Source: www.sagoodnews.co.za

10 February 2011

Over the past 16 years we have relied exclusively on Stats SA for this data. Last week Adcorp challenged this with new, paradigm shifting, evidence. Loane Sharp, head of research at Adcorp tells us, “South Africans may well be the most remarkable people in history. Having made a peaceful and generally cheerful transition from authoritarian rule to democracy in 1994, South Africans have found imaginative solutions to many post-apartheid problems. Following the collapse of government health services, private sector health services have spontaneously emerged that serve 48% of the population in a given year. Following a sharp uptick in the crime rate, private security services have sprung up and more than 500,000 private security guards now out-number the policemen and women on active duty. Following deterioration in government-operated schools, entrepreneurs called “edu-preneurs” have set up independent, private schools that serve both rich and poor alike with remarkable success rates.

Following backlogs and delays in the administration of justice, private mechanisms have emerged all over the place that provide quick and inexpensive dispute resolution services. South Africa’s private sector is undoubtedly one of the most entrepreneurial and responsive to consumer needs in the world.” Yet, according to official statistics, a great pall hangs over this otherwise great success story…unemployment” Background Cees Bruggemans, Chief Economist of FNB recently wrote in Business Day, using the Stats SA numbers (Unfolding Tragedy 31st Jan 2011), “Today our population is about 50 million. Those younger than 15 and older than 65 years of age are called ‘dependents and retirees’. There are 18 million of them. That leaves a pool of 15-65 year olds, some 32 million strong today.

Among them there are some 12.5 million who are not economically active (pupils, students, homemakers and people unable to work for a variety of reasons). This leaves an available labour force of 19.5 million today. This splits two ways. Some 13 million work, of which 9 million formally and some 4 million informally. The remainder (some 6.5 million) is unemployed, of which 4.5 million are still seeking work (but so far no luck) and 2 million described as discouraged (no longer looking)”. Loane points out “If what Stats SA tells us is correct, then in the bigger picture 8.53 million people, or 49% of the labour force, are unemployed, underemployed or permanently disheartened about finding work. Seventy-four % of youth under the age of 35 are unemployed. Only 9% of matriculants will find work within a year of leaving school.

It is not hard to extrapolate from the official statistics to a situation of mass disgruntlement and popular resentment, leading down a road to nowhere.” “But, our research tells us that these official statistics are wrong!” “At Adcorp, (South Africa’s largest employment services company and the country’s leading authority of labour market trends), we have reliable research that prove Statistics SA’s official measurement of employment is to be mistaken. Whilst there may only be 12.96 million people formally employed, there is a total of 19.2 million people engaged in some or other form of economic activity, properly counting the informal, unofficial sector of the economy.” If this is true, the picture changes considerably According to Adcorp’s research, “economic activity in the unofficial sectors (6.19 million) very nearly equals the number of unemployed and discouraged people in the formal sector (6.43 million), which suggests that – if the informal sector is fully accounted for – South Africa’s situation is quite different to what has typically been portrayed. The unemployment rate in the formal sector may well be 25.3%, but there is no question that the rate of people totally excluded from any form of economic activity, including the informal sector, is possibly as low as 7.9%.” This puts us on a par with many developed countries! Research methodology Loane continues, “The statistical methods used (by Stats SA) to reach these conclusions are somewhat arcane, involving the comparison of officially recorded economic activity against the accelerating growth of cash transactions outside the official, recorded sectors of the economy, which are themselves largely connected with the evasion of taxes and the avoidance of labour laws. But Adcorp’s statistical methods are based on widely accepted international norms for calculating the size of the informal economy, and Adcorp’s real innovation has been to use these estimates to calculate the number of people employed in the informal economy.

By contrast, Stats SA calculate that the informal sector numbers to be only 2.17 million people and – in contrast with every South African’s daily observations – this figure has evidently declined from 2.3 million people in 2008 (the last year for which coherent data are available). According to Adcorp research, unofficial employment (growing at 6.7% per annum) will exceed official employment (growing at 0.9% per annum) by 2020.” Of course, employment in the informal sector is not as luxurious or secure as employment in the formal sector. “In fact, in many cases informal employment is brutish and mean. Wage rates in the informal sector are purely market-related and bear no relation to the raft of laws regulating pay and working conditions. Informal sector workers do not have access to medical aids, retirement funds or dispute resolution procedures, which are Stats SA’s minimum requirements for designating someone a “formal” employee.” Yet for many people, especially young people, it is the only available means of lifting oneself by one’s bootstraps. Adcorp interacts with more than 1,000,000 job-seekers and finds work for 200,000 people, lifting people from the informal sector, where they have acquired some rudimentary skills, experience and a disciplined work ethic, into the formal sector, where they usually go on to aspirational careers. “We may argue over the decimal places in our numbers. But Adcorp’s research indisputably presents a picture of an economy that is better able to create economic opportunities than the official statistics suggest. In fact, it holds bold lessons for government: if conditions in the formal sector were better aligned to conditions in the informal sector – notably collective bargaining and dismissal protections, which are notably absent in the fast-growing and job-creating informal sector – formal sector employment would not nearly be the economic, social and political crisis that it is today.” Loane concludes “We have looked through our ability to create jobs through one eye, that of the formal sector and the developmental state, we have totally underestimated the entrepreneurial spirit in the informal and second economy. Our previous measurement methodology has been flawed. There is a different picture out there and this has massive implications for policy making going forward.” Conclusion Gathering statistics, conducting research and drawing conclusions is a difficult job. We all accept that, nevertheless there are four critical issues that need clear answers when research is commissioned: What research needs to be conducted? What is the most appropriate methodology? What ethical issues are there in the conducting of the research? What are the implications for national policy? Clearly the methodology employed by Stats SA, using the 2001 population census and a survey of 30 000 households, is different from the methodology employed by Adcorp, tracking a million job applicants a year. However, in a situation where the findings of the research are so remarkably different the consequences are considerable for government policy. Take one example – the payment of social grants. Currently 13 million people benefit from social grants. The question on all of our minds must be, “how many of these claimants are benefitting from some form of informal employment and yet claiming to be unemployed”? In essence Adcorp’s findings have far-reaching implications for all our social policy issues; housing, feeding, schooling, healthcare, child support and urbanisation to name a few.

So while the research conducted by Adcorp presents a very different picture of our employment / unemployment challenges in South Africa, it is really important that this private sector initiative be embraced by government. In recent times we have witnessed the President’s call for 5 million jobs to be created; proposed amendments to our labour laws; the debate on decent work; and the banning of labour brokers – all of which are government initiatives designed to alleviate our unemployment challenges. But the question remains: If the Adcorp research is right, maybe we should be spending more time encouraging our ‘newly discovered’ and booming entrepreneurial sector (the only sustainable creator of jobs), making it easier for them to exist while offering basic protection to those they employ, rather than expecting government to create jobs (never worked anywhere) and making legislative compliance so onerous that these budding entrepreneurs, and those they employ, hide from the government gatherers of statistics? *Loane Sharp is an economist and labour analyst at Adcorp, South Africa’s leading provider of staffing, human capital management and business process outsourcing services and an eminent authority on the South African labour market.

HSRC chief executive Dr Olive Shisana made the statement as she released the organisation’s audited financial results for the year 2009/10, which saw the organisation receive its tenth consecutive unqualified report.

She said the HSRC which was involved with an estimated 155 projects had generated the organisation’s “highest income ever” at R340m.

Referring to a study carried out in conjunction with the National Prosecuting Authority, Shisana said the HSRC had recommended that there was a need for public intervention ranging from victim counselling to collaborative work among various crime agencies.

“Education is a very big priority. We know, all of us know, the quality of education is very bad in the country.”

HSRC research was looking at how to improve basic education and how matriculants could gain access to further education.

Shisana said there was a high rate of attrition among students, who dropped their studies before obtaining their qualifications. Research had shown that poverty had played a big role.

A large number of school leavers joined the long queues of the unemployed.

“The key question is how to improve the employment prospects of school leavers in the labour market that are not going into higher education.”

HSRC research had shown there were some three million people in the 15 to 24 age group who were not studying or working.

Shisana said race was still playing a major role among university graduates, with black graduates battling more than others in obtaining jobs.

She said that currently the department of science and technology contributed some 50% to the organisation’s funding while the rest came from external sources such as research grants.

The Bills also propose that  employers must notify the labour department  of any vacancy or new position in their establishment within 14 working days after the position became vacant or was created.

Fines, which include 10% of turnover of a company, and jail terms have been mooted for those who do not comply with the proposed pieces of legislation.
The Bills also want to reinforce the fact that private employment agencies must be accredited and issued with licences before they can operate.
Said Pike: “My analogy of this is that it’s like a banking licence. If you want to be a banker, you’ve got to adhere to a particular kind of code of conduct and laws and regulations… it will hopefully weed out those who are unscrupulous, so we think it’s good.

“This is  an international norm because  in Europe, there is a requirement to register. Specifically where it’s happened in Europe, it’s been good. Big operators like ourselves have typically been beneficiaries of that because it’s  weeded out the fly-by-night guys.”
– phakamisa@moneyweb.co.za

Employment in South Africa grew by an annualised 2.83 percent last month, according to the latest Adcorp employment index.

The monthly survey found that the number of permanent workers increased by 1.32 percent and the number of temporary workers by 6.47 percent.

This follows a steep decline in September.

But the survey has bad news for employment in the next 10 years, saying unemployment will increase from the current 6.2 million, including discouraged work seekers, to 16.8 million in 2020. This would be as a result of increasing mechanisation, automation and technology adoption.

Adcorp said the increase in employment last month primarily reflected a seasonal ramp-up in staffing levels for the December holiday season. The index is compiled by looking at the drivers of employment in the macroeconomy, labour demand, labour supply and remuneration trends.

Richard Pike, the chief executive of Adcorp, said the October index reflected increased employment at an annual rate of 5.96 percent in the wholesale and retail trade sectors, while the transport and communication sectors expanded employment by 6.92 percent.

He said that although these increases were modest, they were an indication that retailers and wholesalers expected the year-end shopping season to be better than last year.

Reflecting rising commodity prices, mining jobs increased by 7.72 percent, showing a gradual but increasingly firm turnaround in the South African economy. The construction sector increased employment by 4.37 percent. Among big sectors, only manufacturing (minus 6.65 percent) and financial services (minus 2.22 percent) lost jobs.

The index says labour productivity, properly measured, represents a major challenge and that on average since 1970, each extra unit of labour applied in the production process involves a cumulative loss of productivity over an 18-month period of 49c in every rand.

“By contrast, each additional unit of capital involves a cumulative gain in productivity of R1.71 in every rand. Mechanisation, automation and technology adoption are likely to increase sharply over the coming decade, at the expense of labour,” it says.

Pike blamed labour laws and regulations and said that immigration laws prevented high-skilled foreigners from competing with local workers, with the result that local pay rates for high-end jobs were artificially high and productivity correspondingly lower.

“Elaborate dismissal protections ensure that following their appointment to a job, workers do not have a meaningful sanction against poor performance or low productivity. Minimum wages and, more broadly, the collective bargaining system ensure that real wages only go in one direction – up – irrespective of worker productivity,” said Pike.

Labour analyst Daniel Levy believes the figures are not accurate but would not elaborate. – Wiseman Khuzwayo

Giant recruitment agencies Adcorp and Kelly have described government’s Bill proposing that employees must be employed permanently as problematic. It is expected that  private employment agencies will argue against the view when the Bill is discussed at Nedlac next year.

The labour department has published Bills which, among others, inserts a section in the Labour Relations Act declaring temporary employment to be permanent.
An amendment to the Labour Relations Act proposes that an employee must be employed permanently unless the employer can establish a justification for employment on a fixed term.

Says  Adcorp CEO Richard Pike: “I think there are problems with the assumptions that all employees should be permanently employed. I think it takes  flexibility away from companies. What worries us is that the Bills are not business-friendly.
“I think at a time when South Africa is trying to compete internationally in a very soft market with unemployment running rampant here, we need less regulation not more. They are definitely making South Africa less competitive and less attractive as an investment destination.”

Group HR director at Kelly, Elias Monage,   suggested that permanent employment was impossible even with government as an employer.
“It will never happen… Let’s look at government  itself. When women go on maternity leave, for  example, or when people go on leave, you need people who can come in and perform certain things.

“When you have projects, when you build roads, you build dams, you build power stations, you need people for a particular period… so you cannot have  legislation that compels everyone is going to be permanent, it’s not possible.”

However, Adcorp and Kelly were confident that there would be compromises when  negotiations take place around the bills at the  Nedlac session next year.
A memorandum  accompanying the Bills showed some  room for negotiations with the labour department. It said that the bills were drafts and would go through a process of  negotiation at Nedlac.

“But the way that I read the explanatory memorandum is that there is scope for negotiations and there’s going to be a need for a lot of negotiations because there are fundamental problems with its current form.”
On the issue of the establishment of a public employment agency, Kelly and Adcorp were unfazed about the competition with both stating that current government centres were incapacitated.

Said Pike: “The current employment centres that exist have had no impact on us whatsoever because they are completely incompetent, incapable and inefficient.
“Currently, there are  about 178 employment centres funded by the Labour Department   and operated by it which have been singularly unsuccessful in placing people.

“So to try and think that this mega government agency somehow would be efficient in creating a labour market is just fanciful.”
Monage echoed his sentiments.
the similar statements He said  that people who looked for employment hardly ever went to the labour department centres as there were no proper systems in place.

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Article from www.sagoodnews.co.za
Date:31 August 2010