The skills shortage represents a structural problem within the South African economy. Inadequate formal education and work experience, on a massive scale, have placed objective limitations on the quantity and quality of economic activity in the country.
However, a lack of skills is not the major cause of low economic growth or unemployment — that distinction belongs to South Africa’s highly unequal distribution of economic assets and restrictive macroeconomic policies. Accordingly, skills development, while critically important, must not be seen as a panacea. Indeed, skills development takes time, and therefore can offer little respite to the reality of unemployment and poverty in the short to medium term.
In the past decade most large firms in South Africa have undergone rationalisation processes, with a loss of about one million formal sector jobs, mostly at the lower end. Behind the restructuring has been fiscal restraint (in the public sector) or notions of core competencies or simply constrained demand.
Currently the average skills profile of large companies is about 15% management/professional, 30% skilled artisans/production workers and 55% semi-skilled/unskilled workers.
Surveys of these companies have indicated that firms will be recruiting fewer full-time employees, and those recruited would generally be highly skilled. While lower-skilled jobs are being created these tend to be temporary, linked to contract work and more flexible working arrangements. Thus, the much-hyped rising average skills profile of companies has more to do with the outsourcing of lower skilled workers than a growing industrial knowledge-intensity.
The outcome of this company restructuring is the growth of an army of low-income and especially vulnerable workers, who cannot be re-skilled quickly to access the dwindling numbers of relatively secure jobs.
The government has introduced an important institutional framework that is meant to ameliorate the effect of these trends. This framework is largely incorporated within the Skills Development Act and its institutions, the Sector Education and Training Authorities (Setas).
The Skills Development Act is a potentially powerful tool to ensure that companies invest in skills development through the imposition of a skills levy, which is reimbursed when training is done. As yet, however, the Act is not achieving its potential, and is usually management driven. Trade unions, through incapacity and lack of focus, have not equipped shop stewards to input into workplace skills plans. For their part, the relatively new Setas, with few exceptions, are institutionally weak.
A serious problem is that many companies are merely treating the skills levy as a new form of tax. For example, in the Manufacturing, Engineering and Related Sectoral Education Training Authority only 12% of potential grant claims had been processed by April this year. The carrot approach to implementing the Skills Development Act (with refunding of grants to award compliance) has proven to be an insufficient incentive.
Another problem is that the Department of Labour is under pressure to accept flawed Seta plans. If the department rejected a Seta’s plans, the Seta would not be able to access the skill levy, and the Seta (established with donor loans) could be bankrupted. Thus, under pressure and with weak union inputs, many approved skills plans are focusing disproportionately on “soft” training such as adult basic education and training and health and safety issues.
There can be no argument with the fact that skills development is important, and that more effort must be invested into making the skills-development institutions work effectively. The point, however, is that with an unemployment rate of 42% much more than skills development is needed. Indeed, many of the unemployed do have skills. Many have completed high school or even have university degrees. The longer they remain unemployed, the more these skills depreciate through disuse. The impact of skills development strategies therefore depends on the manner in which they support, and are supported by, broader macroeconomic, industrial development and employment policies.
What does this mean in practice? First, we need a package of policies that expands domestic production and services, distributes assets and incomes to bring the poor into the economy, and creates infrastructural assets through job-creating, public work programmes. An important step in this direction could be the forthcoming sector job summits. Sector summits are an opportunity to develop evidence-based industrial policy within the National Economic and Development Labour Council environment of stakeholder consensus. Similarly, the National Growth and Development Summit, planned for early next year, is likely to arrive at a “targeted investment framework”.
These strategies will create employment and sustainable livelihoods, an excellent environment to support the enhancing qualities of skills development initiatives. Second, to play a role in job creation Setas need to be instruments that forecast and address the skills needs of these new growth and development strategies rather than only serve the needs of current establishments.
Ultimately, the success or failure of skills development strategies is in the hands of these broader strategies.
Naidoo and Jarvis are director and senior researcher respectively at the National Labour and Economic Institute