South Africa Inc laments skills shortage
While our global peers worry about dwindling order books and a severe slowdown in economic activity, South Africa’s private sector executives singled out skills as the biggest obstacle to business growth. This fact emerged from the Grant Thornton Internat
Comparing South Africa to the rest of the world
A comparison of the factors impacting private sector business in South Africa and the rest of the world proves telling. Heads of global businesses were concerned with cost of finance (28%), shortage of working capital (26%) and shortage of long-term finance (25%). This ‘fear’ is a legacy of the credit liquidity problems suffered in the wake of the sub-prime crisis. South Africa’s large banks survived the crisis relatively unscathed with the result local businesses weren’t overly concerned with the funding issues outlined above.
Regulation and red tape ranked equally domestically and abroad. Respondents felt strongly that government intervention was affecting their ability to expand their businesses and rated the impact of red tape at 32%. Financial services providers certainly know the impact of legislation on their business environment. The implementation and continued focus on the FAIS Act has created additional administrative burdens without a revenue offset. Instead of hiring staff to increase turnover, financial services intermediaries have had to increase expenditure to tackle various compliance and administrative issues.
You cannot be competitive without the necessary skills
The Grant Thornton IBR revealed that 34% of local private sector business leaders believed the lack of availability of a skilled workforce was a problem. Leonard Brehm, National Chairman of Grant Thornton South Africa says, “South African privately held businesses are feeling a little less constrained by a lack of skilled workforce, but this is probably due to the recession causing a slightly reduced demand for skills.”
The skills debate has been raging in South Africa for a number of years with certain senior public figures repeatedly denying the problem. Jimmy Manyi, chairman of the Commission for Employment Equity (CEE) is a spearhead figure of the ‘head in the sand’ no skills shortage camp. In speeches and media interviews in his capacity as chairman of the CEE and the Black Managers Forum he repeatedly lambastes suggestions of a skills problem, choosing to ignore mountains of evidence to the contrary.
Forget reports compiled from interviews with small sections of the business community. If you want a taste for poor skills you need only look at the country’s public sector. Poor performances at SAA, the Land Bank, Eskom and the SABC can be attributed to management, where individuals are often promoted to levels beyond their competence. Even Members of Parliament are getting the idea. Defence Secretary Tsepe Motumi raised their collective ire when he couldn’t explain various department expenditures, including R175 million for leases without supporting documentation, unverified payments to consultants totalling R193m and a further R118m in irregular expenditures. ANC MP Mandla Mbili: “It clearly means the secretary here did not do his job properly as outlined… You failed in your duties to do what you are supposed to do, then why are you still here then? Tell me why are you still keeping your job? What happened to people under yourself failing to do their job – do you keep them?”
Other evidence in support of the skills crisis exhibits in the appalling state of government’s books. Parliament learned (not for the first time) that only 91 out of 256 municipalities and other government entities passed their 2008/9 audit. There is no accountability. And clearly senior managers are powerless (or not skilled enough) to bring rampant corruption and maladministration in check. Much as ex-Finance Minister Trevor Manuel deserves praise for running a tight ship at Treasury, he deserves censure for not clamping down on the use of municipalities to fulfil the ruling party’s ‘jobs for friends’ obligations.
Rather focus on the bottom line
Global private business executives place the shortage of orders and reduced demand top of their concern list. No less than 39% of respondents raised this as a major stumbling block to business growth. This observation ties in with the overarching desire of any private company – to maximise shareholder value in the long run. Management achieves this goal by keeping costs under control and growing revenue while finely balancing financing and capital expenditure. Chief executives at global companies view the economic slowdown as a major threat because it reduces turnover – and that means there’s less cash available to keep the wheels turning.
Only 26% of South African private sector business had similar concerns. They’re not worried about reduced demand… Instead, South African businesses are worrying about where they will find a qualified black chartered accountant – with experience – at an annual package that won’t break the bank.
Editor’s thoughts: If South Africa doesn’t get serious about education and skills development all the gains in the 16 years since democracy will go down the tube. We cannot condone a situation where more than 50% of Grade 1’s fail to make it to their final year. Nor can we accept the abysmal matriculation pass rate achieved by the provinces in 2009. Could you suggest a couple of steps to improve skills in South Africa? Add your comments below, or send them to gareth@fanews.co.za
