The South African government believes that the business processing industry is key to job creation. And the sector has indeed created thousands of jobs, in particular for the country’s youth – a group that bears a disproportionate share of joblessness.

But unlike in India, the growth of South Africa’s business process outsourcing sector has not generated the kind of jobs that offer workers the chance of progressing up the career ladder. In South Africa, workers tend to get stuck in the same, low-level and poorly paid jobs with very few prospects of promotion or career development. Their working conditions are also generally poor.

South Africa’s outsourcing industry grew significantly between 1997, when it hosted an estimated 185 contact centre operations, to 2010, when the figure was well over 1000. More recent data isn’t available. But data from 2017 estimated that 228 642 people were employed in the sector.

Most business process services jobs such as in the call and contact centres are taken up by young workers. In the context of the country’s high youth unemployment of more than 52%, government sees the sector as one vehicle for absorbing young workers. However, the sector’s failure to create opportunities for career advancement is proving a trap for young people.

Upgrading technology and processes

The sector is always changing, upgrading its technologies and processes. But do these changes translate into positive impacts for employees? We set out to answer this question in our new research article. We wanted to know whether the upgrading by firms contributed to social upgrading: that is, improvements in wages, working conditions, workers’ freedom of association and bargaining power.

We found that upgrading by firms could lead to social upgrading in the form of improvements in livelihood opportunities. But our research also found that the upgrading by firms led to intense workplace monitoring, insecure employment relations, a lack of career opportunities and adverse physical and psychological impacts.

Our findings suggest that policy makers must ensure working conditions in contact centres are regulated for workers’ well-being.

A stressful environment

Workers view contact or call centres as a good entry point into formal employment as well as a good way to earn at least some income.

But they are also often overcrowded spaces. One person told us they and their colleagues felt like “packed sardines” in their tiny cubicles. The working environment was described variously as “stressful” “strenuous” “demotivating” and “frustrating”.

Contact centre firms have strict workplace controls. Worker performance is carefully quantified and measured based on sales targets or how many calls workers make. Their work quality, specifically how they interact with customers, is also measured.

And the introduction of various technologies, like predictive dialling and automated customer-relationships management tools, worsen employee stress. This is because workers have to juggle more systems and technologies while responding to customer queries and complaints.

Contact centre jobs are rarely stable and secure. Firms adopt flexible employment structures, a mix of permanent and temporary workers. To keep costs down, they prefer to hire workers through labour agencies and contractors. However, this often results in the exploitation of workers.

This flexibility makes workers vulnerable. Union representation remains low among call centre workers. Workers are often fired without the option of arbitration or settlement, affecting their future career prospects. BPESA, the industry association, estimated that in 2016 the industry’s attrition rates stood at about 37.6%, compared to India’s 30%.

Lack of labour mobility

Another problem with this flexible, precarious environment is that there’s little room for agents’ internal progression within a firm. This is largely because of a high volume of temporary and part-time employees hired through labour agencies or contractors.

This stands in contrast to India, where contact centre workers have a greater chance of achieving upward labour mobility. This is due to India’s position as the world’s leading player in outsourced services. India’s bigger business processing outsourcing industry enables workers to bargain for promotions and higher incomes.

Job creation in South Africa has slowed down since 2000, and employment is becoming more skill intensive. The business processing industry is also showing signs of economic upgrading. The unskilled and semi-skilled workforce, therefore, faces limited employment opportunities.

Youth, particularly black South Africans, struggle to secure meaningful employment in the local labour markets. Those who find work in contact centres have less hope for career progression. While the average tenure of agents in call centres is around two years, we met a few workers who were agents for more than five years in the industry and asked them why they were still working in the sector. One agent replied that they had no choice but to continue to work and to hope that working conditions would eventually improve.

Recommendations for policy makers

The South African government needs to rethink its reliance on job incentives for employment generation in the business process outsourcing sector. Incentives have generated some jobs. But the questionable working conditions in the contact centres can have detrimental long-term impacts on workers.

Without adequate job opportunities generated elsewhere in the local labour markets, contact centre workers face constrained labour mobility, risk of long-term unemployment and poverty.

The state, in partnership with the industry and the education sector, should also step up skills training provision (technical and soft skills) for the new workforce to be better suited to the demands of the contemporary labour markets.

High unemployment and the prevalence of low-paid work, primarily in the informal sector, can affect young work seekers’ material, psychological and social well-being.


Read more: South Africa's informal sector: why people get stuck in precarious jobs


To avoid the real potential for an erosion of working standards and systemic exploitation that comes with some of the jobs in the business process outsourcing sector the government must ensure that it has the institutional capacity to monitor working conditions in contact centres.The Conversation

Mohammad Amir Anwar, Post-doctoral Research Fellow, University of Oxford

This article is republished from The Conversation under a Creative Commons license. Read the original article.

South Africa’s new national government and nine new provincial executives have taken office following recent elections. They all have a huge job to do, and it cannot be business as usual.

The country is at a turning point following the nine years of former President Jacob Zuma’s ruinous administration. It needs strong, principled leaders in all spheres of government to put the country on a path of economic growth and to improve the quality of governance.

Many of the current governance failures are linked to corruption or state capture. This includes malfeasance in state-owned enterprises such as Eskom, the power utility and Transnet, the rail and port company. There are also other serious governance problems in some national government departments and provinces and in most of the municipalities.

The main governance problems are non-compliance with legislative requirements designed to keep the running of government clean and free from corruption. These include the Public Finance Management Act and the Municipal Finance Management Act.

The biggest challenges include a lack of oversight and accountability, poor appointments in key positions, tolerance of corruption, and poor management and technical skills.

All these problems can be fixed if some basic steps are taken. These can be narrowed down to a list of seven. The focus should be on improving governance and weeding out corruption. The list would include: bringing those involved in corruption to book, setting clear targets for each minister, imposing a proper accountability structure and appointing an ethics officer. Accountability will also be improved if the involvement of communities is improved.

The added ingredient is leadership. An important first step would be for President Cyril Ramaphosa and the nine new premiers to show commitment to ensuring integrity and to improve transparency and accountability.

Poor performance

South Africa performs badly in the global governance context. The country scores 43% and is 73rd out of 180 countries on the latest Transparency International’s Corruption Perception Index. The index focuses on public sector corruption. It draws on surveys and assessments by experts.

It’s also gone backwards from last year in the latest Ibrahim Index on African Governance. South Africa is in 7th position with a combined score of 68%, which is slightly down from 2017. Mauritius is in the first place with 79,5%.

South Africa’s weakest score (57,4%) on this index is on transparency and accountability.

The index defines governance as the provision of the political, social and economic public goods and services that every citizen has the right to expect from their state. It also factors in the state’s responsibility to deliver to its citizens.

One of the significant ways of improving accountability and governance would be to ensure that the work of the Zondo Commission of Inquiry into State Capture results in the successful prosecution of perpetrators.


Read more: South Africa's commissions of inquiry: what good can they do?


Other practical steps that should be considered are:

  • Setting clear targets for each of the new ministers and members of the executive councils. This must include regular public reports on their performance;

  • Adopting a good governance programme that focuses on enhancing integrity, transparency and accountability;

  • Sourcing the best expertise in the public and private sectors to fill key senior management positions;

  • Appointing a senior manager as “chief ethics officer”. This could be the secretary to the national cabinet and secretary to the cabinet in each province;

  • Strengthening the oversight role of the nine provincial legislatures and Parliament. This could be done by ensuring compliance with the accountability requirements in the various pieces of legislation;

  • Ensuring the effective use of information technology to enhance good governance; and

  • Creating an enabling environment for more constructive community involvement when it comes to delivering public services.

Practical measures like this would help improve the quality of governance. It would also contribute to improving South Africa’s score on the Ibrahim Index.

Why governance matters

Poor governance compounds the already huge task facing the newly elected executives. South Africa has huge economic and social inequalities. This means that it needs a new pragmatic approach that uses the skills and expertise of all citizens, beyond what the government is able to provide.

This implies the development of innovative solutions to some of the country’s biggest problems. These include a lack of adequate housing, poor education and a lack of safety. And every day ordinary South Africans feel the brunt of dysfunctional municipalities. These need to be turned into well-functioning entities that serve their communities well.

The “co-production” method, which entails using the combined expertise of both the private and public sectors in the design and delivery of public services, should be used on a much larger scale. A good example of successful co-production is Partners for Possibility, which makes a significant impact in improving education.The Conversation

 

Dirk Brand, Extraordinary Senior Lecturer at the School of Public Leadership, Stellenbosch University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

It’s been 25 years since democracy dawned in South Africa. But apartheid’s legacies still scar the country. Poverty remains high; inequality remains extreme – and both follow racial lines.

The same is true for unemployment. By conservative official standards, it stands at a staggering 27,6%, and it disproportionately affects black South Africans.

Effective policies to combat South Africa’s plight require good ideas, resources and political will. They also, however, need to build on a solid understanding of the problem in the first place. How can defects in the labour market be tackled if we don’t know what’s actually going on there? Good and relevant statistics are central to effective policies.

Unfortunately, there are limits to how well South Africa’s statistics can capture the situation in the country.

The international gold standard for employment figures comes from the International Labour Organisation in Geneva. According to its template, you count as unemployed if you (a) don’t work (a lot) for money, (b) are available for work, and (c) are actively looking for a job.

This definition originated in the 1920s. It was clearly built on the image of white, male factory workers in Europe and North America. If these men lost their jobs, that spelt social and political trouble. Unemployment statistics functioned as a thermometer for how well such factory economies hummed along.

Immediately after apartheid ended, South Africa’s statisticians tried to move away from the traditional definition of unemployment. For instance, they experimented with various more extended definitions of unemployment that would capture what they now call the “discouraged work seekers”.

But, as our recent research found, the country’s appetite for statistical creativity has slowly waned. It has increasingly embraced the ill-fitting international standard. But this global standard risks creating a skewed image of South Africa’s labour market woes. Complacency and poorly crafted policies may be the result.

Waning appetite for creativity

There are a number of problems with sticking to narrow, global definitions of “unemployment”, “job searching” or “industry” in the South African context.

For instance, the spatial legacies of apartheid mean that for many South Africans, industrial jobs are hundreds of miles removed from where they live. Many people don’t actively look for jobs because they know all too well there are none to be found anywhere near. For all intents and purposes, they are unemployed, and in a particularly hopeless situation. But they would not pass the official International Labour Organisation definition – and so they drop out of the stats.

In rural areas, many people – and women in particular – labour on the land to grow their own food. They might greatly prefer a salaried job to escape poverty. But their hand-to-mouth existence may prohibit the luxury of an extensive “job search”. They, too, would fail the statistical litmus test.

Simply put, international unemployment standards would ignore a big part of South Africa’s labour market problems. This would do an injustice to women and the black population, in particular.

The other problem with existing definitions is that nuance tends to fall by the wayside. Take “discouraged work seeker”. It’s an ambiguous category. Whether you qualify depends on your own judgement: maybe you don’t look for a job actively, but would you like one. Not everyone answering “no” is voluntarily jobless. And people might answer “yes” even though they indeed lack personal effort to find work.

Such vagaries are at odds, however, with the exactness that’s expected from statistics. Statistics privilege easy-to-quantify indicators, and important nuances disappear.

Bold creativity needed

This tendency to ignore soft, hard-to-measure issues is amplified by politicians who happily pounce on statistics that displease them.

Statistics South Africa has over the years often been criticised – unfairly, we think – for unemployment figures that tried to paint a more realistic picture. Yet less than rock-solid statistics have invited the charge that Stats SA would inflate the numbers intentionally, or otherwise manipulate them.

Once Stats SA narrowed the definition, criticism came from the other side – in this case the political opposition. To safeguard its credibility, the agency had little other option than to seek refuge in an international definition that would withstand local criticism, even if it fails to do local circumstances justice.

South Africa faces a genuine dilemma in its statistics. It is impossible to capture the complex ills of its economy and society in single headline figures. Such numbers, and the colourful graphs they generate, ready to be tweeted, are tempting. But all too often, embracing this strategy biases the numbers against people who fall between the cracks.

Our research suggests that the country’s statisticians should be bold and paint a picture that does justice to the colourful quilt that is the “rainbow nation”. And politicians have a duty to respect these efforts if they are genuinely committed to effective policies.

When the new South Africa was born in the mid-1990s, it was carried by a spirit of daring and breaking the mould. May that spirit – even in a field as boring as statistics – prevail in the future, as well.

The Conversation

Daniel Mügge, Professor of Political Arithmetic, University of Amsterdam and Juliette Alenda-Demoutiez, Postdoctoral Researcher at the UvA's Department of Political Science, University of Amsterdam

This article is republished from The Conversation under a Creative Commons license. Read the original article.

In a bid to support the further growth of SMEs in South Africa, Maersk has announced plans to offer digital trade finance in South Africa.

Global Head of Trade Finance for Maersk, Vipul Sardana, stated this in a statement released by the company.
According to him, “Focusing more on small and medium sized enterprises (SMEs) represents a strong opportunity for Maersk to introduce more customers to our end-to-end supply chain and logistics products, services and solutions. In that sense, South Africa is a critical market for us.”

Launched as a response to simplify customers’ supply chain, Maersk Trade Finance represents a different way of financing containerised shipments.

“Cape Town, South Africa, May 13, 2019 – Small and Medium Enterprises (SMEs) are productive drivers of inclusive economic growth in South Africa and around the world. Researchers estimated that in South Africa SMEs make up 91 per cent of formal businesses, provide employment to about 60 per cent of the labor force and total economic output accounts for roughly 34 per cent of GDP,” he said.
“While contributing significantly to the economy, SMEs often face difficulties in accessing finance. According to the ICC Banking Commission, there is a massive trade finance gap in Africa, which sits between $110 billion and $120 billion.

“While trade finance has been a catalyst for expansion, for most SMEs, access to funds has been restrictive due to strict collateral requirements and credit background checks. As digital trade finance develops into an essential alternative, SMEs will be able to access additional capital for their growth,” explained Dirk Van den Berg, Head of Maersk Trade Finance in South Africa.

He added: “This new digital trade finance solution of Maersk provides customers easy access to capital in foreign currency for international trade to finance their business needs when they need it; a simple, end-to-end digital solution removing the paper trail from traditional financing options, and faster release of funds at gate-in.

“In other words, this one-stop-shop provides a more effective way to manage the ocean leg of end-to-end global supply chains, both financially and operationally, ”Van den Berg added.

Since 2016, Maersk Trade Finance has disbursed $0.7billion in loans to over 200 customers worldwide.
“The growing Maersk Trade Finance network of offices stretches from India to Netherlands, Singapore, the United Arab Emirates and the United States (all states other than California).”

 

Credit: ThisDay

South Africans are about to vote in the most competitive election they’ve had since democracy began in 1994. But, despite this, the poll will have far more impact on the factional battle within the governing African National Congress (ANC) than on the contest between it and other parties for control of government.

The election follows a decline in the ANC vote from just under 70% in 2004 to around 54% in 2016’s local elections. This seemed to signal that the ANC was no longer guaranteed re-election nationally and in most provinces. There has been much talk of the ANC vote sinking below 50%, forcing it to seek coalition partners if it wants to govern.

In Gauteng, the country’s economic heartland, the ANC won only 46% in the 2016 municipal elections and was forced into opposition in two metropolitan areas – Tshwane and Johannesburg. This happened because the Economic Freedom Fighters (EFF), a breakaway from the ANC which espouses a more militant brand of African nationalism, agreed to support the country’s second biggest party, the Democratic Alliance (DA), even though they differ on just about everything. This raised the possibility that a similar arrangement this time will mean the ANC will no longer govern in Gauteng or nationally.

So, is South Africa about to see its first election in which national power changes hands? No. The ANC is almost certain to remain in government in all the eight provinces it controls, including Gauteng. This will leave the Western Cape, which the DA holds and is likely to retain despite claims that it is in trouble, as the only province in which the ANC is not in government.

This prediction is not based on opinion polls which, in this election, have continued their tradition of doing more to confuse than inform. One poll has the ANC at 61%. Another says it is on the cusp of losing its majority . The DA’s projected vote veers just as wildly. The only constant is claims that the EFF will improve although this is not what is happening in municipal by-elections, where its support remains largely unchanged.

So, the polls tell us little and there is a good argument for ignoring them. But they do have one use. They largely agree on what won’t happen: the ANC won’t lose power.

Why the ANC is sitting pretty

Predicting that the ANC will remain in government outside the Western Cape is based on political common sense.

Talk of the ANC dropping below 50% often ignores the reality that, just about everywhere, the opposition is far behind it. The nearest an opposition party comes to challenging it outside the Western Cape is in Gauteng where the DA won 37% in 2016. Elsewhere, the nearest opposition party trails by 30 percentage points or more. The only way the ANC could be removed from government is by another deal between the DA and EFF.

But EFF leader Julius Malema has said that it will not make a deal with the DA and is more likely to look to a coalition with the ANC. What politicians say about coalitions cannot always be taken seriously and later Malema said the EFF would consider a coalition with the DA or ANC if they agreed to improve conditions in the townships where black poor people live.

But a DA-EFF coalition seems impossible, whatever Malema says now. For one thing their positions on land, a core EFF concern, are diametrically opposed. This does not matter in local government, which does not decide on land policy. It would matter hugely in national government and to a degree in the provinces.

If there is no DA-EFF deal, the only way the ANC can lose its hold on government anywhere is if either party wins a majority or at least enough to allow them to govern with small parties. But in Gauteng, no poll puts the DA above 38% - its numbers elsewhere are much weaker. In North West province, the ANC’s weakest outside Gauteng and Western Cape, the EFF is the second biggest party and it won only 16% in 2016. No poll has the EFF vote improving by more than eight percentage points.

ANC factions

Nationally and outside the Western Cape, then, two results are possible: the ANC wins a majority or is by far the biggest party and the only one able to form a coalition.

The reality which predictions of a change in government ignore -– the absence of another party which could defeat the ANC – means that, even if the ANC does as badly as one poll says it will, it will still be the party of government just about everywhere.

But, while the election will not change the government, it may change the balance between the two factions which compete for power within the ANC. -– One supports President Cyril Ramaphosa; the other backed former president Jacob Zuma.

The Zuma faction is still strongly represented in ANC decision-making forums. The battle between the two factions continues and the difference between them is often greater than that between the ANC and parts of the opposition. It is impossible to make sense of anything the ANC does without knowing which faction was behind it.

Ramaphosa was elected in 2017 because key ANC figures, most notably current deputy president David Mabuza, believed the ANC could not win this election if it was led by the Zuma faction. Ramaphosa’s credibility with some ANC power brokers depends, therefore, on showing that he can stem the ANC’s decline at the polls.

If the ANC improves on its 2016 vote, Ramaphosa will have presided over the first increase in its vote for 15 years. This will greatly improve his chances of winning re-election as ANC president at its next conference in 2022 because it will signal to ANC politicians that he can deliver more seats.

Because many South Africans are excluded from the benefits of the market, seats in municipal councils and legislatures are often the only ticket into the middle-class. So, an ANC gain in this election is certain to strengthen Ramaphosa now and in 2022 by showing that his leadership offers more opportunities to ANC politicians.

Even if it matches the last result or comes close, ANC power brokers could decide that Ramaphosa saved them from the opposition benches.

If the ANC drops to near 50%, whether Ramaphosa would be at risk of losing in 2022 would depend on whether ANC delegates could be persuaded to blame Zuma and his supporters. That is hardly assured. What is clear is that, the worse the ANC does, the better the Zuma group’s chances are of removing Ramaphosa at the national conference in 2022.

The two factions have very different approaches to governing and so the battle between them affects the country’s future. It is this battle, not that between the parties, which will be shaped by the election result.

This article was updated to reflect the correct date for when the ANC could remove Ramaphosa, if they chose to do so.The Conversation

 

Steven Friedman, Professor of Political Studies, University of Johannesburg

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Even with a decisive election victory for South Africa’s ruling party this week, the country’s President Cyril Ramaphosa could still struggle to push through the tough reforms needed to galvanize Africa’s most developed economy, say analysts and some party insiders.

The former union leader turned business tycoon has promised to introduce major economic reforms and extend a crackdown on corruption if his African National Congress (ANC) party is returned to power in Wednesday’s national election. Ramaphosa’s allies say a result close to 60 percent in this week’s parliamentary vote, which some opinion polls suggest could be possible, would strengthen his hand to deliver on those pledges.

But some analysts and ANC party insiders are skeptical that Ramaphosa would make much progress with reforms, even with a clear election victory. They cite his tenuous grip over the party’s decision-making bodies, where former comrades in the struggle against the brutal apartheid regime are at each other’s throats in a high-stakes battle for power and wealth.

“Ramaphosa needs a united ANC to achieve his agenda, but he doesn’t have that,” said a veteran ANC politician who did not wish to be identified discussing internal rivalries. “His enemies are going nowhere.”

Ralph Mathekga, a political analyst and author of a book on Ramaphosa, echoed the view. “There’s a herd mentality that if Ramaphosa gets a strong majority for the ANC, it will somehow strengthen him. That’s not the case,” he said.

Ramaphosa disputes that his hands will be tied if he is returned to power. At a campaign event last week in Johannesburg he said there would be a “step-change” in the pace of reform and that the economy was ready for lift off. “Our government is now going to open up the valves of our economy and give our people an opportunity,” he said.

Ramaphosa became leader of the ANC in December 2017 after narrowly defeating a faction allied with his scandal-plagued predecessor Jacob Zuma. This will be Ramaphosa’s first national election since taking over as head of state in February 2018, after roughly four years as Zuma’s deputy.

The president is under pressure to address gaping racial disparities in income and wealth that persist 25 years after the end of white minority rule. He also wants to reverse a slide in support for the ANC, which has governed South Africa since 1994 but in recent years has lost support in major cities like the financial and political capitals of Johannesburg and Pretoria.

In the 15 months since he took office, Ramaphosa has been forced into uneasy compromises in key policy areas like land reform and fixing struggling state power firm Eskom, opposition politicians say.

Ramaphosa has vowed to accelerate the redistribution of land to the black majority, endorsing an opposition bill to amend the constitution to make expropriation without compensation easier.

But he also has offered assurances that investments and food security would not be threatened. In doing so, he satisfied neither radical left-wing nor business-friendly factions within his governing alliance and the opposition.

On Eskom, the president has promised trade unions that there will be no layoffs as part of a turnaround plan, even though company management and energy experts say the utility’s bloated workforce is one of its biggest problems.

Getting land reform right and repairing Eskom will be critical to restoring investor confidence in an economy where growth has slowed to a trickle due to a toxic mix of corruption scandals and regulatory upheaval during Zuma’s tenure.

“If you see progress in the clean-up of state-owned enterprises like Eskom that would mean that big headache that investors have would fade away,” said Tilmann Kolb, analyst at the financial services firm UBS Global Wealth Management.

 

- Reuters

South Africa has a jobs crisis. In the fourth quarter of 2018, 6.14 million people were out of work, an unemployment rate of 27.1%, which is one of the highest rates in the world, along with sub-Saharan African countries like Lesotho, Mozambique and Namibia.

South Africa’s labour market has another important distinction. Only about three million people who are working – about 18% of all employed (16.53 million) – are in the informal sector. That’s much lower than other developing countries. For example in India and Ethiopia, up to 50% of those with jobs are employed in the informal sector. The figure is as high as 90% in Ghana and Mali.

There are two schools of thought around the role and value of a country’s informal sector. Some argue that it’s an important alternative to the limited opportunities available in the formal sector; a survivalist strategy that allows those without much formal education to work and earn money. In addition, others argue, the informal sector is also an important space for entrepreneurs.

But there are some who disagree, arguing that employment in the informal sector tends to be poorly paid and precarious. A mere 20% of informal sector employees are hired permanently, compared to 70% of those in the formal sector.

Little is known about how many people transition between the two sectors, a phenomenon called “churning”. Addressing this knowledge gap is important for a number of reasons. These include the fact that informal workers may be spending some time in the formal sector, getting valuable skills and work experience to boost their chances at formal employment, with the hope that they eventually settle permanently in the formal sector, which would be good news.

Conversely, knowing whether there’s a high rate of transition from the formal to the informal sector would be cause for concern because it would suggest high rates of retrenchment and fewer formal job opportunities.

The data

We set out to understand “churning” between South Africa’s formal and informal sectors. To do this we analysed data from the country’s National Income Dynamics Study – a study that was conducted four times between 2008 and 2015 by the Southern Africa Labour and Development Research Unit based at the University of Cape Town’s School of Economics.

We found there was a lot of movement between the informal and formal sectors during these years. But there were very few instances of people making successful, lasting transitions from informal to formal sector employment.

This emphasises South Africa’s skills mismatch. The formal sector requires skills that those in the informal sector simply don’t have. More education and support is necessary to bridge this gap.

Our data were drawn from the National Income Dynamics Survey, which is the first national household panel study in South Africa. It examines the living standards of individuals and households over time.

By analysing data from the four waves of the study we were able to make some key findings about churning, and about the informal sector more broadly. These included:

  • Only 8% of those surveyed were inactive (7%) or unemployed (1%) in all four waves – that is, throughout the seven-year period. About 54% were employed in one to three waves, meaning they worked transitorily but not continuously;

  • only 3% worked in the informal sector in all four waves;

  • only 12% always worked in the formal sector during the seven years under review; and,

  • 8% of individuals worked throughout the seven years under review but transitioned between the two sectors.

These results clearly indicate that a high proportion of the labour force participants have been in and out of employment (which is not surprising, given the country’s high unemployment rate), some workers enjoy the privilege of always working in the formal sector, and most importantly, churning between the informal and formal sectors definitely takes place to some extent.

The findings also emphasised how precarious the informal sector is. For instance, 67% of those who started off working in the formal sector in 2008 remained there seven years later. This suggests that for those who initially secured work in the formal sector, retrenchment likelihood is not as high as perhaps anticipated. The retention figure in the informal sector was just 39%. Only 27% of those in the informal sector successfully transitioned to the formal sector.

The country’s many social inequalities were evident in the data. Black women without school leaving certificates aged between 25 and 44 years were most likely to remain in the informal sector. Highly educated white men living in the urban areas of Gauteng and KwaZulu-Natal provinces were most likely to successfully transition from the informal to the formal sector.

Filling the gaps

Given what we’ve learned from this research, how might the government and policy makers deal with those who “churn”?

First, the country’s education system must do more to produce skilled labour in the areas the economy requires. Formal firms could help here, by providing assistance and information on what skills are needed and how to develop these. This implies that strengthening the partnership between industry and universities is important, as this would help those who are able to access higher education.

Those who don’t go on to higher education, or don’t complete their secondary schooling, also need to be helped. The government should more actively provide workshops and specialised assistance to enhance entrepreneurship skills and advise small informal firms on growth strategies. These incentives will assist in their growth, long-term sustainability and successful transition to the formal sector.

In addition, larger, more established formal firms can also play a role by helping to develop and train informal sector workers and providing expert guidance to informal firms. This assistance can be incentivised through tax reductions and the prospects of a larger collective market via the informal sector.

Lastly, the government should continuously alleviate the numerous barriers to the informal economy. These include limited credit and training opportunities, poor infrastructure and the red tape that makes it difficult to start a business.The Conversation

 

Moegammad Faeez Nackerdien, Lecturer, University of the Western Cape and Derek Yu, Associate Professor, Economics, University of the Western Cape

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Economic disruption from uneven currency trading in Nigeria and continued electricity shortages in South Africa are set to hold back overall growth across sub-Saharan Africa this year, a Reuters poll of economists found on Thursday.

Since commodity prices collapsed four years ago, the region has largely missed out on the global economic recovery, with growth failing to return to rates seen in previous years and set to remain subdued.

The survey, taken in the past week, shows Nigeria, Africa’s most populous country and largest economy, is expected to grow 2.4 percent this year and 2.8 percent next year. South Africa, the number two economy on the continent, will grow 1.3 percent this year and 1.7 percent in 2020.

The 2019 forecasts for the two countries, which together drive around half of the wider region’s growth, are both 0.1 percentage points lower compared to the last survey for Nigeria in January and March’s poll for South Africa.

“Tepid growth in South Africa is one reason why we expect that growth across Sub-Saharan Africa will remain disappointing in 2019,” said John Ashbourne, an economist at Capital Economics in London.

Creaking infrastructure at South Africa’s state power utility Eskom is taking longer to fix than economists previously thought. Rolling power cuts as it struggles with capacity shortages threaten to stymie President Cyril Ramaphosa’s efforts to boost investments and economic growth.

In Nigeria, multiple currency exchange rates designed to deal with dollar shortages following a slump in global oil prices in 2015 have undermined its economy.

Ashbourne said that keeping the naira artificially strong in 2015 prevented the economy from adjusting to lower oil prices.

“The foreign exchange system was improved in 2016, when the Bank partially devalued the official rate and launched a new, ‘Nafex’ rate, now used for 70-80 percent of transactions. But it remains complex and open to abuse,” he said.

South Africa’s economy expanded 0.8 percent last year while Nigeria’s economy grew 1.9 percent, its fastest pace since the recession two years earlier.

The economists surveyed expect South Africa’s key interest rate to remain at 6.75 percent until next year while a separate Reuters poll last month suggested Nigeria’s central bank will wait until May 2020 before cutting its main rate by 25 basis points to 13.75 percent.

Ghana is forecast to grow 6.2 percent, faster than January’s survey suggested. Some analysts expect the exporter of cocoa, gold and more recently oil to be the top performer this year.

Growth in East Africa’s biggest economy Kenya is seen slowing to 5.8 percent growth in 2019, compared to a government estimate of 6.1 percent for 2018. The World Bank is more cautious and has warned growth could slow to 5.7 percent due to dry weather patterns.

The International Monetary Fund last week cut its growth projection for sub-Saharan Africa this year to 3.5 percent from 3.8 percent in October. The World Bank is again more pessimistic, with a 2.8 percent forecast.

A separate survey this month showed yield-hungry investors will trade risky emerging market currencies cautiously against the dollar this year despite the Federal Reserve’s recent dovish stance, though there is still demand for them.

Standard Chartered Africa research head Razia Khan expects the Fed’s more dovish tilt to have a positive impact on sub-Saharan African economies in the months to June, allowing stronger domestic recoveries. However, she was cautious about the likelihood of new easing cycles.

 

- Reuters

An elephant has killed a suspected poacher and lions have eaten his remains, with a human skull and a pair of pants all that authorities have been able to recover.

The man and his accomplices entered South Africa's Kruger National Park in order to poach rhinos on April 2, according to South African National Parks.

The family of the man, who is believed to have been trampled to death, contacted rangers who arranged an aerial and foot search the following day and arrested his four accomplices.

However, due to failing light, they were unable to locate the man's body, and with "further information" provided by the suspected poachers, the search continued into Thursday.

"During this search … the remains of a body were discovered," South African National Parks said in a statement.

"Indications found at the scene suggested that a pride of lions had devoured the remains, leaving only a human skull and a pair of pants."

The Kruger National Park, one of Africa's largest game reserves, is renowned for its high density of wild animals, including lions, leopards, rhinos and elephants.

Park managing executive Glenn Phillips warned people against entering the reserve on foot, saying "it holds many dangers and this incident is evidence of that".

"It is very sad to see the daughters of the [deceased] mourning the loss of their father and, worse still, only being able to recover very little of his remains," he said in a statement.

It is not the first time a suspected poacher has fallen victim to their prey in the Kruger National Park.

Last year lions killed and devoured a man believed to have been poaching animals in the park, leaving behind only "his head and some remains".

Elephants in the reserve have also been known to react violently to the presence of humans.

In 2014, footage emerged of an elephant overturning a car, seriously injuring a woman when one of its tusks ripped open her thigh.

The elephant was later put down and was discovered to have been in musth, a condition that usually affects male elephants once a year when testosterone levels, aggression and sexual activity increase.

 

Credit: ABC News

In the early hours of Saturday, South Africa again avoided a massive blow: its government bonds were not downgraded to junk.

In a surprising move, Moody’s did not release any report – but just said that “ratings were not updated” for South Africa.

Friday was the scheduled day for an announcement on South Africa’s credit rating. The next date is in November – but Moody’s can change its ratings at any time.

 
 

Moody’s postpones it’s potential scheduled review on South Africa, similar to October 2018. This was a growing possibility in my view the past few weeks. It’s in the best interest for an agency to have as much information as possible.

 
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Moody's: Brief update on their website has South Africa listed under "Ratings that were not updated for issuers on the calendar for 29 March". That's it. Certainly their prerogative to issue no review, but a slightly more expansive statement and future date would be courteous.

 
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South Africa currently has a Baa3 rating, the last step before “junk”, with a stable outlook. Polls among economists showed they were split on whether Moody’s would change South Africa’s outlook to “negative” (from stable) – and some predicted it would go all the way to “junk”. A “junk” rating means the agency believes there's is a bigger chance that government won’t be able to pay back its creditors.

 

Gov. fails on promises, yet another Moody's reprieve. Sterling work from Treasury team under very difficult circumstances. Risks ahead.

 
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The two other big ratings agencies, Fitch Ratings and S&P Global, lowered South Africa's credit rating to "junk" in April 2017 after Pravin Gordhan was fired as minister of finance.  

If SA lost its investment rate grade from Moody’s as well, it would have cost the country its place in the most important group of government bonds. The Citigroup’s World Government Bond Index contains only bonds that are investment grade. 

All the many overseas investment funds that are only allowed to invest in investment grade bonds would have been forced to sell their South African government bonds. 

Bank of America previously estimated that South African bonds would have been sold off to the tune of $14 billion (R200 billion).

This would have lowered the value of our bonds, and make it much more expensive for government to borrow money to keep the country afloat. 

What are government bonds?

A bond is basically an IOU, with the borrower agreeing to repay an amount plus interest. If a bond issuer is seen as riskier, investors will demand higher interest rates. If South African bonds were rated as junk, government would have to pay higher interest rates. This means the state would have to pay billions more in interest, at the cost of investments in local roads, hospitals and services. 

Retaining our investment grade rating, which SA has held since 2001, should mean the following: 

1. The rand will get some respect

A sell-off of government bonds would have meant a massive outflow of money out of the country – putting pressure on the rand.

A weak rand affects everything, starting with fuel prices. Oil is South Africa’s biggest import. If the rand weakens, oil (which is priced in dollars) becomes basically immediately more expensive.

Imported electronics and machinery are pricier if the rand is weak. And South Africa’s maize and wheat prices are also linked to the global dollar prices.

The rand remained relatively stable following the announcement at R14.48/$.

2. Interest rates

A weak rand means higher inflation, as more expensive fuel and other imported products push prices higher.

Given that some of the pressure on the rand should ease, this means that inflation will be contained. And this gives the Reserve Bank some leeway to perhaps cut interest rates as a much-needed boost to a comatose South African economy.

3. Banks can breathe more easily

The credit ratings of Standard Bank, Absa, Nedbank and FirstRand are all tied up to the rating of South Africa, where they make most of their profit. S&P downgraded seven local banks directly after it cut South Africa to junk. This means that banks have to offer higher interest rates when they borrow money. 

By law, banks are also forced to hold government bonds, which would have hurt them in case of a bond sell-off.

4. Further income tax and VAT hikes may be limited

If government has to pay more in interest on its debt, it will need more money from you to cover its basic expenses. This can only mean one thing: higher taxes.

 

Source: Business Insider SA

 

We survive yet another announcement.

Guess it's back to Stage 4 loadshedding on Monday ??‍♂️.

 
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