South African power prices will rise more than first planned from April to help the state-owned utility recover 7.8 billion rand ($693 million) of unbudgeted costs, the regulator said.
South African power prices will rise more than first planned from April to help the state-owned utility recover 7.8 billion rand ($693 million) of unbudgeted costs, the regulator said.
Author: Mike Schusssler Source: Economists.co.za
Platinum strike putting strain on KwaZulu-Natal economy.
The strain that the South African economy is under due to strike in the platinum industry is showing in the KwaZulu-Natal economy. The KwaZulu-Natal barometer, as compiled by Mike Schüssler of Economists.co.za, turned negative in April for the first time in seven months as growth slumped and economic stress increased sharply. The barometer declined 0.8% year-on-year and was also down on a month-on-month and quarter-on-quarter basis.
Author: Mike Schussler Source: Economists.co.za
The general sluggishness of the South African economy is affecting KwaZulu-Natal and growth in the province is struggling to gain meaningful momentum. The latest KwaZulu-Natal barometer, as compiled by Mike Schüssler of Economists.co.za, grew 1.4% year-on-year, compared to 2.5% in February, and fell 1.1% month-on-month. The province's economy grew 2.7% year-on-year, and while it still grew quarter-to-quarter, the growth index was down 0.3% on a month-on-month basis, indicating a slowdown in growth.
“If it's tough out there, you are not alone. A lot of other guys are going through a tough period.”
GUGULETHU MFUPHI: Absa launched a new SME Index today, aimed at measuring the current state of small businesses in the country. On the line now we are joined by economist Mike Schüssler who’s done a lot of research into the sector. Mike, there’s a perception out there that small businesses are struggling in the current economy. Would you say that the index shows this?
MIKE SCHÜSSLER: Yes. We are down from last year and the index at the moment is just the number of employers and the number of self-employed and it gives a ratio to each of them. That shows you that times are tough. But even if you take the real figures, the figures that are available from Statistics South Africa, the amount of employers out there is down below 700 000 – 695 000 the second quarter of this year, although we are still talking about 700 000 or so for the whole first half of this year. But that puts it into perspective. At one time, just before the recession hit us in 2008, we had over 800 000 employers.
And if you take the self-employed a few years ago, I one day wrote something for Moneyweb on that, looking back ten years or so you were looking at 2.2m people self-employed, and now you are looking at 1.2m self-employed. So yes, times are tough. It's not easy out there.
I think people have this idea that all businesses are rich or that they easily make it, and the current data, the study we did for Absa, shows it isn't that easy out there. It's very, very tough.
RYK VAN NIEKERK: Mike, the 700 000 businesses – are they in the formal economy?
MIKE SCHÜSSLER: Most employers are in the formal economy, I would say. It's very difficult to distinguish, but I’d say 10 000 or 20 000 may not be in the formal economy. But certainly the majority of them are. Ryk, you know I told you a few years ago about the 301 000 people that were employers of more than five people. At the moment I can tell you that that’s down to 270 000 people that are employers, and that you can say are all in the formal economy. And that gives you an idea how tough it is out there.
And the other thing that gives you an idea of how tough it is out there – business not being that rich – is one very, very simple fact: the average business at the moment has got 11.5 employees. According to Stats SA, according to the UIF it's just on 10. That compares to the 1980s when it was just over 34 people in a business that were employed there. And right now that says to me that businesses are much, much smaller than we think and they need a lot more help than we think at this moment in time.
RYK VAN NIEKERK: Mike, if a business owner or a business manager listens to you or looks at the index, what should they take out? It gives you an index number, but what is the meaning for the individual business owner?
MIKE SCHÜSSLER: It's just a growth rate and the amount of businesses. We are going to add from Absa the number of transactions on the business side, which would give us a more up-to-date current type of thing. But I think if there’s one thing it says to me that I want business owners to take: if it's tough out there, you are not alone. A lot of other guys are going through a tough period.
The average business is only 7.5 years old. The typical business is less than five years old. And if you can just stick it out a little longer, your life expectancy increases tremendously as a business. And you learn a lot as a business. For policymakers it also says to me the one way we can grow a heck of a lot of jobs, if we can get the typical business to stay between four and five years, and go to six to seven years, we automatically will create a million or so jobs. And that is the big, big issue. Can we get businesses to stick around longer to have a better chance of success – I think that is the critical, critical issue.
GUGULETHU MFUPHI: But how would you do that, Mike?
MIKE SCHÜSSLER: Well, I think there’s a few things that I can think off the top of my head. Rules and regulations, red tape – and government has got to change its thinking. Government’s got to say how can I get that airline to fly to the next country, how can I make it easier for business to get that export? How can I make it much, much easier for a mine to stay open? How can I make it that a business that’s in manufacturing can get new markets? How can I help? And that’s where the big question is today – not about the next rule and set of rules that you’ve got to do. Every civil servant out there has got to start thinking differently and has got to say how can I help – not how much money and how many rules can I put in place.
RYK VAN NIEKERK: It doesn’t seem like the labour situation in the country would allow that, especially labour laws are sometimes identified as one of the core reasons why businesses are not growing.
MIKE SCHÜSSLER: Well, certainly labour laws aren’t helpful in South Africa – that’s the first thing. I don’t think it's the end of the world, Ryk. But I would like to say this much: I think the current situation where people are not even adhering to the labour laws at Marikana and at Amplats and Gold Fields and so on. I think we really need to rethink, because this figure shows that a lot of businesses are very, very vulnerable because, remember, it's not just the mine but the guy who is delivering the garden services at the mine, the guy who’s delivering structural steel at the mine or woodwork, the guy that’s serving as a retailer to the miners out there. All those guys are under pressure – and girls too. I would say to people, listen, in today's world you are rich in international standards. Get over it, that’s the way it is.
And I think political parties also have to start saying that and I think we've got to realise that the only rich people who are left are probably politicians and we've now got to go on and get business going. I think that’s what it boils down to. We may have a rich list in one of the newspapers over the weekend, but that’s 1 000 people or 2 000 people. The majority of businesses take 10 years from being a one-man person just running his thing and, if they make it, if they are lucky, to employ another person. That is a huge, huge challenge that we have to take. And if we don’t take that challenge, then we can forget it.
South African motorists have been warned to brace themselves for another increase in the petrol price in March. Fuel went up by 26 cents a litre on Wednesday, while diesel went up by 30 cents a litre.
Over the past week, the rand has weakened considerably and the price of Brent crude has risen due to the unrest in Egypt. These two factors are contributing to the increasing fuel costs.
Economist Mike Schussler said, "The petrol price is very likely to move up around 35 cents a litre next month or even more, depending on how this Egyptian prices plays out. The diesel price may go up in fact by 60 cents a litre.
South Africa’s unemployment rate fell slightly to 24% of its labour force in the fourth quarter of 2010, from 25,3% in the third quarter, with the number of unemployed people decreasing by 259 000 people, a report released on Tuesday showed.
The Statistics South Africa (Stats SA) survey also showed a 2,1% decrease, or 89 000 less people being unemployed year on year, but still leaving about 4,1-million people officially without work.
Economists warned that, while the numbers appeared encouraging, the interpretation thereof was somewhat of a “mixed bag.”
Econometrix chief economist Azar Jamine said that a large proportion of the decrease in unemployment numbers resulted from a record 12,5%, or 117 000 people being discouraged from looking for employment opportunities in the country.
Over the past year alone, 440 000 people were counted as discouraged work seekers, disqualifying them from South Africa’s official labour force.
“We are seeing a lot more people that would previously have been classified as unemployed, being shifted into the not economically active category as definitions keep on changing,” said chief economist Mike Schussler.
He pointed out that, while South Africa’s adult population, or people between 15 and 64, increased by about 504 000 people, its labour force, or those that want to be employed, decreased by 207 000 people. “That means that South Africa is sitting with 711 000 not economically active people over the last year.”
Schussler noted that a more accurate indicator to consider in such a survey would be the country’s labour absorption rate, which only increased from 40,5% to 40,8%.
Investec’s Kgotso Radira noted that the low absorption rate was probably indicative of the economy’s inability to create jobs.
Nevertheless, the country still increased employment growth with 157 000 jobs during the fourth quarter of 2010, compared with the previous quarter.
Schussler said that, while this was a positive progression, it could mostly be passed off as seasonal or unsustainable, as a large percentage of it was generated through government initiatives.
Jamine agreed, saying that while a drive in government employment would be good for the quality of life of some, it could not be sustained over the longer term.
“Interestingly, all racial group showed an increase in employment, except white South Africans, which showed a fall in employment, and possibly pointed towards the more stringent implementation of affirmative action,” he added.
The Stats SA survey showed that 148 000 out of the 157 000 jobs gained were in the community and social services sector, with Limpopo, KwaZulu-Natal and North West showing the biggest growth in employment numbers.
This was followed by about 70 000 jobs created in the manufacturing sector and 28 000 in the trading industry, while 13 000 jobs were lost in agriculture, employment in construction decreased by 20 000 and 31 000 jobs were lost in financial services.
“I think it's safe to say that, except maybe for manufacturing, a lot more jobs came from the public sector than from the private sector. This is unsustainable, as government is not necessarily seen as a productive part of the economy. South African taxpayers are already paying large amounts to salaries in the public sector and welfare cheques, which is why the government now has to start tolling the Gauteng roads to build its infrastructure,” said Schussler.
Nevertheless, Radira said that government’s plans to create employment opportunities would be key for employment growth in the coming quarter.
Clarity on these plans would likely be provided in the State of the Nation Address or the budget statement, expected later this month.
Cape Town - More than 20.4 million workdays were lost last year as a result of strikes.
This was more than double those lost in 2007, in what was then regarded as the biggest public service strike in South Africa’s history.
In 2007 about 9.5 million workdays were lost, and the 2010 figures come after huge job losses in 2009, when only 1.5 million workdays were lost.
Some economists have warned that last year’s massive loss could be repeated this year.
On Wednesday the statistics on workdays lost came to light in the Department of Labour’s provisional 2010 report on industrial action.
In a departmental presentation to a sitting of the labour portfolio committee, which document could not be officially discussed by the committee because of time constraints, it was mentioned that the 2010 loss of workdays amounted to almost 20.7 million (excluding retrenchments and other losses).
Last year was characterised by a public service strike, as well as other protracted strikes in the private sector.
The year was further marked by double-digit wage-increase demands, despite inflation being very low.
Preliminary calculations around these provisional figures indicated that workers lost at least R3bn in direct salaries, said Economists.co.za economist Mike Schüssler.
But the total loss to the economy – which is more difficult to calculate because of, say, the long-term effect of strikes – could easily be between R6bn and R9bn or even higher, said Schüssler.
Last year Finance Minister Pravin Gordhan had to make a R7.2bn adjustment to the 2010 budget to provide for higher wages, among other things, following the public service strike.
Efficient Group economist Dawie Roodt said that he had expected that number of workdays to have been lost, but if the situation were not arrested this year the same scale of strikes could soon be seen.
The department said the consequences of last year’s strikes had aggravated relationships between trade unions and management.
Economists and trade unionists have welcomed the drop in the unemployment rate to 24.0% in the fourth quarter from 25.3% in the third quarter as 157000 jobs were created, but the number of economically inactive people rose by 222000, to a record 14.9 million.
Cosatu spokesperson Patrick Craven said: “We are relieved that at long last there has been a reversal in the trend of job losses, and welcome the drop in the unemployment rate.
“However, it is still far too early to celebrate because the increase in jobs in the fourth quarter may just be seasonal and we need to see the first-quarter data before we can see that a trend of job creation has been established.”
Craven said the labour body was concerned about the rise in the number of economically inactive people, because that “shows that not enough is being done to create jobs, which remains at the heart of our campaigns”.
The number of people who are not economically active has increased by 711000 between the fourth quarter of 2009 and the fourth quarter of last year.
The almost 15million people who are not economically active exceed the number of those employed by almost twomillion.
The biggest proportion of economically inactive are those people at school or studying, at 6.25 million, because the labour force is defined as those aged from 15 years to 64 years old, even though legislation prevents anybody from legally hiring a person aged younger than 16 years old.
Homemakers are the next largest category at just less than three million, then those workers who have given up looking for work, termed “discouraged workers” come in at 2.15 million.
Economist Mike Schussler of economist.co.za said: “The drop in the unemployment rate is welcome, but is also partially more of a statistical quirk because the labour force declined by 102000 when more workers became discouraged, even as the population aged 15 years to 64 years old increased by 121000.”
In terms of sectors, most of the 157000 job gains in the fourth quarter were in the public sector as community and social services jobs increased by 148000 of the job gains.
The manufacturing sector followed with 70000 and then the distribution and trade sector with 28000.
JSE-listed Adcorp’s latest employment index released on Thursday showed that employment rose slightly by 0,9% in January, compared to the previous month.
However, all sectors of the South African economy showed a decline in employment for the month, except for an 8,8% rise in community and social services employment, which is mainly driven by government.
CEO Richard Pike said that the country’s construction industry was the hardest hit with employment falling by 6,6%. Moderate job losses also occurred in the financial services and wholesale and retail trade sectors, with the index falling by 3,7% and 3,6% respectively.
Statistics South Africa’s employment survey, released on Tuesday, showed that 157 000 jobs were gained during the fourth quarter of 2010, of which 148 000 were in the community and social services sector.
Economists Mike Schussler and Azar Jammine said that while the drive from government to create employment was good for people’s quality of life, it was unsustainable as it was further exasperating South African taxpayers.
LABOUR LAW AMENDMENTS
Meanwhile, Pike warned that a recent scenario done by Adcorp showed that the labour law amendments, as was proposed by the Minister of Labour Mildred Oliphant in December, would results in more than a million jobs being lost.
The proposed labour law amendments relate to the Labour Relations Act, the Basic Conditions of Employment Act, the Employment Equity Act and the Immigration Act. In addition, the Employment Services Bill had been introduced, which would extensively regulate the labour broker industry and those making use of brokers, once enacted.
“Ironically, the proposed labour law amendments will represent the most significant ‘informalisation’ of the economy since the Labour Relations Act of 1995,” commented Pike.
But by the end of last year there were 237000 fewer people employed in SA than when Zuma made his promise.
Official unemployment reached a high of 25.3% in last year's third quarter.
Although unemployment fell to 24% in the fourth quarter, the chances of creating fivemillion jobs by 2020, as promised last year, are looking slim.
SA's labour force participation rate is 53.6% compared with a world average of 69.2%, said Mike Schüssler, an economist at Economists.co.za.
The labour force participation rate is the proportion of the population of working age, between 15 and 64, who are either employed or unemployed. That means everybody who works or who wants to work.
The problem, said Schüssler, is that it is difficult to be counted as "unemployed".
According to the official Stats SA definition, to be classified as unemployed a person should have been actively looking for work in the previous four weeks and be available to start work immediately.
The rest of the working-age population are classified as "not economically active". These are the discouraged workers who are not actively seeking work or who simply do not want to work.
The number of discouraged work seekers rose by a massive 25.7% in the past year and the number of people not economically active by 5%.
Schüssler said that classifying people as discouraged work seekers, rather than as unemployed, is a worldwide phenomenon as it makes a country's unemployment figure look better.
Stats SA's quarterly labour force survey indicated that 13.13million people of working age were employed in the fourth quarter of last year and 19.06million, the unemployed and the not economically active, were not.
"The truth is that SA is simply not creating enough jobs," said Schüssler.
Econometrix's Azar Jammine said there are three main reasons for this.
"There is lack of basic skills and education. The effective illiteracy and innumeracy of a big part of the population means the only jobs they can do are the really menial and manual. And we do not only need graduates, we need artisans," said Jammine.
The role of trade unions is the second big obstacle to job creation as they prevent people who do not have many skills from doing menial or simple jobs at a low wage, said Jammine.
It has become extremely unattractive to take on workers and become tied into contracts that are very difficult to get out of.
Jammine said the third obstacle was that small business and entrepreneurship was simply not encouraged and was not allowed to play a constructive role in SA.
"Small businesses create three to five times as many jobs for a given amount of capital investment as big businesses," he said.
"In the State of the Nation address, an incentive of R20-billion was announced for investment purposes, but it will only be available for companies that invest at least R200-million in the economy. So the small business sector is once again left behind."
The social grant system is another reason why small business is not thriving, Jammine said.
Last year, almost 13million people received social grants.
"People rely on the state for hand-outs rather than working hard and starting up their own small businesses to create jobs for themselves."
Schüssler said only 1.2million South Africans are self-employed.
"It is as if people are afraid to employ themselves," he said.
According to Stats SA, most sectors were still shedding jobs in the fourth quarter last year, although a net total of 157000 jobs was created.
The government played the biggest part in the increase in employment, with 148000 jobs being created in community and social services.
The South African Institute of Race Relations said this month that one in eight people who were employed in SA, or almost 13%, worked in the public sector.
This did not include employees of public institutions such as water boards and liquor and tourism boards.
Average public sector earnings last year were 44% higher than those in the private sector.
The period for comment on four controversial labour law amendment bills, published in December, ended on Thursday.
In its submission to the labour portfolio committee of parliament, the Free Market Foundation warned that these amendments would raise the cost, risk and difficulty of creating jobs and sustaining existing jobs.
The forum warned that the amendments would increase unemployment in SA.
Business Unity SA and the South African Chamber of Commerce and Industry both called for the bills to be withdrawn.
A southern African analyst at Control Risk said that if the bills did eventually become law they would be a watered-down version of what was published in December.