Presentation of the Skills Development Bill by Mr. Sipho M. Pityana, Director General of Labour to the Portfolio Committee on Labour
18 August 1998

Chairperson of the Portfolio Committee, Honourable Members, members of the Press, ladies and gentlemen, the road we have travelled to reach this point in the Skills Development Strategy has been remarkably consensual. There is only one explanation for this fact: we all agree that there is a skills crisis in South Africa, and we also agree that new approaches are needed to remedy the problem - and we cannot afford the luxury of grandstanding.

Discussions to design new solutions began way back in 1992 when the National Training Board opened its doors to a more democratic voice. The broad trajectory for policy was designed collaboratively within the NTB. Its proposals were published in the National Training Strategy Initiative (NTSI) in 1994. The first Minister of Labour adopted these proposals in his Five-Year Programme of Action.

The first legislative initiative arising from the NTSI was in partnership with the Minister of Education in 1995 when the South African Qualifications Authority Act was passed. In 1996 joint research was conducted into different strategies for the funding of training internationally. Employers, unions and government grappled together to find the best policy fit to South African conditions and problems. This process, together with multiple workshops, culminated in the Green Paper which was published in March 1997 and the Draft Skills Bill in September 1997. Small areas of difference remained which had to be ironed out under the NEDLAC umbrella from October last year to February this year. Today we believe we have a powerful body of agreement across a very wide spectrum of stakeholders. I urge that we do not lose sight of this agreement when we discuss the few remaining, outstanding issues.

The agreement includes a recognition that the existing legislative environment has to be changed. The voluntary arrangements established under the Manpower Training Act (MTA) of 1981 simply did not change our skills landscape. The MTA did not even stem the decline of what we had when it was introduced: there has been more than an 80% decline in apprenticeship numbers1 since the 1981 when the MTA was first passed by the previous government. Everyone shared the view that it was time to take a fresh look at the problem. Understanding the nature and scale of the problem was the starting point:

We currently have a skills profile that is totally out of sink with the needs of our country. The economy simply no longer generates the same large numbers of unskilled jobs it did in the days when the mining and agricultural industries were dominant. In the 20 years from 1973 to 1993 the proportion of highly skilled jobs (needing at least a post-matriculation diploma) has risen from 10% to nearly 18% and the proportion of skilled jobs has risen from 29% to 24%. However, the semi-skilled and unskilled categories have declined from 61% to 48%.

Of the economically active population in South Africa, only 3 million are skilled or highly skilled (some 20%) while 7 million are employed in so-called "semi-skilled" or "unskilled" jobs (together some 80% of the economically active population) and 4 million are unemployed. In other words only one out of every five South Africans is formally qualified to perform high skilled work.

This profile compares poorly to other middle income and advanced industrial countries. For instance South African professionals constitute fewer than 4% of the labour force, as compared to 8% in other middle income countries and 10.5% in advanced industrial countries. This same shortage is evident in craft and related trade where South Africa's 12% compares to 18% and 16,5% respectively.

One of the consequences of this skill profile was starkly pointed out in the World Competitiveness Report of 1997. They ranked South Africa last out of 46 middle income countries on the availability of skilled labour. It is seen as one of the main reasons not to invest in this country.

There is little doubt therefore that we have a skills crisis, never mind a skills shortage. Understanding how this situation arose helps us to understand the kind of interventions required to remedy the situation.

The collapse of the apprenticeship system as a school-leavers alternative
At the most obvious level the collapse of the apprenticeship system has clearly meant that fewer and fewer people are entering the skilled labour market from a "workplace linked route". There are multiple reasons for this collapse, but probably complex and onerous contracts, insufficient funding, rigid trade demarcations, lack of responsiveness to new technology and wage issues are the most important.

As this route has collapsed, so the alternative has become increasingly over-subscribed. Given the lack of choice, it is hardly surprising that youngsters queue up to enter tertiary education institutions. Certainly, those that succeed within the tertiary education system are four-times more likely to get employed than their "matric-only" counterparts. But limited funding for these learning institutions, together with requirements for exemption, make this a limited option for most matriculants. Most matriculants face unemployment when they leave school. In order to delay this, many stay on at school, repeating year after year, in an attempt to achieve the illusive exemption. Many young African men and women only get their first jobs in their late twenties2. Those that do leave find that they are caught in a classic "catch 22" situation. They cannot get work, because they have no work experience. They don't have experience because they have not worked. The ILO Country Review found that nearly 60% of manufacturing employers look for relevant work experience when recruiting workers3. The majority of the unemployed under 35 have never worked. The same study found 14% of employers cited training as a requirement and fewer than 10% cited schooling.

There is clearly a need to overcome this barrier and provide a way for many more new entrants to gain relevant learning and work experience when they leave the formal schooling system, in preparation for their formal entry into the labour market.

The failure of firms to train the skills they need
So much for first time entrants. But if employers require the skills, why do they simply not train their current workforce to meet their needs? Extensive research under the auspices of NEDLAC showed that large employers are training at levels equivalent to 2,7% of payroll. This compares to between 4% and 5% averages in OECD countries where they also start from a higher general schooling base. Medium and small companies generally do very little if any training. The question still stands, why? The reasons range from: a labour market history based on low skilled labour for commodity export and a poor understanding of the complementary relationships between knowledge, skill, innovation and technology change on the one hand, and traditional market deterrents such as high labour turnover of skilled workers - meaning one employer trains and another employer benefits on the other hand. It is clear therefore that government needs to create some form of catalyst in order to improve the demand for skills by companies.

The low skill base of our country means we are ill prepared for the massive restructuring taking place - with falling tariffs, changing commodity prices and a general increase in competition for markets and trade. Moving from commodity exports to more value-added exports requires a different labour force than the one which is being retrenched. Even in industries like construction, the 1997 government document4 indicates that skill shortfalls will become critical as construction activity grows to keep pace with development demand. Categories acutely affected will be site supervisory capacity (foremen, leading-hands), site management (contract managers and site agents) and the professions". So even social development is impaired by skills shortages.

It is therefore also clear that measures are required to assist people to move from one industry to another in times of great change and to target areas of critical skill need The low skills base is also associated with inequality in this society. Work in my department shows that those with high level skills are, by and large, cushioned from poverty, whilst those performing labouring jobs, particularly in agriculture and domestic work, have a high incidence of poverty in work.

And finally, low skills have pre-disposed the smme sector to retail, and particularly emerging entrepreneurs to the retail industry from street sellers and shopkeepers and shebeen operations. A mere 9,3% of self-employed people in a 1993 SALDRU survey were artisans. Research by CASE5 in 1994 attributed this to the lack of education and training in skills and business to a large measure.

The Skills Development Bill
The Skills Development Bill aims to create an enabling environment within which these key problems can be addressed.

In respect of the constraints lacing first time entrants to the labour market, the Skills Bill puts in place a new learnership system which combines learning and work experience for job competence in areas where there is a clear skill demand. The opportunities will be identified by employers and workers in forward-looking planning exercises, and will be put into practice through simple learnership agreements entered into between employers, learners and training providers.

Special learnerships will also be developed to assist those seeking to become self-employed where skill and business capability will be woven together.

Both learnerships and more general skills programmes will also become more extensively available to those already in work - to underpin productivity and competitiveness drives and employment security - as companies increase their focus on more value added exports. This increased "availability" will be based on increased demand for skills.

This increased demand is to be stimulated by the introduction of the Ievy/grant system. The Bill before us today does not address this - the levy/grant component of the Skills Development Strategy has had to be treated as a money bill in terms of the Constitution. All employers have to pay a levy, but only those who train will be able to qualify for the grant. The detailed arguments pertaining to this component of policy will be presented when the Skills Development Levies Bill is tabled shortly.

The need to accommodate both restructuring and equity considerations are addressed through the establishment of a special National Skills Fund. This Fund will focus on national priorities that include targeting training funds in areas of economic and employment growth and social development, funding of the unemployed and special designated groups, increasing the incentives available to small and micro enterprises for training and as well as learnerships. The money for training in the context of a Coega Project or the Social Plan will need to be drawn from the National Skills Fund. We believe that joint contributions from the private as well as the public sector should resource this Fund, as both industry and the society at large will benefit.

All of these initiatives will not happen without people with the authority, time and resources. At a national level the National Skills Authority is to play this role in partnership with government, and in each economic sector across the country, it is envisaged that the employers and unions will form a partnership, with relevant government departments, to catapult us into a future where increasingly skilled citizens are able to design, construct and operate their own destinies.

Partnership is not only the process that was followed to achieve the proposals that are before you today, it is also a precondition for the success of the Skills Development Strategy. I look forward to two days of constructive comments on a strategy that seeks to construct the tools with which we will build our future together.