Employment: Adcorp says unions stifle job creation

The recruitment firm also differs with Stasa SA over the size of the informal economy writes Tina Weavind

The tripartite alliance is putting at risk any real possibility for job creation in South Africa. So says Richard Pike, CEO of listed recruitment agency Adcorp Holdings, who adds that organised labour is pricing formal sector employment out of the market.

The labour market has become increasingly unreliable in terms of strike action, with more days being lost now than during the riots at the height of apartheid, Pike says.

In 2009, 2.9million work days were lost through strikes; in 2010, 14.6-million days were lost and this year the figure is close to 17.8million days.

He says that to make matters worse, the wage increases demanded are often 7% and 8% above the official inflation figure and productivity is declining to the extent that the real wage gap is closer to 14%.

Where wage demands are met, efficiencies are quickly reclaimed through automation, which results in retrenchments. Demands for better working conditions, says Pike, often result in a worse outlook for job creation.

The jobs problem is being addressed by Economic Development Minister Essop Patel's left-leaning new growth path and by the pro-business National Planning Commission, headed by the National Planning Minister in the Presidency, Trevor Manuel.

But Pike says the unions are the spanner in the works of both - a "proper diagnosis" of the jobs problem by either entity would point fingers at organised labour, but because of the tripartite alliance, the state could not be objective.

Pike asks who represents the interests of the unemployed. Not business, he says, because it is looking after efficiencies and the shareholders' bottom line.

The government, while it is making the right noises on the one hand, is unable to make any serious dents in the problem because it is handcuffed to labour.

Recently Pike and Pali Lehohla, the statistician general of Stats SA, disagreed publicly on the level of unemployment in SA. Stats SA claims unemployment is close to 25% with two million people operating in the informal economy, while Adcorp puts the informal economy at closer to six million people.

If this is the case, the group says unemployment and economic inactivity is closer to 8%, lower than the most recent estimates for unemployment in the US.

Adcorp and the government get their information from different sources and each claims its method is superior. Stats SA uses national surveys of representative groups of people and then extrapolates to the national whole.

Adcorp gets its information from its database of one million job applicants it deals with each year, and the 200000 jobs they place people in.

Adcorp also uses a "cash and coin" econometric model to establish the size of the informal economy - the Reserve Bank knows how much money has been printed, and the banks know how much they are holding - whatever is not accounted for is in the informal economy.

Pike says one of the principal downfalls of the survey technique is that people often don't tell the truth.

A housewife with a small cottage industry might declare herself to be unemployed so she doesn't have to register a company and pay tax; a person selling cellphone chargers on the side of the road is equally unlikely to declare that he is gainfully employed.

However, there is an extensive and thriving informal economy in South African cities, as a trip into Alexandra or down William Nicol Drive in Sandton will attest.

More evidence is that despite the dearth of jobs, and allowing for some measure of state aid, there are few reported incidents of people actually starving.

Also, while service-delivery protests are common, there is little rioting in the streets on a scale comparable to the recent Arab uprisings or even the London riots.

Pike believes that South Africa's tolerance of the informal sector is the reason we don't see rioting like that in many other parts of the world where opportunities for informal operations don't exist to the same extent.

Pike has long proposed that one way to deal with South Africa's unemployed, disaffected youth and address many of the country's pressing social needs is voluntary national service.

Adcorp has crunched the numbers for a two-year national service programme that would take in 500000 people a year, incorporating a maximum of one million at any given time.

The group reckons it would cost in the region of R20- to R30-billion a year, compared with the R75-billion spent on social grants each year.

On Tuesday, Adcorp's shareholders voted in favour of a buy-out of specialist IT recruiter Paracon in a deal worth R622-million, bringing the company's market capitalisation up to R2.2-billion. It increased the company's market share by about 10% and reinforced its position as the biggest operator in the country in a field of about 3500 smaller entities.

On Wednesday, Stats SA noted in its quarterly labour force survey the first increase in jobs since 2009, saying unemployment had dropped from 25.7% to 25% in the third quarter of this year.

But the body qualified the finding by saying its mining figures - accounting for 42000 of the 193000 jobs gained - were not "robust".

Officials said the figure was based on interviews with households that might have had difficulty with the classification and that for a more accurate assessment, the quarterly employment survey, which is based on responses from business, should be addressed.