and more labour flexibility, business can more effectively drive employment growth.”

He adds that this in turn will reduce the reliance on social grants and government subsidies which support up to 40% of the population according to some economists and this burden is becoming unmanageable.

With second quarter GDP growth figures coming in at a surprising 3% the question on everyone's mind has to be whether we are seeing the true signs of local economic recovery on the back of encouraging signs from both the United States and Europe. This could signal the return to something resembling normality, although sustained local economic growth is increasingly dependent on clear political direction.

The elevation of the economy as a discussion point at the recent Cabinet lekgotla is certainly an indication that government is serious about addressing the many pressures placed on the economy, although recent ructions around government’s adopted economic masterplan - the National Development Plan - is equally a sign of the magnitude of the challenge that lies ahead.