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Shortage of Skills in Gauteng How is it being Gauteng Treasury

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					                                         Quarterly Bulletin

                                                          June 2009

     A Shortage of Skills in
     Gauteng: How is it being
     Skills shortage is one of the major constraints hampering
     South Africa’s economy to reach full potential economic
     growth. This paper looks at what has been done to address
     this shortage of critical and scarce skills.

                       Economic Analysis Directorate
                                  Gauteng Treasury

Economic Analysis Directorate                1
                                                                             Quarterly Bulletin

1. Introduction
The skills shortage is one of the major                      when monitoring progress of addressing the
challenges facing developing economies. For                  skills shortage.
Gauteng, as the economic powerhouse of
the country, this poses a serious threat to                  The scarcity of skills occurs from various
economic growth and the ability to achieve                   dimensions in the province; absolute and
socio-economic goals of the government.                      relative scarcity. Absolute scarcity refers to a
Addressing the skills shortage in Gauteng is                 situation where suitably skilled people are in
one       of the    priorities    of government        in    demand and are not available. An example is
partnership with the private sector. The                     the       emergence         of     an    occupation            like
labour      market      requires     an   appropriately      biotechnology, which creates scarcity of bio-
skilled labour force. If the labour force is not             technicians. In such situations there is a lack
skilled, unskilled labour force will not match               of    a    sufficient     number        of     workers        with
demand by the economy, increasing the                        specific skills or insufficient number to satisfy
demand for scarce and critical skills needed                 replacement demand. Relative scarcity refers
for the economy to produce.                                  to a situation whereby suitably skilled people
                                                             exist for some occupations but do not meet
Scarce skills refer to occupations in which                  other      employment            criteria,     for    example,
there is scarcity of qualified and experienced               vacancies       exist      in    different      geographical
people,      currently      or    anticipated    in   the    areas than where skilled people live.
future, and are usually measured in terms of
occupations and qualifications needed within                 This paper looks at the shortage of skills as
the economy. For example a Chartered                         identified by the national Department of
Accountant (CA), will need a certificate                     Labour (DoL), which was adapted from the
accredited by the South African Institute for                Skills Development Act No. 97 of 1998 (SDA)
Chartered         Accountants        (SAICA)     to   be     as amended in 2003. Furthermore, the paper
recognised as a professional accountant.                     looks      at    how       the     challenge          is     being
Critical skills refer to particular capabilities             addressed.        The       paper       will         decompose
which are needed within an occupation and                    educational                attainment,                     sectoral
difficult to find people who possess such                    employment, and demand for skilled labour
skills; also referred to as key or generic                   and skills levels of the Gauteng labour force.
skills.    This    also    creates    skills   shortage,     There is also an outline on initiatives that aim
examples           of     which      include    general      to address existing skills shortages at both
management and information technology.                       national        and       provincial         level     by      the
Both scarce and critical skills are important                government and the private sector.

                             Economic Analysis Directorate                         2
                 `                                                                                                                             Quarterly Bulletin

2. The Demand for Skilled Labour in South Africa
Figure 1: Skills Demand, S.A, 2005 & 2008


                                                                                                                                                                Advertisisng, Media
                                                 Banking & Finance

                                                                     Gas, Petrolium,


                                                                                                                                                  Health Care

                                                                                                              IT & Telecomms
                                                                                       Tourism, Transport &

                                                                                                                                                                                                  Retail & Wholesale
              Mining, Constr & Eng


                                                                                                                                                                    & Comms

                                                                        2005                                                                   2008

Source: Derrick Mengel Associates-Group, 2009

Figure 1 shows the relative demand for skills in South Africa by sectors in 2005 compared to
2008. According to Derrick Mengel and Associates South Africa (DMASA), the demand for skilled
labour in mining, construction & engineering categories has been high during 2008, followed by
demand for skills in IT & telecoms and banking & finance. Within the tourism, transport &
hospitality sector, demand for specialised skills decreased from 5% in 2005 to 2%. However, the
first quarter of 2009 recorded 8% due to preparations for sporting events that are taking place
and planned to take place. For manufacturing and wholesale & retail trade sectors, demand
slowed down due to high inflation and interest rates in 2008. The slowdown in demand for goods
and services within manufacturing resulted in job losses within the manufacturing sector.

3. Employment in Gauteng
According to Statistics South Africa (StatsSA), the unemployment rate for Gauteng was 21.7%
for the 1st quarter of 2009 compared to the 20.7% in the 4th quarter of 2008. This was the
second lowest provincial unemployment rate after the Western Cape (18.4%). With the national
economic slowdown due to global financial crisis, the largest net job losses were observed in
KwaZulu-Natal with 117,000 followed by Gauteng with 49,000 during the 1st quarter of 2009.

                                           Economic Analysis Directorate                                                                         3
                                                                     Quarterly Bulletin

 Figure 2: Employment Share by Sector, Gauteng, 2000 & 2008
                           2001                                                   2008
                                       Primary                                                2.3%

                                  Secondary                                              y 24.8%

 Source: Quantec Research, 2009

 Figure 2 shows that there has been a change in sectoral employment shares between 2001 and
 2008 in the province. The primary sector employment share declined from 5.5% in 2001 to
 2.3% in 2008. The decline in primary sector employment and simultaneous increase in
 secondary and tertiary sector employment shows the existence of structural unemployment
 within Gauteng. Workers that were competent to perform tasks in agriculture & mining (primary
 sector), now have to seek work in the secondary sector (manufacturing, trade and construction)
 and tertiary sector (wholesale, government, finance and private household). However they do
 not posses requisite skills to enter these sophisticated sectors, as tertiary sectors require high
 skilled labour. Without basic retail, literacy or numeracy skills many of these workers are left
 without the human capital to make the transition to new occupations. The situation creates
 structural unemployment, caused by a mismatch between jobs offered by employers and
 potential workers.

Figure 3: Employment by Sectoral Share, Gauteng, 2000 & 2008

  Community, social & personal services
            Finance & business services
    Transport, storage & communication
                Wholesale & retail trade
          Electricity, gas & water supply
                     Mining & quarrying
           Agriculture forestry & fishing

                                            0%   5%        10%      15%         20%          25%       30%

                                                             2000                     2008
Source : Quantec Research, 2009

                           Economic Analysis Directorate                  4
                                                                      Quarterly Bulletin

Figure 3 shows employment by sector in Gauteng between 2000 and 2008. Finance & business
services employment by share increased from 12% to 17% over the review period. Construction
recorded a three percentage point increase in employment, construction is one of industries that
requires highly skilled labour although it is labour intensive. Increased demand for labour withinin
construction sector is related to major projects such as the Gauteng Rapid Rail Link (Gautrain),
road infrastructure development and stadia renovations that are currently taking place in the
province. The employment share of mining & quarrying declined by three percentage points,
followed by community, social & personal services with two pecentage points. Community, social
& personal services constitutes the highest sectoral share within Gauteng sectoral employment
because of the majority of national government departments that are based in the Gauteng

4. Skill Level of the Gauteng Labour Force
The objective of having a skilled and educated labour force is to improve productivity within the
economy, which will lead to higher economic growth and poverty alleviation. In this way, the
country can attain the Millennium Development Goals (MDG) of achieving universal primary
education, eradicating extreme poverty, hunger and improving maternal health.

Figure 4: Labour Force by Skill Level, Gauteng, 2001 & 2008
                       2001                                                  2008

                                Skilled                                 17%         Skilled,

                     skilled                                              Semi-
                      56%                                                skilled,

Source: Quantec Research, 2009

Figure 4 shows that the share of skilled1 labour in Gauteng increased from 29% to 32% between
2001 and 2008. Unskilled2 labour force increased by two percentage points in the same period.

  Skilled: Legislators, senior officials & managers, Professionals, Technicians & Associate Professionals
  Unskilled: Elementary Occupations
  Semi-skilled: Clerks, service workers & Shop & Market Sales Workers, Craft & related Trades Workers and Plant &
Machine Operators & Assemblers
                           Economic Analysis Directorate                 5
                                                               Quarterly Bulletin

On average Gauteng’s labour force was mainly dominated by semi-skilled3 individuals both in
2001 and 2008, recording 56% and 51% respectively.

5. The Importance of Education in Skills Development
The education of a country’s workforce is the most significant contributor to economic growth.
An educated community has better ability to adapt with global technological progress that will
lead to increased production. Improved literacy can contribute to increased economic growth
and employment, leading to a reduction in poverty, crime and the prevention of HIV/AIDS and
other diseases. The National Education Policy Act No 27 of 1996 outlined that the right to
education is a basic human right. The new government administration of May 2009 divided the
education portfolio into two separate departments; basic education and higher/post secondary
education. Basic education consists of primary and secondary education, higher/post secondary
education includes further education and training as well as universities. This separation will
give the departments’ ample room to work with sensitive issues like lack of access to higher
education by the poor and the working class.

Table 1: Attainment in Education Levels, Gauteng, 2000 & 2008
Level of Education(‘000)              2000             %      2008         %    % Point change

None                                    281        5%         1,517       14%                     9%

Primary                               1,030       18%         2,449       23%                     5%

Secondary                             3,661       63%         5,189       49%                    -14%

Diploma/Certificate                     485        8%          809        8%                        0

Tertiary                                260        4%          454        4%                        0

Other                                     2        0%           42        0%                        0

Don't know                              110        2%           42        0%                     -2%

Total                                 5829                 10,502
Source: Quantec Research, 2009

Table 1 shows the highest education levels attainments in the province between 2000 and
2008. Attainment of education was concentrated on the secondary level whereby 63% and
49% of people obtained a secondary level of education in 2000 and 2008 respectively. However
the fall in the percentage of people with secondary education in 2008 of -14%, was associated
with an increase of the percentage of people with primary education 5%. Those who possessed
diploma/certificate constituted 6% of Gauteng’s population. Only 4% of people in Gauteng had
tertiary qualifications which remained constant over the review period. This highlights the
shortage of skills that the province has and is addressing.

                       Economic Analysis Directorate                  6
                                                                        Quarterly Bulletin

Figure 5: Matric Achievement Rate for Selected Subjects, SA, 2008



   %   40


                Economics        Business studies       Accounting     Physical science   Mathematics

                            Achieved at 30% and above       Achieved at 40% and above

Source: Econometrics, 2009
Note: System no longer distinguishes between HG and SG

Figure 5 shows the national achievement rate for matric (secondary education level) in selected
subjects for 2008. The figure shows the percentage of learners who achieved above 30% and
40% respectively. Mathematics learners who achieved above 40% pass rate recorded 30% and
physical science 32% achievement rate respectively. In general, mathematics and science
subjects pupils achieved lesser than commercial subjects. A lot of transformation within higher
education and training still has to be implemented, as secondary education prepares learners to
attend tertiary education, so that they can be equipped to work within the secondary and
tertiary sectors which require skilled employees. The transformation will also help balance the
spread of skills by gender and race that will enable the attainment of employment equity goals.
The lack of properly qualified mathematics and science teachers, has led to poor performance in
those subjects. Programmes that target students at tertiary level for special training in
mathematics and science should be encouraged because these subjects are crucial in the
development of a competent workforce and addressing skills shortages.

6. Addressing Shortage of Skills
Addressing the skills shortage has been a major focus of government. In November 2003,
former President Thabo Mbeki agreed to amend the Skills Development Act (SDA) of 1998. This
was in order to define certain expressions and amend some definitions, to extend the functions
of the National Skills Authority (NSA) and to change its composition.

                         Economic Analysis Directorate                      7
                                                              Quarterly Bulletin

The aim of the Act is to develop the skills of the South African workforce and to improve the
quality of life of workers. This improvement will spill over to their immediate families,
productivity in the workplace, and competitiveness of the employer and promote self-
employment. In order to address the skills shortage in South-Africa the government initiated the
following institutions; Sector Education and Training Authorities (SETA) that is mainly funded by
skills development levies from employers that pay 1% of their workers pay and the Joint
Initiative on Priority Skills Acquisition (JIPSA). The Gauteng Provincial Government (GPG)
initiated the Gauteng City Region Academy (GCRA).

6.1. SETA
The Sector Education and Training Authorities (SETA) have been established in terms of the
SDA. The authority is responsible for payment of the training levies payable by all employers
who are registered with the SETA. SETA ensures that the skill requirements of specific sectors
are identified and that adequate and appropriate skills are readily available. SETA contributes to
the improvement of sector skills through achieving a more favourable balance between demand
and supply, ensuring that education and training is provided and people with disabilities are
taken into consideration.

According to the SETA 2008 annual report, by May 2008 there were 3,917 learners approved for
certification nationally in various fields. Furthermore, 645 bursaries were offered, 18% of which
were in Gauteng. In respect of employment, 139 learners were registered nationally with 55 in
Gauteng and 35 employed for the period under review.

6.2. JIPSA
Accelerated and Shared Growth Initiative for South Africa (ASGISA) was formed in 2006 with
the objectives of targeting a 6% growth in the Gross Domestic Product (GDP) and halving
poverty and unemployment by 2014. Gauteng Provincial Government took the challenge further
to aim for an 8% economic growth for the same period. In order to achieve and speed up the
development of skills that are most urgently needed to contribute towards positive economic
growth, JIPSA was formed. It identified five high-priority skills, engineering, city urban &
regional planning, artisan & technical, management & planning, education management &
planning, mathematics, science and language competence in public schooling. JIPSA plays an
important part by addressing skills shortage within the country that will lead to government
achieving ASGISA goals. Through improved skills, the economy can absorb more youth who
could be rescued from both poverty and social difficulties. The massive infrastructure
programmes like Gautrain, road expansions and renovation of stadia can be successful if
                      Economic Analysis Directorate              8
                                                                                                                           Quarterly Bulletin

appropriate and adequate skills could be acquired. In this way sectors earmarked for growth
(e.g. construction) will prosper.

6.3. GCRA
The GCRA was launched by GPG in order to provide training and development interventions.
The training will enable improved capacity for the public sector to render services that will
facilitate talent and skills acquisition. Furthermore the intervention is expected to be
responsive to the socio-economic needs of Gauteng and to be an agent of transformation in
skills development. For the 2008/09 financial year, R45 million was allocated to address skills
development by providing financial assistance and advice to Gauteng matriculants. The
students were encouraged to further their studies within the scarce skills categories in 2009.
The scarce skills acquisitions are directed through two kinds of learning institutions; Further
Education and Training (FET) and universities. In 2009 a total of 933 students were offered
financial support, 13.6% and 86% of which to study through FET and universities respectively.

Figure 6: Bursaries Offered to Study Degrees, 2009



                                                                             Planning & Development




                                                                                                      Travel & Tourism


                                       Computers & IT

Source: GCRA, 2009

Figure 6 shows the percentage distribution of bursaries offered to students for degree studies
at universities by the GCRA in 2009. In total 806 bursaries were offered, 27.2% of which were
from the engineering field. Within the engineering field, electrical and civil were the leading
fields of study with 58% of students respectively, followed by chemical and mechanical at
33%. Financial assistance offered to the finance field was the second highest at 24.9%;
composed of 79% in accounting, Bachelor of Commerce in finance at 10% and Charted
Accountants at 6%. The remaining 48% consists of computer studies and Information

                                 Economic Analysis Directorate                                                                         9
                                                                                                                                     Quarterly Bulletin

Technology (10.9%), commerce (9.1%) and other fields (27%).

Figure 7: Bursaries Offered for Certificates and Diplomas, 2009




                                                                                                                                                                                               Clothing production
                                                                       Computers & IT
                                         Finance and B.Management

                                                                                        Travel & Tourism

                                                                                                                                           Milwrights Fitting & Turning
                                                                                                           Auto Repairs & Mechanic

Source: GCRA, 2009

For FET more than one third of financial assistance was offered, engineering (36.2%), followed by
artisans (13.4%) and finance and business management (9.4%). Figure 7 shows that the GCRA
provided almost 90% of financial assistance for students to further studies within scarce skills
careers in FET, which was in line with the objective of the GCRA. According to the GCRA this was
the beginning of financial assistance offered to young Gauteng matriculants.

7. Other Initiatives of addressing skills shortages
7.1. Association for the Advancement of Black Accountants of Southern Africa
ABASA was established in 1985 to promote the interests of Black men and women engaged in the
accounting profession. Commitment and persuasion of ABASA is driven by the need to ensure that
every Black accountant and aspiring accountant is able to realise his/her full potential and
aspirations. ABASA            reported   that                       their initiative to                    encourage                                                      furthering         studies within
accountancy reached 28,483 accountants in April 2009. The number of Black CA’s in South Africa
recently crossed the 1,000 mark to 1,247 from only 973 in the beginning of 2008 which shows an
increase of 22%. This figure amounts to 4.4% of the total Black CA’s in South Africa. ABASA
underlined that transformation in the sector still has a long way to go as one of its objectives was
to increase the number of Black CA’s to a level more representative of the

                              Economic Analysis Directorate                                                                           10
                                                               Quarterly Bulletin

South African demographics. ABASA in 2008 estimated that the South African market is in
short supply of approximately 30,000 CA’s.

7.2. Neotel Academy
Neotel is South Africa's new telecommunications network operator that is based in Midrand.
The company aims to reduce the cost of doing business by enhancing the operational
efficiencies of companies through the optimal use of advanced communications technologies.
The competency gaps of the growing South African telecommunications market and scarcity of
skills within the telecommunications industry has prompted Neotel to launch a training
academy in order to develop a pool of expertise in response to the current and future skills
needs. The Academy works closely with industry partners such as Nokia Siemens Networks,
Cisco Systems and Huawei Technologies. Each of the partners provides access to propriety
curriculum, training materials, equipment, trainers as well as internship opportunities. The
academy has been accredited by the Information and Communication Technology (ICT) SETA.
In 2007, the Neotel Academy conducted a pilot study by taking in ten students within
Gauteng, this was completed successfully. In 2008 26 students, primarily made of previously
disadvantaged South Africans, were enrolled into the academy. Currently the academy is
producing quality graduates in the scarce field of information technology.

7.3. Ifihlile Training Academy
In response to South Africa's call for training and skills development, Ifihlile Training Academy
was formed in 2005. Aircon Corporation (Pty) Ltd and Imbraco Brand Compressors provide
skills development to individuals looking to enter the, Heating-electrical, Ventilation & Air-
conditioning, and Construction industry (HVAC). In 2005, Ifihlile Training Academy started
their pilot project, 120 learners were registered in 2006 and 58 managed to complete the full
course in 2007. The second project commenced in 2007 with 274 registered and 150 learners
successfully completing their course in 2008, 97 learners dropped out and 89 are still in
training. For the 2007 students 94% were Black, 3% Coloured and 3% White.

8. Conclusion
Education and training are the key factors in addressing the problem of skills shortage. This is
a long-term solution, the government together with private sector are urgently addressing this
in order to fill the gaps of skills shortage instantly by making full use of the human capital that
is available. ASGISA identified the need to grow the South African economy, reduce poverty
and unemployment; the objectives can be dealt with by improving the level of education and
addressing critical skills shortage.
                      Economic Analysis Directorate              11
                                                                Quarterly Bulletin

In response to skills shortage JIPSA, SETAs and other institutions were formed to address the
skills shortage so that the objective of ASGISA can be fulfilled. Evaluation of JIPSA and SETAs
shows that more progress has been made. GCRA was one of the GPG initiatives that offered
financial assistance to matriculated students to help them further their careers within scarce
skills identified. Although the initiative is still new within the province, it recorded a high number
of intakes in 2009. Other initiatives from the private sector were the Neotel Academy, Ifihlile
Academy and ABASA which showed huge contributions towards addressing the skills shortage.

9. References

SSETA. 2008. Annual Report. Phakisa Communication (Pty) Ltd. South Africa.
Office of the Deputy President of South Africa. 2008. Joint Initiative on Priority Skills Acquisition.
Government Communications.
Statistics South Africa. 2008. Quarterly Labour Force Survey. Statistical Release P0211. Pretoria.
Statistics South Africa. 2009. Quarterly Labour Force Survey. Statistical Release P0211. Pretoria.
Ifihlile Training Academy. 2008. Choose a working future. Johannesburg.

                                For further information contact Gauteng Treasury at
                                14 Floor Standard Bank Building, 78 Fox Street. Tel:
                                011    227   9000 Fax:   011   227 9055   or   email

                      Economic Analysis Directorate               12

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