SA employees set to benefit from higher wage increases than the rest of the world over the next 12 months

Employees in SA can expect higher pay rises than workers worldwide over the next 12 months, according to a recent global survey. Although this is good news for workers, it’s questionable whether this situation is sustainable given current global economic

That’s according to Grant Thornton’s recent International Business Report, which assesses business owner perceptions in terms of a variety of factors that affect organisational growth and expansion.

The survey revealed that a surprising 68% of South African businesses will increase salaries in line with inflation, while more than a quarter (26%) will increase salaries by more than that over the next year. It is important to remember, though, that SA’s inflation is higher than in other countries and one must take this into account when assessing real increases.

Less than 5% of SA businesses will not increase pay.

A core theme in Finance Minister Pravin Gordhan’s recent Budget Speech was that of government’s intense focus for the year ahead on issues of poverty, unemployment and inequality.

“We applaud government for raising this concern so vocally in the Budget Speech 2013,” says Ian Scott, managing partner at Grant Thornton Cape. “However, while pay rises are certainly a necessity to help eradicate poverty concerns, unrealistic wage hikes will only bring added pressure to an ailing economy.”

By stark contrast to SA’s high wage increase expectations, a total of 18% of BRIC businesses and 21% of global businesses do not plan to offer any pay rises in the next 12 months. Only 15% of BRIC and 14% of global businesses will offer increases higher than inflation in the year ahead, while approximately half the businesses in each of these geographical areas will offer increases in line with inflation.

“SA’s labour unions and collective bargaining councils ensure that employees get salary increases every year, which sets the tone for the private sector,” says Ian Scott, managing partner for Grant Thornton Cape. “But, continuing to increase salaries every year in a struggling economy, however, places SA firmly in the danger zone for rising inflation over the next 12 months – and this could have a negative impact on this county’s growth expectations for the year ahead.”

Skills shortage epidemic threatens business growth prospects

Businesses around the world are reporting a skills shortage epidemic that is weighing on growth prospects.

In South Africa this issue is equally challenging, with a lack of qualifications and work experience exacerbating this concern even further.

A staggering 83% of local businesses reported a lack of technical skills when it came to recruitment. Only 61% of BRIC economies and 64% of global businesses reported this challenge.

“When the data is split according to sector, we note that SA’s mining industry is finding the shortage of technical skills the most challenging,” Scott continues.

The survey revealed that 58% of SA businesses report difficulties in recruiting skilled workers.

“SA urgently needs to address the enormous dichotomy between the skills shortage and unemployment,” says Scott. “There is much talk in both the private sector and government about initiatives that could improve this situation, but the time for talking is over.”

President Jacob Zuma confirmed during his State of the Nation address in February that the youth wage subsidy would be signed and that this would be just one of several interventions to alleviate youth unemployment. This was further clarified and confirmed in the Budget Speech, when Finance Minister indicated that a revised youth employment incentive will be tabled in the House.

“Hopefully these will go some way towards helping to solve the crisis,” says Scott. “However, government also needs to address a variety of other issues. These include apprenticeship schemes for skills development, which practically disappeared when our technikons and teachers’ colleges were disbanded, as well as SA’s complex labour laws which act as a deterrent to employment, especially for smaller businesses.”

Scott says it’s imperative for business and government to work more closely to find solutions to SA’s employment crisis.

“We need to find innovative solutions, for example, initiatives that allow a percentage of the total workforce to be treated more flexibly,” he suggests.

“SA also needs to urgently increase productivity, which is far behind many other countries globally, if we are to see business growth and economic success.”

It’s not all bad news, though.

According to Grant Thornton’s report, 43% of SA businesses increased the number of employees which were hired over the past year, compared to 15% of South African businesses that reported decreasing their staff complement during 2012. This is in line with BRIC countries for which the percentages were 45% and 14% respectively. Of these, the Gauteng region saw the highest employment increases (48%), followed by Durban and Pietermaritzburg (47%) and Cape Town and surrounds (41%). The Eastern Cape experienced the least employment increases (39%).

When questioned about staff retention, more than a third of SA businesses (37%) experienced no staff retention problems, while only 7% of BRIC businesses claimed the same. Of those 37% of SA companies, 46% reported ‘increased operating costs’ as one of the main problems that staff retention issues caused to their business. This was followed by ‘increased workload for the remaining staff’ (45%) and ‘fall in customer service standards’ (30%).

“A business is nothing without its people just as a strategy is nothing without the people to drive it forward. The best people boost productivity save a business time and money and ultimately grow the organisation,” Scott concludes.