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Graduate Unemployment in Post-Apartheid South Africa: Nature and Possible Policy Responses

Research Report Compiled for Business Leadership South Africa Funded by Standard Bank

March 2006

Development Policy Research Unit School of Economics, University of Cape Town Private Bag, Rondebosch, 7701 http: //www.commerce.uct.ac.za/dpru/

Executive Summary
Overview The Development Policy Research Unit (DPRU) has been commissioned by Business Leadership SA to undertake an analysis of the growing problem of unemployment among South African graduates at the request of Deputy-President Phumzile Mlambo-Ngcuka. The research was funded by Standard Bank. Research of this nature is both timely and important, especially w ithin the context of the Accelerated and Shared Growth in South Africa (ASGISA) programme and the Joint Initiative for Priority Skills Acquisition (JIPSA). The ASGISA initiative recognises skill shortages and the poor quality of education as binding constraints to accelerated growth in South Africa. The first phase of the project involved a detailed review of the South African literature on the subject of graduate unemployment and more broadly, youth unemployment, as well as empirical analyses of various Labour Force Surveys (Statistics South Africa). The second phase attempted to acquire more practical insight into the problem through a series of interviews with some of South Africa’s largest companies, across a range of different sectors. The interviews, broadly on the graduate unemployment problem, traversed a range of issues relating, for example, to the schooling and higher education system, the learnership programme and SETA system and the nature of skills shortages. In turn, a number of very detailed long- and short -run policy suggestions emanated from the interviews. Graduate Unemployment in Context The unemployment problem in South Africa can be described as structural in nature, given that there appears to be an ongoing, almost intractable, mismatch between the types of workers demanded by firms and those supplied in the labour market. The South African economy, like many other economies following a natural development path, has seen a structural shift in production towards more skill- and capital-intensive industries. Pressure to become technologically more advanced and the effects of increased global competition have further increased the demand for high-skilled workers at the expense of low-skilled workers. It is, therefore, understandable that South African unemployment is most prevalent among poorly educated, low-skilled workers. Within the context of increased demand for skilled workers and reported skills shortages the phenomenon of rising graduate unemployment is worrying. Unemployment among graduates in itself s insignificant in the context of broader i unemployment in South Africa. Almost 71 per cent of the unemployed (broad definition) have a Grade 11 or lower qualification. Matriculants make up 26 per cent of the unemployed. Tertiary qualified individuals, including people with post-matric diplomas, technical qualifications and university degrees make up less than three per cent of the unemployed. This represents approximately 200 000 individuals out of 7.8 million unemployed people in South Africa. Looking at the composition of tertiary unemployment (see Figure on page ii, left hand panel) we see that less than one in five of the tertiary unemployed hold degrees. In contrast, 82 per cent of tertiary unemployed persons hold diplomas. The majority of these individuals are African. The right hand side panel of the figure shows that the actual unemployment rate among Africans with diplomas is also significantly higher than that of the other racial groups.

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Composition of tertiary unemployment African degree 12% Other diploma 9% African diploma 73% Other degree 6%

Unemployment rates (%) 25 20 15 10 5 0 African Coloured Asian White Degree

Certificate/Diploma

This evidence is indicative of the fact that African students or students studying at historically Black institutions tend to graduate in fields of study with lower employment prospects, often because they do not meet the minimum requirements for enrolling in mathematics, science and engineering courses. This raises questions about the quality of secondary school education in South Africa, as well as the quality or relevance of education offered at historically Black institutions (and perhaps tertiary institutions in general). While education is one aspect of the graduate unemployment problem, and certainly one of the most important, various other issues are also explored in this paper. In particular, the hiring practices of firms, the type of firm-level training offered to reduce the skills shortages or skills scarcities among graduates, as well as the policy environment aimed at encouraging firms to increase the absorption of graduates were explored in some detail. In this regard the paper reports on some general and specific findings of a series of interviews conducted among 20 of South Africa’s largest companies operating in a variety of sectors, including mining, manufacturing, construction, transport and communication, and business and financial services. Results and policy recommendations are thus based largely on these findings. Economic Trends General economic trends potentially have an important impact on firms’ recruitment practices. The firm interviews confirmed the general trends of structural change and the impact on employment outlined above. The mining sector (or primary sector in general) is contracting and the expectation is that it will continue to do so in the foreseeable future. As a result future employment prospects for this once thriving sector are bleak. The manufacturing sector, on the other hand, is emerging from the slump of the 1980s and 1990s and entering a boom phase, fuelled by favourable political and economic conditions (low interest rates and inflation), general consumer confidence and confirmed plans to significantly step up public infrastructure investment. However, production processes are characterised by skills-intensification and capital deepening, which suggests that increased production levels are often associated with increased productivity, not necessarily increased employment. Yet, as capacity expands (and various firms suggest that they have such plans), employment is likely to grow. At present, however, skills shortages in key areas are hampering expansion plans (see below). The various services sectors are experiencing equally prosperous times, with ii

many firms gearing towards providing high-tech support services to the rapidly growing economy. This has been coupled with fairly large increases in employment in recent years, although skills constraints remain a barrier to growth. Skills Scarcities The issue of skills shortages and constraints was identified by many firms as somewhat of a predicament. While most of the firms adhere to the notion of a ‘pipeline strategy’ whereby firms focus their recruitment on young entry-level candidates who are then trained to become future managers, this strategy appears to be failing in many instances. Many firms have lost skills in the last decade due to emigration, while poaching by competitors is widespread due to general shortages of managers and more experienced workers. As a result recruitment continues to focus heavily on attracting skills at a premium. This raises the issue of identifying scarce skills. In particular, three ‘types’ of scarce skills can be identified; the first two can be seen as skills shortages, while the third is more correctly defined as a skills deficit: • There is a shortage of artisans and other technically trained workers, such as electricians, technicians, mechanics etc. Engineers and scientists also list high on the list of scarce skills. These shortages are especially a concern in the manufacturing sectors. There is a shortage of middle- and senior managers. This skills shortage exists within all industry types, e.g. mine managers or shaft managers in the mining industry, foremen and managing engineers in the manufacturing industry and general business managers in the services industry. Management skills, it seems, are so problematic that poaching is endemic across industries. As far as entry-level positions are concerned, the constraint is not necessarily the quantity of graduates, but rather the quality of these graduates. The problem therefore relates to a skills deficit (in terms of quality) rather than a skills shortage (in terms of numbers).





In explaining skills shortages one should look at a combination of past and present factors. Technical skills shortages are partly explained by declining enrolment in engineering sciences at tertiary institutions during the 1990s, while graduation in ‘softer’ non-technical fields of study has been on the rise. Related to this, is the premium placed by students on obtaining university qualifications as opposed to more practical FET college qualifications. Students would much rather obtain, say, a human science degree than a technical diploma, despite the lower employment prospects attached to the former. Workplace training at manufacturing firms has also been declining, partly due to the unfavourable economic conditions that existed during the 1980s and 1990s. However, the uncertain policy environment with respect to the future of apprenticeships may have also played a role. At the time of the introduction of learnerships, the perception existed that learnerships would replace apprenticeships despite the fact that many manufacturing firms feel that apprenticeships are more appropriate as a model for workplace training. The end result felt now is a shortage of people with technical skills and some years of experience. Shortages at management level may simply be a problem of insufficient firm-level training and ineffective pipeline strategies. While poaching and emigration (the brain drain) has iii

been identified as part of the problem, a stark critic may point out that proper talent management and middle-management training opportunities at the firm level may have prevented management shortages from reaching endemic proportions. However, it may also simply point at the fact that firms are struggling to find the right calibre of entry-level persons that can be trained to become future managers. This point relates to the skills deficit among graduates in South Africa. The skills deficit, on the other hand, relates directly to issues around education in South Africa. Various firms pointed out that they believed the poor quality of education at school level, especially in mathematics and science, is to blame for the low enrolment numbers in key study areas, as well as poor academic performance of students in general. Substandard education and inappropriate qualifications at tertiary institutions, especially historically Black institutions, is also a concern. There is a perception among employers that current educational subsidies are causing institutions to focus on enrolling large numbers of students rather than on the quality of education. Related to the skills deficit is the issue of a lack of soft skills. Many firms felt that graduates lacked soft skills such as communication and general language skills (especially in English), which caused them to be unsuccessful in interviews. Often students are not ready for the workplace emotionally and struggle to adapt to a corporate environment. Considerable debate is also taking place about the future of the FET college system. Significant changes have been proposed or introduced in the courses and curricula offered at these public institutions as part of the recapitalisation process. The aim is to improve the image of these institutions. However, despite large investments in the FET system, firms still perceive these institutions to be inferior, often preferring to offer vocational training themselves. Firms feel that practical training offered at these institutions is either inadequate or inappropriate. Yet, the new curricula at the FET institutions appears to introduce an even broader type of education that, on the one hand, ensures inclusion into a modern knowledge society, but on the other hand perhaps comes at the cost of widening the technical skills deficit. Given the already poor image of these institutions the wrong signals sent out now may jeopardise the future of these institutions. Much of the future debate needs to centre on the curricula and the appropriate balance between technical (vocational) training and broad education. Current Policy Learnerships, which now officially, according to available information, includes apprenticeships, were introduced in 1998 as part of the National Skills Development Strategy, supposedly as a fix-all for the dual problem of skills shortages (or the skills deficit) and (youth) unemployment. Officially, learnerships are based on the premises that they provide structured learning and workplace experience, where the learning component is offered by an accredited training provider and the qualification obtained upon completion is nationally recognised. The general response from firms has been very positive. Whether support and adoption for the scheme is being driven by the tax grants or the BEE points on offer is unclear, but ultimately it is clear that many trainees are being appointed on learnerships, which has certainly contributed to the skills pool within firms and the economy. However, two concerns remain. Firstly, the administrative burden and bureaucratic complexities around the implementation of learnership programmes, the accreditation of training institutions, the registration of learners and the assessment process is proving to iv

be a major barrier to increased participation and enrolment of learners, especially at smaller firms. While there is perhaps not much that can be done to reduce the paperwork required, given the stringent quality requirements associated with awarding nationally recognised qualifications, the functionality and efficiency of SETAs has to be addressed. Secondly, there is evidence that the learnership system has probably been less effective in increasing the absorption of unemployed workers and reducing unemployment by more than what would have been the case in the absence of the policy. Although the number of learners has increased dramatically, far exceeding the initial targets set out by the various SETAs, evidence collected during the firm interviews suggests that learners would in all probability have been hired anyway, particularly in firms where training has always formed part of the business philosophy of the firm. The original aim of learnerships, namely that of firms training unemployed people for the market has not materialised, with most firms linking their learnership enrolment numbers with the actual labour needs of the firm. Thus, while the system is certainly effective in promoting standardised training at firms, it has failed to generate above-equilibrium employment. Put differently, in the absence of the learnership grants and tax breaks, training probably would have taken place anyway. This r equires some thought about the implementation of the learnership programme as well as the way in which the incentive system is structured. Policy Proposals A number of very detailed long- and short-run policy suggestions emanated from the interviews and the literature review. The first three general policy proposals represent interventions that may have an immediate impact on the behaviour of economic agents, with potentially, immediately visible outcomes. The last suggestion addresses the structural problems pertaining to human capital and the deficiencies in the education system. • Immigration Service Centre: The shortage of experienced, skilled employees, however defined, requires a bolder and more efficient immigration policy. Currently the turnaround time and associated bureaucratic inertia around immigrant worker applications makes this particular labour market intervention operationally inefficient. In addition, it remains a moot point whether the list identified by the Department of Home Affairs is in fact an exhaustive and accurate representation of skill shortages in the domestic economy. Given this, we propose that a Immigration Service Centre for n large, established companies be set up. In the first instance, to avoid secondguessing firms on their labour demand needs, it is proposed that the Department of Home Affairs list be viewed only as a guideline for skills in need. Secondly, in order to obviate the institutional inefficiency of such a centre, such an immigration service should guarantee the processing of all immigration paperwork within a month, with all due diligence around the specific occupation in need, being undertaken within this period. Expansion of the learnership programme and financing options: The learnership system is presently viewed by many firms as an instrument that may be employed to train entry-level workers, mainly targeted at matriculants and/or unemployed people. The learnership system is, however, highly flexible and can potentially incorporate a range of training models for which the firm can receive subsidisation. These training models should be aligned with the types and nature of skills shortages that exist in the economy:



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Addressing skills shortages through middle-management training: At present learnerships are almost entirely focused on entry-level positions, probably due to the strong emphasis placed by the Department of Labour on the absorption of matriculants or entry-level unemployed learners (the grants are structured such that subsidies for unemployed learners are higher than those for employed learners). Ironically, despite severe skills shortages at middle-management level, few firms are using learnerships to provide training for middle-managers despite the fact that the learnership system is adequately equipped to deal with such learning. In this regard SETAs, firms and educational institutions should work together towards developing and implementing suitable and appropriate higher-level learnership programmes that would gear firms towards training future managers, and ultimately targeted at where the shortages currently exist. Addressing technical skills shortages through bursary schemes linked to learnerships: Bursary schemes are utilised by many larger firms either as a corporate social investment or a a core s part of the recruitment process. A proposal is that the state sets up a bursary scheme in conjunction with firms that would subsidise any net additions to their current pool of bursars. Hence, firms would be incentivised to increase their existing quota of bursars, as these could potentially be funded by the state. The state could, of course, build its own criteria into such a firm-based bursary programme, ensuring that equity goals and employment guarantees are secured. Firm-based bursary schemes have a number of distinct advantages. Firstly, it locates labour demand needs directly with firms, ensuring effectively that the institutions of human capital are supplying the required skills to the labour market. Secondly, the firm can become involved more directly in the education of the student in the sense that they can provide academic support and guidance as to subject choice – something in this model that the state would not need to pay for. Thirdly, firms can offer relevant practical experience to bursary holders by creating opportunities for vacation work – an in-built work experience programme. Finally, all this comes at a fairly low risk to the company given the contractual obligations of the bursar to work for the firm on completion of his or her studies. If poached by another employer the bursar would have to pay back the bursary. Given the nature of a bursary scheme coupled with vacation work it could easily fit into the ambit of the learnership scheme. Addressing the skills deficit among graduates: Many graduates lack soft skills and are not workplace ready when they start their careers in the corporate sector. This was highlighted as a reason why many graduate are unsuccessful already at the recruitment phase. Learnerships can potentially be successfully implemented as training programmes that aim to bridge the ‘soft skills deficit’, thus narrowing the gap between the workplace environment and student life. Various ‘soft skills’ learnership programmes and training programmes are already in existence. vi

§

§

Learnerships may also help bridge the gap where training or education obtained at educational institutions is deemed inappropriate or insufficient. One such example is employing students without accounting degrees and enrolling them in Chartered Accountancy conversion courses offered at some universities. Much scope exists to employ graduates with potential and converting their qualifications by enrolling them in abridged conversion courses. § Employing ‘marginal subsidies’ to promote above-equilibrium absorption of learners: The finding that the current incentive structures are not conducive to above-equilibrium employment at firms (learners would have been trained and employed anyway), as well as the contention of firms that they would o consider nly employing more learners if the subsidy covers the full cost of such training, are strong motivating factors in support of the idea of a ‘marginal subsidy’. This principle is easily applied to the learnership system. Two variations of the proposed model can be considered: (1) Rather than subsidising all trainees of the firm, only learners over and above the number of learners that would have been trained anyway are subsidised. (2) Alternatively, all learners are subsidised, but the subsidy amount for learners over and above some threshold level is higher. Savings on the subsidy paid towards the equilibrium number of learners can be used to finance the increased subsidy amount paid towards above-equilibrium learners.



Database of Unemployed Graduates: Two databases of unemployed young people were evaluated as part of the project (see accompanying document entitled Graduate Databases). The first, from the Umsobomvu Youth Fund (UYF), contains more than 130 000 individuals (of which only about 81 000 have supplied contact details), covering a wide spectrum of qualifications, including matric certificates, diplomas and degrees. The second database, is that provided by the South African Graduates Development Association (SAGDA), which contains a listing of some 2 500 unemployed individuals with post-matriculation qualifications. Currently, both databases are in an electronic format that is not user-friendly to potential employers – a survey response that was common with respect to the UYF database in particular. However, these two datasets do contain the raw elements for a nationally representative electronic storage facility of unemployed individuals. This presently does not exist and, arguably, would serve as the beginning of a free service-based labour market information system for all firms in the economy. Various proposals are made as to how the database and services associated with the placement of unemployed graduates can be improved. These are explored and outlined in the accompanying document. Education and human capital: Various policy proposals should be considered to improve on the educational outcomes in South Africa. Poor quality education, poor subject choices and poor performance of students were frequently raised by firms as just some of the key concerns about education in South Africa. Although these interventions can be put into practice



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immediately, their impacts are only likely to be visible in the longer period given the nature of the educational problems. § Addressing the poor quality of school outcomes: (1) Greater funding of career guidance services that are offered either at schools or off-site. These will prove invaluable in inculcating the importance of mathematics and science amongst learners, which firms believed is not fully appreciated by young people. (2) The restructuring of educators’ remuneration packages on the basis of scarce skills. Hence, we would expect that through such a reallocation, science and mathematics educators, for example, would be remunerated more than other educators. Restructuring state subsidies for tertiary institutions: (1) That the current state subsidy system, biased heavily in favour of throughputs, should be restructured to include a (regularly reviewed) ranking of the quality of the institution and an ‘employability’ criterion. Institutions ranked as high quality ones which, through their certification, manage to secure employment for most of their graduates, are therefore likely to attract the largest proportion of the subsidy. (2) A special dispensation, outside of current funding envelopes, should be secured to support tertiary enrolment in areas where there are skills shortages. Again, employers should define where these shortages exist. Restructuring and marketing of FET colleges: A number of possible policy options regarding FET colleges present themselves. Hopefully these, together with the FET recapitalisation project, will be beneficial to standards and quality of training and education at FET colleges. This process should be monitored closely to ensure an optimal outcome. Some specific policy issues include: (1) Careful consideration of the current curricula at FET colleges. It is crucial that industry standards are met as far as firms’ expectations of practical knowledge and experience is c oncerned. (2) Industry support and trust in the FET system is crucial. Many firms have applied for accreditation as training providers and opt to conduct learnerships and apprenticeships themselves rather than outsourcing this to FET colleges or other academic institutions. This is a reflection of the distrust of the private sector in public training at present, which poses a threat to the credibility and future of the FET system. (3) Perhaps a ‘soft’ recommendation, but one we feel that is vital, revolves around the fact that FET colleges are viewed within the African community as a secondbest option for post-matric training. Hence, a key policy intervention would involve marketing FETs in African communities, and in particular repositioning them within these communities as institutions offering valuable and highly marketable skills. The severe shortage of artisans reported consistently by manufacturing firms, reinforces the need for this intervention. Corporate financial and logistical support could be considered for such a marketing campaign.

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To conclude Ultimately, the above study, through gleaning information from nationally representative statistics and a small, but significant sample of firms, has attempted an overview of the graduate unemployment issue. It is clear that in both our prognosis of the problem and a select, but hopefully, focused set of proposals much still needs to be done to resolve what is probably one of the key constraints to long-run growth in the South African economy.

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Table of Contents
1. INTRODUCTION________________________________________________

_________1 2. THE NATURE, EXTENT AND GROWTH OF THE GRADUATE UNEMPLOYMENT PROBLEM_________________________________________________2 2.1 INTRODUCTION ________________________________________________________2 2.2 DATA AND DEFINITIONS _________________________________________________3 2.2.1 Data and Methods _________________________________________________3 2.2.2 Defining Graduates ________________________________________________3 2.3 GENERAL L ABOUR MARKET TRENDS IN SOUTH AFRICA _________________________4 2.3.1 Labour Supply, Employment and Unemployment ________________________4 2.3.2 Structural Change and Labour Demand Patterns_________________________6 2.4 GRADUATE UNEMPLOYMENT _____________________________________________8 2.4.1 Age and Education Profiles of the Labour Force _________________________8 2.4.2 Graduate and Youth Unemployment: A Multivariate Analysis ______________12 2.4.3 Explaining Graduate Unemployment _________________________________14 2.5 CONCLUDING REMARKS ________________________________________________20 3. GRADUATE UNEMPLOYMENT IN THE CONTEXT OF SKILLS SHORTAGES, EDUCATION AND TRAINING: FINDINGS FROM A FIRM SURVEY AND OTHER RELATED RESEARCH __________________________________22 3.1 BACKGROUND _______________________________________________________22 3.2 A NOTE ON THE S AMPLE _______________________________________________22 3.3 PRODUCTION AND W ORKFORCE TRENDS ___________________________________24 3.4 RECRUITMENT AND TALENT MANAGEMENT STRATEGIES ________________________26 3.4.1 Recruitment philosophies __________________________________________26 3.4.2 Graduate recruitment______________________________________________27 3.4.3 Bursary schemes _________________________________________________28 3.4.4 Employment equity and the ‘war for talent’ _____________________________29 3.4.5 Graduate Expectations ____________________________________________30 3.5 INCENTIVE SCHEMES AIMED AT PROMOTING E MPLOYMENT AND TRAINING __________31 3.5.1 The National Skills Development Strategy _____________________________31 3.5.2 Firm Responses to Learnerships, Apprenticeships and Workplace Training32 3.5.3 Learnerships and Graduate Absorption _______________________________34 3.5.4 Administration and Costs of Learnerships _____________________________37 3.6 VACANCIES, SCARCE SKILLS, EDUCATION AND TRAINING _______________________41 3.6.1 Identifying Scarce Skills____________________________________________41 3.6.2 Explaining Skills Shortages _________________________________________42 3.6.3 Explaining the Skills Deficit _________________________________________46 4. POLICY OPTIONS ______________________________________________________50 4.1 ON SKILLS SHORTAGES AND VACANCIES ___________________________________50 4.1.1 Immigration Service Centre _________________________________________50 4.1.2 Middle-management Training _______________________________________51 4.1.3 Restructuring and Marketing of FET Colleges __________________________52 4.2 ON EDUCATION AND HUMAN C APITAL ______________________________________53 4.2.1 Addressing Poor Quality of School Outcomes __________________________53 4.2.2 Restructuring State Subsidies for Tertiary Institutions ____________________53 4.3 ON W ORKPLACE TRAINING ______________________________________________54 4.3.1 Increasing the Number of Learners___________________________________54 4.3.2 Reinstating Faith in Apprenticeship Training for Manufacturing __________55 x 4.3.3 Being Creative with Learnerships ____________________________________56 4.4 OTHER POLICY ISSUES _________________________________________________57 4.4.1 Promoting Bursary Schemes________________________________________57 4.4.2 Public Graduate Unemployment Databases ____________________________57 5. CONCLUSIONS ________________________________________________________58 6. REFERENCES _________________________________________________________60

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List of Figures
FIGURE 1: UNEMPLOYMENT RATES, 1995 TO 2005 ............................................................................... 5 FIGURE 2: SKILLS D ISTRIBUTION OF E MPLOYMENT BY S ECTOR, 1995 AND 2005........................................ 8 FIGURE 3: B ROAD U NEMPLOYMENT RATES BY AGE, 1995 AND 2005 ..................................................... 11 FIGURE 4: B ROAD U NEMPLOYMENT RATES BY L EVEL OF EDUCATION, 1995 AND 2005 ............................. 11 FIGURE 5: AGE COMPOSITION OF U NEMPLOYED G RADUATES , 2005 ...................................................... 14 FIGURE 6: E NROLMENT AT PUBLIC EDUCATIONAL INSTITUTIONS IN S OUTH AFRICA AND THE UNITED KINGDOM ................................................................................................................... 43 FIGURE 7: R EGISTERED LEARNERSHIP PROGRAMMES BY NQF CATEGORY , 2002 AND 2006....................... 45 FIGURE 8: COMPOSITION OF SCARCE SKILLS QUOTAS ACROSS BROAD OCCUPATION CATEGORIES ............... 51

List of Tables
TABLE 1: C HARACTERISTICS OF THE B ROAD SOUTH AFRICAN LABOUR FORCE, 1995 AND 2005 ................... 9 TABLE 2: C HARACTERISTICS OF THE E MPLOYED, 1995 AND 2005 ........................................................... 9 TABLE 3: C HARACTERISTICS OF THE B ROADLY UNEMPLOYED, 1995 AND 2005........................................ 10 TABLE 4: EMPLOYMENT EQUATIONS (B ROAD D EFINITION OF U NEMPLOYMENT), 1995 AND 2004 ................ 13 TABLE 5: BREAKDOWN OF TERTIARY U NEMPLOYMENT BY RACE AND TYPE, 1995 AND 2005...................... 15 TABLE 6: BREAKDOWN OF TERTIARY U NEMPLOYMENT BY F IELD OF S TUDY , 2000-2005 ........................... 16 TABLE 7: BREAKDOWN OF TERTIARY U NEMPLOYMENT BY TYPE AND F IELD OF S TUDY , 2005...................... 17 TABLE 8: P ERCENTAGE OF U NIVERSITY G RADUATES E MPLOYED IMMEDIATELY , BY RACE .......................... 18 TABLE 9: EMPLOYMENT BY COMPANY AND S ECTOR, 2005 ................................................................... 23

List of Boxes
BOX 1: BUSINESS P ROCESS O UTSOURCING, G RADUATE R ECRUITMENT AND L EARNERSHIPS ............ 36 BOX 2: THE L ETSEMA L EARNERSHIP P ROGRAMME ..................................................................... 39 BOX 3: MARGINAL SUBSIDIES ................................................................................................. 40 BOX 4: ALTERNATIVE TESTING M ETHODS FOR G RADUATES ......................................................... 49

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Graduate Unemployment In South Africa

1. Introduction
Within the context of rising unemployment rates in a skills constrained economy, rising graduate unemployment is particularly worrying. While in absolute numbers graduate unemployment is not comparatively large, it remains an important area of study for two reasons. Firstly, as a category, despite the small absolute numbers, relative to the approximately 8 million broadly unemployed – it has been the fastest growing education cohort of unemployed since 1995. Secondly, for an economy faced with severe skills shortages, it is particularly worrying that we are unable to generate sufficient job opportunities for those individuals that apparently have the highest probability of finding employment. In response to a request from the Deputy President of South Africa, Ms Phumzile Mlambo-Nqcuka, Business Leadership South Africa has commissioned the Development Policy Research Unit (DPRU) at the University of Cape Town to undertake an analysis of the problem of graduate unemployment in South Africa. In attempting to understand the full extent of the challenge, and define an optimal response, the following three-pronged research framework (as outlined in the Terms of Reference for the project) was proposed: 1. To undertake a detailed empirical overview of the nature, extent and growth of the graduate unemployment problem. To understand the current graduate absorption programmes offered by large formal sector companies On the basis of the above, to outline a menu of possible policy options that could potentially alleviate this growing labour market problem.

2.

3.

This document contains the full research report. Section 2 provides an empirical overview of the nature, extent and growth of the graduate unemployment problem as outlined in part one of the Terms of Reference. Section 3 is a detailed report on the findings of a series of firm interviews conducted by the DPRU during February and March 2006. Some of South Africa’s largest companies, across a range of different sectors, were interviewed in order to get their perspective on issues ranging from schooling and the higher education system, the learnership programme and National Skills Development Strategy (NSDS) and the nature of skills shortages and the skills deficit in South Africa. Section 4 raises general policy issues and proposes a set of detailed short- and long-run policy options. Section 5 draws some short conclusions. A technical appendix is attached and contains detailed information about the policy environment governing workplace training in South Africa, as well as a detailed set of company-specific interview reports.

1

Graduate Unemployment In South Africa

2. The Nature, Extent and Growth of the Graduate Unemployment Problem 2.1 Introduction

The South African economy has been experiencing rising unemployment rates during the past decade. At the same time there has been a structural shift in the observed labour demand trends towards increased demand for high-skilled workers. This lends weight to the observation that much of the unemployment problem is structural in the sense that the poorly educated workers, who constitute the vast majority of labour supply in the country, cannot find employment due to insufficient demand for workers with low skills. In contrast, there remains a serious shortage of high-skilled workers in South Africa. 1 The average shortfall in the public sector alone is about one in three senior managers (Robinson et al., 2005). In a large South African manufacturing firm survey (see Chandra et al., 2001) firms identified a shortage of appropriately skilled personnel as one of the main constraints to increased business activity. Young South Africans have become better educated over the last decade (Mlatsheni, 2005), partly in response to the adverse labour market conditions for low-skilled workers and the high monetary returns to education. Increasing enrolment rates at tertiary educational institutions also contributed to this. However, while the graduate labour force is growing, many graduates with tertiary diplomas and degrees are not being appointed despite the observed structural shifts in labour demand. As we show in this document, the graduate unemployment rate appears to be rising together with the overall unemployment rate. In fact, graduate unemployment has been growing the fastest of all the education cohorts since 1995. Indications are that this is a result of a mismatch between educational outputs and the type of employment opportunities available (Kraak, 2005, Mlatsheni, 2005, Oosthuizen, 2005 and others). Although small in absolute terms, graduate unemployment is certainly worrying given the severe skills shortage in the economy. High unemployment is often associated with social problems such as poverty, crime, violence, a loss of morale and social degradation (Kingdon and Knight, 2000), while the inability to find employment can create a sense of uselessness and idleness, especially among the youth (ILO, 2004). Mlatsheni (2005) finds that significant percentages of youth are neither working nor studying.2 This is either due to apathy among the youth or a loss of self-esteem. Either way, it is a situation that needs to be addressed. If young people are given the chance to find decent employment when they enter the labour force for the first time, it would help them to avoid the vicious circle of unemployment, poor working conditions, poverty and frustration which can damage the future prospects of whole economies (ILO, 2004). The graduate unemployment problem has become an important policy concern in recent times. While much research has been done in this area, some of which is drawn upon in

1

The Department of Home Affairs released a list of 56 occupations where up to 22 550 immigrants will have access to the South African labour market in February 2006. However, the relief for unemployed graduates is that the quotas are available to immigrants with at least 5 years relevant experience plus relevant qualifications. Drawing on the Cape Area Panel Study (CAPS) (CSSR and SALDRU, 2002) he finds that 57 per cent of non-studying youth are unemployed.

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2

Graduate Unemployment In South Africa

this paper, some initiatives that aim to deal directly with the problem are emerging. In December 2005, government launched a database of unemployed graduates (SABC News, 2005). This database, administered by the government’s Umsobomvu Youth Fund, aims to link unemployed graduates with prospective employers. While this initiative is both necessary and encouraging, it does not necessarily address the root cause of the problem. It is arguable that it merely addresses frictional unemployment, i.e. it helps match the ‘employable unemployed’ with employers. The real challenge is addressing the structural unemployment problem, which requires a longer-term focus on the transformation of the education system as a whole and assisting potential and current labour market participants in acquiring necessary and relevant skills that make them more employable. This report reviews the recent literature on graduate and youth unemployment within the context of the general labour market and educational trends outlined briefly above. In section 2.2 we clarify some definitions and introduce the data sources on which most of the findings are based. Section 2.3 reviews briefly the broad labour market trends of the past decade. This review provides a useful perspective on unemployment in general and graduate unemployment in particular. Section 2.4 explores the incidence o graduate f unemployment in more depth and seeks explanations for the trend of rising graduate unemployment. Section 2.5 makes some concluding remarks and highlights areas that require further research.

2.2

Data and Definitions
Data and Methods

2.2.1

This report is compiled mainly as a literature review of recent South African literature on graduate unemployment. Data are drawn from related research done within the Development Policy Research Unit, which is based on various datasets from Statistics South Africa, including the biannual Labour Force Surveys and the October Household Surveys.3 The aim is to ascertain the extent and nature of graduate unemployment in South Africa. However, due to the nature of the surveys and the relatively small sample of unemployed graduates that they contain, it is sensible to analyse some of the various smaller scale surveys and graduate tracer studies conducted around the country as well. In this regard we draw on research reports and articles by Koen (2003), Cosser et al. (2003), Kraak (2005), Moleke (2005) and Mlatsheni (2005), many of which are based on alternative surveys to the Statistics South Africa surveys.

2.2.2

Defining Graduates

The term ‘graduate’ can be defined in various ways, generally referring to an individual with any type of post-matriculation qualification. A tertiary qualification may, therefore, include a whole range of different qualifications from a variety of institutions, which introduces significant variations by field of study, entry requirements, length of study, perceived quality of the qualification etc. In some instances we, therefore, distinguish

3

In most instances figures for 1995 are compared to current figures. The 1995 data is from the October Household Survey and referenced as OHS 1995. The ‘current’ figures are based on various of the Labour Force Surveys (LFS), including March 2002 (LFS 2002: 1), September 2003 (LFS 2003: 2) and September 2004 (LFS 2004: 2).

3

Graduate Unemployment In South Africa

between non-degree (diplomas or c ertificates with a matric qualification) and degree (including post-graduate degrees) tertiary qualifications. The reasons for this are, firstly, that the holders of degree and non-degree tertiary qualifications are quite different from each in terms of employment probabilities. Secondly, people with a non-degree tertiary qualification make up over 82 per cent of tertiary qualified unemployed individuals. Consequently, it is likely that the analysis and policy recommendations would be most useful if a formal distinction between degree and non-degree qualifications were made. It is also important to note that the term ‘unemployed graduates’ is often used to denote recently graduated youths without jobs. In most tables and graphs in this report, graduates include persons with a tertiary education of any age group between 15 and 65. Youth – defined as those between the ages of 15 and 34 years – constitute the majority (77 per cent) of unemployed graduates (see Figure 5).4

2.3

General Labour Market Trends in South Africa
Labour Supply, Employment and Unemployment

2.3.1

The high levels of unemployment that persist in South Africa and the various adverse socio-economic effects associated with it have long been identified as one of the major stumbling blocks to accelerated growth and poverty reduction in this country. Shortly after coming into power, the ANC government committed itself to various specific goals, including that of lowering unemployment. Various policy documents came to the fore, most notably the Reconstruction and Development Programme (RDP), which was later replaced by the Growth, Employment and Redistribution programme (GEAR) in 1996 (Department of Finance, 1996). GEAR envisaged “sustained growth on a higher plane” as its main point of departure and the solution to the low rate of job creation. The GEAR policy-writers projected that high economic growth rates would create an average of 270,000 jobs per annum between 1996 and 2000, which translates into an average annual increase of 2.7 per cent in formal non-agricultural employment (Department of Finance, 1996: 7). Although these optimistic predictions never quite materialised the economy performed reasonably well in an unstable international environment. The result was that formal employment continued to fall, or at best stagnated during the latter half of the 1990s (Pauw and Edwards, 2003). 5 A turnaround in this trend became visible after 2000, with an estimated 409,000 jobs created in 2000 alone. In an analysis of the period 1995 to 2004, Oosthuizen remarks that “employment growth … should be seen in a more positive light than is generally the case” (2005: 3). Although employment growth has been slightly lower than economic growth, it exceeded growth in both the population and working age population, suggesting that the country has not experienced jobless growth over the last decade in
4

In South Africa, the National Youth Commission Act No. 19 of 1996 defines ‘youth’ as “persons between the ages of 14 and 35” (Republic of South Africa, 1996). As international definitions have 15 years as the lower bound and the age of 34 years is commonly used as an upper bound, the definition of ‘youth’ used in this report is those individuals aged from 15 years up to and including 34 years. Much controversy exists about the employment growth performance in the latter part of the 1990s. See Pauw and Edwards (2003) and more recently Oosthuizen (2005) for more.

5

4

Graduate Unemployment In South Africa

the strict sense of the word. However, in terms of the economy’s ability to absorb a rapidly growing labour force, the picture is not as rosy. The labour force is defined as all people aged 15 to 65 years that are willing and able to work. Entry into the labour market appears to have been stepped up after 1995. The ‘narrowly defined’ labour force grew by 45 per cent from 11.5 million in 1995 to 16.8 million in 2005, while the ‘broadly defined’ labour force increased by 46 per cent from 13.8 million in 1995 to 20.1 million in 2005 6. As we show later in this paper (section 2.4.1) much of the growth in the labour force is attributed to the large number of young adults entering the labour force. Over this period, narrow unemployment levels more than doubled from just over 2 million in 1995 to 4.6 million in 2003, while broad unemployment increased by 97 per cent from 4.2 million to 8.3 million. The latter constitutes an average annual increase of 12 per cent per annum. The related unemployment rates for these two years are shown in Figure 1. The narrow unemployment rate has increased from 17.6 per cent in 1995, peaking at 30.4 per cent in 2002. Thereafter, it declined and seems to have stabilised between 26 and 27 per cent in 2004/2005. Broad unemployment increased from 30.8 per cent to 41.8 per cent between 1995 and 2002, and consequently fell to 38.8 per cent in 2005. Clearly the growth in employment was not enough to absorb all new entrants into the rapidly growing labour force. Figure 1: Unemployment Rates, 1995 to 2005

45.0 40.0 35.0 34.3 30.0 30.8 25.4 29.4 30.4 28.2 26.2 26.7 41.8 41.8

40.6

41.0 38.8

Percent

25.0 20.0 15.0 10.0 5.0 0.0 1995 17.6

2000

2001

2002

2003

2004

2005

Broad Unemployment

Narrow Unemployment

Source: Own calculations, OHS 1995 and LFS 2005(2) (Statistics South Africa).

6

Statistics South Africa uses two definitions of unemployment, namely a strict (official) and broad definition. The strictly unemployed are those people within the economically active population who (a) did not work during the seven days prior to the interview, (b) want to work and are available to start work within a week of the interview, and (c) have taken active steps to look for work or to start some form of self-employment in the four weeks prior to the interview. The broad or expanded unemployment definition excludes criterion (c).

5

Graduate Unemployment In South Africa

2.3.2

Structural Change and Labour Demand Patterns

Some important structural shifts have taken place within and between sectors during the last decade. Most apparent has been the shift in output away from primary and secondary sectors towards services or tertiary sectors (Bhorat and Oosthuizen, 2005), a trend often seen in developing economies. This has also brought about a change in the demand patterns for different types of labour due to differences in sectors’ skills composition. Most notable has been the increase in demand for skilled labour at the cost of unskilled workers (Burger and Woolard, 2005). However, changes in the labour demand patterns are not only due to structural changes taking place in the country. South African firms have in the past decade or more been forced to adopt improved production techniques in order to remain competitive in the face of globalisation, trade liberalisation, and more recently, the strengthening of the currency. Such efficiency gains enable producers to produce a unit of output using fewer inputs than before, thus, depending on the demand-side effect of the resulting lower commodity prices, often leading to a decrease in demand for factors of production (Pauw et al., 2004). Such gains have been especially prevalent in the primary sectors agriculture and mining, both of which employ a large share of low-skilled workers. This has resulted in a decline in employment in these industries (Burger and Woolard, 2005, Vink, 2000). 7 The technical change experienced has been mostly capital deepening in nature, i.e. capitallabour ratios have been increasing as South African production processes have become more capital intensive. Bhorat and Oosthuizen suggest that, in general, such technical change is “viewed in a relatively negative light due to [its] dampening on the employmentincreasing effect of output expansion” (2005: 12). Intuitively speaking, however, one would expect greater capital intensity to “lower the demand for unskilled and low-skilled labour that is being replaced by the new capital equipment, but increase the demand for more skilled labour who are required to operate and maintain the new capital equipment” (Bhorat and Hodge, 1999: 352). 8 Alternative studies in the past have focused more directly on the effects of trade liberalisation on the structure of employment. Bell and Cattaneo (1997) find that “ trade flows have shifted production away from Black intensive sectors towards White intensive (or skill intensive) sectors” (as cited in Edwards, 2001a). A more recent study by Dunne and Edwards (2005) finds that tariffs fell relatively sharply in labour intensive sectors, particularly those with high shares of unskilled workers, and as a result the direct employment effect of liberalisation has been biased against semi-skilled and u nskilled workers. Their analysis further shows that in addition to the negative impact in labour intensive sectors, metal products sectors also experienced a decline in labour demand, while the capital-intensive resource-based and chemical products sectors experienced positive employment effects.

7

Research by Hartzenberg and Stuart (2002) revealed that total factor productivity (TFP) growth for the South African economy as a whole was negative between 1960 and 1975 (-1.0 per cent) and remained unchanged between 1976 and 1989 (0.0 per cent). However, TFP growth recovered during the 1990s (0.8 per cent). The agricultural industry was one of only a few sectors that experienced positive TFP growth over all the time periods. These authors further decompose the changing labour demand patterns in order to gauge the relative importance of technical change versus structural change in the overall employment change and find that although both had been important the former had a greater impact in terms of the demands for different types of labour (skilled versus unskilled and low -skilled).

8

6

Graduate Unemployment In South Africa

Factor costs have also undoubtedly had an important impact on the structure and levels of employment in South Africa. The capital intensification of the economy referred to earlier was partly due to the reduction of the cost of capital relative to other factors of production through subsidisation of capital intensive industries (tax breaks and preferential interest rates) (Pauw and Edwards, 2003). According to Edwards (2001b), financial support for certain capital-intensive industries, such as chemicals and iron and steel, continued during the 1990s. Real wage increases have further put pressure on employment levels. Although comparisons over long periods are slightly problematic, Lewis (2001) estimates that the real wage of semi- and unskilled workers increased by 150 per cent between 1970 and 1999. Those of highly skilled workers declined while real wages of skilled workers rose by approximately 10 per cent over the same period. This was accompanied by a much more rapid increase in unemployment among low-skilled individuals (Pauw and Edwards, 2003). Burger and Woolard (2005) go as far as suggesting that wage levels for some low-skilled workers are actually above their market clearing levels, which make them relatively less attractive than skilled workers. At the same time, some argue that the post-1994 period has seen increases in non-wage costs of employment with negative consequences for employment, particularly among the less skilled (see for example Burger and Woolard, 2005, and Chandra et al., 2001). It is impossible to disentangle the relative importance of economic development, technical progress, trade liberalisation, and increases in real wage and non-wage costs of labour in altering the labour demand patterns in South Africa. However, all these effects have probably contributed to the economy’s skills-biased labour demand trajectory. Figure 2 clearly illustrates how output growth continues to be skills-biased by comparing the employment composition in various sectors between 1995 and 2005. For the economy as a whole, there appears to have been a definite shift away from low-skilled employment towards employment of higher skilled individuals. In 1995, skilled workers accounted for 19.8 per cent of employment, compared to the 47.9 per cent share for semi-skilled workers and the 31.1 per cent share for unskilled workers. By 2005, the share in total employment of skilled workers had risen by almost two per centage points to 21.5 per cent, while that of semi-skilled workers had risen to 48.5 per cent. Conversely, unskilled employment as a share of total employment contracted to 29.8 per cent in 2005. While a detailed discussion of this figure is excluded here (see Bhorat and Oosthuizen, 2005 for more), the figure clearly illustrates skills-biased employment growth in numerous sectors, including Agriculture, Hunting, Forestry and Fishing; Manufacturing; Utilities and Community Services. Interestingly, unskilled workers have increased their share of employment in the Internal Trade as well as Transport and Communications sectors.

7

Graduate Unemployment In South Africa

Figure 2: Skills Distribution of Employment by Sector, 1995 and 2005

100.0 90.0

Share of the Employed (Percent)

80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 '95 '05 Agr '95 '05 Min '95 '05 Mfg '95 '05 Util '95 '05 Cons '95 '05 Trade '95 '05 T&C '95 '05 Fin '95 '05 CServ '95 '05 PrivHH

Skilled
Source: Note:

Semi-Skilled

Unskilled

Own calculations, OHS 1995 and LFS 2005(2) (Statistics South Africa). 1. 2. Skilled refers to ISOC codes 1 and 2; Semi-Skilled refers to ISOC codes 3-8 and Unskilled refers to ISOC code 9, excluding code 9999. Agr = Agriculture, Hunting, Forestry and Fishing; Min = Mining & Quarrying; Mfg = Manufacturing; Util = Utilities; Cons = Construction; Trade = Wholesale and Retail Trade; T&C = Transport & Communication; Fin = Finance, Real Estate & Business Services; CServ = Community Services; PrivHH = Private Households; Unspecified categories excluded. For 1995 and 2002, elementary occupations includes domestic workers. Private households in 2002 and domestic services in 1995 were treated as synonymous.

3. 4.

2.4

Graduate Unemployment

Education is often used as a proxy for the skills level of a labour force participant. Given the skill-biased labour demand and the skills shortage in the economy, the expectation is that unemployment among labour market participants with a tertiary qualification should be declining. However, as suggested earlier (and shown below) this has not been the case. In this section the phenomenon of rising graduate unemployment is analysed in more depth.

2.4.1

Age and Education Profiles of the Labour Force

The South African labour force (broadly defined) grew by about 46 per cent from 13.8 million in 1995 to 20.1 million in 2005. Table 1 compares the composition of the labour force for the years 1995 and 2005. The age profile of the labour force has not changed dramatically over the period, although it does appear as if the labour force is becoming younger, with labour market participants between the ages of 15 and 34 (defined as youth) accounting for more than 60 per cent of the growth in the labour force, despite accounting for less than 54 per cent of the labour force in 1995. The labour force also appears to have become better educated over the period. The share of the labour force who have not completed the compulsory minimum of Grade Nine has decreased over the 8

Graduate Unemployment In South Africa

period, while almost two-thirds (66.3 per cent) of the growth in the labour force is accounted for by participants who have completed Grades 10, 11 or 12.

Table 1: Characteristics of the Broad South African Labour Force, 1995 and 2005
1995 ‘000s 15-24 years 25-34 years 35-44 years 45-54 years 55-65 years Total No education Grades 0 through 9 Grades 10 through 11 Grade 12 / Matric Tertiary Other/Unknown Total 2 403 4 977 3 670 1 941 762 13 754 1 182 5 705 2 326 2 873 1 430 237 13 754 Share (Per cent) 17.5 36.2 26.7 14.1 5.5 100.0 8.6 41.5 16.9 20.9 10.4 1.7 100.0 ‘000s 4 069 7 171 4 547 3 022 1 291 20 100 1 054 7 252 4 021 5 385 2 066 321 20 100 2005 Share (Per cent) 20.2 35.7 22.6 15.0 6.4 100.0 5.2 36.1 20.0 26.8 10.3 1.6 100.0 Change Share in ‘000s Change (Per cent) 1 666 26.3 2 193 34.6 878 13.8 1 081 17.0 529 8.3 6 347 100.0 -127 -2.0 1 547 24.4 1 694 26.7 2 512 39.6 636 10.0 84 1.3 6 347 100.0

Education Level

Age Group

Source: Own calculations, OHS 1995, LFS 2005(2) (Statistics South Africa).

Table 2 turns to the employed and compares the composition of employment for the years 1995 and 2005. The overall employment level increased by 29 per cent from 9.5 million in 1995 to 12.3 million in 2005. The employed population appears to have become slightly older over the period. Almost 45 per cent of the change in employment accrued to the older age groups (45 to 65 years), far in excess of this group’s share of employment in 1995 of 23.6 per cent. As a consequence, all the age groups between 15 and 44 years saw their shares of employment decline over the decade. Job creation also seems to have benefited those with secondary or tertiary education the most, with almost two-thirds (64.0 per cent) of the change in employment accruing to these groups. This is consistent with the evidence presented earlier of skills-biased structural and technical change in the South African economy. Table 2: Characteristics of the Employed, 1995 and 2005
1995 ‘000s 15-24 years 25-34 years 35-44 years 45-54 years 55-65 years Total No education Grades 0 through 9 Grades 10 through 11 Grade 12 / Matric Tertiary Other/Unknown Total 1 126 3 281 2 863 1 590 656 9 515 772 3 605 1 523 2 097 1 336 182 9 515 Share (Per cent) 11.8 34.5 30.1 16.7 6.9 100.0 8.1 37.9 16.0 22.0 14.0 1.9 100.0 ‘000s 1 416 4 153 3 253 2 376 1 103 12 301 691 4 063 2 071 3 351 1 865 259 12 301 2005 Share (Per cent) 11.5 33.8 26.4 19.3 9.0 100.0 5.6 33.0 16.8 27.2 15.2 2.1 100.0 Change Share in ‘000s Change (Per cent) 290 10.4 872 31.3 390 14.0 786 28.2 447 16.1 2 786 100.0 -81 -2.9 458 16.4 548 19.7 1 254 45.0 529 19.0 78 2.8 2 786 100.0

Education Level

Age Group

Source: Own calculations, OHS 1995, LFS 2005(2) (Statistics South Africa).

9

Graduate Unemployment In South Africa

The numbers and composition of the unemployed (broadly defined) are shown in Table 3. The unemployed are simply those labour market participants ( Table 1) who are not employed (Table 2), i.e. Table 3 is the difference between these two tables. The related unemployment rates are shown in Figure 3 (also broad definition). As far as the age composition of the unemployed is concerned, the combination of more young adults entering the labour force and more middle-aged people getting the jobs have caused the unemployed to become younger. Young adults under the age of 35 years account for more than three-quarters (75.7 per cent ) of the change in unemployment. As shown in Figure 3, these young adults still experience the highest unemployment rate of all age cohorts in 2005, while the (absolute) change in their unemployment rate has also been the highest of all the age groups.

Table 3: Characteristics of the Broadly Unemployed, 1995 and 2005
1995 ‘000s 15-24 years 25-34 years 35-44 years 45-54 years 55-65 years Total No education Grades 0 through 9 Grades 10 through 11 Grade 12 / Matric Tertiary Other/Unknown Total 1 277 1 696 807 351 107 4 239 410 2 100 803 777 94 55 4 239 Share (Per cent) 30.1 40.0 19.0 8.3 2.5 100.0 9.7 49.5 18.9 18.3 2.2 1.3 100.0 ‘000s 2 653 3 018 1 295 646 188 7 800 364 3 189 1 949 2 034 201 62 7 800 2005 Share (Per cent) 34.0 38.7 16.6 8.3 2.4 100.0 4.7 40.9 25.0 26.1 2.6 0.8 100.0 Change Share in ‘000s Change (Per cent) 1 376 38.6 1 321 37.1 488 13.7 295 8.3 81 2.3 3 561 100.0 -46 -1.3 1 090 30.6 1 146 32.2 1 258 35.3 107 3.0 7 0.2 3 561 100.0

Education Level

Age Group

Source: Own calculations, OHS 1995, LFS 2005(2) (Statistics South Africa).

Perhaps more worrying is the trend of rapidly rising unemployment rates among labour force participants with secondary and tertiary qualifications. Table 3 shows that individuals with Grade 10, 11 or 12 qualifications account for almost two-thirds (67.5 per cent) of the change in unemployment between 1995 and 2005. Although tertiary unemployment only accounts for 3.0 per cent of the change in overall unemployment in this period, the actual unemployment rate (Figure 4) for this education group has increased by half from 6.6 per cent to 9.7 per cent, which represents the largest relative change for all education groups.

10

Graduate Unemployment In South Africa

Figure 3: Broad Unemployment Rates by Age, 1995 and 2005

70.0

Broad Unemployment Rate (Percent)

60.0

65.2

50.0

53.1

40.0 34.1

42.1

30.0

28.5 20.0 22.0 18.1 10.0 14.0 14.6 21.4

0.0 15 to 24 yrs 25 to 34 yrs 1995 35 to 44 yrs 2005 45 to 54 yrs 55 to 65 yrs

Source: Own calculations, OHS 1995, LFS 2005(2) (Statistics South Africa).

Figure 4: Broad Unemployment Rates by Level of Education, 1995 and 2005

50.0 48.5

Broad Unemployment Rate (Percent)

44.0 40.0 36.8 34.7 30.0 27.0 20.0 34.5 34.5 37.8

10.0 9.7 6.6 0.0 None Gr 0-9 1995 Gr 10-11 2005 Gr 12 Tertiary

Source: Note:

Own calculations, OHS 1995, LFS 2005(2) (Statistics South Africa). 1. The fact that unemployment rates are generally higher for those with some education (e.g. incomplete or complete primary and secondary) as opposed to those with no education may appear strange. This, however, has to do with the fact that those with no education are less likely to participate in the labour market since they have a very low probability of finding employment in any event. Many working-age people with no education are therefore not included in the calculation of the unemployment rate.

11

Graduate Unemployment In South Africa

2.4.2

Graduate and Youth Unemployment: A Multivariate Analysis

Graduate unemployment remains small in relative terms, with only 2.6 per cent of the unemployed in 2005 (see Table 3) reported as having a tertiary qualification. However, the fact that the unemployment rate among graduates has been rising in a skillsconstrained economy is a surprising result. This does not suggest, however, that having a tertiary qualification is not good. Using a probit model of labour market participants’ employment status and following the Heckman two-step approach, Oosthuizen (2005) estimates labour market participants’ probabilities of being employed and finds that the higher a participant’s education level, the higher his or her probability of finding employment. Variables for various age groups, racial groups, gender and province and splines for educational attainment were included in the model as independent, explanatory variables.9 The model also distinguishes between degree and non-degree tertiary qualifications (see section 2.2.2). Table 4 shows the estimated coefficients for the age and education variables. The discussion below briefly considers the implications of the coefficients of these selected variables. In 1995, participants aged 15 to 24 years (the referent group) were least likely to find employment relative to their older counterparts. All the age group coefficients are positive and statistically significant, except the coefficient for 55 to 65 year olds, which is insignificant. The 35 to 44 year age group was 21 per cent more likely to be employed than their 15 to 24 year old counterparts. Interestingly, this general situation had changed somewhat by 2004. Firstly, the coefficient for 24 to 35 year olds is no longer statistically significant, meaning that 24 to 35 year olds were, ceteris paribus, no more or less likely to find employment than their younger counterparts. Further, the coefficients of the 34 to 44 year age group declined significantly over the period. In 2004, 35 to 44 year olds were only 2.5 per cent more likely than 15 to 24 year olds to be employed (down from 21 per cent). In contrast, the coefficient for 45 to 54 year olds indicates that they were 16.5 per cent more likely than 15 to 24 year olds to be employed (up marginally from 15.0 per cent). Interestingly, the positive and significant coefficient for 55 to 65 year olds indicated that these individuals were 11.8 per cent more likely than 15 to 24 year olds to be employed.

9

The referent variables were Age: 15 – 24, Race: African, Gender: Male and Province: Eastern Cape.

12

Graduate Unemployment In South Africa

Table 4: Employment Equations (Broad Definition of Unemployment), 1995 and 2004
1995 Marginal Effects 0.1623 ** 0.2143 ** 0.1496 ** 0.0000 -0.0119 ** -0.0491 ** -0.0209 ** 0.1253 ** 0.1344 ** -0.0118 0.4745 0.4481 64627 28132.2 0.3146 x-bar 0.2370 0.1909 0.1204 0.1042 5.1514 0.7404 2.0347 0.2580 0.0827 0.0533 2004 Marginal Effects 0.0239 0.1288 ** 0.1651 ** 0.1177 ** -0.0253 ** -0.0189 * -0.0195 ** 0.0763 ** 0.2398 ** 0.0007 0.3959 0.3618 67946 19466.91 0.2134 x-bar 0.2696 0.1776 0.1314 0.0972 5.3573 0.7756 2.1952 0.2945 0.0750 0.0822

25-34 years 35-44 years 45-54 years 55-65 years No education to Grade 6 Grade 7 Grade 8 to Grade 11 Grade 12 Diploma Degree Observed Probability Predicted Probability (at x bar) Number of Observations Chi² Pseudo R²
Source: Note:

See Oosthuizen (2005) for the full results of the participation model and employment model. Results generated using OHS 1995 and LFS 2004: 2 (Statistics South Africa) 1. * ** Only selected age and education coefficients shown in this table. Significant at the five per cent level. Significant at the one per cent level.

The education variables (technically referred to as splines) indicate that levels of education below Grade 12 are associated with lower likelihoods of finding employment. This is observed in both periods. The rapid increase in unemployment among holders of grade twelve certificates is reflected here in the weakening of the positive coefficient of the grade twelve variable. In 1995, the coefficient was 0.1253, but this declined to 0.0763 in 2004. In contrast, the value of tertiary education (diploma) in helping individuals find employment appears to have strengthened, with a substantial increase of the coefficient from 0.1344 in 1995 to 0.2398 in 2004. Interesting, though, is the insignificance of the coefficients of Degree in both years. This suggests that nothing can be concluded about the difference in the probability of employment of persons with degrees versus persons with diplomas. This probably points to the fact that the sample size of people with degrees as a sub-sample of tertiary educated persons is very small. In the analysis further below, the differences between the employment statuses of degree and nondegree labour market participants will become clearer. Nevertheless, as mentioned, having a diploma has a significant positive impact on the probability of employment relative to having a Grade 12 certificate. The current skills shortage is also detected in the increased effect of tertiary education within the employment equation. Some broad conclusions can be drawn from the preceding paragraphs as well as section 2.4.1. The youth, who are becoming better educated, account for most of the growth in unemployment. Ten years ago, a Grade 12 qualification raised a participant’s probability of finding employment well above that of someone without it, but this has dropped significantly, suggesting that the stakes have been raised and a post-matriculation degree or diploma has become much more important in determining an individual’s employment status. Figure 5 shows the age composition of the unemployed with a tertiary qualification in 2005. That about 77 per cent of graduate unemployed are youth suggests they are recent graduates. Unemployment among educated youth is potentially damaging for the 13

Graduate Unemployment In South Africa

economy as it can lead to frustration and disillusionment among young people, while extended periods of unemployment may result in the erosion and outdating of young people’s skills base.

Figure 5: Age Composition of Unemployed Graduates, 2005
60.0 54.9 50.0

40.0

Percent

30.0 22.1 20.0 15.9

10.0

5.6 1.5

0.0 15 to 24 yrs 45 to 54 yrs 25 to 34 yrs 55 to 65 yrs 35 to 44 yrs

Source:

Own calculations, OHS 1995, LFS 2005(2) (Statistics South Africa).

2.4.3

Explaining Graduate Unemployment

Various explanations for the graduate unemployment problem have been sought. In this section, we aim to regard the problem more closely by focusing specifically on some of the issues that have been raised in research by Mlatsheni (2005), Kraak (2005) and Koen (2003). We also report on some of the findings of two graduate tracer studies by the Human Sciences Research Council (HSRC). The one is a technical college tracer study (see Cosser et al., 2003), which tracks the employment experiences of 3 503 graduates from technical colleges as they enter the labour market after graduation. Another study tracked the employment experiences of 2 672 u niversity graduates between 1990 and 1998 (see Moleke, 2005). a. Types of Qualification Obtained and Field of Study

One argument that is frequently offered as an explanation for graduate unemployment is the notion of a mismatch that exists between the types of skills required by employers and those offered by graduates. This may relate to either the field of study or the quality of the institution at which the qualification was obtained. The focus here is on the actual field of study, while a comparison between degree and non-degree qualifications is also made. Table 5 shows that the majority of the unemployed with a tertiary qualification has a diploma or a certificate coupled with a Grade 12 (matric) qualification. This category’s 14

Graduate Unemployment In South Africa

share in total tertiary unemployment has increased from 80.9 per cent in 1995 to 82.0 per cent in 2005. Africans with a diploma or certificate accounted for close to three-quarters (73.2 per cent) of total tertiary unemployment in 2005, up from 63 per cent in 1995. In total, tertiary educated Africans accounted for 84.9 per cent of the tertiary unemployed in 2005. This rise in the African graduate unemployment share is partly explained by a massive increase in the enrolment of African students at tertiary institutions (see Koen, 2003). 10 Also, the fact that historically Black universities (HBUs) have “disproportionate numbers of students graduating in fields with lower employment prospects” also contributes to this (Moleke, 2005: 5). These issues are explored further below.

Table 5: Breakdown of Tertiary Unemployment by Race and Type, 1995 and 2005
African 63.0 73.2 10.1 11.7 73.1 84.9 Per cent of Total Coloured Asian White 5.3 3.4 9.2 1.7 1.2 6.0 2.3 0.3 6.4 0.0 0.9 4.6 7.6 3.7 15.6 1.7 2.0 10.5 Total 80.9 82.0 19.1 18.0 100.0 100.0

Diploma/Certificate with Matric Degree Total
Source: Notes:

1995 2005 1995 2005 1995 2005

Own calculations, OHS 1995, LFS 2005(2) (Statistics South Africa). 1. In the OHS 1995 there is only a category for “degree”, while the September 2005 LFS distinguishes between various levels of degrees . These categories from the September 2005 LFS were combined to allow comparison with 1995 figures.

Table 6 presents the breakdown of tertiary unemployment by field of study from 2000 to 2005. Individuals with a qualification in the field of business, commerce and management studies accounted for between 26 per cent and 31 per cent of total tertiary unemployment over the six years. However, these figures have to be seen in the right context. Commerce students typically make up a very large proportion of tertiary institutions. This is even true for technical institutions, where enrolments have been ncreasing (Koen, i 2003). Hence it is not surprising to see that they also represent a large share of the unemployed. As far as university graduates are concerned, Moleke (2005) notes that almost two-thirds of economic and management studies (EMS) students f und work o immediately after completing their studies, which compares favourably to the average of 60 per cent across all study areas. She further finds that EMS university graduates represent only 10 per cent of unemployed graduates.11 This suggests that the bulk of graduate unemployment among commerce students is among non-university students (see Table 7).

10 11

Africans made up four per cent and 19 per cent of all technikon students in 1985 and 1990 respectively. This rose to 73 per cent in 2000 (FRD, 1993 and SAIRD, 2001, as cited in Koen, 2003). It needs to be stressed that this result is based on a rather small sample size, and only includes university graduates.

15

Graduate Unemployment In South Africa

Table 6: Breakdown of Tertiary Unemployment by Field of Study, 2000-2005
Field of Study Business, Commerce and Management Studies Education, Training and Development Physical, Mathematical, Computer & Life Sciences Manufacturing, Engineering and Technology Health Sciences and Social Services Human and Social Studies Other/Unspecified Total
Source:

2000 30.5 25.6 11.3 8.6 5.8 2.7 15.5 100.0

2001 26.9 26.5 15.1 9.2 3.4 3.8 15.1 100.0

Share (Per cent) 2002 2003 28.2 23.2 10.5 12.4 5.7 6.8 13.1 100.0 27.6 19.0 14.4 13.7 5.5 4.4 15.4 100.0

2004 28.2 21.1 9.8 10.8 8.3 4.9 16.9 100.0

2005 28.1 14.1 16.5 11.6 9.7 4.9 15.2 100.0

Own calculations, LFS 2000(2), LFS 2001(2), LFS 2002(2), LFS 2003(2), LFS 2004(2), LFS 2005(2) (Statistics South Africa).

Table 6 further shows that individuals with a q ualification in education, training and development constituted the second largest category with their share generally varying between 19 per cent and 27 per cent over the period, although its share did fall to 14.1 per cent in 2005. Individuals with a qualification in physical, mathematical, computer and life sciences or manufacturing, engineering and technology also accounted for a sizeable share in tertiary unemployment, although these students probably make up over 80 per cent of technical college enrolments (see Cosser et al., 2003). This is, however, still surprising given the “huge demand … for information technologists, health professionals, managers, engineers, accountants and auditors” identified by Koen (2003: 17), which perhaps points at issues surrounding the quality of these qualifications. Without downplaying the problem of unemployment among labour market participants with degrees, it is clear from Table 5 that most of the increase in tertiary unemployment is explained by unemployment among people with diplomas or certificates. This may be related to problems in the Further Education and Training (FET) system, with some service providers presenting inappropriate courses that are not valued by potential employers. In this regard, Mlathseni (2005) notes that many of the FET colleges are under-resourced and not situated where they are needed most and they have a poor image with employers given the employment records of graduates from these colleges. Table 7 provides a breakdown of tertiary unemployment in 2005 by field of study and type of qualification. Individuals with a diploma or certificate in business, commerce and management studies were the largest contributing category, accounting for 24.9 per cent of tertiary unemployment. They are followed by individuals with a diploma/certificate in physical, mathematical, computer and life sciences, with a 12.9 per cent share. Individuals with either a diploma/certificate in manufacturing, engineering and technology or education, training and development accounted for 10.8 per cent and 9.9 per cent respectively of total tertiary unemployment. While labour demand for students with qualifications in social sciences and humanities are “less acute” (Koen, 2003: 17) enrolments in these fields of study remain high. Moleke (2005) found that university graduates with qualifications in fields with a more professional focus, such as medical sciences and engineering, found employment faster than graduates with a more general degree. In the more general study fields, such as humanities and arts, which do not “directly prepare graduates for a profession”, graduates

16

Graduate Unemployment In South Africa

took longer to find jobs than graduates in economic and management s ciences and natural sciences (Moleke, 2005: 40). In 2000 the government’s National Plan for Higher Education has set the target of a 30:30: 40 split in enrolment between science/engineering, technology/business/commerce and humanities/social sciences to be reached within a five to ten year period in order to meet the labour market needs more effectively (Kraak, 2005). This ratio was 26:24:50 for technikons and universities combined, with technikons at 35:31: 34 and universities at 21:20:58.

Table 7: Breakdown of Tertiary Unemployment by Type and Field of Study, 2005
Field of Study Business, Commerce and Management Studies Physical, Mathematical, Computer and Life Sciences Education, Training and Development Manufacturing, Engineering and Technology Health Sciences and Social Services Human and Social Studies Law, Military Science and Security Communication Studies and Language Agriculture and Nature Conservation Other/Unspecified Total
Source:

Diploma/ Certificate 24.9 12.9 9.9 10.8 8.8 4.4 2.4 3.4 1.2 3.2 82.0

Degree 3.1 3.6 4.1 0.8 0.9 0.5 1.9 0.4 2.2 0.4 18.0

Total 28.1 16.5 14.1 11.6 9.7 4.9 4.3 3.8 3.4 3.7 100.0

Own calculations, LFS 2005(2) (Statistics South Africa).

This raises questions about how students make decisions about what to study, and whether they receive any assistance or guidance in making such decisions. One reason offered by Moleke is that students find these general fields of study with their less stringent entry requirements more accessible, while at times their decisions are “purely arbitrary” (2005: 41). Cosser et al. (2003: 34) find that over 60 per cent of the respondents in the technical colleges survey gave as the reason for their choice of field of study that they were “ interested in it” and only 23 per cent chose their field of study because they thought it would secure employment. This may point to deficiencies in career guidance both in schools and technical colleges – roughly half of the respondents indicated that they did in fact receive guidance before enrolling, while 60 per cent received guidance during their enrolment. As far as job search is concerned, Cosser et al. found that 71 per cent of graduates did not receive any assistance from their colleges to find employment. The general lack of adequate preparation for the labour market may be a contributing factor to the high unemployment rate amongst technical college graduates. Where graduates did receive assistance, the majority received assistance in the form of the college arranging for employers to interview students at the college (2003: 46). b. Continued Discrimination

Inter-racial variation in unemployment rates may be as a result of continued discrimination favouring Whites in particular and to a lesser extent, Asian and Coloureds. Moleke (2005) suggests that there are signs that African graduates are still disadvantaged in the labour market. Although Africans are more likely to choose study 17

Graduate Unemployment In South Africa

areas with lower employment prospects, evidence suggests that there are also differences between races within particular study areas. Table 8 shows the percentages of university graduates that find immediate employment.12 Only in engineering did more Africans than all other racial groups find employment immediately. Very low proportions of Africans with humanities and arts, education and law degrees find employment immediately, which points to the oversupply and over-enrolment of African students in these fields of study. During the firm surveys (see section 3) the fact that too many graduates graduate with inappropriate qualifications was frequently raised as one of the major problems faced by recruiters. On average, a much greater proportion of Whites than all other racial groups found employment immediately. Table 8: Percentage of University Graduates Employed Immediately, by Race
Field of study Natural sciences Engineering Agriculture Medical sciences Humanities and arts Education Law Economic and management studies Total
Source: Moleke (2005).

Asian 30.0 50.0 46.0 53.6 71.4 36.4 53.5 47.6

African 45.9 88.9 53.3 65.7 38.7 48.3 26.8 37.5 43.0

Coloured 52.2 50.0 83.3 32.5 33.3 28.6 51.6 42.2 42.2

White 59.9 78.3 64.3 91.2 56.4 75.0 69.6 74.8 70.4

As far as enrolment rates are concerned the majority of students at technical colleges are male (approximately 56 per cent, according to Cosser et al., 2003). Although these authors find no evidence that the throughput rates are higher for males, they are concerned about the fact that technical education “is seen as a male preserve” while “job placement and enrolment patterns are a cause for concern” (Cosser et al., 2003: 55). As far as universities are concerned there were small differences between male and female graduates, with a slightly smaller proportion of males finding employment immediately after graduation (Moleke, 2005). c. Quality of Tertiary Institutions

While the findings in section 2.4.3b are disturbing it may be linked directly to actual or perceived differences in the quality of the institution attended. It is difficult to determine, given evidence at this stage, whether the graduate unemployment problem is closer linked to the notion of a mismatch between skills supplied and skills demand, or whether it is more likely a problem of the quality of the education given the severe skills shortage in the country. In this regard, findings regarding the employment prospects of graduates from historically White universities (HWUs) and historically Black universities (HBUs) are particularly interesting (see Moleke, 2005: 4-5): students from HWUs are found to have much better employment prospects than those at HBUs. This is partly explained by employers’ perception about the quality of the institutions. However, it is also important to note that HBUs enrol disproportionate numbers of students in fields of study with poor

12

These results are based on a survey of 2 672 respondents who obtained their qualifications from South African universities between 1990 and 1998. The sample was drawn from a database, the Register of Graduates, held by the Human Sciences Research Council (HSRC), which contains the details of all graduates of South African universities.

18

Graduate Unemployment In South Africa

employment prospects (see Table 8). Unfortunately, anecdotal evidence suggests that employers are biased against employing graduates from specific institutions, and perhaps quality of education at certain institutions needs to be investigated. d. Quality of Primary and Secondary School Education

While the quality of the tertiary institutions is certainly one part of the problem, poor student performance can often be traced back to quality issues in primary and secondary schooling in South Africa. Mlatsheni (2005) cites poor performance of primary school pupils in tests of language ability13 and the declining numbers of matric candidates who pass with exemption, which enables university entrance, as particularly worrying. He also cites a survey (South Africa Survey 2003/2004) in which it is suggested that 82 per cent of students who are accepted into tertiary institutions in South Africa are functionally illiterate (i.e. a literacy level of grade eight or below). Furthermore, 60 per cent of students fail to cope with the level of mathematics and science offered at university. Kraak suggests that poor throughput statistics at universities and technikons in South Africa “are yet another indication of the weaknesses of school education which should provide a more adequate preparation for entry and success in further higher learning”, while the “perceived poor quality of South African schooling (particularly in the former African school system) serves as a major disincentive on the demand-side for employing large numbers of first-time entrants to the labour market” (2005: 22, 31). Most tertiary institutions in South Africa use English as the medium of instruction. Cosser et al. (2003) find that almost 95 per cent of students are taught in English, yet only ten per cent speak English at home. Although most students arguably want to study in English given that English is the lingua franca of the business world, the high degree of functional illiteracy perhaps explains poor academic performance and hence the poor quality of an individual’s education. The solution to this is to improve the competencies of secondary school students with regards to English and mathematics/science. This was also a point that came out strongly during the firm interviews (see section 3) e. Other Issues

Some other issues that need to be explored further are the following: • Increasing enrolment and throughput rates: There is evidence that South African tertiary institutions are enrolling more students than in the past. This probably has to do with a combination of factors, including entrance requirements at universities and other tertiary institutions being lowered to allow greater accessibility, while many formerly disadvantaged individuals can more readily access study loans and bursaries than in the past. Many students struggle to cope with the academic workload at these institutions given poor preparation at secondary schools, leading to high failure rates. According to the HSRC (2006) in 2000, a total of 120 000 students enrolled in the country’s public higher education institutions. At the end of that year 36 000 (or 30 per cent) had dropped out. Another 24 000 dropped out between their second and third years. Furthermore, less than half of the remaining 50 per cent graduated within the years’ duration and the vast majority w ere

13

According to “language experts ”, language ability of an average 7-year old pupil from disadvantaged backgrounds in South Africa is equivalent to that of a 3- to 4-year old (Mlatsheni, 2005: 2).

19

Graduate Unemployment In South Africa

Black students.14 Institutions may even find themselves under pressure, whether knowingly or not, to lower standards and maintain throughput rates in order to ensure that the system does not clog up. • Work experience: Although difficult to test, one hypothesis is that these results can also be explained by the fact that work experience is becoming very important. As Mlatsheni (2005: 1) writes, work experience is an “important factor that influences employability at all levels”. Employers are also perhaps risk averse and prefer to employ older, more experienced workers who do not require as large an investment in training given the threat of headhunting in a scarce skills economy. Kraak (2005) also finds that South African youth face poor chances of receiving pre-employment training, which makes young people less attractive to employers.

2.5

Concluding Remarks

While the graduate unemployment problem in itself is not substantial in relative terms, it is a concern as it goes against expectations and points at serious problems in the South African education system. Unemployment can be structural or frictional, where the latter is rather easily addressed by improving information through measures such as the Unemployed Graduate Placement Initiative, a database set to link unemployed graduates with possible employers. However, unemployment in South Africa is mainly structural in nature, where the majority of the unemployed are low-skilled or poorly educated workers for which demand has been shrinking due to changes in the domestic structure of production. The solution to this part of the unemployment problem is better training and education – an area that clearly receives a lot of attention in this country. Tertiary unemployment can also be regarded as a structural problem. As enrolment at tertiary institutions has increased during the last decade, especially among Black students, more young graduates have become unemployed. This implies that the shift towards greater demand for skilled labour has either been insufficient to absorb new graduate labour market entrants, or that these graduates are not suitably qualified for the jobs that are available. Given the prevailing skills shortage in the economy, the latter is more likely to be the case – graduates do not posses the right qualifications and often these qualifications are not of a standard or quality that is required by employers. With graduate unemployment high on the policy agenda, particularly given South Africa’s skills shortage, it is clear that macroeconomic policy alone can not sufficiently increase the absorption of graduates into the labour market. Government, civil society and the private sector need to work together to address this structural economic reality. The Umsobomvu Youth Fund’s (UYF) school to work programme (a skills development initiative designed to transfer high level technical skills and facilitate work experience for unemployed matric and tertiary graduates with the aim of securing them meaningful employment in strategic sectors of the economy) and the youth service programme (focusing on unemployed youth who have no tertiary education, enabling them to acquire skills, competences and experience they require to achieve economic independence) are

14

Financially this amounts to a loss of about R4.5 billion in subsidies allocated to the higher education institutions. The HSRC is to undertake a research project on the underlying reasons for the high dropout rates among Black students (HSRC, 2006).

20

Graduate Unemployment In South Africa

welcome initiatives 15. Indeed, the UYF’s JOBS database, a database of work seekers, is discussed in the accompanying DPRU report entitled Graduate Databases. Some key lessons and policy considerations include the following: • Quality of institutions and academic courses: A proper investigation into the quality of lecturers and of institutions in general is needed. Good education starts with properly trained lecturers who are able to continuously modernise and adapt their courses so that they remain relevant. Poor funding and poor management are often to blame. Many students study at poor institutions without knowledge about the quality or perceived quality (from the employer’s perspective) of the qualification that they will receive afterwards, which often leads to disillusionment and disappointment when they fail to find employment. Training versus education: Research is needed to identify the needs in the labour market with regards to technical (diplomas and certificates) and nontechnical (degrees) training. The functions of colleges, technikons and universities in this regard should also be clearly delineated. Universities are traditionally institutions where students receive more general education of a highly academic nature, while colleges and technikons focus more directly on the technical training of students, which should adequately prepare them for the job market. These lines seem to have become blurred, with universities trying to introduce more job-relevant training, while technikons and colleges are enrolling more students in general fields of study such as arts and humanities. It needs to be debated whether this situation is ideal. Career guidance and support: One of the issues that came to the fore in the graduate tracer studies is a lack of assistance to students in selecting the right courses and fields of study. Whether this should be a function of the labour market or tertiary institutions is debatable. The question is how should the signals from the labour market be passed on to students? At present it appears as if students are more likely to enrol in areas with poor employment prospects. The problem also perhaps relates to the fact that many students fail to meet the entry requirements of many of the more scientific fields of study. Therefore, despite the fact that job prospects of students in scientific fields of study are better, poor secondary schooling and incompetence in areas such as mathematics prevents school leavers to follow these types of courses. Work experience: The labour market appears to have a preference for more experienced, older employees. There is a need to look at options for ensuring that graduates acquire relevant work experience prior to them formally entering the labour market, perhaps in the form of vocational training, holiday work experience etc.







15

Umsobomvu Youth Fund (UYF) was established by Government in January 2001 with the mandate of promoting job creation, skills development and skills transfer among young South Africans between the ages of 18 and 35 years. The Youth Development Trust, in co-operation with Nokia, implemented the Make A Connection programme (MAC) in April 2000. The programme aims to tackle the persistent problem of youth unemployment by offering an innovative three month training course to graduates who have been unemployed for at least a year. During the training period, unemployed graduates learn to build their self confidence and motivation, improve their team work and presentation skills, acquire basic computer skills and learn how to look for and keep a job.

21

Graduate Unemployment In South Africa

This review of the nature, growth and extent of the graduate unemployment problem has perhaps left more questions than answers. The firm surveys, discussed in section 3, aim in part to shed some light on these questions from the employers’ point of view.

3. Graduate Unemployment in the Context of Skills Shortages, Education and Training: Findings from a Firm Survey and Other Related Research 3.1 Background

As part of the Development Policy Research Unit’s research into Graduate Unemployment a series of interviews with some of South Africa’s largest companies, across a range of different sectors, were conducted during February and March of 2006. The interviews, broadly on the graduate unemployment problem, traversed a range of issues relating, for example, to the schooling and higher education system, the learnership programme and National Skills Development Strategy (NSDS) and the nature of skills shortages and the skills deficit. In turn, a number of detailed long- and short-run policy suggestions emanated from the interviews and background research.

3.2

A Note on the Sample

The sample comprises 20 of South Africa’s largest companies, of which 19 are members of Business Leadership. Fourteen of the companies are listed on the JSE, and 13 of these were among the top 40 performing companies as ranked on 10 March 2006 (JSE/Liberty Life, 2006). The companies are spread across a range of economic sectors, with two in the mining sector, nine in the manufacturing sector, one construction company, one company in the wholesale and retail trade sector and two companies in the transport and communication sector. Five major players in the financial services sector were also interviewed. The time constraints imposed on the project did not allow for a larger sample size. Employment differs significantly across companies, ranging from a workforce of just over 2 000 employees to more than 40 000 workers. While employment numbers are not available for all the companies, Table 9 provides an indication of the size of the workforce for the companies we do have information for, as well as their share contribution to total employment in the relevant sector in 2005.

22

Graduate Unemployment In South Africa

Table 9: Employment by Company and Sector, 2005
Employment by Company Mining and Quarrying Company A Company B Total Manufacturing Company C Company D Company E Company F Company G Company H Company I Total Construction Company J Total Transport, Communication Company K Company L Total Storage and 26,133 10,059 36,192 4.2% 1.6% 5.9% 43,214 31,000 74,214 Total Employment by Sector % Share of Sectoral Employment 10.5% 7.5% 18.1%

411,077

2,983 24,737 2,010 10,441 5,320 3,000 4,000 52,491

1,706,458

0.2% 1.4% 0.1% 0.6% 0.3% 0.2% 0.2% 3.1%

24,904 24,904

934,971

2.7% 2.7%

615,743

Financial and Business Services Company M Company N Company O Total
Notes:

2,675 36,156 5,264 44,095

1,295,584

0.2% 2.8% 0.4% 3.4%

Source: LFS 2005: 2 (SSA, Various); Company interviews and annual reports; Employment includes permanent, contract as well as temporary workers

The two mining companies accounted for more than 18 per cent of employment in the mining and quarrying sector in 2005. Seven of the manufacturing companies contributed 3.1 per cent to the total employment in their sector, while the construction company account for 2.7 per cent of sectoral employment. Almost 6 per cent of the workers in the Transport and Communication industry were employed by the two companies that we interviewed. The three financial services institutions that we have information for employed 3.4 per cent of the workers in the financial and business service sector.

23

Graduate Unemployment In South Africa

3.3

Production and Workforce Trends

The introductory segment of the interviews covered general issues around past company performance and future expectations, and how these have impacted on, or are likely to impact on employment in the future. In particular, companies were asked about changes in the size and composition of their workforces. Evidence presented in Section 2 suggests that South African firms are increasing the skills intensity of production as a result of the adoptions of technologically advanced production techniques in an effort to become more competitive globally. This often leads to a decrease in the size of the workforce while at the same time altering the composition of the workforce (ratio of skilled versus unskilled workers). The introductory questions were therefore aimed at finding out whether such trends were also visible in the small sample of large firms interviewed. However, at the same time the South African economy is entering a boom phase, which implies that some firms may actually expect to expand their production capacities and hence employment numbers. The firms interviewed typically have complex corporate structures and are often involved in mergers or new acquisitions, selling of subsidiaries and outsourcing of activities. The corporate landscape has also changed dramatically in the last few years with companies entering into Black Economic Empowerment (BEE) deals. Such corporate transactions may have important employment effects for the company concerned (as reflected in their payroll), but the indirect employment effects elsewhere in the economy may in fact negate the net employment effect. As a result it is sometimes difficult to discern employment trends. However, the general industry-specific trends seem to concur with those of the economy. In short, the past decade or more has shown a decline in the importance of the primary sectors in the economy and a shift towards the more skillintensive secondary (manufacturing) and tertiary (services) sectors. Firms themselves have also typically become more skills intensive. Below we briefly report on some of the industry and firm-specific findings with regards to growth expectations and employment trends. The mining companies generally agree that the mining industry is unlikely to grow in the future, at least not within the domestic economy. As such, the industry is unlikely to maintain its share of employment as the labour force grows over time – a trend that has in fact been visible for some time and can be expected from developing economies. The gold mining industry in particular is at best stable, but potentially a declining one, despite recent hikes in the gold price. The large mining companies in South Africa are multinationals and at present, company growth is driven mainly by expansion into overseas markets, with no significant employment impact domestically in South Africa. As far as company growth and past and future employment trends in manufacturing are concerned, most companies plan to expand production, both domestically and internationally. However, very often increased domestic output is associated with higher labour productivity and improved production techniques rather than increased employment levels. While few firms are explicitly reducing their workforce sizes through layoffs, many are becoming ‘leaner’ in the long run by recruiting at a rate that is below the natural attrition rate (resignations and retirement) of the workforce. Increased production efficiency is also typically associated with increased skills intensity of the workforce. However, this trend of downsizing or ‘rightsizing’ is likely to be something of the past. It had much to do with inefficiencies in production that had to be dealt with. In many 24

Graduate Unemployment In South Africa

instances large and ineffective staff structures were inherited from the past, caused in part by subsidisation and years of economic isolation. The current economic recovery can, however, reverse the trends of downsizing, especially if the manufacturing sector is able to exploit opportunities. Some firms hinted at plans to expand production capacity, especially in the light of announcements by government of large-scale investments in public infrastructure. 16 Such an increase in, for example, the number of plants a firm owns and operates, is likely to go hand in hand with increased employment levels despite continuing efforts by firms to become more efficient in production. 17 The combined effects of skills intensification and capacity expansion imply that key manufacturing skills, e.g. artisans, technicians, scientists and engineers will become even more important in the near future (see discussions in section 3.6). Firms in the services sector generally report that favourable economic conditions have meant an increase in business and employment opportunities. Firms in the wholesale and retail trade sector have experienced a boom phase and report significant increases in sales, the number of retail outlets and employment levels. Favourable economic conditions during a period of low interest and inflation rates have led to strong growth in consumption expenditure by households in the last five to ten years. The financial services industry has also benefited from increased economic activity and expansion into non-traditional markets.18 As a result employment levels in banking, auditing and insurance firms have been on the rise. There was one exception to this, with one of the insurance firms reporting a decline in employment in the last three to five years. However, this was related to the net employment effects of mergers, acquisitions and outsourcing of non-core business processes. The transport and communications sector is highly monopolised. As competition barriers are being removed the firms are driving efficiency and restructuring inefficient staff structures, which have generally led to a decline in employment levels. In summary the broad industry trends suggest that the services sector will remain the fastest growing sector. Financial management and accounting skills are important and enrolment in these areas has to be encouraged. However, the manufacturing sector should not be ignored. Skills intensification and capacity expansion linked to government’s plans to invest heavily in infrastructure also implies that the current skills shortages in technical occupations such as artisans, engineers and technicians will become even more critical.

16

According to the 2005 Medium Term Budget Policy Statement (National Treasury, 2005) public sector investment is set to rise from its current level of approximately 6% of GDP to 8% of GDP. This implies that government’s capital budget will rise by between 15% and 20% per annum (ASGISA, 2006). Few firms were willing to reveal specific plans to expand capacity given the sensitive nature of such information. However, some firms have hinted at the potential impact of government’s plans to increase public investments (see footnote 16). This includes mostly remote rural areas and informal markets that were previously not serviced by the banking industry.

17

18

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Graduate Unemployment In South Africa

3.4

Recruitment and Talent Management Strategies
Recruitment philosophies

3.4.1

The recruitment processes and strategies vary greatly between different types of firms. In particular, two main approaches exist. The first is commonly known as the ‘pipeline’ strategy, which entails a strong focus on the recruitment of young people who start at entry-level positions and are groomed and trained for middle- to senior management positions within the firm. Most of the firms (95 per cent) interviewed base their recruitment strategies on such a pipeline strategy. For most of these firms the recruitment process is a core business function, with bursary schemes, training initiatives, graduate recruitment drives and general recruitment all linked explicitly to the current or future business needs of the firm. However, few of the firms interviewed felt that their pipeline strategies are working in the sense that most vacancies arising at middle- to senior management levels are filled internally. In fact, many firms end up spending a large amount of resources on recruitment and headhunting of people with experience to fill vacancies at the upper end of the pipeline. The second approach is that of only hiring people with experience. This implies that higher salaries are offered, but limited training is required given the person’s past experience. The choice between employing recent graduates or matriculants into entrylevel positions as opposed to employing more experienced workers is a difficult one to make. Despite the fact that most firms adhere to the pipeline strategy quite a number of firms nevertheless feel that experienced workers are more attractive than recent graduates from a recruitment point of view. Graduates and matriculants need substantial investments in training before they become assets to the companies. At the same time young people are highly mobile and the risk of losing a young trainee to a competitor shortly after completion of training is high. Yet, only a single manufacturing firm was very explicit about the fact that they did not employ recent graduates at all as they value experience more and are willing to pay a premium to attract skills.19 From a national human resource development point of view it is crucial that all firms buy into the pipeline strategy. For this to happen incentives need to be created to increase the absorption of graduates or young people, while firms’ investments in training and development of young recruits should be protected. The learnership programme is one such incentive system. The fact that the majority of firms interviewed are forced to recruit experienced workers externally when vacancies arise at middle to senior management level, often at a large cost to the company, is indicative of the failure of the pipeline strategies of many firms. The cost to the company is often inflated due to exorbitant headhunting fees of employment agencies. The problem is exacerbated, of course, by poaching and headhunting due to the ongoing ‘war for talent’ in South Africa. Recently steps were taken to simplify the immigration process for foreign workers with key skills. This reflects the severity of the scarce skills problem in South Africa (see section 4.1.1). However, such initiatives have to be seen as short-term measures aimed at relieving immediate shortages in the market, and should only be considered in cases

19

This is perhaps sample-specific. Typically large firms are in a better position, financially, to spend large amounts of money on training and staff development. They are also more willing and able to take the ‘risks’ associated with the pipeline strategy.

26

Graduate Unemployment In South Africa

where skills shortages are hampering company growth. The fact that companies regard experienced workers, whether foreign or local, as more attractive than inexperienced graduates is worrying.

3.4.2

Graduate recruitment

Recruitment drives or recruitment exhibitions on campuses are potentially very important to both employers and employees. From a firm’s perspective they represent an opportunity to market the firm as a preferred employer, which may attract high-calibre jobseekers. From the students point of view they provide information, open up opportunities and options, while also shaping perceptions and expectations of students about the workplace. 20 The use of recruitment drives at campuses generally depends on the firms’ preference for this type of recruitment strategy. Recruitment drives are often very expensive, especially when it involves campus visits with exhibits and presentations, and on-campus screening and interviews. As a result on-campus recruitment drives are often only used by large firms that employ large numbers of graduates annually as a recruitment channel. 21 For firms that only take on a limited number of graduates annually, recruitment drives are viewed as too expensive. From the interviews it became clear that the majority of firms that make use of recruitment drives prefer to visit only specific institutions, with most firms being fairly explicit about the fact that they do not approach historically Black institutions. A variety of reasons was listed: • Most importantly or worrying perhaps, are companies’ concerns about the quality of education at these institutions. When firms invest large amounts of money in recruitment drives they at least expect a return in the form of an acceptable (quality education and good grades) number of potential recruits. This is often not the case at historically Black institutions. Some firms also felt that students at historically Black institutions are typically not exposed to many such corporate recruitment drives, and are, therefore, sometimes overwhelmed and unable to deal with the interview process in a mature way. Consequently, the students are not highly successful in terms of being short-listed. This relates to the problem of underdeveloped soft skills (communication skills, writing skills etc.) among many young Black graduates in South Africa. Many of the manufacturing firms indicated that they do not approach historically Black institutions since they do not offer courses in areas where they recruit, e.g. engineering. Recruitment drives at historically Black institutions simply do not produce the number of suitably qualifi ed candidates to make the expense worthwhile.





20 21

There is of course also the danger of ‘too much information’, especially with the Internet becoming an important marketing tool for firms. The majority of firms interviewed make use of on-campus recruitment drives.

27

Graduate Unemployment In South Africa



Given increased enrolment numbers of Black students at historically White institutions most firms indicated that they manage to find enough employment equity candidates by only visiting the historically White institutions. Adding to firms’ reluctance to visit historically Black institutions is the inability of these institutions to facilitate recruitment drives. Many of these institutions have poor infrastructures in terms of facilitating graduate recruitment drives. The infrastructure required to facilitate recruitment programmes includes wellfunctioning recruitment placement offices, trained and committed staff, suitable venues for talks, presentations and exhibitions, and media (radio, student newspapers etc.) on campus. 22



The low probabilities of students from historically Black institutions of finding employment after graduation are possibly linked to firms’ unwillingness to invest in recruitment drives at these institutions. Firms can never be forced to visit specific institutions. It remains a business decision. Tertiary institutions need to realise the importance of facilitating the process of bringing together prospective employers and employees, especially if this can increase the success of students in finding employment opportunities. It is crucial for historically Black institutions to realise that their quality is also measured by their graduates’ success in securing employment, and that any efforts towards improving their chances of finding employment will reflect positively on the institution. The career prospects of students at historically Black institutions will be further enhanced by improving the quality of teaching at these institutions. Alternatively, if quality is on par then these institutions have to realise the importance of using proper marketing strategies for their institution, to alter the perceptions of employers.

3.4.3

Bursary schemes

About 65 per cent of firms interviewed link their graduate recruitment processes to bursary schemes. These are generally linked to university education, but in some instances bursaries are also offered for studies at universities of technology or other technical institutions. The number of bursars taken on varies widely between firms, but is largely linked to the annual intake of graduates at the firm. Some firms, however, offer fewer bursaries annually than the planned intake and supplement the annual intake of graduates during graduate recruitment drives on campuses. Others offer more bursaries than the planned intake, in which case the expenditure on the bursary is seen as a corporate social investment in education. Generally firms are very positive about their bursary schemes for a number of reasons: • They ensure to a large extent that the targeted annual intake of graduates is reached. They also allow firms to plan ahead and ensure that employment equity targets will be met in the future by enrolling the right mix of students. The firm can become involved more directly in the education of the student in the sense that they can provide academic support and guidance as to subject



22

This was a comment not restricted to historically Black institutions. Some historically White institutions were also unhelpful in facilitating recruitment on campuses.

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Graduate Unemployment In South Africa

choice. Some of the firms that run large bursary schemes offer additional guidance in terms of subject choice, tutorials and study support. • Firms can offer relevant practical experience to bursary holders by creating opportunities for vacation work. This not only supplements students’ incomes, but prepares students for the workplace and reduces the training requirement of students once they become employed full-time. All these benefits come at a fairly low risk to the company. Most bursaries are offered on condition that bursars have to work for the company for a set number of years, usually linked to the time of sponsored study. If the student is unwilling to work for the company at completion of his or her studies the bursary often has to be paid back with interest. Such conditions are seldom attached to normal training offered at the workplace.



3.4.4

Employment equity and the ‘war for talent’

Sectoral BEE (and more recently BBBEE) charters typically dictate employment equity targets for industries. However, it can be argued that employment equity requirements have biased remuneration packages of previously disadvantaged individuals with desired skills and experience upwards. As far as the intake of previously disadvantaged graduates is concerned firms generally feel that there is no shortage of graduates with suitable qualifications. However, when it comes to Black students with good quality qualifications and above average grades, in certain study areas in particular, firms are experiencing shortages. Manufacturing firms found it especially difficult to find good quality Black candidates with engineering, science and information technology qualifications. While equity targets are more easily reached in the finance and business sectors, given relatively large enrolment of Black students in commerce disciplines, Black students with good finance and accountancy grades are still hard to come by. This is especially true for African Black students: firms indicate that they generally have less trouble finding Indian and Coloured students. The poor performance and high failure rate of Black students at tertiary institutions has become somewhat of a national concern and has led to the a joint research initiative between the Association for Black Empowerment in Higher Education (ABEHE) and the Human Sciences Research Council (HSRC) on the matter. Another concern raised by firms relates to soft skills and workplace readiness, specifically among students from historically Black institutions. For many the transition from poor quality schooling to tertiary institutions is a difficult one. The transition from tertiary institutions to the workplace is even more challenging. Firms cite poor soft skills, such as (English) communication skills, as a key shortcoming of students from historically Black institutions. These institutions also seldom offer the type of work experience opportunities that can be found at historically White universities, e.g. representation on student bodies, administrative or academic assistant positions in university departments, and so on. However menial these tasks, they provide some form of basic experience to students in dealing with administrative issues and communicating optimally at the workplace. Firms find that, generally speaking, students who come from historically White institutions, both Black and White, are better prepared for the workplace both in terms of soft skills and work experience, and therefore are better able to adapt to corporate environments. 29

Graduate Unemployment In South Africa

Although there is no hard evidence for this, it is clear that this differential signalling is in part a function of students at historically Black institutions as opposed to historically White institutions, irrespective of race, having experienced distinctly lower quality schooling relative to their counterparts at historically White institutions. The high mobility of young Black graduates is further cause for concern given employment equity targets and the war for talent in this country. Most firms report a higher than average turnover rate for young Black workers, especially those with soughtafter qualifications such as engineering and science degrees. Often, high calibre Black employees with scarce skills do not stay in positions long enough to gain the necessary experience before being offered more lucrative positions by rival firms. Poaching of this nature comes at a serious cost to the economy, both in terms of recruitment costs (it can easily cost an employer up to R80 000 to headhunt a prospective employee) and skills lost to specific industries when people move between industries. One of the mining firms for example, noted that many mine managers are being poached by the finance industry for their good managerial skills. However, more importantly, high mobility, especially early on in a career, can also be harmful to the individual who never fully realises his or her potential. The long run risk is that these individuals become unattractive to prospective employers due to the perceived risk of employing them and investing in their training. In response to high turnover rates many firms have aggressive retention strategies in place. Given the size of the firms interviewed, many are able to offer remuneration packages above the industry averages, which to some extent reduce labour turnover rates. Although this is a successful way of reducing labour turnover by countering poaching, it sends the wrong signals. As a result some firms feel that certain ‘unfair’ recruitment practices should be regulated. Also, talent management should become a key personnel management function in firms and young appointees should be educated about the dangers of changing jobs too regularly.

3.4.5

Graduate Expectations

Most firms indicated that the expectations of graduates, particularly university graduates, are too high. Employers, however, feel that the return to employing a graduate is low, given that graduates require substantial on-the-job training before they provide optimal returns. In addition, many firms indicated that these expectations are unjustified, particularly because of the limited experiential training of graduates. Some firms also indicated that graduates expect their qualifications to open doors at middle management level and are often unwilling or unhappy to start at entry-level. Firms feel that it is necessary for graduates to have a more realistic view of what they can offer and what to expect from their first jobs. In addition, as argued in the previous section, current labour market requirements have biased remuneration packages upwards. However, some firms feel that the chronic shortages of Black university graduates are starting to subside and remuneration priced more realistically. Yet many graduates still expect high start-up packages.

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Graduate Unemployment In South Africa

3.5 Incentive Schemes aimed at Promoting Employment and Training
3.5.1 The National Skills Development Strategy23

The National Skills Development Strategy (NSDS) was launched in February 2001 with the aim of transforming education and training in South Africa by improving both the quality and quantity of training. The responsibility of implementing the NSDS rests with the National Skills Fund (NSF) and the Sector Education and Training Authorities (SETAs). Under the Skills Development Act of 1998 (Republic of South Africa, 1998), 25 SETAs were established in March 2000. 24 The Skills Development Levies Act of 1999 (Republic of South Africa, 1999) requires that employers with an annual payroll of greater than R250 000 pay 1 per cent of the value of their payroll to the South African Revenue Services (SARS). 25 Of the levy , 80 per cent is transferred to the relevant SETA and the remaining 20 per cent is transferred to the NSF. Employers can claim back a maximum of 50 per cent of the original 100 per cent levy in the form of mandatory grants and 20 per cent in the form of discretionary grants. The remaining 10 per cent is retained by the SETA for administration. One of the functions of SETAs is to develop and register learnership programmes. Learnerships are specifically aimed at assisting new entrants into employment by providing them with skills and improving their chances of finding or creating work. The learnership system is derived from the apprenticeship system; while in countries like the UK, Australia and Germany these retooled apprenticeships became known as ‘Modern Apprenticeships’; in South Africa they became known as learnerships (Smith et al., 2005: 540). The purpose of learnerships is threefold: to provide workplace learning by an accredited training provider, to ensure the link between structured learning and work experience, and to ensure that training culminates in a nationally recognised qualification. The qualification obtained via a learnership is registered on the National Qualifications Framework (NQF) by the South African Qualifications Authority (SAQA). The building blocks of learnerships are unit standards. Employers implementing learnership agreements can claim back discretionary grants from the relevant SETA, and in addition are entitled to tax breaks. These incentives are typically higher for unemployed learners. By March 2005, a total number of 109 647 unemployed people below the age of 35 had entered into learnership/apprentice agreements, well above the target of 80 000 set out in the NSDS. However, how many people have successfully completed their learnerships programmes and found employment is unclear (employers are not obliged to employ learners post-learnership), although Jennings et al (2004) (cited in Department of Labour, 2006a) and Smith et al (2005) give some indication of the trends. There has also been much concern about the functioning and effectiveness of SETAs and the learnership system, as well as the perceived quality of learnership programmes in some cases given

23 24 25

This section provides a brief overview of the policy framework upon which workplace training is based. A detailed discussion is added as an appendix to this report. There are currently 23 SETAs due to the merger of some of the SETAs in 2005. Employers paying annual remuneration of less than R500 000 are exempt from skills development levies from 1 August 2005.

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Graduate Unemployment In South Africa

that SETAs have received substantial funding through collection of skills levies as well as the NSF. The Skills Development Act of 1998 effectively repealed the Manpower Training Act of 1981 (Republic of South Africa, 1981), which governed apprenticeships. However, schedule two in the Skills Development Act made provision for those sections in the Manpower Training Act pertaining to apprenticeships to remain in force until the Minister repealed them by notice in the Government Gazette. The Act therefore seemed to suggest that apprenticeships were being phased out and replaced with learnerships. Adding to these suspicions is the fact that learnerships have a much broader scope in terms of the coverage of occupations and thus in a sense encompass apprenticeships (see section 3.6 for more): • Learnerships are period bound and linked to specific SAQA registered qualifications (NQF recognised). The scope of coverage is for all possible qualifications (approximately 25 000). Apprenticeships are also linked to a qualification, but these are not necessarily SAQA registered. Apprenticeships are further linked specifically to designated artisan trades (approximately 500). The fact that apprenticeships are not SAQA accredited should not be seen as a distinct disadvantage of apprenticeships. SAQA accreditation implies basically that qualifications are aligned to the NQF, whereas apprenticeship qualifications are not necessarily (although in reality they are equivalent to NQF 1 to 4 levels). The SAQA qualifications are also transferable between industries, which makes it perhaps more attractive to jobseekers. However, apprenticeship qualifications are also nationally (and sometimes internationally) recognised, but often only within the specific industry in which they were obtained.



3.5.2

Firm Responses to Learnerships, Apprenticeships and Workplace Training

During the interviews firms were asked about the effectiveness of the learnership system in absorbing more graduates and/or young unemployed people. Respondents were also asked to talk about workplace training in general and comment on the incentive systems that in are place. The focus was mostly on learnerships, although apprenticeships are still favoured in some of the manufacturing sector firms. As noted in the preceding section a large number of learnerships have been registered and many people have been put onto learnerships during the last few years. Learnerships have the dual objective of improving the skills of the general workforce and at the same time increasing employment directly (in the sense that the grants act as an employment subsidy) or indirectly (in that learners generally become more employable and are thus employed on completion of the learnership). Learnerships are generally targeted at both the employed and unemployed, although the grants available for unemployed learners are higher. About two-thirds of learners in South Africa are officially classified as unemployed learners (see Figure 1 in the appendix, and Smith et al. (2005) for more).

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Graduate Unemployment In South Africa

However, indications from our interviews are that these represent people that the firms would have hired anyway. As such learnership grants are in a sense a windfall gain as firms probably would have trained these workers anyway. Although harsh, critics may see this as a failure of the learnerships in its objective of increasing employment levels over and above what the employment level would have been in the absence of the incentive system. Put differently, the learnership programme on current evidence has done little to increase employment above the existing market equilibrium level of employment. The idea of the learnership system was that some firms would utilise economies of scale and offer workplace training to more learners than they could or wanted to absorb themselves. However, it appears as if incentives are not high enough as very few firms train ‘for the market’. Most firms prefer to link learnerships to their actual recruitment strategies with the intention of employing all learners upon completion. This obviously explains why there is no net employment effect over and above what normal absorption would have been. This is also understandable; as one respondent said, he hates the idea of offering training to learners, but then having to turn them away once they complete the training. Not only is it stressful to learners as they have to look for new employment opportunities, but the firms providing the workplace training are left to deal with the disappointment. A policy option that may be considered is the idea of a marginal subsidy. This involves offering higher subsidies to firms who increase the intake of learners over and above the intake of the previous year. As discussed in section 3.5.3 below firms suggested they would only consider increasing the number of learners if all costs were covered. This includes the financial costs associated with training provision, as well as the administrative burden associated with implementing and running the learnership programme (see Box 3 on page 40 for more information). Evidence presented by Smith et al. (2005) does seem to indicate that the tax breaks are acting as an incentive to at least enrol staff members in formal training programmes: about 75 per cent of respondents in a firm survey conducted by these authors indicated that they were involved in learnerships because of the tax incentives. Thus, although net employment levels are perhaps not increased by the learnership system, more people are formally trained and acquire SAQA-recognised qualifications. Firms are generally very positive about the impact learnerships have on skills at the firm level, which certainly implies that learnerships are successful in achieving the primary goal of improving skills of the workforce. Some general comments by respondents that are relevant in this regard include the following: • Some firms partake in the process because of their industry’s BEE charter prescriptions and the BEE points that they can earn for offering learnerships. Many respondents suggested that learnerships are too expensive for small firms to implement. One solution is for large companies to offer learnerships that are linked to employment opportunities at smaller firms. These could, for example, include small firms that are linked to the large firm as a supplier (upstream) or client (downstream). A number of respondents suggested that much greater collaboration is needed between large and small firms, as

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Graduate Unemployment In South Africa

proper utilisation of capacity at training facilities at large firms could lead to a win-win situation for all. • Learnerships are not the only solution to creating employment and bridging the skills deficit. It is also not a system that suits all industry types. In some industries apprenticeships with a more practical focus may perhaps work better (artisans, technologists) while in other instances a more academic approach is perhaps preferred (accounting article clerks). Often firms would prefer to offer relevant practical training that is not necessarily linked to a SAQA recognised academic qualification. This idea is explored in more detail in section 3.6. Bursary schemes are utilised by many larger firms either as a corporate social investment or as core part of the recruitment process. The latter should be encouraged and perhaps even subsidised by the state as an alternative to learnerships or wage subsidies. If bursars are expected to do vacation work as part of the requirements of the bursary contract it becomes very similar to a learnership scheme, but potentially less costly since the academic assessment takes place outside the firm at the educational institution. Such bursary schemes should preferably be funded over and above existing state bursary schemes. One possibility is to finance and administer this funding through the National Skills Fund (NSF) contributions made by firms as part of the skills levy paid to SETAs. The NSF is already involved in education funding in terms of its National Students Financial Aid scheme (see section 1.1.8 in the appendix).



3.5.3

Learnerships and Graduate Absorption

Learnerships are generally not targeted at graduates in the pure sense of the word, i.e. university or university of technology graduates. During the interviews firms suggested that graduates are often reluctant to enrol for learnerships since further training of this nature is ‘beneath them’. There is a perception that learnerships have simply replaced workplace training based on the apprenticeship system, which was specifically targeted at artisans and the lower NQF level (or equivalent) qualifications. As a result learnerships have a kind of a ‘blue collar worker’ label. Yet, the system is designed to include workplace training and education at all NQF levels, which includes even post-graduate qualifications. 26 This suggests that learnerships at present are not necessarily geared towards relieving the graduate unemployment problem per se. Yet, they are potentially able to address the matter, particularly with regards to the following: • Many graduates lack soft skills and are not workplace ready when they start their careers in the corporate sector. In fact, this was highlighted as a reason why many graduate are unsuccessful already in the recruitment phase (see section 3.4). However, some firms have started using learnerships successfully as a way to bridge the ‘soft skills deficit’ and narrow the gap between the workplace environment and student life. Various soft skills

26

The issue of learnerships for middle-management occupations (NQF levels 6 to 8) is explored further in section 3.6.2.

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learnership programmes are available, for example the Mentoring Programme (NQF 3 to 5 covered) offered by the Reach Africa Group ( a training provider) in conjunction with the Services SETA (see www.reachafrica@iafrica.com). • Another problem frequently raised by employers was the fact that students often graduate with inappropriate degrees. Firms frequently demand people with financial backgrounds, or more technical qualifications such as science and engineering. One of the auditing firms interviewed said they were in the process of developing a learnership based on similar principles as the socalled CA conversion course at the University of Cape Town. This is a oneyear course that allows graduates with non-commerce first degrees to convert to a B.Com. (Accounting) degree within one year, enabling them to then apply for article clerk positions at auditing firms. Such a programme can easily be implemented as a learnership at a firm, with the university as the training provider. Another way in which learnerships can be used to absorb more graduates with less appropriate qualifications is in the Business Process Outsourcing (BPO) sector (see Box 1). Many firms, including telecommunications and financial and business services firms, are enrolling graduates with nontechnical qualifications, but with some IT skills in call centre learnerships where they quickly learn basic business and communication skills pertaining to the specific call centre work that they perform. This presents a wonderful opportunity to graduates to enter the workplace, gain valuable experience and move on to better opportunities.



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Graduate Unemployment In South Africa

Box 1: Business Process Outsourcing, Graduate Recruitment and Learnerships
Business Processing Outsourcing (BPO) refers to the strategic business tool whereby firms outsource non-core business processes to service providers who are often able to perform the relevant tasks at a lower cost given economies of scale, specialisation and cost structures (e.g. lower wages). The Government has identified the BPO sector (together with the tourism sector) as a priority sector for its Accelerated Shared Growth Initiative (ASGISA). The sector’s high labour intensity and rapid worldwide growth makes it an ideal sector for job creation, while it also presents various opportunities for broad-based BEE and small business development (see ASGISA, 2006). The South African Contact Centre Community (SACCCOM) is an NGO with developmental objectives and a view to promote the growth and development of the contact centre and BPO sector in South Africa. In particular, this NGO promotes outsourcing as an option to domestic firms and supports firms wishing to enter the market as service providers (e.g. telecommunications firms, ICT firms, auditing firms etc.). SACCCOM also promotes South Africa internationally as a preferred offshore location for foreign firms. South Africa’s offshore call centre industry is growing and is well positioned to exploit current opportunities given its multiple urban centres and first-world infrastructure. The McKinsey management consultancy group’s study on the viability of the BPO sector shows that the English speaking global market is expected to grow about five or six fold over the next 3 years, with 40 to 50 per cent of the growth accounted for by the banking and insurance business that frequently make use of BPO. The study argues that an additional 3 million jobs will be created worldwide in the BPO sector, of which, 200 000 to 500 000 jobs will be contested by South Africa and its direct competitors. If South Africa is able to successfully exploit this opportunity the country stands to create between 65 000 and 100 000 jobs , attracting $90 to $175 million in FDI in the process. The sector employs many young people, typically aged between 18 and 35. Specific requirements usually include fluency in English and computer literacy, depending on the service. The majority of people in the BPO sector are school leavers or matriculants, who typically have a long-term view of employment and as such investing in training of matriculants is seen as a fairly safe investment from the firms’ point of view. However, graduates are also employed. Graduates , although more mobile (they generally see this sector as a stepping stone into the market), are often targeted to fill middle to senior management positions in BPO sector firms after completing basic training. Compared to matriculants, graduates require less training and move faster up the job ladder. However, the industry faces the challenge of promoting the BPO sector as an option to graduates since starting salaries are low and the industry is perhaps not seen as glamorous. According to SACCCOM they intend promoting the BPO as an employment option to students at campus recruitment drives. Out of several companies interviewed at least five have implemented learnerships to train call centre staff. One of the auditing companies has identified BPO as a major growth sector and they have already expanded their services in this sector (outsourcing accounting and human resource management services). As such they run various learnerships to train people for call centre work and on-line support services in the areas of accounting and human res ources (SAP based software). Various other financial institutions, especially insurance companies, make extensive use of call centres to support their large client bases, and training is often offered in the form of learnerships .

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Graduate Unemployment In South Africa

3.5.4

Administration and Costs of Learnerships

The complex bureaucratic processes surrounding the establishment of learnership programmes and the enrolment and assessment of learners were frequently raised as a major barrier to expanding learnerships. In some instances the process of setting up and registering learnerships is seen as too cumbersome to make it a worthwhile exercise. At the SETA level, mismanagement, inefficiencies and high staff turnover rates were some of the problems mentioned. This was a common sentiment across all firms. The few firms that felt the process was fairly straightforward typically have representation on the SETA boards, which implies they have better knowledge of the procedures. In addition, the sample of firms interviewed represent those that typically have the resources and capacity to deal with SETA problems as compared to smaller firms who do not have the resources and capacity, yet many of the firms find the SETA environment a difficult environment in which to function, with one firm going as far as to call the process a ‘nightmare’. Incentives for the private sector to register learnerships come in the form of tax breaks and learnership grants. Companies who take on previously unemployed learners are entitled to a tax break of a maximum of R50 000 per learner, R25 000 claimable in the year of enrolment and R25 000 claimable in the year of completion. For those that take on employed learners, 70 per cent of the initial R25 000 may be claimed. From 1 March 2006, the maximum initial allowances for existing employees increased to R20 000 (up from R17 500) and to R30 000 for new employees (up from R25 000). The maximum allowance upon the completion of the learnership increased from R25 000 to R30 000. 27 The other incentive offered is a grant for putting people onto learnerships. The actual size of the grant is determined by the SETAs. The grants are managed and disbursed by the SETAs, the amount depending on the level of complexity of the learnership, the input costs, the difficulty associated with convincing employers to take on learners, etc. The grant is meant to cover the learner allowance, as well as the course fees for the training and other associated costs. The grants for taking unemployed people onto learnerships are typically higher than for taking on employed people. Firms generally indicated that the incentives were well below aggregate actual direct costs borne by firms, which include stipends, training materials and tuition costs. When adding the indirect costs, such as staff (administrative) and infrastructural requirements the net cost per learner becomes substantial. Few firms could provide accurate estimates of the net cost of learnerships. Crude estimates of the net operating cost per learner per year were in the region of R35 000. When also accounting for staff and infrastructure requirements, the actual budget outlay increased to about R150 000 per learner per year. 28 The majority of firms interviewed indicated that they could only expand their learnership programmes if the grants were increased to such an extent that all administrative costs were covered since the current intake of learners were invariably based on the firms’
27 28
More favourable allowances were also introduced to promote the enrolment of disabled learners (National Treasury, 2006a). Note that these figures may not be reliable averages across all industries and firms.

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needs. This raises the issue of marginal subsidies as a policy option (see example in section 3.5.2). Anecdotal evidence presented by many of the respondents suggested that high start -up costs prevented many small firms from setting up and offering learnerships. Often large firms have one or two full-time staff members that are dedicated to dealing with SETAs and taking care of the administrative requirements related to learnerships. Smaller firms cannot afford such expenditures. The same goes for training providers: smaller training providers cannot afford to apply for accreditation and often lose out on training contracts because of this. Small firms play a very important role in creating employment opportunities, but the current learnership system is designed in such a way that it is difficult for smaller firms to participate. Finally, a an institutional level many firms felt that better co-ordination and clarity was t needed about the respective roles of the Departments of Labour and Education in the learnership system. Since learnerships involve both education and employment, areas of overlap require constant and consistent collaboration between the Department of Labour and the Department of Education, which many respondents felt was lacking. Arising out of the above, some of the policy implications include: • Exploring ways of simplifying the bureaucratic processes of the SETAs without compromising the credibility of the qualification obtained through a learnership. This is perhaps the greatest challenge and many feel that there is no real solution other than to give firms more responsibility and trusting them more in awarding qualifications. Simplification will also reduce costs, which will also allow greater buy-in from smaller firms. Reviewing the cost of providing training and education via a learnership programme by vesting administrative control and authority with registered education and training providers. The infrastructural and staffing requirements of learnerships offered at firms are enormous. Educational institutions perhaps have a competitive advantage in administering the process of assessing the academic performance of students and awarding qualifications. Firms should be allowed to focus on what they do better, namely provision of workplace training and practical experience. The fact that learnerships are linked to an academic qualification makes it a novel idea (transferability of a qualification across industries), but it also introduces administrative complexities (unit standards, assessment processes, accreditation etc.).





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Box 2: The Letsema Learnership Programme
In 2003 the Department of Labour (DoL) proposed that the banking sector place up to 10 000 unemployed matriculants on learnerships per year. Subsequent discussions led to the sector undertaking to implement a learnership programme in terms of which “…each financial institution will employ up to 4.5 per cent of its total staff in the form of black matriculants, or the NQF level 4 equivalent, in registered learnerships” (Financial Sector Charter/FSC, paragraph 5.7). The result was the Letsema Learnership Project, which was launched in 2004. Letsema initially set out to enrol 5 000 unemployed learners over a three-year period, made up of matriculants (75 per cent) and young graduates. In terms of the agreements in place, R211 million was earmarked for the project, with the DoL contributing R120 million from its National Skills Fund (NSF) and Bankseta providing the balance. Planned enrolments were as follows: Letsema I (2004) Matriculants 600 Graduates 200 SMME Learners 0 TOTAL 800 Letsema II (2005) 1 200 400 100 1 700 Letsema III (2006) 1 800 600 100 2 500

Letsema I commenced in March 2004 with 826 learners. The NSF contributed R20 million, while the Bankseta funded the remaining R26 million. However, in 2005, with no upfront funding from the NSF, only 813 learners (610 matriculants) were enrolled into Letsema II at a cost of R31 million (Bankseta). The NSF later contributed R15 million insisting this be used only for matriculants. Currently Letsema III only has 824 participants and only matriculants were enrolled due to cost considerations. The Bankseta provided R39 million for this phase, while no funding could be secured from the NSF. According to Mr Cas Coovadia of the Banking Council, indications a that the failure of the DoL to fulfil its commitments was not due to funding re problems but rather due to a flawed bureaucratic process. Despite the fact that the original target of 5 000 learners will be missed by a significant margin, the project is still described by Mr Frank Groenewald, CEO of Bankseta, in a Business Report article as a “huge success”. The programme has been well received by all the major banks who have indicated that they have the capacity to accommodate up to 1 500 learners each, per year. The first two phases of Letsema are now complete, and more than 80 per cent of learners have been placed in permanent employment by the banks. Furthermore, according to officials at Bankseta, negotiations are currently underway for the induction of Letsema IV. Although nothing has been confirmed yet, the DoL will apparently contribute financially. A estimated R77 million n has been earmarked for Letsema IV, which will commence in March 2007. The Letsema Learnership Project is a large initiative with committed and enthusiastic stakeholders. The Bankseta, which was described by many respondents in the firm interviews as a very well run organisation, as well as the banking sector have shown commitment and intent to make a contribution towards reducing unemployment and improving skills among young matriculants and graduates. However, unfortunately it has also become an example of how bureaucratic processes, in this example, specifically those processes within the DoL, can hamper efforts to make a positive contribution. It is crucial that stakeholders in learnership programmes, in general, are not only committed, but that the administrative processes allow such initiatives to be successful. It is equally important that this initiative be monitored in future in order to ensure that targets are reached, especially given the prominence of the project in the National Skills Development Strategy. Sources: Financial Sector Charter ( ww.treasury.gov.za), Sandra Dunn in Babb and Meyer w (2005), Bankseta (www.bankseta.org.za and Ms Eva Tabane), Department of Labour (www.labour.gov.za), Business Report (www.busrep.co.za), Skills Portal (www.skillsportal.co.za), Mr Cas Coovadia of the Banking Council and Mr Sipho Ngidi of Standard Bank.

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Box 3: Marginal Subsidies
The notion of a marginal as opposed to an ‘average’ subsidy derives from the theory of employment or wage subsidies (see Pauw and Edwards, 2005). The learnership system falls in the same vein as employment subsidies in the sense that employment (in this case linked to training of the employee) is subsidised, which serves as an incentive to the employer to increase the overall employment level. If, however, firms collect the subsidy but fail to increase employment they receive a windfall gain and the subsidy is ineffective in reaching its goal of increased employment. This is in fact what seems to be happening with the learnership system: firms are collecting subsidies (or grants) for people that they probably would have hired and trained anyway (see section 3.5.2). This may be sample-specific : the firms that were interviewed are large firms and many have been involved in workplace training in any event. Kraak (2006) notes “training is occurring primarily in large and medium-sized firms – enterprises that would train irrespective of incentives and encouragements from government”. The author further finds that training expenditures range between 2 to 4 per cent of payroll, which is well above the sector charters’ recommendation of around 1 per cent. “This w as the case prior to the launch of the NSDS and continues to be the case today” (Kraak 2006). During the interviews firms were asked whether, firstly, the current subsidy amount per learner covered costs, and secondly, how the subsidisation scheme would have to be changed to encourage them to increase the number of learners taken on annually. Most firms said that the subsidy amount – approximately R25 000 at the start of the learnership and a further R25 000 upon completion – did not cover costs, especially when taking into account hidden costs such as office space and equipment and staff time. Most firms also felt that they are currently training an optimum number of learners, which is typically based on staffing requirements, but if all administrative and training (direct and indirect) costs were covered, they would consider employing additional people. A marginal subsidy in the context of an employment subsidy scheme works on the principle that only additional workers over and above the current employment level are subsidised (Pauw and Edwards 2005). This principle is easily adapted for the learnership system. Two variations of the model can be considered: (1) Rather than subsidising all trainees of the firm, only learners over and above the number of learners that would have been trained anyway are subsidised. (2) Alternatively, all learners are subsidised, but the subsidy amount for learners over and above some threshold level is higher. Examples : Firm A has 100 learners in year one and receives a subsidy of R25 000 for each learner. Government wishes to increase the number of learners at Firm A by 20 per cent to 120 learners. Firm A responds by saying they cannot absorb more, unless the total cost of the additional learners is covered (say R50 000 per learner). This subsidy now covers the marginal cost of employing an additional worker. This can become quite costly, and in order to finance the marginal subsidy government may consider reducing the ‘average’ subsidy of the first 100 learners. In the ex treme the subsidy for the first can be reduced by 60 per cent to R15 000, in which case the R1 million that is saved can be used to subsidise 20 additional learners at R50 000 per learner. If it is really true that the firm would have trained the first 100 learners even in the absence of the subsidy, they will still train the 100 workers, but now also the additional 20 because the subsidy amount is now high enough to become an incentive to increase employment over and above the baseline intake. While the above example is greatly simplified, it illustrates the point quite effectively. In reality the true marginal cost of employing an additional learner may be much lower given that significant investments have already been made to accommodate the first 100 learners. In instances where firms were able to provide estimates of the average cost per learner, figures ranged from about R35 000 (direct training and administrative expenses) to over R100 000 (cost of employment taking into account office space, equipment and staffing requirements, e.g. running a human resource division responsible for implementing and administering the learnership programme). The marginal cost per learner may be much lower, and probably closer to the R35 000 estimate (note that this is the net cost- to-company for a learner once the state subsidy and tax allowances are accounted for).

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3.6

Vacancies, Scarce Skills, Education and Training
Identifying Scarce Skills

3.6.1

Various types of shortages exist; in particular three main areas can be identified as critical: • Shortage of artisans and other technically trained workers, such as electricians, technicians, mechanics etc. Engineers and scientists also listed high on the list of scarce skills. These shortages were especially raised as a concern in the manufacturing sectors. Shortage at middle- to senior-management level. This skills shortage exists within all industry types, e.g. mine managers or shaft managers in the mining industry, foremen and managing engineers in the manufacturing industry and general business managers in the services industry. Management skills, it seems, are so problematic that poaching is endemic across industries. For example, engineers and mine managers are often coaxed into accepting positions in the banking or finance industry. As far as entry-level positions are concerned, the constraint, as mentioned, is not necessarily the quantity of graduates, but rather the quality of these graduates. At the graduate level therefore the problem seems to relate to a skills deficit (in terms of quality) rather than a skills shortage (in terms of numbers).





The phenomenon of rising graduate unemployment has to be viewed within the context of skills shortages and vacancies that exist in the private sector. The third point above is interesting, as it suggests that graduate unemployment relates either to an oversupply of graduates in general or perhaps, more likely so, an oversupply of inappropriately qualified or poor quality graduates. Some firms explicitly noted that the average new recruit’s education is of a lower quality than in the past, while others suggested that if they could find more good quality graduates they would increase the intake of graduates. This raises the issue of graduate employment targets, i.e. how many graduates would firms employ if there was no quality issue at hand? The number of graduates absorbed intermittently by firms appears, in many cases, to be driven by the quality of supply. Hence, firms who require a set number of graduates may actually end up adjusting these targets downwards given the skills and quality of the pool of the applicants. Conversely, firms have indicated that they are willing and able to increase the intake if faced with a higher quality of labour supply. The notion, therefore, in an odd way, that supply creates its own demand, seems to be partially true at the margin here. In section 3.6.1 we explore some of the reasons for the skills shortages as defined in the first two bullet-points above. We look at both the supply and demand-side issues that have contributed to this problem. Section 3.6.2 considers some of the concerns around the skills deficit problem and inadequate or inappropriate qualifications obtained by graduates at secondary and tertiary institutions.

41

Graduate Unemployment In South Africa

3.6.2
a.

Explaining Skills Shortages
Graduation Levels in Technical Qualifications at Universities and Universities of Technology

Kraak (2003) presents various figures showing evidence of declining numbers of engineering students graduating from tertiary institutions. For example, university graduates with engineering bachelor’s degrees declined from a peak of just under 1 600 in 1994 to around 1 150 in 2000. Similarly, despite the almost fourfold increase in enrolments at universities of technology between 1988 and 2000, the number of students graduating with national diplomas, higher diplomas and degrees in engineering declined dramatically. As Kraak notes, “it is ironic that institutions of technology … are currently witnessing a dramatic decline in a key ‘hard’ technology field (engineering), while graduations in ‘softer’ non-technical subjects (such as business studies) expand” (2003). Adding further to the shortages is engineering graduates’ unwillingness to do front-end engineering work, a problem identified by one of the construction firms interviewed. Most students show a strong preference for working as engineering consultants in a services environment rather than working at manufacturing plants or mines. It is apparent that training at universities and universities of technology is skewed towards producing workers for the rapidly expanding tertiary (services) sector, with large numbers of students graduating in management sciences, commerce and finance. All this comes at the expense of the mining and manufacturing sectors. While such a shift towards services was perhaps justified by market conditions during the 1990s, manufacturing firms are currently facing skills shortages in the face o increasing demand for their f products. Demand is fuelled further by government’s plans to dramatically step up public sector investment in the next few years. b. Enrolment at Tertiary Educational Institutions

Related to the above is the unique situation in the South African tertiary education system whereby a huge premium is placed on university educations as opposed to technical qualifications obtained at universities of technology, tertiary colleges or FET colleges. When compared to, for example, the United Kingdom, South Africa’s enrolment at tertiary institutions appears to be highly skewed towards ‘academic’ institutions (universities and universities of technology) and away from FET colleges. Figure 6 shows clearly that South Africa has a large share of students attending universities and technikons relative to FET colleges. In 2001, the most recent year for which figures could be found, only 36.6 per cent of students attending a tertiary institution in the United Kingdom were attending a university or technikon, with the remainder (63.4 per cent) attending FET colleges. In the same year, attendance at tertiary institutions in South Africa was heavily skewed towards universities and technikons, with almost two-thirds of students attending universities or technikons. In that year 65.1 per cent of all tertiary students in South Africa were studying at universities or universities of technology. University students alone comprised 44 per cent of all students.

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Graduate Unemployment In South Africa

Figure 6: Enrolment at public educational institutions in South Africa and the United Kingdom

36.6% University & Technikons

65.1% University & University of Technology

63.4% Further Education Colleges

34.9% FETs

United Kingdom (2001)

South Africa (2001)

Source: (South African) Department of Education (2003) and UK Higher Education Statistics Agency (see www.hesa.co.uk).

Give n the nature of skills shortages many firms felt that government should subsidise or promote tertiary enrolment in fields of study or training that are more practically orientated. Manufacturing firms, in particular, experience shortages of experienced artisans, which suggest that higher enrolment at technical FET colleges is crucial. Firms also called for greater collaboration between educational institutions and the business sector on curriculum design in order to address problems associated with irrelevance of certain course modules and the lack of practical application of theory. Collaboration entails developing courses together and creating opportunities for internships or experiential training as part of academic courses. It is crucial that the qualification and practical experience obtained at educational institutions are relevant to the needs of employers. c. Workplace Training and the Policy Environment

Adding to the current woes of the manufacturing sector is the apparent decline in apprenticeship training during the 1990s. Kraak (2003) shows that the number of apprentices in training in South Africa declined from 29 826 in 1986 to 16 577 in 1998, a drop of almost 50 per cent. A number of reasons exist for this decline, including economic reasons (cont raction in output), as well as the policy environment. These are discussed further below. This decline was driven by the contraction in output in the manufacturing sector over this period. Firms followed strategies of ‘rightsizing’ in an attempt to raise efficiency and reduce costs. Firms’ expectations of future skills requirements were such that training did not feature high on the list of priorities for the sector. The lack of training provided can perhaps be seen as short-sighted by firms, although the recent boom phase and the planned increases in public sector investments could perhaps not have been foreseen at the time. 43

Graduate Unemployment In South Africa

From 1998 onwards with the implementation of the Skills Development Act of 1998 (amended in 2003), which provided the institutional framework for the development and implementation of national, sectoral and workplace strategies to develop and improve the skills of the South African workforce, further uncertainties around the future of the apprenticeship system emerged. The Skills Development Act of 1998 effectively repealed the Manpower Training Act of 1981, which governed apprenticeships. However, schedule two in the Skills Development Act made provision for those sections in the Manpower Training Act pertaining to apprenticeships to remain in force until the Minister repealed them by notice in the Government Gazette. The Act, therefore, seemed to suggest that apprenticeships were being phased out and replaced with learnerships. Adding to these suspicions is the fact that learnerships have a much broader scope in terms of the coverage of occupations and, thus, in a sense encompass apprenticeships. More recently various sectoral Black Economic Empowerment (BEE) charters were drawn up by the Sector Education and Training Authorities (SETAs), and very often the wording in these charters suggested that ‘BEE points’, which are awarded to firms to determine whether they are ‘BEE compliant’ only awarded points for learnerships specifically, and not apprenticeships. This has led some firms to convert apprenticeships to learnerships in order to comply with the BEE charters. In fact, some firms indicated that they only provide training based on the learnerships system because of the BEE points that are on offer. In the absence of learnerships they would have provided training based on their own models. It appears now as if there is a realisation among policymakers that apprenticeships may perhaps be more appropriate. In fact, steps are being taken to ‘bring back apprenticeships’ and to restore firms faith in the future of apprenticeships. While the changeover from the apprenticeship to learnerships initially appeared to imply the end of apprenticeships, it now starts to seem that it was merely a name change. In an article published on The Skills Portal website (www.skillsportal.co.za, ‘Apprenticeships are not dead’, 8 February 2006) the author reports on a statement by the Minister of Labour where he said he never repealed the sections in the Manpower Training Act that pertains to apprenticeships and further asked firms to “ please take on apprentices” as this “the right thing to do”. In addition most of the Sector and Education Authorities (SETAs) offer the same grants for learnerships and apprenticeships. According to officials at the Department of Labour the Department of Trade and Industry also recently proposed that learnerships and apprenticeships be awarded the same BEE points. Such a step will certainly remove all skewed incentives to implement learnerships over and above apprenticeships when the latter is in fact more appropriate for the firm concerned. In summary, therefore, the economic circumstances (slow growth and uncertainties about the future) that prevailed during the 1990s, coupled with the uncertain policy environment regarding workplace training, probably led to a decline in the number of workers trained at the workplace.

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Graduate Unemployment In South Africa

d.

Middle-management Training

Despite the fact that firms cite skills shortages at middle-management level as a major concern, very few firms are using learnerships to offer subsidised training for middlemanagement level. Kraak (2003) presents figures from the Department of Labour for March 2002 showing the distribution of the number of registered learnerships programmes across different NQF levels. About 39 per cent of the programmes are targeted at NQF levels 1 to 3 (equivalent to pre-matriculation), while 47 per cent of programmes are targeted at NQF levels 4 and 5 (matric and matric plus diploma). The remainder (14 per cent) are for NQF levels 6 to 8 (equivalent to higher education degrees and postgraduate courses). In Figure 7 the 2002 estimates are compared with the latest figures from the Department of Labour (2006b). The figure shows a relative increase in the bias towards registering lower-level learnership programmes. 29 In order to effectively address skills shortages at the mid-career level more subsidised learnerships programmes should be registered at the NQF 6 to 8 levels. This requires no change in the design of the learnership system – the system is already equipped to deal with higher-level learning. It merely requires changing the mindsets of training providers, firms and SETAs so that the learnership system is not only seen as entry-level training. It may even require a change in the mindset of employees, many of whom regard learnerships as beneath them. The various stakeholders, including SETAs, firms and educational institutions should work together towards developing and implementing suitable and appropriate higher-level learnership programmes that would gear firms towards training future managers.

Figure 7: Registered learnership programmes by NQF category, 2002 and 2006
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2002 2006* NQF 1-3 (Equivalent to prematric) NQF 6-8 (Equivalent to degree/post-graduate degree) NQF 4-5 (Equivalent to matric/matric plus diploma)

Source: Kraak (2003) and Department of Labour (2006b). Note: These are the proportions of programmes registered, not learners. The figures for learners are not available at NQF level.

29

This may be due to the fact that the subsidies for unemployed learners are higher than those for employed learners, thus creating a bias towards enrolling unemployed learners onto lower NQF level learnerships. Perhaps a rec onsideration of the incentive system is needed. Higher subsidies for NQF level learnerships where scarcities are most severe should perhaps be considered.

45

Graduate Unemployment In South Africa

e.

Other Factors: The Brain Drain and Employment Equity

The brain drain has also had a huge impact on manufacturing, construction and mining industries, especially in engineering-related fields. In an online article published by the South African Institution of Civil Engineering (Lawless, 2006) the author estimates that the industry had lost approximately 6 000 educated and trained staff who have graduated since 1963. A “large percentage” has emigrated, while the rest have either taken early retirement or moved into other jobs. Ironically the author estimates that between 3 000 and 6 000 civil engineering professionals will be needed in the next few years to match the demand for skills driven by large projects such as Gautrain, the Soccer World Cup 2010, expansion at Eskom and Transnet. Another interesting observation by Lawless (2006) is about the age distribution of civil engineering professionals in South Africa. It shows a large group of experienced engineers in their late forties and older. In contrast there are insufficient numbers of midcareer staff to carry out the bulk of production. The author notes that in the rest of the world, older, more experienced workers are being retained by raising the retirement age, while at the same time increasing the number of young people in training. Emigration and early retirement of experienced mid-career workers is certainly impacting on productivity and output in South Africa. A recent report published on www.fin24.co.za (‘Eskom in for a skills shock’, 8 March 2006) suggested that 75 per cent of Eskom workers surveyed identified the staff shortages and inappropriate skills as the main reasons behind the electricity supply crisis. One of the banks interviewed mentioned specifically the huge problems they had with retaining experienced middle-management staff members, many of whom emigrate or set up their own businesses in South Africa.

3.6.3
a.

Explaining the Skills Deficit
Quality of Primary and Secondary Schooling

The majority of firms identified low quality primary and secondary school education as a major factor behind the labour market problems in the South Africa. The poor quality of teachers and the low number of passes in matric mathematics and science was frequently raised as something that needs urgent attention. The transition from rural schools to tertiary education and the working environment is often daunting to people from disadvantaged backgrounds. This explains high drop-out rates at tertiary institutions, poor performance during formal job interviews and the inability of disadvantaged individuals to adapt to the working environment. Schools, and to large extent tertiary educational institutions, are also failing in the provision of proper career guidance despite well-publicised facts about poor job prospects for students studying in arts, humanities and the social sciences. The quality of education needs to be addressed at a primary and secondary school level. School pupils need to be encouraged to follow mathematics and science as subjects. Career guidance councillors should educate them about the importance of these subjects. At the same time, the quality of teachers in these fields needs to be addressed through better training and remuneration packages. In response to the slow progress in transforming and improving the schooling system, and especially mathematics and science teaching, a number of firms interviewed indicated that they are actively involved in school education. Firms invest in mathematics 46

Graduate Unemployment In South Africa

and science projects, while some fund learning centres, computer laboratories and so on. Firms view such initiatives not only as corporate social investments but also long-term investments in their own firms as they will benefit from an increased supply of matriculants with passes in suitable subjects. b. Quality of FET Colleges

The state of FET colleges, and particularly the quality of education and training provided at these institutions, is another concern. Some firms are of the opinion that the current FET system is not generating the quantity or quality of artisans that used to be produced under the old system of industry training boards. While major restructuring of the FET system has already taken place – recently 122 FET colleges were merged into 50 colleges, while a further R1.5 billion is being invested as part of the FET recapitalisation project – FET colleges have for too long been seen as ineffective and inefficient (Kraak 2003). The South African FET system currently accommodates three types of FET colleges, namely the general academic FET, the vocational FET and the industry-based FET. The general academic FET’s offer “a so-called ‘whole’ qualification consisting of exit level outcomes which schools will offer and which will no doubt form the basis for university entrance criteria” (Papier 2006: 6), while the vocational and industry-based FETs are more practically oriented. As with the m ove from apprenticeships to learnerships the college education system also appears to be moving away from a pure vocational training model to what some would term a more ‘balanced’ vocational and academic training model, driven by a need to educate people for the modern so-called ‘knowledge-based learning society’ (Papier 2006). There are two important issues here. Firstly, broad education ensures inclusion in this knowledge society and deals to some extent with complaints from employers about young people that leave education without a balanced education that enables them to function in the workplace. However, the new vocational qualifications on the NQF may be a cause for concern for FET colleges who in the past have been training explicitly for industry. The additional educational requirements are potentially taking study and teaching time away from pure vocational training. As Papier suggests, “… it may well be that FET qualifications will again neither satisfy the demands of the workplace, nor the requirements of Higher Education” (2006: 6). The realities in South Africa are that young people need to acquire technical skills that would make them workplace ready and more employable, but at the same time softer skills are also lacking. This presents a major dilemma and challenge to the FET sector. Perhaps the greatest challenge to the FET sector is regaining the trust of industry. A second is the quality issue. Many of the learnerships currently in place are being managed and run by private industry-based FET colleges. A number of firms interviewed indicated that they have gone the route of applying for accreditation as a training provider, either due to a lack of faith in the public education (FET) system, or because they felt that they could provide better quality and more appropriate training themselves. Smith et al. (2005: 559) find a similar trend among the sample of firms and learners interviewed by them “[d]espite massive efforts in South Africa to transform public … FET colleges”. Many of the large firms obviously have the capacity, economies of scale and experience to offer training. Whether this training can be offered at a lower cost than the cost of outsourcing the service is unclear. Either way, the perception of firms is that they 47

Graduate Unemployment In South Africa

can provide higher quality, more appropriate practical training than FET colleges that caters for a wide variety of firms. c. Quality of Education at Tertiary Institutions and Functional Illiteracy

Another general concern relates to the quality of education offered at tertiary institutions. This, many felt, is driven by the strong focus on enrolling large numbers of students rather than focusing on the quality of education. Firms felt that educational subsidies at tertiary institutions should be based on a combination of student numbers and quality rating of the institution or the qualifications offered rather than the throughput rate as is presently the case. The current subsidisation system is creating the wrong incentives for educational institutions. It is also important that these institutions limit enrolment in degree or diploma courses with poor employment prospects. Poor academic performance of students (discussed in section 3.4) also relates to high functional illiteracy among students and poor soft skills. Tertiary educational institutions should focus on bringing soft skills, entrepreneurial skills and communication skills on board as part of bridging courses for students.

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Graduate Unemployment In South Africa

Box 3: Alternative Testing Methods for Graduates
Much of the graduate unemployment problem is ascribed to the poor quality of education in South Africa. Qualifications obtained from historically black institutions especially are often deemed substandard, and as a result firms are reluctant to employ students from these institutions. Some respondents in the firm survey bluntly indicated that they had a complete distrust in qualifications awarded by certain institutions. This results in potentially good quality students from historically black institutions being overlooked. Many firms acknowledge that qualifications alone do not give an accurate representation of an employees potential. For example, poor English language skills sometimes prevent students from demonstrating their full potential. Other students may have difficult circumstances at home, perhaps having to support large families by working part-time, or living in an environment that is not conducive to learning. Thus, while some students have the potential to excel academically, they are unable to do so as measured by academic performance, and as a result the employer is unable to gauge the quality of the student. Unfortunately an academic transcript is often the only information available to employers. Such information asymmetries generally lead to suboptimal outcomes. The idea of instituting some form of additional testing at a national level will do much to bridge the information deficiencies, while also removing firms’ uncertainties about the comparability of qualifications from different institutions, many of which vary significantly in terms of quality, material covered or course contents, assessment methods and so on. The model used in the United States is perhaps a useful example. The Education Testing Service (ETS) offers a variety of tests. Although many of these are designed to be used by educational institutions in their decision to allow students to enrol in academic courses, they can also certainly be used by prospective employers to test the academic and even non-academic abilities of students. Probably best known is the Standardised Aptitude Test (SAT), which consists of the Reasoning Test (measuring critical reading, math, and writing skills) and Subject Tests (measuring knowledge of particular subjects and the ability to apply that knowledge). Many colleges require or recommend one or more of these tests for admission or placement purposes. Also offered by ETS is the Graduate Record Examination (GRE), which is written by prospective graduate applicants and used by graduate admissions or fellowship panels to supplement undergraduate records and other qualifications. The scores provide common measures for comparing the qualifications of applicants. A general test measures critical thinking, analytical writing, verbal reasoning, and quantitative reasoning skills that have been acquired over a long period of time and that are not related to any specific field of study, while various subject-specific tests measure undergraduate achievement in the eight specific disciplines (Biochemistry, Cell and Molecular Biology; Biology; Chemistry; Computer Science; Literature in English; Mathematics; Physics; Psychology). Other tests offered by ETS include a test for Information and Communication Technology Literacy, a Measure of Academic Proficiency and Progress (MAPP), various tests of English and so on. Similarly, the Graduate Management Admission Council conducts a Graduate Management Admission Test (GMAT), which is a standardised assessment that helps business schools assess the qualifications of applicants for advanced study in business and management. Schools may use the test as a predictor of academic performance. The exam measures basic verbal, mathematical, and analytical writing skills developed over a long period of time in education and work. Various types of aptitude or psychometric tests have been developed that measure non-academic abilities, skills and personal profiles. Some firms may find it useful to draw on information about individuals’ natural skills and abilities to operate within certain types of environments. For example, Solutionsfinding.com, a South African firm, has developed a variety of non-academic tests. Perhaps their best known instrument is the Neethling Brain Preference Profile (NBPP), which identifies the thinking preferences of the individual based on the “thinking quadrants” of the brain: analytical and factual, organised and detailed, interpersonal and sensitive, strategic and unorthodox. Linked to this are tests that identify personal skills (The Personal Skills Instrument), identify future skills needed for a specific career linked to an individual’s preferences (The Future Skills Instrument), as well as a test that draws brain profiles for specific job types (The Job Skills Instrument). What makes these tests useful is that they can be performed on- line. Testing of an academic nature has to be conducted and managed centrally by an independent organisation, but funded by the Department of Education. Non-academic tests must be based on accepted psychological practices. An idea put forward by one of the firms was that an institution such as the Umsobomvu Youth Fund (UYF), perhaps in conjunction with an institution with knowledge and experience in this area, becomes involved in testing of individuals that register on their database of unemployed youth. Given this institution’s well-developed network of youth adv isory centres with computer facilities across the country they are suitably equipped to conduct tests and register results on their database of unemployed youth. These results can complement matric results or transcripts of tertiary academic qualifications, thus making it easier for employers to make better-informed decisions about candidates. Sources: US College Board (www.collegeboard.com), Educational Testing Service (www.ets.org), Graduate Management Admissions Council (www.mba.com), Solutionsfinding.com (www.solutionsfinding.com), Umsobomvu Youth Fund ( www.youthportal.org.za).

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Graduate Unemployment In South Africa

4. Policy Options 4.1 On Skills Shortages and Vacancies
Immigration Service Centre

4.1.1

Some of the short-term solutions proposed to deal with the skills scarcity problem include rehiring early retirees, assisting and encouraging S outh Africans living and working abroad to come back and sourcing foreigners with relevant scarce skills. The latter policy option has enjoyed the most media coverage in recent months. A scarce skills list published by the Department of Home Affairs in February 2006 contains 56 different occupation types and sets a quota of scarce skills that may be sourced from abroad at 46 500 (Department of Home Affairs, 2006). Figure 8 shows how this quota is allocated across different broad occupation categories. Of these jobs, 55 per cent are in science and engineering, thus reflecting the critical shortages in this broad occupational category. Agricultural scientists make up 21 per cent of the total, while occupations in the health and medical sciences account for 11 per cent. The rest is distributed between people with Information Communication Technologies (ICT) skills (8 per cent), management and commerce skills (3 per cent) and the educational profession (2 per cent ). The quotas are only applicable to foreigners with at least five years relevant experience. This ensures that the importation of skills does not impact on South Africans competing for entry-level positions (graduates). An important provision attached to the sourcing of skills from abroad is that the foreign recruit should be employed in a position where he or she can act as a mentor or coach for young entry-level workers in the firm. Various other such scarce skills lists have been published recently, and a substantial literature exists around the methods used to identify scarce skills. These include lists by the Human Resources Development Council (2003), the National Advisory Council on Innovation and the Department of Science and Technology (2003) and the Human Science Research Council (2003) (surveyed by Powell and Groenmeyer-Edigheji, 2006). Most include engineers, artisans and technicians, while occupations such as educators and academics, scientists and biologists, and people with skills in the area of Information Communication Technology (ICT) are also prominent.

50

Graduate Unemployment In South Africa

Figure 8: Composition of Scarce Skills Quotas across Broad Occupation Categories
Management and commerce professionals 3% Agricultural sciences 21%

Health and medical sciences 11% Information technology professionals 8%

Education professionals 2%

Science and engineering 55%

Source: Department of Home Affairs (2006).

The shortage of experienced, skilled employees, however defined, requires a bolder and more efficient immigration policy. Currently the turnaround time and associated bureaucratic inertia around immigrant worker applications makes this particular labour market intervention operationally inefficient In addition, it remains a moot point whether the list identified by the Department of Home Affairs is in fact an exhaustive and accurate representation of skill shortages in the domestic economy. Given this we propose that an Immigration Service Centre for large, established companies be set up. In the first instance, to avoid second-guessing firms on their labour demand needs, it is proposed that the Department of Home Affairs list be viewed only as a guideline for skills in need. Secondly, in order to obviate the institutional inefficiency of such a centre, such an immigration service should guarantee the processing of all immigration paperwork within a month, with all due diligence around the specific occupation in need, being undertaken within this period.

4.1.2

Middle -management Training

The sourcing of skills from abroad should be seen as a short-term measure to alleviate current shortages. In the longer run the ideal should be to train South Africans for these positions. At present learnerships are almost entirely focused on the lower NQF levels. This probably has to do with the fact that the NSDS is fairly explicit in suggesting that the unemployed youth are particularly vulnerable and, hence, a special target of the NSDS – as reflected in the higher subsidies for unemployed learners. As pointed out in section 3.6.2 the irony about workplace training is that despite the severe skills shortages at middle-management level, few firms are using learnerships to provide training at the higher NQF levels. In fact, as shown in Figure 7, the proportion of learnership programmes at the NQF 6 to 8 levels has actually declined since 2002. The learnership system is already equipped to deal with higher-level learning, and nothing prevents firms from utilising it as a way of providing subsidised training for skilled workers as well. As noted previously, the various stakeholders, including SETAs, firms and 51

Graduate Unemployment In South Africa

educational institutions should work together towards developing and implementing suitable and appropriate higher-level learnership programmes that would gear firms towards training future managers, and ultimately targeted at where the shortages currently exist.

4.1.3

Restructuring and Marketing of FET Colleges

A number of possible policy options regarding FET colleges present themselves. Hopefully these, together with the FET recapitalisation project, will be beneficial to standards and quality of training and education at FET colleges. This process should be monitored closely to ensure an optimal outcome. Some specific policy issues include: • The move towards ‘whole education’ (see section 3.6.3) is driven by the need to ensure inclusion in the knowledge society, but it is also crucial that industry standards are met as far as firms’ expectations of practical knowledge and experience is concerned. This requires a process of quality control as well as regular consultation with industry about the curricula at FET colleges. Support from industry is crucial. Many firms have applied for accreditation as training providers and opt to conduct learnerships and apprenticeships themselves rather than outsourcing this to FET colleges or other academic institutions. This is a reflection of the distrust of the private sector in public training at present, which poses a threat to the credibility and future of the FET system. Perhaps a ‘soft’ recommendation, but one we feel that is vital, revolves around the fact that FET colleges are viewed within the African community as a second-best option for post-matric training. Hence, a key policy intervention would involve marketing FETs in African communities, and in particular repositioning them within these communities as institutions offering valuable and highly marketable skills. The severe shortage of artisans reported consistently by manufacturing firms, reinforces the need for this intervention. Corporate financial and logistical support could be c onsidered for such a marketing campaign.





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Graduate Unemployment In South Africa

4.2

On Education and Human Capital
Addressing Poor Quality of School Outcomes

4.2.1

Firms lamenting the poor quality of schooling leads to two short -term solutions, which we believe can be facilitated through JIPSA. These are: • Greater funding of career guidance services that are offered either at schools or off-site. These will prove invaluable in inculcating the importance of mathematics and science amongst learners, which firms believed is not fully appreciated by young people. The restructuring of educators’ remuneration packages (currently under negotiation between the DoE and SADTU) on the basis of scarce skills. Hence, we would expect that through such a reallocation, science and mathematics educators for example, would be remunerated more than other educators.



4.2.2

Restructuring State Subsidies for Tertiary Institutions

The mismatch between labour demand and supply as a function of problems with supply of labour through tertiary institutions is well-known. We propose the following short-term solutions: • That the current state subsidy system, biased heavily in favour of throughputs, should be restructured to include a (regularly reviewed) ranking of the quality of the institution and an ‘employability’ criterion. Institutions ranked as high quality ones which, through their certification, manage to secure employment for most of their graduates, are therefore likely to attract the largest proportion of the subsidy. A special dispensation, outside of current funding envelopes, should be secured to support tertiary enrolment in areas where there are skills shortages. Again, employers should define where these shortages exist.



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Graduate Unemployment In South Africa

4.3

On Workplace Training
Increasing the Number of Learners

4.3.1

The one substantive, and fairly unique, result to emerge from the survey is that in many cases firms are placing existing employees on learnerships. Put differently, learners are individuals that firms would have hired anyway or in fact have hired already. Hence, as an active labour market policy with the intention of inducing employment effects over-andabove market-driven increases, the learnership programme – at least from the evidence here and on this indicator – appears to have been unsuccessful. We propose, again on the basis of suggestions from many of the firms, a more aggressive learnership programme that would in part: • Increase the number of learners by 20 per cent from its current estimated annual figure of 43 000 to approximately 51 600 learners per annum. Many of the firms in the survey had indicated that they could possibly increase the number of learners, provided that the state covered all the costs of the additional learners. Hence, relatedly, we propose that the idea of a marginal subsidy is explored further as outlined and explained in Box 3. The basic idea is that the state finances the marginal cost of taking additional learners over and above the current intake. This is based on the apparent assumption that the current value of the subsidy per learner does not act as an incentive to take on learners and, hence, learners represent people that would have been trained and employed in any event. A very rough figure indicates that the net cost-tocompany for a learner (once the state subsidy and tax allowances are accounted for) is approximately R35 000 per annum. Ultimately then, this would entail, admittedly on extremely rough figures, a total financial commitment of R300 million, which in the context of overall skills development budget 30 falls within the expenditure limits (see section 1.1.8 in the appendix). It is clear that under the present conditions, where no ‘aboveequilibrium’ employment is being generated, it may be an investment worth exploring.



30

R1.8 billion from the NSF alone is being allocated to SETAs for strategic community level projects and for unemployed learners in learnerships. This excludes R3.1 billion received by SETAs in skills development levies.

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Graduate Unemployment In South Africa

4.3.2

Reinstating Faith in Apprenticeship Training for Manufacturing

As noted above, skills shortages at the entry or graduate level and those at the midcareer level are very different in nature. Many firms interviewed tended to agree that there are enough graduates coming through the education system, but that the quality of education and training is a concern. 31 According to Smith et al. (2005: 540) South Africa, like many other countries including the United Kingdom (UK), Australia, Norway and New Zealand, based its learnerships system on a “reinvented notion of apprenticeships”. Learnerships aim to provide workplace training by an accredited training provider by combining structured learning and workplace experience. The idea is that the training would culminate in a nationally recognised qualification. While the main aim of learnerships is skills acquisition, it has also doubled up in South Africa as a type of employment or wage subsidy. The idea was that the financial incentives attached to learnerships would encourage firms to employ more workers, and that higher overall skill levels would increase the employability of workers in general, which would then indirectly lead to greater absorption. The perception among firms is that learnerships are (potentially) very effective in providing workers with the necessary skills and qualifications, with many firms indicating that their workers become more employable after completion of a learnership programme. However, given that a large number of firms simply put existing workers on learnerships, this suggests that learnerships are perhaps not as successful in terms of the absorption of more workers in the economy. The adoption of learnerships, which, as explained earlier, initially seemed to imply the end of apprenticeships, introduced a lot of uncertainty about training in general. Workplace training for artisans and technicians was in the past based only on the apprenticeship system. The qualification attached to apprenticeship training is not necessarily SAQA accredited, which simply means that the qualification is not necessarily aligned with the ‘transferable’ NQF system. Qualifications are, however, generally recognised in respect of the specific trade. The training has a more practical focus and this is arguably more important given the nature of technical occupations. Learnerships actually incorporate artisan-type training, but are attached to a SAQA recognised academic qualification. This has some benefits to the trainee, including transferability and recognition of the qualification, but it also introduces an administrative burden to the firm, relating mostly to the requirements of the assessment process. During the interviews a number of firms, especially those in the manufacturing and mining sectors, complained about the added administrative burden brought about by the academic requirements of learnerships. Firms feel that their core business competency is training, not assessing the academic merit of a candidate’s qualification. The more academic or theoretical approach is certainly appropriate for many of the occupations that were not previously covered by apprenticeships. This is especially true for occupations in the services industries, e.g. call centre operators or accounting clerks. However, it is not always appropriate for artisan-type training.

31

This may not necessarily be true for university or university of technology-trained engineers. However, it seems to hold for technical workers trained at FET colleges.

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Graduate Unemployment In South Africa

The apparent realisation among policymakers (see section 3.6.2) that apprenticeships are in some instances more appropriate or preferred by firms is a step in the right direction. As mentioned before, steps are being taken to ‘bring back apprenticeships’ and to restore firms faith in the future of apprenticeships. These include an announcement by the Minister of Labour that firms should continue to enrol apprentices and that he has no intention of repealing the relevant section of Act. Also, proposals are being considered to give apprenticeships the same status as learnerships in terms of grants receivable from SETAs as well as BEE points awarded for training people. A clear policy standpoint needs to be taken on the issue, as years of training may already have been lost due to the uncertain policy environment surrounding workplace training. This does not mean that learnerships should now be abandoned again in favour of apprenticeships. Learnerships have their merits in certain types of environments, just as apprenticeships suit manufacturing firms with a strong focus on providing practical workplace training for artisans that do not necessarily need a SAQA accredited qualification. Instead therefore, what is required, is a clear signal from the Department of Labour and its respective SETAs, regarding the relationship between learnerships and apprenticeships, with a view to ensuring that firms are equally incentivised to invest in both learners and apprentices.

4.3.3

Being Creative with Learnerships

Many firms have benefited from applying learnerships in ‘non-traditional’ ways. The learnership system is a flexible system that can be adapted to any type of SAQA accredited qualification. Some examples include: • Management-level learnerships (see previous discussions, sections 3.6.2 and 4.1.2) Soft skills training (see section 3.5.3) Bridging courses to close the skills gap, e.g. accounting bridging courses and call centre or BPO courses (see section 3.5.3 and Box 1).

• •

Not only do such creative applications address the graduate unemployment problem, but they may also solve many of the problems faced by employers with regards to middlemanagement vacancies, poor soft skills of graduates, and inappropriate qualifications among applicants.

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Graduate Unemployment In South Africa

4.4

Other Policy Issues
Promoting Bursary Schemes

4.4.1

Bursary schemes are utilised by many larger firms either as a corporate social investment or as a core part of the recruitment process. We propose here that the state sets up a bursary scheme in conjunction with firms, that would subsidise any net additions to their current pool of bursars. Hence, firms would be incentivised to increase their existing quota of bursars, as these could potentially be funded by the state. The state could of course build its own criteria into such a firm-based bursary programme, ensuring that equity goals and employment guarantees are secured. Firm-based bursary schemes have a number of distinct advantages. Firstly, it locates labour demand needs directly with firms, ensuring effectively that the institutions of human capital are supplying the required skills to the labour market. Secondly, the firm can become involved more directly in the education of the student in the sense that they can provide academic support and guidance as to subject choice – something in this model that the state would not need to pay for. Thirdly, firms can offer relevant practical experience to bursary holders by creating opportunities for vacation work – an in-built work experience programme. Finally, all this comes at a fairly low risk to the company given the contractual obligations of the bursar to work for the firm on completion of his or her studies. If poached by another employer the bursar would have to pay back the bursary.

4.4.2

Public Graduate Unemployment Databases

The DPRU has managed to secure two databases of unemployed young people. The first, from the Umsobomvu Youth Fund (UYF), contains more than 130 000 individuals (of which only about 81 000 have supplied contact details), covering a wide spectrum of qualifications, including matric certificates, diplomas and degrees. The second database, is that provided by the South African Graduates Development Association (SAGDA), which contains a listing of some 2 500 unemployed individuals with post-matriculation qualifications. Currently, both databases are in an electronic format that is not userfriendly to potential employers – a survey response that was common with respect to the UYF database in particular. However, these two datasets do contain the raw elements for a nationally representative electronic storage facility of unemployed individuals. This presently does not exist and, arguably, would serve as the beginning of a free servicebased labour market information system for all firms in the economy. Various proposals are made as to how the database and services associated with the placement of unemployed graduates can be improved are explored and outlined in the accompanying document entitles Unemployment Databases.

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Graduate Unemployment In South Africa

5. Conclusions
A clear understanding of the nature and extent of vacancies o skills shortages in the r economy may help us better understand the graduate unemployment problem. The South African manufacturing sector faces severe skills shortages in technical occupations such as artisans, engineers and scientists. In all sectors shortages of middle- to seniormanagement personnel was also raised as a concern. These shortages are viewed as critical constraints to accelerated growth in South Africa. The economy has entered a boom phase, fuelled by low inflation and interest rates, high real income levels and increased public investment expenditure. The danger is now that production cannot keep pace due to skills constraints, which may leave government’s 6 per cent growth target a distant dream. In addressing the shortages of skilled technicians, artisans, engineers and middle to senior management, government has proposed a policy whereby immigration laws and the work permit application process will be greatly simplified and relaxed in an effort to make it easier for people who possess critical skills to enter and work in South Africa. This is an important short- run initiative and if utilised properly by firms, may alleviate some of the most critical skills shortages in the short term. At the same time, however, it is equally important to curb the loss of critical skills through emigration with the use of aggressive retention strategies. In the longer run it is to reinvest time and effort towards the development of new skills internally. The restructuring of the FET college system will hopefully improve the quality of technical training, although many have raised concerns about the new proposed curricula. Proper consultation between the authorities, educational institutions and industry may ensure that public education and training is appropriate and quality-driven. Workplace training in the form of learnerships and apprenticeships are generally viewed in a positive light by firms and should be expanded and improved even further. While there are some concerns around the efficiency and bureaucratic processes within the SETAs, it is important that firms buy into the process of training and developing internal talent. Various policy ideas around the implementation and use of learnerships and apprenticeships were raised in this report, including learnerships for middle-management training, options for creating incentives for firms to increase the intake of learners, and reinstating the faith in the apprenticeship system as an alternative to learnerships where appropriate. If the economy is successful in enrolling more learners it may potentially have a large impact on employment. As far as graduate unemployment is concerned the problem has been identified as a skills deficit. Poor quality education, inappropriate qualifications and poor soft skills is causing firms to hire fewer graduates than they would have had the quality of these labour market entrants been higher. Reforms have to start at primary and secondary school level with proper education and good quality teachers, especially in the areas of mathematics and science. Career guidance and incentives to students (or academic institutions) to enrol in the right areas of study are crucial. Learnerships may also be used to close the skills gap, either through soft skills training or bridging courses that provide not only workplace readiness training, but also retrain graduates in the right study areas. While these are all measures to directly impact on graduate employment, or at least the employability of graduates, it is quite likely that graduate employment levels will also

58

Graduate Unemployment In South Africa

benefit indirectly from skills acquisition at middle to senior management level. Once fewer vacancies exist and management level firms will be able to absorb more graduates as well as skills and experience will be available for training of young recruits. Ultimately then, the above study, through gleaning information from nationally representative statistics and a small, but significant sample of firms, has attempted an overview of the graduate unemployment issue. It is clear that in both our prognosis of the problem and a select, but hopefully, focused set of proposals much still needs to be done to resolve what is probably one of the key constraints to long-run growth in the South African economy.

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Graduate Unemployment In South Africa

6. References
ASGISA (2006). "A Catalyst for Accelerated and Shared Growth - South Africa. Background Document." Media Briefing by Deputy President Phumzile MlamboNgcuka. 6 February 2006. Babb, S. and Meyer, T. (Eds.) (2005). Perspectives in Learnerships: South African Case Studies. Knowres Publishing (Pty) Ltd: Randburg. Bell, T. and Cattaneo, N. (1997). "Foreign trade and employment in the South African manufacturing industry," Occasional Report, No. 4. Employment and Training Department, International Labour Organisation, Geneva. Bhorat, H. and Hodge, J. (1999). "Decomposing Shifts in Labour Demand in South Africa," South African Journal of Economics, 67(3): 348-380. Bhorat, H. and Oosthuizen, M. (2005). What Have We Learnt about the South African Labour Market?: Development Policy Research Unit, University of Cape Town. Burger, R. and Woolard, I. (2005). "The State of the Labour Market in South Africa after the First Decade of Democracy," CSSR Working Paper No. 133. Centre for Social Science Research, University of Cape Town. Chandra, V., Moorty, L., Rajaratnam, B. and Schaefer, K. (2001). "Constraints to Growth and Employment in South Africa. Report No. 1: Statistics from the Large Manufacturing Firm Survey," Informal Discussion Papers on Aspects of the Economy of South Africa, No. 14. Cosser, M., McGrath, M., Badroodien, A. and Maja, B. (2003). "Technical College Responsiveness. Learner destinations and labour market environments in South Africa," Research Programme on Human Resources Development, HSRC Research Monograph. Human Sciences Research Council. CSSR and SALDRU (2002). Cape Area Panel Study: Centre for Social Science Research and South African Labour and Development Research Unit, University of Cape Town. Department of Education (2003). "Education Statistics i South Africa at a glance in n 2001." Department of Education, Pretoria. June 2003. Department of Finance (1996). Growth, Employment and Macroeconomic Strategy, Pretoria: Ministry of Finance. Redistribution. A

Department of Home Affairs (2006). "The National Scarce and Critical Skills List," Government Gazette, No. 28480. Department of Labour (2005). "National Skills Development Strategy (NSDS) Implementation Report: 2004 - 2005." Department of Labour, Pretoria. Available online at www.labour.gov.za. Department of Labour (2006a). "National Skills Development Strategy (NSDS) Implementation Report: 2004 - 2005." Department of Labour, Pretoria. Available online at www.labour.gov.za. Unpublished. Department of Labour (2006b). "Registered Learnerships by SETAs." Department of Labour, Pretoria. Available online at www.labour.gov.za. 27 January 2006.

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Dunne, P. and Edwards, L. (2005). "Trade and Poverty in South Africa: Exploring the trade and employment linkage." Paper prepared for the Trade and Poverty Project. Available online at www.cssr.uct.ac.za/saldru. Edwards, L. (2001a). "Globalisation and the skill bias of occupational employment in SA," South African Journal of Economics, 69(1): 40-71. Edwards, L. (2001b). "Trade and the Structure of South African Production, 1984-97," Development Southern Africa, 18(4): 471-492. Hartzenberg, T. and Stuart, J. (2002). "South Africa's Growth Performance since1960: A Legacy of Inequality and Exclusion," Report prepared for the AERC Growth Project. University of Cape Town. HSRC (2005). "Further Education and Training: Quo Vadis," SAQA Bulletin, 7(1): 5-46. ILO (2004). "Global Employment Trends for Youth." International Labour Organisation. Available online at www.ilo.org. August 2004. JSE/Liberty Life (2006). "JSE/Liberty Life Investment Challenge." Available online at http: //university.jse.co.za/Company/top40companies.htm. 10 March 2006. Kingdon, G.G. and Knight, J. (2000). "Unemployment in South Africa: The Nature of the Beast." Paper presented at the Trade and Industrial Policy Strategies Annual Forum, Muldersbush. Koen, C. (2003). "The Contribution of Technikons to Human Resource Development in South Africa," DPRU Working Paper No. 03/80. Development Policy Research Institute, University of Cape Town. August 2003. Kraak, A. (2003). "HRD and the Skills Crisis." In Human Resources Development. Education, Employment and Skills in South Africa, edited by Kraak, A. and Perold, H. Pretoria: HSRC Press. Kraak, A. (2005). An overview of South African human resources development. HSRC Press: Cape Town. Kraak, A. (2006). "The challenge of the ‘second economy’ in South Africa: The contribution of skills development," Journal of Vocational Education and Training, 57(4): 429-452. Lawless, A. (2006). "Number & Needs. A wake up call to address the capacity crisis in SA civil engineering," published online at www.civils.org.za. South African Institution of Civil Engineering. Lewis, J.D. (2001). "Policies to Promote Growth and Employment in South Africa." World Bank, Washington. Mlatsheni, C. (2005). "The youth labour market: What does is take to succeed?," Mimeo. Moleke, P. (2005). "Finding work. Employment experiences of South African graduates," Compiled by the Employment and Economic Poliy Research Programme. Human Sciences Research Council. National Treasury (2005). "Medium Term Budget Policy Statement." National Treasury, Pretoria. Available online at www.finance.gov.za. October 2005. National Treasury (2006a). "Budget Review 2006." National Treasury, Pretoria. Available online at www.finance.gov.za.

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National Treasury (2006b). "Estimates of National Expenditure." National Treasury, Pretoria. Available online at www.finance.gov.za. February 2006. Oosthuizen, M. (2005). "The Post-Apartheid Labour Market: 1995 -2004." Development Policy Research Unit, University of Cape Town. Papier, J. (2006). "FET Seminar: Youth Unemployment and Education in South Africa." Paper presented at the Harold Wolpe Memorial Trust and Inset Providers Coalition (IPC) 49th Open Dialogue Event., 2 February 2006, Cape Town. Pauw, K. and Edwards, L. (2003). "Evaluating the General Equilibrium Effects of a Wage Subsidy Scheme for South Africa." Paper presented at the Biennial Conference of the Economic Society of South Africa, 17 - 19 September 2003, Somerset West. Pauw, K., McDonald, S. and Punt, C. (2004). "The Welfare Impacts of Domestic and International Agricultural Efficiency Gains: A South African Case Study." Paper presented at the Inaugural Symposium of the African Agricultural Economic Society, 6 - 9 December 2004, Nairobi, Kenya. Powell, L. and Groenmeyer-Edigheji, S. (2006). "The Identification of Scarce and Priority Skills. An Introduction to the Methodological and Conceptual Challenges Involved," Report prepared for the Accelerated and Shared Growth - South Africa (ASGISA) initiative. 6 February 2006. Republic of South Africa (1981). "Manpower Training Act, No. 56 of 1981." Pretoria. Republic of South Africa (1996). "National Youth Commission Act, No 19 of 1996." Pretoria. Republic of South Africa (1998). "Skills Development Act, No. 97 of 1998." Pretoria. Republic of South Africa (1999). "Skills Development Levies Act, No. 9 of 1999." Pretoria. Robinson, V., Gedye, L., Mabanga, T. and Tabane, R. (2005). Shortage Confusion Mismatch Surplus. SABC News (2005). Database for graduates launched. Smith, M.J., Jennings, R. and Solanki, G. (2005). "Perspectives on Learnerships: a critique of South Africa's transformation of apprenticeships," Journal of Vocational Education and Training, 57(4): 539-564. SSA (Various). Labour Force Survey (Various), Pretoria: Statistics South Africa. Vink, N. (2000). "Farm profitability and the cost of production inputs in South African agriculture," A Report to the National Department of Agriculture. http: //www.agriinfo.co.za.

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Unemployment Databases

Research Report Compiled for Business Leadership South Africa Funded by Standard Bank

March 2006

Development Policy Research Unit School of Economics, University of Cape Town Private Bag, Rondebosch, 7701 http: //www.commerce.uct.ac.za/dpru/

1

Graduate Unemployment In South Africa

1. Introduction
Unemployment amongst graduates can be partly attributable to incomplete information: graduates do not know about all the current job opportunities for which they qualify and employers do not know about all the current labour force members who are able to fill their vacancies. One way to address this issue and thereby help alleviate, at least partially, the unemployment problem is to improve labour force members’ and employers’ information. Specifically, this can be achieved via the creation of centralised databases that can be used by individuals and/or employers and two such databases are investigated below. These two databases, the South African Graduates Development Association (SAGDA) Database and the Umsobomvu Youth Fund’s JOBS Database, contain the details of workseekers and are used to match workseekers to employers’ requirements. The first database is a privately held database, SAGDA being a nongovernmental organisation, while the JOBS database is publicly held. The purpose of the analysis of these two datasets is to provide an indication of the type of individuals that form part of the databases, including analysis of their demographic and educational characteristics. In the case of the JOBS database, there is a second objective, namely to highlight some of the issues that constrain the effective and efficient use of the database and that limit its contribution to alleviating unemployment.

2. The South African Graduates Development Association Database
The South African Graduates Development Association (SAGDA) is a non-governmental youth initiative established in 1997. According to its mission statement, SAGDA aims to “develop Graduates from tertiary institutions for active participation in the socio economic mainstream, while inculcating a culture of social responsibility, through the rendering of a quality and professional service in order to reduce the level of graduate unemployment” (SAGDA, 2006b:2). Various organisations, in both the public and p rivate sectors, have recruited graduates from SAGDA, including National Treasury, Statistics South Africa, Eskom, Arthur Anderson, Pick ‘n Pay, CASE and World Vision (SAGDA, 2006b: 7). The SAGDA database is comprised of 2 405 records, each representing one graduate. A variety of fields exist in the database, including the individual’s name, identity number, qualification, major subjects, institution, date of completion of qualification, location and contact number. Gender and age are derived from the identity numbers, the former from the seventh digit of the ID number (0 to 4 is female, 5 to 9 is male) and the latter from the date of birth contained in the first six digits of the ID number. Unfortunately, there are problems with a number of the fields. For example, contact numbers were only entered for two groups of individuals: those with contact numbers recorded in the database held either B.Admin. or B.Sc. degrees and numbered only 218 (fewer than ten per cent of the records). This, and the fact that only five individuals with these degrees have no contact number information, means that contact numbers were only selectively captured and can not therefore be used in the analysis. Data on major subjects is stored as text and is not amenable to analysis without substantial investment of time for questionable returns. Similarly, the qualification field often does not clearly or consistently classify qualifications. Figure 1 presents the age and gender distribution of the individuals in the database. Unsurprisingly, they are relatively young: of the 2 304 individuals for whom a date of birth 1

Graduate Unemployment In South Africa

can be derived, ages range between 20 years and just over 56 years, with the mean age being 29.3 years. This is consistent with the fact that all individuals (except one) have obtained a post-school qualification. The database is almost perfectly evenly split between males and females (where gender information is available), while there is no real difference in the mean ages of these two groups. In general, females outnumber males in the lowest age groups (below 28 years) and in the highest age groups (35 years and over), while males are more numerous in the middle age groups. The bulk of individuals are to be found between 25 and 32 years of age.

Figure 1: Gender and Age Distribution of Individuals in SAGDA Database
350 300 262

332 301

Number of Individuals

250 211 200 150 100 50 19 0 0 0 0 0 40 172 150 171

226

98 80

111 87 95

17 0 0 0

27 0 2 4

s s s s s s s lus fied ear ear ear ear ear ear ear eci rs p 7y 4y 2y 9y 4y 2y 9y nsp yea o2 o2 o3 o3 o3 o2 o2 t t t t t t t U 40 20 23 25 28 30 33 35

Males

Females

Unspecified

Source:

Own calculations, SAGDA database (SAGDA 2006a).

The database also records information regarding the institution from which the individual obtained their qualification. Recent changes in higher education, which resulted in the merging of various institutions of higher education and the introduction of the ‘University of Technology’ designation to replace that of ‘Technikon’, have made the analysis of this field somewhat complex. The decision was taken to analyse the field using the new designations, firstly to reflect the current institutional landscape and, secondly, to minimise confusion and problems of allocating graduates from new institutions to old institutions. In most instances, the reallocation of graduates from the old universities and technikons to the new universities and universities of technology is straightforward. However, in the cases of the old University of the North and the old Vista University, where specific campuses were merged into different new institutions, such reallocations were not possible. Fortunately, though, these two institutions still form part of universities and are therefore included within the University category. 1

1

Parts of the University of the North were merged with MEDUNSA to form the University of Limpopo, while parts were merged into the University of the Free State. Vista University’s Port Elizabeth Campus was merged into the Nelson Mandela Metropolitan University, its Mamelodi Campus now forms part of the University of Pretoria, while Vista-Vudec was merged into UNISA.

2

Graduate Unemployment In South Africa

Of the 2 405 individuals in the database, 1 390 (57.8 per cent) graduated from institutions that are now universities (including 379 graduates from the old universities of Vista and the North), 713 (29.7 per cent) graduated from institutions that are now Universities of Technology, and 302 (12.6 per cent) graduated from various colleges and other educational institutions. This latter group includes a handful of graduates of foreign educational institutions, including universities. Figure 2 presents information on the institutions from which qualifications are obtained according to the age of the individual. The proportion of individuals within each age group that obtained their qualification from Universities increases as age increase, while the opposite is true for Universities of Technology (UTs) and, to a lesser extent, Colleges. This can be explained in various ways, such as that University qualifications may, on average, take longer to obtain than qualifications from other institutions, or that older individuals have had more time in which to accumulate university qualifications in addition to earlier UT or college qualifications. It may also be interpreted as indicating greater probabilities of employment for UT graduates, although this conclusion cannot be substantiated by the data, particularly since it is not a representative sample. It is also important to note that the actual numbers of individuals aged 33 years and older are considerably smaller than younger age groups in general.

Figure 2: Institution Graduated From by Age Group

20 to 22 years 23 to 24 years 25 to 27 years 28 to 29 years 30 to 32 years 33 to 34 years 35 to 39 years 40 years plus

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

Proportion of Individuals (Percent)
College University of Technology University

Source: Note:

Own calculations, SAGDA database (SAGDA 2006a). 1. The following institutions comprise the “University” category: the Universities of Cape Town, Fort Hare, the Free State, Johannesburg, KwaZulu-Natal, Limpopo, the North-West, Pretoria, Stellenbosch, Venda, the Western Cape, the Witwatersrand, and Zululand, as well as the Nelson Mandela Metropolitan University, Rhodes University, UNISA, the Walter Sisulu University. This category includes traditional universities and comprehensive universities. The following institutions comprise the “University of Technology” category: the Cape Peninsula University of Technology, the Central University of Technology, the Durban Institute of Technology, the Tshwane University of Technology, the Vaal University of Technology, and Mangosuthu Technikon. Colleges include all other institutions.

3

Graduate Unemployment In South Africa

The majority of graduates in the database have graduated relatively recently (Figure 3). The majority of individuals graduated between 1998 and 2003, although there is a substantial proportion (23.5 per cent) that do not report the year of graduation. Approximately 28 per cent of individuals in the database graduated in 2002-2003, while a further 20 per cent graduated in 2000-2001 and 12 per cent in 1998-1999. Following the analysis of Figure 2, it is not surprising that university graduates dominate in each period. Proportionally, university graduates account for between 50 per cent and 64 per cent of graduates in each period, and UT graduates account for 16 per cent and 35 per cent. All other graduates account for between eight per cent and 32 per cent of the database.

Figure 3: Year Graduated by Type of Institution

1986-93 1994-95 1996-97 1998-99 2000-01 2002-03 2004-05 Unspecified

0

50

100

150

200

250

300

350

400

450

500

550

600

650

Number of Individuals
College University of Technology University

Source: Note:

Own calculations, SAGDA database (SAGDA 2006a). 1. The following institutions comprise the “University” category: the Universities of Cape Town, Fort Hare, the Free State, Johannesburg, KwaZulu-Natal, Limpopo, the North-West, Pretoria, Stellenbosch, Venda, the Western Cape, the Witwatersrand, and Zululand, as well as the Nelson Mandela Metropolitan University, Rhodes University, UNISA, the Walter Sisulu University. This category includes traditional universities and comprehensive universities. The following institutions comprise the “University of Technology” category: the Cape Peninsula University of Technology, the Central University of Technology, the Durban Institute of Technology, the Tshwane University of Technology, the Vaal University of Technology, and Mangosuthu Technikon. Colleges include all other institutions.

The SAGDA database appears to be a useful database and, judging from the fact that SAGDA has been able to place individuals with a variety of organizations, the database appears to be functioning well. Unfortunately, though, the database is relatively small, thereby possibly limiting its impact on unemployment in the national context.

4

Graduate Unemployment In South Africa

3. The JOBS Database 3.1 The Nature of the Data

The Jobs and Opportunities Seekers’ (JOBS) Database is a database held and administered by the Umsobomvu Youth Fund (UYF) and aims to facilitate the employment of graduates by providing a link between unemployed graduates and employers. The JOBS database contains 136 256 records. However, 3 783 of these records are duplicates. Once these records are dropped from the dataset, 132 473 unique records remain. However, this is a poor reflection of the true extent of this database. Investigation of the data reveals, as will be discussed below, that 51 875 individuals in the database have provided no contact information whatsoever. What this means, in the context of the objective of the database, is that, should an employer decide to offer an individual employment, there is an almost 40 per cent chance that they will be unable to contact the individual. Clearly, this is of concern. The database is evenly balanced between males and females, with females accounting for 50.3 per cent of individuals and enjoying a slight majority of less than 1 400. Just under 550 individuals did not report their genders. Interestingly, males outnumber females in all but one age-group, namely the 15 to 17 year age-group, where females account for 55.1 per cent of individuals. Further, the proportion of males within each agegroup increases as age increases, eventually stabilising at around 65 per cent for the age-groups between 30 and 39 years. This dominance of males in almost all age- groups is related to the fact that females account for 61.2 per cent of individuals that did not report their age, and this may also be related to the increased dominance of males within older age-groups.

5

Graduate Unemployment In South Africa Figure 4: Gender Distribution of Individuals in JOBS Database

Proportion of Individuals (Percent)

100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 20 to 22 years 23 to 24 years 25 to 27 years 28 to 29 years 30 to 32 years 33 to 34 years 35 to 39 years 40 years plus 15 to 17 yrs 18 to 19 yrs Unspec/Invalid

Males

Females

Source:

Own calculations, JOBS database (UYF, 2006).

Notes:

1.

Negatives ages, as well as ages below 15 years and over 65 years, are treated as invalid and are grouped with unspecified ages .

The analysis of racial composition of individuals in the database is complicated by two factors. Firstly, racial categories are blurred by the fact that some 1 100 individuals report being ‘Black’ as opposed to one of the four standard racial classifications generally used in South Africa. Secondly, almost two-fifths (37.3 per cent) of individuals in the database do not specify their race. Since it is not clear as to which races are more likely to report their race, it is difficult to make any definitive statements regarding the racial composition of the database. Nevertheless, Africans do dominate within the database, particularly when those of unspecified race are omitted. Just under three-fifths (58.1 per cent) of individuals are African, rising to 59.0 per cent if ‘Black’ individuals are assumed to be ‘African’. Coloured, Asian and White individuals number just under 5 000 and account for 3.8 per cent of the database. Interestingly, females are substantially less likely than males to divulge their race, as was the case for age. Close to 35 000 females, equivalent to 52.1 per cent of females, did not report their race, compared to 14 100 males (21.6 per cent) who did not report their race.

6

Graduate Unemployment In South Africa Table 1: Racial Composition of Individuals in JOBS Database
Male Number Share 48 489 74.3 47 899 1519 525 662 14 077 65 272 73.4 2.3 0.8 1.0 21.6 100.0 Female Number Share 29 632 44.5 29 090 1317 370 606 34 729 66 654 43.6 2.0 0.6 0.9 52.1 100.0 Total Number Share 78 125 59.0 76 993 2 836 895 1 268 49 349 132 473 58.1 2.1 0.7 1.0 37.3 100.0

African … excl. 'Black' Coloured Asian White Unspecified Total
Source:

Own calculations, JOBS database (UYF, 2006).

Notes:

1.

Numbers and shares may not add to the totals due to the omission of 544 individuals of unspecified gender. This affects the first two and the sixth rows of this table.

As noted previously, a substantial proportion of individuals do not report their age. As is evident in Figure 5, close to nine out of 20 respondents do not report their age or have invalid (negative or improbably high) ages. This is equivalent to more than 59 000 respondents. Of the more than 73 000 individuals with valid age data (between the ages of 15 and 65 years), the mean age is 25.9 years. The figure reveals that a large proportion of individuals with valid age data is concentrated between the ages of 20 and 27 years, as one would expect. In fact, of those with valid age data, the majority (56.0 per cent) are aged between 20 and 27 years.

Figure 5: Age Composition of Individuals in JOBS Database

45.0

Proportion of Individuals (Percent)

40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 Unspec/Invalid 20 to 22 years 23 to 24 years 25 to 27 years 28 to 29 years 30 to 32 years 33 to 34 years 35 to 39 years 15 to 17 yrs 18 to 19 yrs 40 years plus

Source:

Own calculations, JOBS database (UYF, 2006).

Notes:

1.

Negatives ages, as well as ages below 15 years and over 65 years, are treated as invalid and are grouped with unspecified ages .

7

Graduate Unemployment In South Africa

Similar to the analysis of the SAGDA database above, institutions have been grouped according to type, with the distinction made between qualifications from universities, Universities of Technology (UTs) and colleges and other educational institutions. The JOBS database, however, differs from the SAGDA database in that a possible five qualifications and institutions are listed. In order to deal with situations where the type of institution differs for an individual’s different qualifications, a hierarchical approach was taken whereby university qualifications take precedence over UT qualifications, which in turn take precedence over all other qualifications, irrespective of the order in which the qualifications were obtained. This approach is taken to ease analysis and is not meant in any way to reflect on the qualifications or institutions themselves. Figure 6 presents the institutions graduated from according to the individuals’ ages, as a proportion of all individuals with qualification data within the database. Overall, of the 7 375 individuals with qualification data, 39.2 per cent have university qualifications, 24.3 per cent have UT qualifications, while 36.5 per cent have college and other qualifications. It is important to note that the 39.2 per cent with university qualifications may also hold UT, college or other qualifications, while the 24.3 per cent with UT qualifications may also hold college or other (non-university) qualifications. University qualifications are dominant in almost every age-group, accounting for between 36 per cent and 57 per cent of individuals. It is only amongst 25 to 27 year olds that it constitutes the second largest group, accounting for 34.9 per cent of individuals. Proportionally, UT qualifications are concentrated amongst younger age-groups, particularly between the ages of 20 and 30 years. These qualifications account for between 22 and 30 per cent of individuals in their twenties, compared to between seven and 17 per cent of individuals aged 30 years and over. Conversely, the proportion of individuals with college and other qualifications generally rises with age. Only two individuals aged between 15 and 17 years had qualification data and it appears that their age data is incorrect, given that they hold university qualifications.

8

Graduate Unemployment In South Africa Figure 6: Institution Graduated From by Age-Group

15 to 17 years 18 to 19 years 20 to 22 years 23 to 24 years 25 to 27 years 28 to 29 years 30 to 32 years 33 to 34 years 35 to 39 years 40 years plus

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

Proportion of Individuals
College University of Technology University

Source: Note:

Own calculations, JOBS database (UYF, 2006). 1. The following institutions comprise the “University” category: the Universities of Cape Town, Fort Hare, the Free State, Johannesburg, KwaZulu-Natal, Limpopo, the North-West, Pretoria, Stellenbosch, Venda, the Western Cape, the Witwatersrand, and Zululand, as well as the Nelson Mandela Metropolitan University, Rhodes University, UNISA, the Walter Sisulu University. This category includes traditional universities and comprehensive universities. The following institutions comprise the “University of Technology” category: the Cape Peninsula University of Technology, the Central University of Technology, the Durban Institute of Technology, the Tshwane University of Technology, the Vaal University of Technology, and Mangosuthu Technikon. Colleges include all other institutions.

For the JOBS database to succeed in its objective of facilitating the employment of graduates, firms that are interested in employing individuals that have registered on the database need to be able to contact them. The JOBS database allows individuals to supply six sets of contact details, namely telephone number, cellphone number, fax number, email address, physical address and postal address. The first four sets of contact details are r ferred to as ‘immediate contacts’ since they allow rapid, if not e instantaneous, communication with potential recruits. The last two sets of contact details are referred to as ‘delayed contacts’ due to the delay in communication via these two channels. For potential employers, more contact details are undoubtedly superior to fewer contact details. Particularly in instances where some details may become outdated, having more contact details means individuals may still be contactable via other channels. Figure 7 presents the average number of contacts per person across the various agegroups. The three vertical black lines indicate the ideal values. The line at two contacts per person refers to the maximum number of delayed contacts that can be provided, the line at four contacts per person refers to the maximum number of immediate contacts that can be provided, while the line at six contacts per person represents the maximum number of contacts, in total, that can be provided. The problem that employers face in contacting potential recruits is clear from the figure. Overall, the average person in the database provides 0.56 delayed contacts out of two and 0.85 immediate contacts out of

9

Graduate Unemployment In South Africa

four. This means that firms have an average 1.41 methods of contacting a potential recruit. Particularly disturbing is the proportion of the database that does not provide contact information. Of the more than 132 000 individuals in the database, more than 76 000 provide no delayed contact information at all, equivalent to 57.4 per cent of the database. Similarly, more than 55 000 individuals, or 42.0 per cent of respondents, provide no immediate contact information. However, almost 52 000 individuals report no contact data whatsoever. This means that nearly two in five records (39.2 per cent) in the database are essentially useless as potential employers have no means of contacting these individuals. This represents a serious flaw in the database that needs to be addressed urgently if the database is to be used widely.

Figure 7: Ease of Contactability

15 to 17 years 18 to 19 years 20 to 22 years 23 to 24 years 25 to 27 years 28 to 29 years 30 to 32 years 33 to 34 years 35 to 39 years 40 years plus Unspecified

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

Average Number of Contacts Per Person
All Contacts Immediate Contacts Delayed Contacts

Source: Notes:

Own calculations, JOBS database (UYF, 2006). 1. Six fields in the database provide contact information: four of these are ‘immediate’ contact details, including telephone numbers and email addresses, while two of these are ‘delayed’ contact details, namely postal and residential addresses.

The JOBS database also includes data on individuals’ previous employment experiences. Individuals can enter the employer name, job designation, employment dates and sector for up to three previous jobs. Possibly the most interesting fields are employment dates and sector, allowing analysis of duration of previous employment episodes and the sectoral distribution. However, employment dates are relatively rarely provided and the quality of the employment sector data is extremely poor 2. In many instances, data for one employment episode is replicated for each of the three sets of previous employment data
2

The individuals themselves provide the information on employment sector, despite the exercise being relatively complex for individuals that are unfamiliar with the system of classification. For example, an individual may report working as a cashier at a clothing retailer. The sector in this instance would be retail, but the respondent identifies the sector as Clothing, Textiles, Footwear and Leather, which is in fact a manufacturing subsector.

10

Graduate Unemployment In South Africa

in the database. Further, respondents do not always leave the employer fields blank if they have not been employed, meaning that there are more than 20 different values that indicate no previous employer. The poor quality of previous employment data makes the identification of suitable candidates for employment by firms via this database more difficult. As a result, the only use of this data is to determine, with arguably a relatively low level of certainty, whether or not an individual has had any previous work experience. Figure 8 presents the proportion of respondents in each age-group that appear to have had some kind of work experience. An individual is deemed to have had previous work experience if they report an employer name in any of the three employment organisation fields. Very few individuals in the database report having previously been employed: for more than 128 000 individuals, equivalent to 96.8 per cent of the database, no employer data is recorded. This means that a mere 3.2 per cent of respondents have indicated that they have work experience. Lack of work experience is most common amongst the youngest age-groups and, interestingly, amongst the oldest. Low rates of previous work experience amongst younger individuals are not unexpected, given the relatively short time that these individuals have been engaged in the labour market. Low rates of reported experience amongst older individuals, however, relate to high rates of non-completion of the online questionnaire that collects this data. Respondents aged between 20 and 39 years were more likely than average to report previous work experience, with those between 23 and 27 years, in particular, most likely to report having had previous work experience.

Figure 8: Incidence of Work Experience

15 to 17 years 18 to 19 years 20 to 22 years 23 to 24 years 25 to 27 years 28 to 29 years 30 to 32 years 33 to 34 years 35 to 39 years 40 years plus Unspecified

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Proportion of Individuals with Work Experience (Percent)

Source: Note:

Own calculations, JOBS database (UYF, 2006). 1. 2. The vertical line indicates the mean of 3.25 per cent for the database as a whole. An individual is deemed to have work experience if he or she has reported any information in the employment institution fields.

11

Graduate Unemployment In South Africa

Fortunately, where respondents report having had previous work experience, threequarters (76.3 per cent ) of them have contactable references (Figure 9). There is not much variation by age in the proportions with references. There are only two observations in the 15 to 17 year age-group, negating the usefulness of any comparisons with or deductions derived from this group. In most other age-groups, excluding those aged 40 years and above and those of unspecified age, approximately four-fifths of those with previous work experience have references.

Figure 9: Contactable References

15 to 17 years 18 to 19 years 20 to 22 years 23 to 24 years 25 to 27 years 28 to 29 years 30 to 32 years 33 to 34 years 35 to 39 years 40 years plus Unspecified

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

Proportion of Individuals with Work Experience (Percent)

Source:

Own calculations, JOBS database (UYF, 2006).

3.2

Linking Graduates and Employers

The rationale for the establishment of the JOBS database is to provide a link between unemployed graduates and employers, thereby facilitating the employment of the former by the latter. However, there are important questions regarding the extent to which the database is able to fulfil this objective. This is a particularly important issue given the large number of incomplete records that exist in the database. Missing data is not necessarily too problematic depending on its distribution across records and across fields. Missing data concentrated in relatively few records or in relatively unimportant fields may not negatively impact on the usefulness of the database. However, as Figure 10 shows, missing data is common in important fields. The figure presents the proportion of the over 132 000 records that have valid data in 12 selected fields, covering demographic, contact and educational information. The gender field is the most complete field of the 12 fields: 99.6 per cent of records have gender information. This is followed by race, yet 37.3 per cent of records do not have race information. Over half (55.2 per cent) of the records have valid age data, which is linked to problems with the date of birth field. Cell phone numbers are known for 44.5 per cent of the database, while less than one-third (31.4 per cent) and one-quarter (24.4 per cent ) have physical 12

Graduate Unemployment In South Africa

and postal address data respectively. Fewer than one in ten records contain email, matriculation, qualification name or qualification institution data3.

Figure 10: Proportion of Records with Valid Data in Selected Fields

Gender Race Age Cell Phone Physical Address Postal Address Telephone Number Language (first of five) Email Matric Qualification Name (first of five) Qualification Institution (first of five)

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

Proportion of Records (Percent)

Source:

Own calculations, JOBS database (UYF, 2006).

From the perspectives of both individuals registering their CVs on the database and employers searching for prospective employees on the database, there are some important issues that hamper the process. While registration on the database is relatively straightforward, completing the online form is not always simple. Firstly, there is no indication given of which fields are required and which are optional, and it is only when the form is submitted that a dialogue box will inform the respondent of missing required information. It may be worth altering the system so that all information is required, but appropriate options are provided to allow for individuals who are unable to provide that information (such as “None”, “Not applicable” or even “Unspecified” options). The fact that some individuals make it onto the database with virtually no information at all (immediate contact information in particular) means that some sort of screening method should ensure a minimum level of completeness before individuals are entered into the searchable database. One argument against this is that it is the individual’s responsibility to ensure a minimum level of completeness. However, the fact that so many individuals have large amounts of missing information is certainly detrimental to potential employers’ perceptions of the usefulness of the database and whether or not it is worthwhile to undertake searches. Further, the small number of job advertisements placed on the website is further evidence of low usage levels of the database. For example, on Friday

3

The ‘matric’ variable in the database is a zero-one dummy variable. However, since a value of one indicates the presence of data regarding the individuals’ Grade 12 year of schooling, it is not possible to determine whether a value of zero reflects the fact that the concerned individual has not completed Grade 12, or the fact that the concerned individual has omitted to fill in this information. This is also the reason why no analysis of this field is presented.

13

Graduate Unemployment In South Africa

31 March, a total of 45 job advertisements were listed on the UYF website with salaries ranging from a few thousand rands per month to more than R550 000 per annum. Secondly, insufficient use of drop-down menus is made, meaning that manipulation of the database for searches (and analysis) is made substantially more complex by the fact that identical information can be stored differently. For example, where individuals are asked the tertiary education institution from which they obtained their qualification, one individual may enter “The University of the Witwatersrand”, another may enter “University of the Witwatersrand”, a third may enter “Wits University”, and so on, requiring extensive cleaning of the database. Other important examples include dates, qualifications and matric subjects. While cleaning the dataset for analysis, a total of 27 different values in the first employment organisation field indicating no previous work experience were identified. Use of a calendar in a pop-up window is required for valid entry of date of birth and other date data, although this is not clearly stated, nor is it made impossible to type the date in manually. However, when the form is submitted, an automated error message is generated without any reference to how the error can be rectified. It is quite possible that this may prevent individuals from entering their information, contributing to the problem of sparsely populated fields within the database. Entered data is also not properly screened before it is accepted. The database should reject invalid responses such as three digit phone numbers, five digit years, telephone numbers containing letter, etc. Thirdly, searches performed by firms on the database are difficult and the quality of results is variable. Firms that register to use the UYF database are able to perform searches via drop-down menus on eight fields, namely Level of Education, Position Level, Qualification (not a drop-down menu), SAQA Verified, Province, Age Cohort, Gender, and Affirmative Action. However, probably largely due to the issue of missing data, searches using certain fields are virtually useless. For example, searches using the Affirmative Action field only (specifying yes or no) render no results at all, only searching for ‘Non Graduates’ under Level of Education yields zero results, only specifying ‘Yes’ under SAQA Verified renders 18 results, while only searching for matriculants under Level of Education delivers 11 matriculants. Further, due to the problems in terms of the qualification data, searches for specific degrees are problematic. For example, searches for ‘B.Comm.’, ‘B.Com.’ and ‘B Com’ will deliver different sets of results. One way around this is to perform a keyword search, specifying a particular specialisation, for example. Thus, the B.Comm. search can be replaced by a search for ‘Accounting’, for example, although this search will only yield those individuals that specify ‘Accounting’ within the qualification field and those who spelled it correctly. The usefulness of the database from the perspective of employers can certainly be increased by increasing the number of fields according to which searches can be done. Most problematic, though, is the fact that missing data narrows the search far more than the searcher realises. For example, stipulating one of the three age cohorts (14-19, 2024, 25-35) excludes almost 50 per cent of the database, due to missing age data, even before individuals from the remaining two cohorts are excluded. Once a search has been performed and the maximum of 30 results are displayed, it is often a long process to open CVs and locate candidates with immediate contact details. The Umsobomvu Youth Fund’s JOBS database is potentially an extremely useful database, providing an important link between jobseekers and employers and 14

Graduate Unemployment In South Africa

contributing to the reduction of unemployment of the youth. However, due to various reasons, the database is currently not realising its full potential. The aim of this section is not to present a damning critique of the database, but rather to begin to identify problems and potential issues that hamper the full utilisation of the database and that prevent it from achieving its objectives.

15

Graduate Unemployment In South Africa

4. Conclusion and Recommendations
The DPRU has managed to secure two databases of unemployed young people. The first, from the Umsobomvu Youth Fund (UYF), contains more than 130 000 records, of whom only 60 per cent are contactable, covering a wide spectrum of qualifications, including matric certificates, diplomas and degrees. The second database, is that provided by the South African Graduates Development A ssociation (SAGDA), which contains a listing of some 2 500 unemployed individuals with post-matriculation qualifications. Currently, both databases are in an electronic form that is not user-friendly to potential employers – a survey response that was common with respect to the UYF database in particular. However, these two datasets do contain the raw elements for a nationally representative electronic storage facility of unemployed individuals. This presently does not exist and, arguably, would serve as the beginnings of a free-to-use labour market information system for all firms in the economy. The UYF’s JOBS database has the potential to make a meaningful positive contribution to the graduate unemployment problem. However, the attainment of this potential is hamstrung by problems relating to the setup and administration of the database. These problems, many of which are relatively easy to resolve, have meant that the value of the database as a whole has been eroded in the eyes of firms and other potential employers. It is most useful to consider the database from two viewpoints: firstly, as a repository of data on unemployed graduates and, secondly, as a source of information for potential employers. As a repository of information on unemployed graduates, the JOBS database has the basic ingredients for a useful database and can be upgraded without having to be completely repopulated. However, the existing database needs to be cleaned, specifically to remove duplicate records and to delete duplicated entries, particularly in the work experience and qualification fields. A marketing campaign can be undertaken to publicise the ‘relaunch’ of the database, encouraging all individuals who have previously registered on the database to ensure that their details are complete and stipulating that individuals with incomplete information can not be added to the searchable database used by employers. The minimum amount of information required by employers should be established and should be communicated to respondents during the data collection process (e.g. by highlighting with colour the specific fields that are required for entry into the searchable database). Individuals should, however, still be able to register on the database, irrespective of how incomplete their data is. Those who have registered on the database should be required to ‘check in’ or log into the database once in a specified period, say six or 12 months, to update their details, including employment status, failing which they may be removed from the searchable database until such time as they do update their details. This will ensure that the database remains reasonably current and accurate. A thorough review of the data collection system by experts in this field, with the objective of identifying and correcting problems that have led to the large amount of missing data that currently characterises the database, would also be invaluable. The searchable database available to prospective employers should exist separately (conceptually, but not necessarily physically) from the main database. Currently, the database is probably of relatively little use to firms seeking to recruit due largely to the 16

Graduate Unemployment In South Africa

missing data problems. Consequently, o nly records that have the required minimum information should be included in the searchable database in future. It is clear that the required minimum information should be determined via consultation with potential employers: if employers feel that vital information continues to be lacking in the searchable database, confidence in the reconstituted database as a viable means of recruitment is unlikely to materialise. The search function available to employers should be re-examined, to allow firms greater flexibility in searching for suitable candidates. Throughout this process, it would be important to elicit the opinions of firms that have used this database in the past, as well as those who would be likely to do so in the future, in order to ensure the process is as streamlined and user-friendly as possible. It is envisaged that these changes would result in greater efficiency and effectiveness for the JOBS database, enabling it to play its full role within the national labour market.

17

Graduate Unemployment In South Africa

5. References
SAGDA(2006a). SAGDA Database, Johannesburg. SAGDA (2006b). “SAGDA Profile.” South African Graduates Development Association, Johannesburg. Umsobomvu Youth Fund (2006). JOBS Database, Pretoria.

18

Appendix Graduate Unemployment in Post-Apartheid South Africa: Nature and Possible Policy Responses

Research Report Compiled for Business Leadership South Africa Funded by Standard Bank

March 2006

Development Policy Research Unit School of Economics, University of Cape Town Private Bag, Rondebosch, 7701 http://www.commerce.uct.ac.za/dpru/

Graduate Unemployment In South Africa

Table of Contents
1. WORKPLACE TRAINING & THE NATIONAL SKILLS DEVELOPMENT STRATEGY _ 1 1.1 INTRODUCTION _______________________________________________________ 1 1.2 W HAT IS A LEARNERSHIP? _______________________________________________ 2 1.3 LEARNERSHIPS, APPRENTICESHIPS AND SKILLS PROGRAMMES ___________________ 3 1.4 HOW TO ESTABLISH A LEARNERSHIP _______________________________________ 4 1.4.1 Registration of the Learnership_______________________________________ 4 1.4.2 Quality Assurance and Assessment___________________________________ 5 1.4.3 Choosing Learners ________________________________________________ 6 1.4.4 Costs and Funding ________________________________________________ 6 1.5 DEMAND FOR LEARNERSHIPS_____________________________________________ 7 1.5.1 Skills Shortages___________________________________________________

7 1.5.2 Sector Specific Skills_______________________________________________ 8 1.5.3 Sector Demand ___________________________________________________ 8 1.5.4 Company Culture _________________________________________________ 9 1.6 POTENTIAL PITFALLS AND PROBLEMS ______________________________________ 9 1.6.1 Employers _______________________________________________________ 9 1.6.2 SETAs __________________________________________________________ 9 1.6.3 Learners _______________________________________________________ 10 1.7 ABSORPTION OF LEARNERS AND GENERAL FINDINGS __________________________ 10 1.7.1 Total Number of Learners on Learnership Programmes __________________ 10 1.7.2 Unemployed Learners_____________________________________________ 11 1.7.3 Finding Employment ______________________________________________ 11 1.7.4 Training Providers and SETAs ______________________________________ 12 1.7.5 NQF Levels of Learnerships ________________________________________ 12 1.8 NSF AND SETA FUNDING AND EXPENDITURE _______________________________ 12 1.8.1 The National Skills Fund (NSF) _____________________________________ 12 1.8.2 SETAs _________________________________________________________ 13 1.9 GLOSSARY OF ABBREVIATIONS __________________________________________ 13 2. INDIVIDUAL COMPANY REPORTS________________________________________ 14 2.1 MINING ____________________________________________________________

14 2.1.1 Company 1A ____________________________________________________ 14 2.1.2 Company 1B ____________________________________________________ 15 2.2 MANUFACTURING_______________________________________________

______ 17 2.2.1 Company 2A ____________________________________________________ 17 2.2.2 Company 2B ____________________________________________________ 18 2.2.3 Company 2C ____________________________________________________ 19 2.2.4 Company 2D ____________________________________________________ 21 2.2.5 Company 2E ____________________________________________________ 23 2.2.6 Company 2F ____________________________________________________ 25 2.2.7 Company 2G ____________________________________________________ 27 2.2.8 Company 2H ____________________________________________________ 29 2.2.9 Company 2I _____________________________________________________ 32 2.3 CONSTRUCTION ______________________________________________________ 33 2.3.1 Company 3A ____________________________________________________ 33 2.4 W HOLESALE AND RETAIL TRADE _________________________________________ 34 2.4.1 Company 4A ____________________________________________________ 34 2.5 FINANCIAL SERVICES __________________________________________________ 37 2.5.1 Company 5A ____________________________________________________ 37 2.5.2 Company 5B ____________________________________________________ 38 2.5.3 Company 5C ____________________________________________________ 39

Graduate Unemployment In South Africa

2.5.4 Company 5D ____________________________________________________ 41 2.5.5 Company 5E ____________________________________________________ 43 2.6 TRANSPORT AND COMMUNICATION SERVICES _______________________________ 44 2.6.1 Company 6A ____________________________________________________ 44 2.6.2 Company 6B ____________________________________________________ 45

Graduate Unemployment In South Africa

1. Workplace Training & The National Skills Development Strategy 1.1 Introduction

The Skills Development Act of 1998 (and amended in 2003) (Republic of South Africa, 1998) provides the institutional framework for the development and implementation of national, sectoral and workplace strategies to develop and improve the skills of the South African workforce. In terms of the Act, a number bodies and schemes were established. 1 The National Skills Authority (NSA) was established to, along with its other functions, advise the Minister of Labour on a national skills development policy and strategy as well provide guidelines for the implementation of the strategy. The Act also provided for the establishment of the Sector Education and Training Authorities (SETAs), learnerships, Skills Programmes as well as the National Skills Fund (NSF). The National Skills Development Strategy (NSDS) was launched in 2001 with the aim of transforming education and training in South Africa by improving both the quality and quantity of training. The initial targets of the strategy were set for March 2005. The NSDS consists of a set of performance indicators which define certain levels of training that need to be met within the term of the strategy. One of these performance indicators was that by March of 2005, a minimum of 80 000 people under the age of 30 were to have entered learnerships. In 2005, a further skills development strategy for the period 2005 – 2010 was launched. The 2005-2010 NSDS aims at supporting employment creation and poverty eradication through economic growth, promoting productive and equitable citizenship through aligning skills development with national strategies for skills development, and accelerating broad based black economic empowerment, with the goal being to halve the unemployment rate by 2014 (National Treasury, 2006b: 358). The responsibility of implementing the NSDS rests with the NSF and the SETAs. The NSF was set up in 1999 in terms of the Skills Development Act 1998 and is aimed at achieving the annual targets of the national skills development strategy. The NSF may only be used for national priorities identified by the NSA. Most of the revenue of the NSF comes from 20 per cent of the Skills Development Levy which is allocated to the NSF. Under the Skills Development Act, 25 SETAs were established in March 2000. SETAs are funded mainly through the skills development levies collected within its sector as well money paid to it from the NSF. The main functions of SETAs are to: • • Develop sector skills plans Develop and register learnership programmes. Learnerships have to be registered with the relevant SETA.
2

1 2

The NSA consists of representatives of organised labour, organised business, government, development and community organisations, as well as education and training providers. In August 2005, the Minister of Labour announced the merger of some of the SETAs. DIDTETA and POSLEC SETA were merged to form SAS SETA, while PAETA and SETASA were merged to form AgriSETA. There are currently 23 SETAs. See Appendix for a list of SETAs.

1

Graduate Unemployment In South Africa •

Quality assure qualifications and standards of programmes: A SETA applies to SAQA for accreditation for the Education and Training Quality Assurance (ETQA) within its sector. As an ETQA, the SETA can authorize providers to offer education and training in accordance with the standards and qualifications registered on the NQF. Disburse national skills development levy funds



Each SETA has to draw up a sector skills plan within the national skills development strategy which guides the decisions about skills development priorities and provides the background for the activities of the SETA.

1.2

What is a Learnership?

Learnerships are part of the skills development strategy and are meant to address problem areas of the SA labour market by bringing education and training closer to labour market needs. Learnerships are specifically aimed at trying to assist new entrants into employment by providing them with skills and improving their chances of finding or creating work The learnership system is derived from the apprenticeship system; while in countries like UK, Australia and Germany these retooled apprenticeships became known as ‘Modern Apprenticeships’, in South Africa they became known as learnerships (Smith et al., 2005:540). The purpose of learnerships are threefold: to provide workplace learning by an accredited training provider, to ensure the link between structured learning and work experience and to ensure that training culminates in a nationally recognized qualification. Formally, a learnership is regarded as a contract between a learner, an employer, and a training provider for a specified period leading to the acquisition of a national qualification (Babb and Meyer, 2005: 87) The four employment contexts within which learnerships can be set up as defined by government are: firstly, medium to large enterprises in the formal sector; secondly, SMMES in both the formal and informal sector; thirdly, volunteer and non-governmental development sectors; and lastly, public sector job creation schemes (Kraak 2006). The qualification obtained via the learnership is registered on the National Qualifications Framework (NQF) by the South African Qualifications Authority (SAQA). The NQF is a framework (created by the South African Qualifications Authority Act of 1995) on which standards and qualifications agreed to by education and training stakeholders throughout the country are registered. National Standards Bodies (NSBs) and Standards Generating Bodies (SGBs) are responsible for the generation and recommendation of the qualifications and standards for registration on the NQF. Unit standards are components or building blocks of NQF qualifications. In other words, a number of unit standards combined in an agreed way make up a qualification. The unit standards form the basis of assessment and are a guide for educators when preparing learning material. The building blocks of a learnership are therefore unit standards. These unit standards are components focusing on the theory and practice of the occupation, relevant communication and numeracy outcomes, industry specific knowledge, issues of national importance, life skills issues, entrepreneurship, etc. Each unit standard has a credit value and one credit is equal to ten average hours of learning. A learnership should consist of a minimum of 120 credits, and 120 credits should take a year to complete. A learner can

2

Graduate Unemployment In South Africa

get credits towards a qualification through the process of Recognition of Prior Learning (RPL), where skills previously obtained can be assessed against the outcomes of the unit standard.

1.3

Learnerships, Apprenticeships and Skills Programmes

Formal skills development programmes can be in the form of learnerships, apprenticeships or skills programmes. Learnerships and apprenticeships are both workbased routes to learning that combine theoretical learning components with practical workplace application. With the introduction of learnerships, some of the existing apprenticeships have been turned into learnerships. There are, however, important 3 distinctions between apprenticeships and learnerships. • Learnerships are period bound and linked to a specific SAQA registered qualification (i.e. it is NQF recognized). Learnerships are targeted at both employed and unemployed learners. Apprentices are trained while working for the employer towards a qualification level in a specified time. The qualification obtained from an apprenticeship is not necessarily SAQA registered. If a learnership is not completed, credits can be retained and the learnership can be completed at a later date. No credits are retained if an apprenticeship is not completed. Learnerships’ scope of coverage is for all possible qualifications (± 25 000), while the scope of apprenticeships is limited to about 500 designated artisan trades. Learnerships are regulated by the Skills Development Act of 1998 and apprenticeships are regulated by the Manpower Training Act of 1981.







Skills Programmes are unit standard based programmes which are occupationally based and offered by an accredited training provider. Upon completion of the Skills Programme the learner will have an employable skill as well as a certain number of credits towards an NQF registered qualification. A training provider may apply to a SETA for a grant after it has developed a skills programme. A grant may be awarded if the programme is in accordance with the sector or national skills development strategy. The main differences between learnerships and Skills Programmes are: • A learnership is a complete learning unit, while Skills Programmes can be combined to form a learnership A NQF level qualification is awarded upon successful completion of a learnership, while credits toward a qualification are awarded when a skills programme has been successfully completed



3

Provided by Indlela, a division within the Department of Labour.

3

Graduate Unemployment In South Africa •

A learnership is a formal agreement between learners, training provider and an employer, while no formal agreement exists in the case of a skills programme A learnership must combine institutional and workplace learning, while a skills programme’s practical component can be offered at the training provider’s site



1.4

How to Establish a Learnership 4
Registration of the Learnership

1.4.1

There are various ways in which a learnership can be set up. For a company that wants to implement a learnership, the first step is to register a Skills Development Facilitator (SDF). The SDF can be an existing employee or external consultant. The SDF is the contact between the company and the SETA and is responsible for compiling the Workplace Skills Plan and the Annual Training Report. A needs analysis is first conducted to determine if there is a demand for a learnership in a particular sector or field. This involves an extensive review of Sector Skills Plans, consultation with various governing bodies, and an investigation of the National Skills Development Strategy and Human Resources Development Strategy. Once the needs analysis confirms the need for a learnership, plans are submitted to the Department of Labour and after the initial concept is approved, a detailed Project Implementation Plan is submitted for approval to the Department of Labour. An employer can either choose a learnership from a list of learnerships registered with the relevant SETA or it can set up and register a new learnership with the SETA. The employer has to develop the capacity for the delivery of the learnership, and identify an accredited training provider before registering the learnership with the relevant SETA. If the employer wants to undertake the formal training, they have to be accredited as a training provider with the SETA, but if they are offering only the practical training component using an external training provider, they have to meet the minimum requirements for becoming a workplace provider which include complying with the relevant acts, transparent policies for selection of learners, adequate work procedures and training facilities for the workplace training component, a database to store learner records, and coaches and mentors to support the learners. Once the employer has selected the learnership to be implemented and the capacity for delivering the learnership is in place, learners are selected, and the learnership agreement is signed by the learners, the employers and the training providers. Employment contracts are signed between employers and learners if the learners are not already employed by the relevant employer. The learnership can then be implemented. The grant can then be claimed back from the SETA and the initial tax allowance is applicable.

4

Information for this section is sourced from various websites including that of the Department of Labour (www.labour.gov.za), Skills Portal (www.skillsportal.co.za) and various SETA websites.

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Graduate Unemployment In South Africa

Up to 70 per cent of the learnership can consist of structured work experience. The employer must ensure that the learner is supervised and has to keep up-to-date records of learning in accordance with the SETA requirements. Employers have to comply with working hours and leave requirements in accordance with labour laws. Learnerships can also be set up by training providers. They have to first ensure that they are accredited as training providers. In order to be accredited, the training provider has to develop a training curriculum for the learnership according to the SAQA standards, as well as follow sound education, training and development practices and be registered as an Education and Training Development Practitioner. Once a training provider has chosen a learnership, they have to find employers to host the learners and p rovide practical workplace experience. The training providers and employers have to agree on the number of learners to be trained, the criteria for choosing learners and where the learners will be sourced from. After sourcing the learners, the learnership agreement can be signed by the trainers, employers and the learners, and the learnership can be implemented. For the training component, it has to be ensured that trainers are prepared, the curriculum for the training programme is developed, assessors are trained and registered and courseware and equipment is secured.

1.4.2

Quality Assurance and Assessment

Workplace providers and training providers have to have a quality management system together with policies and procedures to ensure quality education and training. The SETA is generally accredited by SAQA to ensure that providers meet the requirements. The quality management system must deal with a range of issues including the selection of appropriately qualified/experienced staff, internal quality controls relating to programme design and delivery, as well as requirements relating to learner feedback on quality and relevance of the programmes. Policies and procedures relating to assessment, recognition of prior learning (RPL), learner entry, staff selection, appointment and appraisal are also required. Assessment consists of both formative and summative assessment. Formative assessment allows the facilitator to assess the progress of learners on an ongoing basis with a range of methods and instruments. Summative assessment is generally conducted at the end of the learning programme, and is used to establish whether the learner has achieved the pre-set outcomes. The assessment of the learners to determine if they are competent in the skills obtained is crucial to the learners obtaining a qualification – the training provider is responsible for the assessment of the formal training component, while qualified assessors are required for the workplace assessment. The employer has to facilitate the on-the-job assessment. This requires an assessment policy and assessors which are registered with the SETA. The registration of assessors is to ensure that qualifications are assessed consistently. Before assessment takes place, the assessor has to plan, design and prepare the assessments and this includes making decisions about the method of assessment, the instruments to be used during the assessment, and the activities to be structured.

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Graduate Unemployment In South Africa

Moderators are used to quality assure the assessments, the assessors as well as the competence of the learners. Internal moderation of the assessment is undertaken by a registered assessor, while the ETQA of the training provider is responsible for the formal learning moderation. External moderation is undertaken by the SETA.

1.4.3

Choosing Learners

Learners can be already employed by the company or chosen from the pool of unemployed. Grants for taking on unemployed learners are typically higher than those for employed learners to incentivi se higher absorption of unemployed into learnerships. Employed Learners (referred to as 18.1 learners) are paid their normal salary, as per the Basic Conditions of Employments Act. In addition, their employment contracts stays in place. Unemployed (18.2) or previously employed learners are paid a pre-det ermined minimum allowance or stipend. The employer is not obliged to give unemployed learners employment after the learnership. Criteria for choosing learners differs between different learnership programmes and are usually a combination of relevant academic qualifications and other personal skills. When choosing the learners for a learnership the equity targets of 85 per cent black, 54 per cent women and 4 per cent people with disabilities have to be taken into account

1.4.4

Costs and Funding

The Skills Development Levies Act requires that all employers with an annual payroll of greater than R250 000 pay 1 per cent of the value of their payroll to the South African Revenue Services (SARS). 5 To pay the levy, the employer has to register with the SETA within which jurisdiction it falls. 80 per cent of the levy is transferred to the relevant SETA and the remaining 20 per cent is transferred to the NSF. Employers can claim back from the 80 per cent transferred to the SETA in the form of mandatory 6 and discretionary 7 grants. Employers can claim back a maximum of 50 per cent of the original 100 per cent levy in the form of mandatory grants and 20 per cent in the form of discretionary grants. The remaining 10 per cent is retained by the SETA for administration. The mandatory grant is claimed back for having a registered skills development facilitator, submitting a workplace skills plan and submitting an implementation report based on the plan. Claims for discretionary grants are not limited to the prescribed 20 per cent of the levy paid, but subject to the availability of funds, which can include surplus administration funds, unclaimed mandatory grants, interest earned on investments, and other sources. These discretionary grants can be in the form of strategic cash grants, learnership grants, or grants for other skills development programmes, including apprenticeships.

5 6 7

Employers paying annual remuneration of less than R500 000 are exempt from skills development levies from 1 August 2005 In this case mandatory refers to it being mandatory for the SETA to pay the grant back to the employer if the employer has a workplace skills plan etc. Payment is at the discretion of the SETA.

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Graduate Unemployment In South Africa

The grants for learnerships are paid to employers by the SETAs and the amount depends on the level of complexity of the learnership, the input costs, the difficulty associated with convincing employers to take on learners, etc. The actual size of the grant is determined by the SETAs. The grant is meant to cover the learner allowance (stipend), as well as the course fees for the training and other associated costs. In addition, companies are entitled to learnership tax allowances which can be claimed at the inception of a learnership and upon the successful completion of the learnership. In the 2006 Budget these allowances were increased and the period over which allowance can be claimed has been extended to October 2011 (initially it was envisaged to fall away at the end of October 2006). From 1 March 2006, the maximum initial allowances for existing employees increased to R20 000 (up from R17 500) and to R30 000 for new employees (up from R25 000). The maximum allowance upon the completion of the learnership increased from R25 000 to R30 000. 8

1.5

Demand for Learnerships

Learnerships are a new concept and are therefore being implemented through trial and error. In many instances it has been found that a pilot project helps to iron out problems before the full scale implementation of a learnership. Learnerships have become an important part of the skills development strategy of government but whether employers are willing to register and implement learnerships depends on how they view these programmes. Learnership programmes may be part of the core business strategy of a company or a form of social responsibility. In addition, it has to be examined whether the incentives provided create a ‘need’ for learnerships. Whether employers are willing to take learners onto learnerships is partly dependent on the ‘need’ for learnerships within the organization and how well the concept of a learnership fits into the running of business in the organization. The buy-in from employers could be influenced by factors such as skills shortages, sector-specific skills, sector demand and company culture, as discussed below.

1.5.1

Skills Shortages

Learnerships may be commissioned because of the recognition of a skills shortage. For example, the Eskom Project Management Learnership came about through the recognition of skills shortages in the area of Project Management. With this in mind, a learnership initiative for long-term management skills was undertaken by Eskom and they sourced UK ZN Leadership Centre as the training provider. Therefore, in cases where there are skills shortages, learnerships can be used to address these problems (Babb and Meyer, 2005: 141). A similar type of example is that of the Thuthuka initiative. It has been recognized that there is a shortage of black Chartered Accountants in the South African economy. The Thuthuka initiative attempts to address this problem through an attempt at transformation from the secondary school level up to learnerships. The root of the problem lies at the

8

More favourable allowances were also introduced to promote the enrolment of disabled learners (National Treasury, 2006a).

7

Graduate Unemployment In South Africa

fact that there is “a missing pool of potential candidates who are able to enter at this level of learning, hence the programme Thuthuka, which, although not a learnership itself, feeds into the CA learnership route” (Babb and Meyer 2005: 167).

1.5.2

Sector Specific Skills

Some skills are more sector-specific than others, and therefore jobs that use these types of skills may require a greater on-the-job training component and are more conducive to learnerships. Where skills are organization or sector specific, organizations may not rely on the market to obtain these skills, but instead will train people to perform these types of jobs. An example of this is Consol Glass which is a high-technology organization requiring specific skills. Consol Glass therefore places a large emphasis on learning and skills development, and this makes learnerships particularly relevant to this type of organization. Not all types of required skills are conducive to the establishment of learnerships. For example, FASSET (Finance, Accounting, Management Consulting and other Financial Services Education and Training Authority) established a learnership for the management consulting subsector in 2002. However, though research indicated that there was a need for the learnership, the subsector rejected the qualification when it was presented to SAQA for registration. Reasons for the failure include the fact that management consulting is not an entry-level occupation and it is not a distinct occupation for which there is a clearly defined development path (Babb and Meyer 2005: 59).

1.5.3

Sector Demand

The sector in which learnerships are offered is important since if it is a growing sector, one would expect a growing demand of skilled employees, thus making learnerships in these sectors more relevant and worthwhile. Therefore it is important to choose a growing demand sector for implementation of the learnership. For example, the CTFL SETA (Clothing, Textiles, Footwear and Leather Sector Education and Training Authority) learnership saw some learners drop out because of closure of factories due to the contraction of the domestic textiles industry (Babb and Meyer 2005: 74). The ICT (Information Communications Technology ) sector is a rapidly growing sector with new products and services being offered to customers. To this end, call centres are becoming the interface between service providers and customers. Thus the Telkom Call Centre learnership came about because of the demand for skills in this area coupled with the fact that learnerships are particularly helpful with call-centre work since it is conducive to on-the-job training. Another fast growing sector is the Financial Services Sector where the main products of the sector are support services utilized by other sectors of the growing economy. In addition to being a fast growing sector, it is also a sector of the economy in which workplace training is similar to learnership-type training. Thus, this type of sector is particularly open to the idea of learnerships.

8

Graduate Unemployment In South Africa

1.5.4

Company Culture

It is also noted that company culture may play a role in whether learnership-type training is implemented. A study of Further Education and Training (HSRC, 2005) alludes to the fact that in some societies, like Germany, there is a culture of enterprise-sponsored training, which arguably makes it easier to implement learnership-type training programmes. Generally, in terms of employer willingness to establish learnership-type programmes which involve partnerships between employers and colleges, international experience has shown that factors such as the size of the company, the overall education level of its workforce, and the level of technological sophistication are factors which influence employers’ decisions (HSRC, 2005). Large companies are better-positioned to implement learnership-type training, because they can afford to invest substantially in training programmes for employees.

1.6

Potential Pitfalls and Problems
Employers

1.6.1



If employers are not involved in the planning process of a new learnership, there may be lack of commitment from companies and as a result not enough companies willing to host learners Existing training facilities (especially FET colleges) may be deemed inadequate as training providers, leading to companies and sectors creating their own training institutions that will address their needs better



1.6.2

SETAs



There is a lack of uniformity between the SETAs with regard to their quality assurance requirements In addition, SETAs are often not aware of the cost implications of their requirements, while the staff are unclear about the processes The bureaucracy involved with registering a learnership, may act as a disincentive especially to smaller companies from investing in learnerships. In addition, the ongoing administration related to quality assurance, assessment, training and general management may be too resource intensive in terms of time, money and effort – making learnerships an unattractive option for companies





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Graduate Unemployment In South Africa

1.6.3

Learners



Previously unemployed learners may not be workplace ready – a life skills component may have to be added to a learnership or prospective learners may have to undergo orientation before entering the learnership. Unemployed learners may drop out of the learnership if they find other fulltime employment (especially if the there is no prospect of full-time employment upon completion of the learnership at the company that offers the learnership) Unemployed learners may be less motivated to complete the learnership because there is no guarantee of employment upon completion of the learnership.





1.7

Absorption of Learners and General Findings

The NSDS set a target of a minimum of 80 000 people under the age of 30 to have entered into learnerships by March 2005.

1.7.1

Total Number of Learners on Learnership Programmes

By March 2005, a total number of 109 647 unemployed people below the age of 35 had entered into learnership/apprentice agreements. Below is a graph which gives an indication of the total number of people that have been registered on learnerships, broken down by unemployed and employed learners, and excluding apprentices (these numbers derive from various NSDS Implementation Reports, see Department of Labour, 2005, 2006a).

Figure 1: Total Number of Learners on Learnership Programmes
160000 140000 120000 100000 80000 60000 40000 20000 0 2002/2003 2003/2004 2004/2005 Total no. of Employed Learners Total no. of Unemployed Learners

Source: Department of Labour (2005, 2006a)

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Graduate Unemployment In South Africa

1.7.2

Unemployed Learners

From the NSDS Implementation Reports for 2003-2004 and 2004-2005, it is possible to ascertain how many unemployed people have entered into learnerships (excluding apprenticeships) during these two periods: Table 1: Unemployed Learners
Total Number of Unemployed Learners 8362 49355 88410 Annual 40992 39055

March 2003 March 2004 March 2005

Source: Own Calculations based on Department of Labour (2005, 2006a)

While the SETAs have met and exceeded the targets of the initial NSDS, Kraak (2006) notes that “this number is still minute compared with the total number of people seeking training and sustainable employment”.

1.7.3

Finding Employment

One of the success indicators of the initial NSDS was that by March 2005 a minimum of 50% of those who had completed learnerships, within 6 months of completion, were to be employed, in full time study or further training, or in social development programmes. A research project called the 2004 Baseline Survey of the Learnership Programme was undertaken to investigate the placement of learners after completion of learnerships by Jennings et al (2004). A total of 1207 (21 per cent of completed learners) learners who had completed their learnership programmes within 12 SETAs and 201 employers were interviewed. The findings showed the following (NSDS Implementation Report 20042005): • 77 per cent of unemployed learners were employed on a full-time of part-time basis Smaller companies showed the greatest absorptive capacity of unemployed learners



An analysis of the survey by Smith et al (2006) raises some interesting questions. They note that by June 2004 FASSET accounted for almost three quarters of learners who had completed their learnerships (Smith et al, 2006: 543). In addition, learners from FASSET learnerships were part of households that were better off than learners from other SETAs (Smith et al, 2006: 544). Due to this sample bias, the largest proportion of learners who had completed learnerships were White (46 per cent) because 62 per cent of those that completed within FASSET were white (Smith et al, 2006: 545). In terms of employment, while 78 per cent of unemployed learners found employment on a full or part-time basis, unemployed learners within NQF levels 6 and 7 were far more likely to gain employment – almost all of these learners were FASSET learners – while only 51 per cent of learners from NQF 1-3 had found full-time employment. Within NQF

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Graduate Unemployment In South Africa

levels 4-5, 19 per cent found full-time employment, and a further 20 per cent found parttime employment. (Smith et al, 2006: 544-545) Given that the learnership programme is meant to create skills and ultimately employment, it is thought -provoking to note that “there is some evidence in South Africa that due to the preoccupation with volume as opposed to quality, those who are participating are participating in sectors that traditionally have had high numbers of apprentices (such as FASSET), rather than sectors that are important for the growth of the South African economy” (Smith et al, 2006: 560).

1.7.4

Training Providers and SETAs

On training providers, Smith et al (2006) found that a high number of employers were using private providers for training and these providers are located mainly in metropolitan areas. The implication is that learnerships will continue to flourish where private providers are located, since public FET colleges are not in favour with employers. The general perception is that some SETAs have been better than others at administering and managing their learnership programmes. Smith et al’s (2006) findings corroborate this; they find that SETAs differ enormously in their ability to co-ordinate learnerships. In addition, they find that most SETAs have weak data information and performance monitoring systems Kraak (2006) however notes whilst the SETAs and government bodies might be falling short of making the learnership programme a success, the ‘short-term’ and ‘voluntarist’ mindset of employers towards enterprise training does not help the problem. Many employers seem to view the new levy-grant system as an “additional tax burden impacting negatively on cost structure and enterprise training”, resulting in for example R3 billion in skills development funds being unspent in 2002. In response the SETAs claim that the regulations and procedures for claiming the levy are too bureaucratic.

1.7.5

NQF Levels of Learnerships

There has been an increase in the number of learnership programmes registered by SETAs. In 2002, there were about 262 registered learnerships programmes (see Kraak, 2003) while in early 2006 (January), there were about 900 registered learnership programmes (Department of Labour, 2006a) (see Figure 7 in the main report).

1.8

NSF and SETA Funding and Expenditure
The National Skills Fund (NSF)

1.8.1

In 2004/05 the NSF accumulated revenue of R1.1 billion, 87 per cent of which was from the Skills Development Levy. Expenditure in the period was R1.2 billion (National Treasury, 2006b:374). Funds are spent on nationally prioritized projects through funding windows. The focus of the biggest funding window, the social development initiatives window, is on the unemployed and under-employed. Through this window, the NSF has committed R1.8

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Graduate Unemployment In South Africa

billion to the SETAs for strategic community level projects and for unemployed learners in learnerships; R541 million remains to be transferred to the SETAs in 2005/06 (National Treasury, 2006: 374). During 2005, the NSF spent R181 million on 7330 unemployed learners on various learnerships. In addition, money for the 2005 academic year was allocated to the NRF (R26.2 million) and on the National Students Financial Aid scheme (R49 million) to award bursaries for post-graduate and undergraduate study in scarce skills. Training on social development initiative projects for the period ending September 2005 amounted to R77.6 million (National Treasury, 2006: 367).

1.8.2

SETAs

Transfers to the SETAs from the skills development levies increased from R2.7 billion in 2002/03 to R3.1 billion in 2004/05. From 2002/03 to 2005/06 the average annual growth in skills levies transferred to the SETAs is 13.2 per cent (National Treasury, 2006: 379).

1.9

Glossary of Abbreviations
HRDS NQF NSB NSDS NSF RPL SAQA SDF SETA SGB Human Resource Development Strategy National Qualifications Framework National Standards Body National Skills Development Strategy National Skills Fund Recognition of Prior Learning South African Qualifications Authority Skills Development Facilitator Sector Education Training Authorities Standards Generating Body

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Graduate Unemployment In South Africa

2. Individual Company Reports9 2.1 Mining
Company 1A
Core functions

2.1.1
a.

Company 1A is the 4th largest gold mining company in the world. It operates deep level underground mines in South Africa and open pit and shallow underground mines in Ghana, Australia and Venezuela, with development projects in Peru and Burkina Faso and exploration projects on most continents. About two-thirds of its production takes place in South Africa. The company’s offshore expansion is driven by limited gold mining opportunities in South Africa. In the last decade the overall size of the company’s domestic labour force has decreased. This has been coupled with a process of skill intensification in production, i.e. the proportion of the workforce that is skilled or semi skilled has increased over time. The decline in the workforce is mainly the result of a slowdown in domestic gold mining activities, with shafts or operations closing down as South Africa’s ore bodies are in the process of being exhausted. The gold price and the Rand-Dollar exchange rate also have a major impact on gold mining operations. b. Recruitment

Recruitment of recent graduates is generally done through the company’s bursary scheme and graduate recruitment programmes. Applicants are invited while specific individuals may be identified through university or university of technology contacts and through the Mining Qualification Authority (MQA). Many matriculants apply directly to the company. Company 1A prefers to train and develop employees internally; most senior managers are drawn from the bursary programme. As far as the bursary schemes are concerned, the focus is mainly on recruiting 2nd, 3rd and 4th year university students. The company finds that there is no shortage of applicants, but the quality of qualifications is a problem due to declining standards at institutions. The perception exists that institutions focus on passing as many candidates as possible without taking the quality of candidates into account. Preferences for specific institutions are guided by those that offer relevant qualifications, for example Westcol & Gold Fields College (Welkom), Vaal University of Technology, and Tshwane University of Technology offer degrees/courses specific to the mining industry. The Universities of Johannesburg, Pretoria, Witwatersrand and Stellenbosch are also well-respected and perceived to maintain good standards. The company finds it difficult to recruit enough university or college graduates from previously disadvantaged communities, particularly graduates with some work experience. Company 1A struggles with a high turnover rate of artisans, technicians and previously disadvantaged individuals at the middle- to senior management levels. However, the bulk of vacancies that exist reflect the shortage of artisans in the economy. While there are many applicants with suitable qualifications there are very few with relevant experience for the skilled and higher skilled vacancies. Another reason for persistent high levels of vacancies is that the BEE requirements have created a highly imperfect labour market

9

Company names have been changed to ensure confidentiality.

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Graduate Unemployment In South Africa

with many companies paying high salaries to attract and retain historically disadvantaged talent. c. Training and Learnerships

The provision of training at Company 1A is a core business strategy. Human resource mobilisation and development is a critical imperative for the company. Company 1A belongs to the MQA (Mining Qualification Authority – the SETA in the mining industry) and also has secondary a ccreditation (programme approval) with SASSETA, THETA, CETA and ETDP SETA. Learnerships are targeted at non-graduates and result in NQF levels 2 to 4 qualifications. Setting up the learnerships was not difficult but complying with industry requirements and obtaining SETA approval was time consuming. More than 90% of learners who are not employees of the company are absorbed into the company after completion of the learnership. Financial incentives may move the company to consider increasing the existing number of learners. The company does, however, feel that it is crucial to ensure that employment is available to all learners upon completion of the learnership. The company is of the opinion that learnerships have the potential to address the skill shortages because they produce, in theory at least, employable graduates. However, it is critical that learnerships are strictly aligned with industry requirements. In addition, the administration related to learnerships should be the responsibility of the SETA, while the company as the training provider should focus exclusively on the provision of training for the system to be effective. d. • Policy Considerations Studies in the science, engineering and trades should be incentivised in order to direct the careers students are pursuing. Barriers can be imposed to prevent students from studying degrees for which demand is limited or nonexistent. Institutions need to focus on producing employable graduates with life and soft skills.



2.1.2

Company 1B

a.

Core functions

Company 1B’s core business is platinum mining. During the last 3 to 5 years the company outsourced some of its service departments such as cleaning services as well as certain mining activities, with a decline in the workforce as a result. Around 85 per cent of the permanent workforce is semi-skilled or unskilled. b. Recruitment

Company 1B’s bursary scheme attracts matriculants who want to study in core business disciplines such as engineering, mining, metallurgy, chemistry and mining services. To identify the p otential bursars Company 1B visits and supports schools that are in close

15

Graduate Unemployment In South Africa

proximity to their mines (mainly North West and Limpopo provinces). Bursary holders are employed after graduating and trained through a mentorship programme. The company has found that these employees remain in the employ of the company for longer periods even after completion of their bursary obligation period. Company 1B also visits universities to promote careers in mining and to recruit graduates. There are no preferences with regard to institutions but the majority of recent graduates are from historically white universities such as UCT and WITS. Company 1B does not prescribe where bursary holders should study – this is left purely up to the students. It is hard to recruit enough university or university of technology/college graduates from previously disadvantaged background especially in fields such as engineering and mining. Generally the turnover rate in the workforce is not a major concern, but in specific fields such as engineering the turnover rate is high due to the scarcity of skills and a limited resource pool. Persistent vacancies are the result of difficulties in sourcing historically disadvantaged candidates with experience from a limited supply of candidates. The demand for historically disadvantaged candidates is high due to the employment equity targets that have to be met, but the supply of these candidates often does not match the demand. c. Training and Learnerships

The provision of training and learnerships is part of the organisation’s business strategy. Company 1B belongs to the Mining Qualification Authority (MQA). In total there are six different learnerships, with 70 per cent of learners from historically disadvantaged communities. They are targeted at post-matric candidates and provide artisan training at the NQF 3 level. It was not difficult to establish the learnership programme mainly because the MQA functions well. All unemployed learners are employed in the company upon completion of the learnership. Company 1B feels that the current learnerships in the mining industry are better suited to matriculants than graduates, with limited scope to impact on graduate unemployment. In order for Company 1B to double the number of learners taken on annually, government will have to implement incentives, for example, maintain and improve the special grant rebate process as well reduce corporate tax. The company is of the opinion that learnerships have the potential to reduce the skills scarcity problem. However, learnership programmes need to improve the duration and quality of experiential training in the workplace. They can also be expanded to other qualifications, e.g. create a learnership consisting of a combination of study and work experience (on-the–job training) to qualify as an engineer. d. • Policy Considerations Learners should be encouraged to study mathematics and science at high school level to increase the number of students that are able to enrol for technical courses at tertiary level.

16

Graduate Unemployment In South Africa •

To deal with the graduate unemployment problem, government could either offer tax relief for companies absorbing graduates, or subsidised tertiary education in areas where there are shortages in the labour market.

2.2

Manufacturing
Company 2A
Core functions

2.2.1
a.

Company 2A is a beer brewing and soft drink manufacturing company. The skills that are required by the business are mostly in the engineering and science fields (such as chemistry for production/brewing), as well as commerce (sales, marketing and logistics) qualifications. b. Recruitment

Company 2A offers bursaries to university students and about 50 graduates are absorbed into the business annually. About 50% of the annual intake is engineering graduates, 30% have a logistics background, while the rest are sourced from other skills areas. Recruitment at Company 2A is decentralized, with each plant or regional office taking care of its own recruitment. The preference is to grow people from within the organisation in order to manage skills shortages more effectively. However, the annual graduate recruitment drive is not yielding the numbers required and as a result new models such as closer ties with student and academic networks are being explored. Typically operators and technical staff are sourced from universities of technology. Company 2A also makes use of recruitment drives at tertiary institutions. Although they accept applications from all institutions, recruitment drives currently only take place at historically white institutions, mainly because most of the historically black institutions do not offer the type of courses and skills that are required at Company 2A, such as engineering and logistics. As a result the pool of graduates that can be employed from historically black institutions is relatively small, making recruitment drives at these institutions not cost-efficient. Company 2A has a strong employment equity focus, and the bursary system is used to ensure that enough graduates from previously disadvantaged backgrounds are employed. As of 2006, Company 2A also plans to target high schools directly in an attempt to increase the share of black recruits. In addition Company 2A has found that equity targets are difficult to reach when only recruiting from historically white universities, so they will have to start targeting historically black institutions as well. The current intake of black graduates is well below their target level of 35. In 2005, for example, only four suitable equity graduates were employed, despite thousands of applications. Turnover within the firm is not generally a big problem given that many graduates join the company as part of a bursary scheme. However, Company 2A finds that because of its structured traineeships the staff at Company 2A become very marketable once they have completed their t aining and are often targeted by competitors. Therefore, while the r strategy is to grow its middle and senior management from within the firm, Company 2A finds that they have vacancies at the middle management level. About 15% of new appointments each year are at a middle management level. Company 2A also finds that artisans are always in shortage. 17

Graduate Unemployment In South Africa

c.

Training and Learnerships

Company 2A belongs to the FoodBev SETA. Training and learnerships are implemented as part of the business strategy of Company 2A which embraces the outcomes-based education ideology in South Africa. At Company 2A the business strategy of the organization feeds directly into the human resource development strategy, with learnerships a core component of this strategy. For example, if the human resources strategy is training in areas such as packaging and distribution, training programmes are developed and converted or registered as learnerships. In addition, whereas unemployed workers would previously have been used as temporary workers, they are now provided with skills and are therefore given the opportunity to progress within Company 2A or the industry. Company 2A finds that through learnerships output is enhanced as a result of a broader skills base, and the cost of training is reduced because of the SETA grants and allowances. There are currently 240 learners in the soft drinks division, 80 per cent of these are employees and 20 per cent are sourced from the pool of unemployed. Of the 240 learners, 210 are in the sales division (mostly employed). The remaining 30 are in the manufacturing or production division (mostly unemployed). There are a further 200 learners in the beer division, 70 per cent of which are unemployed learners in the packaging division. As for the rest, 15 per cent are in human resources, 18 per cent in finance, and 20 per cent in brewing (all employees). Although there are administrative problems with setting up and implementing learnerships, most of these are unavoidable because learnerships are linked to recognised qualifications. In order to ensure credibility of the system there has to be quality assurance in the form of a proper assessment process so that the qualification is transferable across industries and firms. d. • Policy Considerations Company 2A finds that the quality of the graduates in specialized areas such as logistics and microbiology is an issue.

2.2.2
a.

Company 2B
Core functions

The core business at Company 2B is paper and pulp manufacturing. In addition, the company owns forests. Over the last decade the size of the overall workforce has decreased due to cost constraints and productivity improvements. In the last 3 to 5 years the company outsourced forestry operations, which also contributed to the decline in the workforce. b. Recruitment

Company 2B offers bursaries to matriculants to study in fields of engineering and chemistry at university level with the aim of employing them after they finish their studies. The company also recruits university graduates in addition to the bursary scheme students. Company 2B is also a TOPP training provider (accounting graduates are trained to become Chartered Accountants). 18

Graduate Unemployment In South Africa

The company finds it difficult to find suitably qualified people from previously disadvantaged backgrounds, especially women. A lack of work experience to supplement education at high skills levels together with BEE requirements and the war for talent are the main reasons for persistent vacancies. The company also struggles with high turnover rates in certain occupation groups, such as technicians, artisans and engineers. The company see this as a result of the increase in large-scale infrastructure projects in the country leading to an increase in demand for these skills. More specific to the industry, many South African paper industry workers have emigrated to Asia and Australia. c. Training and Learnerships

There are currently 120 people in the paper and pulp learnership as well as 68 apprenticeships. The company also offers a management learnership. The company found it difficult to establish the learnership programme because of the registration requirements. On average, 80% of the unemployed learners are absorbed into the company after they complete the learnership. Company 2B feels that learnership programmes have the potential to address the graduate unemployment problem if all role-players (industry, SETAs and government) collaborate in the implementation of the programmes. In addition, big businesses should to be encouraged to absorb more learners in order to produce experienced workers for small businesses who cannot afford to implement learnerships. If Company 2B is to double the number of learners, the cost of establishing and managing the learnership has to be subsidised. d. • • Policy Considerations Establish learnerships at the middle management level The duration of the learnerships should be increased to more than 2 years and learnerships should be set a higher NQF levels (at and above NQF level 4). Address the forestry SETA’s funding problems. Better coordination and collaboration between the Departments of Labour and Education and the private sector.

• •

2.2.3
a.

Company 2C
Core functions

Company 2C falls under the chemicals sector. Its core business functions are the manufacturing and selling of gas and related products. It also manufactures welding equipment and products. The bulk of the workforce is comprised of artisans. The size of the workforce has decreased in the last decade mainly because Company 2C has sold a division to a BEE company. b. Recruitment

Company 2C has a graduate recruitment programme targeting previously disadvantaged matriculants, offering them bursaries for university studies. Upon completion of their

19

Graduate Unemployment In South Africa

studies these bursars will be employed by Company 2C. Artisans are recruited from welding schools and universities of technology. When hiring graduates, there is no preference in terms of institutions, although most recruits are Company 2C bursary holders or graduates from universities where Company 2C offers sponsorships. Universities that are geographically close to the operations of the company are more likely to be sponsored, including the universities of Cape Town, Witwatersrand, Johannesburg and KwaZulu-Natal. The company does not struggle to recruit sufficient students from previously disadvantaged backgrounds as the pool of graduates has expanded in recent years. They have also found that the salary packages of black graduates with scarce skills are stabilising. At times the company experiences shortages of technologists and artisans, mainly due to the poor quality of applicants and the lack of experience of applicants. c. Training and Learnerships

The provision of training and learnerships are viewed as both a core business strategy and a corporate social responsibility. Learnerships are typically targeted at artisans. Learners who are not employees of the company are likely to be employed after completing their learnerships (currently there is 100 per cent absorption rate). Company 2C feels that learnerships can be used to address the shortages of artisans. Company 2C belongs to the chemicals SETA (CHIETA), which functions well. They feel that proper assessment tools have been designed for the learnerships. However, to take in more learners the company will need some financial incentive. d. • Policy Considerations There should be collaboration between government, universities and business in order to identify skill shortages and gear the education system towards addressing these shortages Universities need to rethink the intake of certain disciplines and could perhaps direct students towards disciplines where there are skills shortages Mathematics and science education at schools needs to be given greater importance Government could play a role in identifying and supporting children with potential at disadvantaged schools The lack of adequate career guidance at schools should be addressed The poaching of artisans by overseas companies needs to be addressed the importance of artisans as a scarce skills occupational group should be recognised.







• •

20

Graduate Unemployment In South Africa

2.2.4
a.

Company 2D
Core functions

Company 2D is involved in fast moving consumer goods – manufacturing, branding, and marketing. Supply chain management is an important function which requires specialised skills; often engineers with specific skills are targeted. For the other activities of the business, they mainly employ graduates from various fields who are then trained, except where specialist skills such as IT skills are required. The company has been growing, but its growth has also been associated with increased efficiency (productivity of workers), mainly brought about by increased mechanisation. Since Company 2D is a global organisation, growth may also be associated with new product lines that are not necessarily produced domestically. Such new products may imply growth domestically in terms of sales, but not necessarily in terms of domestic employment. b. Recruitment

The company recruits primarily through three main channels: (1) graduate recruitment drives at university campuses, (2) First Bounce (graduates with a few years of relevant experience) and (3) ad hoc (targeted at higher skills levels when vacancies arise). Their main objective is to grow graduates into middle- and senior management positions. 1. Graduate recruitment: The company recruits at campuses through road shows, presentations and posters. In employing graduates, Company 2D looks for balanced graduates, that is, people with good quality social skills and life skills as well as good academic performance. Applications are reviewed and potential candidates are short listed and interviewed on campus. This process includes case studies, group work, psychometric testing and lengthy interviews. A shortlist is then drawn up, and candidates are subjected to a panel interview (at Company 2D) with further rounds of case studies, interviews and simulated business problems. Senior managers are directly involved in this process. Successful candidates are then offered a position at the company. 41 graduates were appointed at the end of 2005. First Bounce: This involves the recruitment of graduates with a few years of experience, many of whom are university of technology graduates (minimum requirement is a B.Tech. qualification). Often these are applicants who were previously unsuccessful at entering the company through the graduate placement programme. Ad hoc: This type of recruitment is undertaken typically for middle- and senior management. A significant amount of senior staff members at Company 2D have come ‘through the ranks’, but at times vacancies arise. Agencies are typically used, which often implies resorting to headhunting to find scarce skills.

2.

3.

Recruitment drives are exclusively aimed at university campuses and officially the minimum requirement is a B.Tech. degree. Although all external applications are accepted and reviewed, all appointees in 2005 were recruited at the graduate recruitment drives. Company 2D’s model is based on taking young graduates and training them into

21

Graduate Unemployment In South Africa

management positions, but it expressed concern about graduates being trained and then leaving the company. Only certain institutions are targeted. Company 2D has formal graduate recruitment drives at the following institutions: UCT, Rhodes, Free State, UKZN (Durban and Pietermaritzburg), Johannesburg, Pretoria, WITS, and WITS Business School. Stellenbosch was recently dropped due to their lack of diversity – the recruitment team could not justify spending millions on a recruitment drive when applicants are not diverse. The company does not recruit from historically black universities (HBUs), although they tried to recruit from Zululand in 2005. The company has experienced the following: 1. HBUs have a poor infrastructure in terms of facilitating graduate recruitment (recruitment placement offices, staff, venues for talks and presentations, media on campus). In addition, the number of candidates they recruit at HBUs does not justify the amount spent on their recruitment. Company 2D also finds that some campuses (including some historically white universities) are less keen than others to facilitate the recruitment process, whereas the company feels that it should be one of a university’s core functions. Students at HBUs are typically not exposed to many corporate companies/recruitment drives, and they are sometimes overwhelmed and unable to deal with the interview process in a mature way. These students are less successful in being short listed.

2.

The company does not typically have many vacancies. If they do arise, they are usually for artisans, engineers and middle and senior management-level positions. The company always reaches its target numbers in terms of graduate recruitment, and these graduates are usually grown into senior and middle management positions. There is, however, a high turnover rate for black engineers because they are in such high demand. Company 2D notes that young people generally are much more mobile, but understands that this is a global problem. In response to the problem of high-turnover, Company 2D allows a ‘career break’ where employees can take three to four months unpaid leave, but get to keep medical aid and pension (negotiable, depending on situation). At a company-wide level, the company meets its quotas as far as recruitment of previously disadvantaged individuals (PDIs) are concerned, but the company sometimes struggles to recruit black accounting graduates as well as PDIs at higher skills levels. c. Training and Learnerships

The company offers a range of training programmes, including learnerships. The training of new recruits is part of the company’s business strategy. Learnerships are negotiated with unions for the unionised factory workers. Learnerships are predominantly aimed at the factory floor level, but there are also learnerships for accountants at CIMA level, as well as learnerships run through the Durban Institute of Technology (DIT) for bio- or foodtechnology students. The learnerships for factory floor workers are targeted at unemployed matric students with mathematics/science, and the learners are typically employed after they have completed the learnership. There are approximately 100 people currently on learnerships.

22

Graduate Unemployment In South Africa

The company found it difficult to obtain accreditation as a training provider due to complexities of the process and the amount of paperwork that needs to be submitted. The company feels that more learnerships operated through universities of technology would be a good idea, but the difficulties in setting these up are currently preventing them from following this route. d. • Policy Considerations The company does not feel that the quality of education is lower at universities than in the past. However, they do find that student performance appears to be weaker than before and that especially finance and engineering students take longer to complete their degrees. Company 2D has also found that the quality of their First Bounce applicants, who are usually Technikon students, is generally lower than their graduate recruitment drive applicants. Company 2D finds that for the most part people are sufficiently skilled, but that the maturity of applicants is a problem. Candidates from previously disadvantaged backgrounds, however, have been found to lack soft skills and this puts them at a disadvantage, both during the recruitment process and in the workplace. The company feels that business etiquette and soft skills training at universities will be more useful in making graduates more attractive to Company 2D than learnerships in the workplace, and that it would employ more graduates (perhaps 60 instead of 40) if suitable, “well-rounded” candidates were found. The company feels that learnerships don’t have the ‘sexiness’ that appeals to students. This seems to be a ‘generation issue’ where this generation has a sense of entitlement, especially if they have a degree they feel they are ‘worth more than being on a learnership’; that is, learnerships are not attractive enough to meet expectations, specifically for those at the university graduate level. For a company like Company 2D that specifically targets graduates for employment, the issue of access to campuses is important. Company 2D finds that some campuses are better equipped than others to facilitate recruitment drives. The company feels that there needs to be more collaboration between tertiary institutions and employers, and there needs to be a bigger buy-in from campuses into the process. Some campuses such as UCT and Rhodes University were singled out as having great graduate recruitment facilities and channels, while other campuses behaved ‘as if they were doing Company 2D a favour by hosting them’.





2.2.5
a.

Company 2E
Core functions

Company 2E, a subsidiary of another company, manufactures and markets cement and cement products. As far as technical skills are concerned, it employs engineers and artisans. In the recent past, the growth in the volume of output has not been accompanied by a corresponding growth in the workforce because Company 2E is pursuing increased efficiency, and have therefore been streamlining operations. However, Company 2E is currently in an expansion phase, so they expect their workforce to increase as production capacity increases. Many of the workers employed in the 23

Graduate Unemployment In South Africa

current expansion phase will be offered temporary contracts, as Company 2E does not want a situation where they have excess staff if the business contracts again. The current expansion phase is expected to employ about 40 new permanent people, while at its peak about 600 people will be employed on temporary contracts. b. Recruitment

Company 2E has a good human resource (HR) infrastructure, with HR representatives at each site. The company has a decentralized system of recruitment, with each site responsible for its own recruitment guided by an overarching recruitment strategy. Recruitment is mainly done through recruitment agencies, and some preferred agencies are used. The process of filling a vacant position is as follows: all positions are first advertised internally within Company 2E and its parent company. Thereafter positions are advertised and filled using recruitment agencies. Company 2E prefers to hire candidates with engineering degrees (specifically B.Sc. Engineering) and some experience. The company prefers not to hire graduates, because they require a much greater investment, and have to be mentored, supervised and trained, whereas more experienced people immediately add value to the company in terms of work output. Artisan skills are critical and in high demand in South Africa. Artisans employed by Company 2E are trained in-house to ensure the quality of training. In the company’s experience, the standards of a rtisans from colleges and universities of technology are lower than the standards of those artisans that are trained by Company 2E. The do however find that once artisans have been trained they are often lost to competitors. Company 2E finds it very difficult to find high quality black engineers with experience to fill positions; in fact they find that it is difficult to even find white engineers with experience to fill positions. Company 2E has in the past resorted to importing these engineering skills from abroad, but this is not the preferred route because of the “red tape” involved. Company 2E finds that mining managers, especially employment equity candidates, are easily lost because they are in high demand in South Africa. Company 2E finds it frustrating to see people who have been trained in scarce skills moving out of the company into positions that are monetarily more attractive but that do not use the skills for which they have been trained, and Company 2E feels that this is a skills loss not only for the company but for the economy as a whole. c. Training and Learnerships

The learnerships currently in place are for artisan type skills with Company 2E as the training provider. There are plans to implement more learnerships for supervisory, senior management and sales and marketing positions. However, there has been an indication that the MQA (the SETA Company 2E belongs to) may reduce the learnership grants to firms. This is a concern to the company as it may affect plans to expand the learnerships programme. In 2005 Company 2E had four learnerships with about 80 learners. The learners are a combination of employees of the company and unemployed that are sourced externally. The salaries for those on learnerships are gazetted and range from R2,500 to R7,000 a

24

Graduate Unemployment In South Africa

month. The grant received for the learnerships at the moment are R105,000 per learner over the 3-year period while the learnership costs about R96,559. Company 2E tries to employ the unemployed learners upon completion of the learnership. There are plans to establish other learnerships and Company 2E would also consider putting unemployed learners onto some of these learnerships. However, there has to be good financial incentive since learnership programmes are costly. With a possible decrease in the grants to be received, they may reconsider how they will run the learnership programmes. Company 2E, however, notes that it is useful to enter people into learnerships in order to earn BEE points. Company 2E has to reapply for mining rights periodically, and part of this process includes an audit of their performance in terms of social labour plans and compliance with labour legislation. Obtaining the mining rights is dependent on meeting these targets. It was difficult to establish the learnerships both in terms of setting up the learnerships and administering them. Company 2E finds that the assessment at the workplace is very complex and the requirements from the SETA are strict and impractical. In addition, it was very onerous to get accreditation as a training provider. The quality assurance standards were difficult to meet and the process was very resource intensive. The investment into a learnership programme is about R1 million (setup and customisation costs). Company 2E notes that the learnerships have to be considered in terms of the cost of the outlay versus the number of people put onto the learnerships to determine if they are cost-effective. Company 2E feels that learnerships are expensive to set-up and to implement, therefore there needs to be more of an incentive to make these programmes more attractive, especially given that learners don’t add much value in the first 2 years, it is only after the 4th or 5th year that the employees begin to add value. In addition, the process tends to be highly regulated, time-consuming and costly. Thus, there needs to be more funding to justify the investment and more input into the process from business in order to make it less bureaucratic d. • Policy Considerations The quantity and quality of people coming out of tertiary institutions is a problem. There are not enough people coming out of tertiary institutions with the necessary skills, such as engineering and artisan skills. In addition the quality of the tertiary education system is not up to standard, and this is evidenced by the fact that artisans trained within the organization are better able to perform their jobs then those coming out of colleges.

2.2.6
a.

Company 2F
Core functions

Company 2F is an integrated oil and gas company with substantial chemical interests. Domestically Company 2F mines coal and converts it into synthetic fuels and chemicals, while it is currently also expanding in the area of fuel retail. Company 2F has chemical manufacturing and marketing operations in Europe, Asia and the Americas. The group is also involved in crude oil explorations and production in Gabon, the extraction of natural 25

Graduate Unemployment In South Africa

gas in Mozambique, gas-to-liquids operations in Qatar and Nigeria. The company is classified under the oil and gas sector. In the last decade the size of the overall workforce has decreased. Staff requirements are mainly for engineers (mechanical and electrical) and artisans. b. Recruitment

The technical nature of Company 2F’s operations requires specific skills that can only be obtained by means of relevant experience. However, Company 2F does focus on developing the existing workforce and has a dedicated bursary scheme which has been in operation for more than twenty years. Company 2F is able to secure the relevant skills via a mix of new graduates and experienced employees. Their extensive graduate development programmes contribute to the quick and effective integration of young graduates into the business. The majority of new bursaries awarded each year (80 per cent) are aimed at matriculants. During the time that these individuals are studying at university they are exposed to Company 2F and the practical aspects of their field of study via structured vacation work programmes where they are given specific projects to complete. The remaining 20 per cent of bursaries awarded each year are aimed at university students. Company 2F does not have preferences for graduates from a particular institution at the undergraduate level. The specific post-graduate qualifications that the company requires however, can only be obtained at certain universities. c. Training and Learnerships

Training is a core business strategy of Company 2F and ensures a constant supply of competent resources to the various Company 2F businesses. Company 2F is also acutely aware of i s corporate social responsibility and invests more than R8 million t annually in training at community level. Company 2F is an accredited training provider and undertakes its own training in order to ensure that its requirements are met and to offer continuous training and re-training to its employees. In addition, no other training centres in the area can meet Company 2F’s training requirements. About 165 people are currently on learnerships for artisan-type qualifications and operators, and these range from NQF levels 1 to 3. Company 2F trains about 250 artisans a year for the national skills pool. Of those on learnerships, about 80% are employed by Company 2F upon completion of the learnership. The education requirement for the learnerships is a grade twelve (matric). Increasing the capacity at Company 2F to cater for additional learners would require a significant increase in training resources and extensive capital expenditure. In addition, with the present absorption rate of 80 per cent the company meets its business requirements. If the company were asked to increase the amount of learners it takes on board it would require resource grants, fixed learnership grants and capacity grants.

26

Graduate Unemployment In South Africa

The company feels the learnership system is a good way to absorb graduates into the formal sector since graduates are equipped with the skills and theory to perform in the labour market. Because Company 2F has undertaken modular-based training as part of its training ideology since 1999, the transition to learnerships was not difficult and it was not particularly difficult to establish the learnership programmes. Although it was not difficult to get accreditation as a training provider (comprehensive guidelines were provided by the SETA) it was a laborious task to collect the evidence required by the SETA. The incentives (grants) help with the cost of establishing learnerships; however the amount of administration makes the learnerships a net cost to the company. Company 2F finds its SETA to be generally good, but the management of funds and the accreditation system is a problem. The company notes that those SETAs that represent large-scale industries characterised by large firms that can afford to become involved (such as oil refinery, banking, auditing) are generally better run and more successful than those SETAs that service industries where firms are small. d. • Policy Considerations There is currently a problem with mismatch of skills. There are too many students taking humanities and social science courses, while there are insufficient science and engineering students especially from previously disadvantaged backgrounds. The problem reflects the insufficient numbers of learners who are completing subjects such as mathematics and science at school level. In addition, the number of educators available for technical skills training especially at secondary school level is problematic and significant investment and incentives are required in this area. Company 2F is in full support of the National Strategy for mathematics, science and technology adopted in 2006 but it is expected that this strategy will take some time to start delivering results. It is also worth considering an incentive scheme for companies to become involved in sponsoring technical skills training and for employing technically skilled employees. Given that there is a limited pool of previously disadvantaged engineers and scientists in the economy, poaching of these employees has become a problem.







2.2.7
a.

Company 2G
Core functions

Company 2G is classified under the iron and steel manufacturing sector of the economy. Core business functions include manufacturing and processing of steel and steel products (engineering and related services). The size of the workforce has decreased in the last decade as a result of efficiency improvements in the mid-1990s and operations becoming more cost effective. About half of the workforce can be classified as semiskilled and these workers are mainly artisans and technicians (in the iron and steel 27

Graduate Unemployment In South Africa

manufacturing industry they are regarded as skilled). Non-core functions (such as cleaning services, water treatment and certain once-off activities) have been outsourced over the last 3 to 5 years. b. Recruitment

Company 2G visits schools in the Vaal Triangle to recruit matriculants to pursue careers as artisans. In addition, career guidance information is provided at FET Colleges during registration. Advertisements are also placed in local newspapers, career magazines and school science fairs. About 200 to 250 apprentices are sponsored, meaning that Company 2G pays their training costs. The apprenticeships lasts for more than 1 year and between 50 per cent and 70 per cent of these apprentices are eventually employed. In order to recruit technicians, Company 2G contacts universities of technology to supply them with their best students for Work Integrated Learning bursaries. Between 40 and 50 trainees are recruited from universities of technology each year. After completing the theoretical portion and the Company 2G-sponsored work-integrated programme, between 30% and 70% of these trainees are absorbed, depending on the business requirement at the time. Advertisements are placed in national newspapers to recruit bursars in the engineering field and the company also visits universities to recruit possible bursars. Currently there are between 90 and 100 university bursary holders in the mechanical, electrical and metallurgy engineering fields. Vacation work is compulsory after completing their 2nd or 3rd year. The aim is to employ all of these students after completion of their studies. Recruiting students with acceptable levels of mathematics and science, especially from previous disadvantaged communities, is problematic. There are no preferences as far as specific institutions are concerned. However, Company 2G prefers to recruit from the universities of technology that are in close proximity to the business units. In addition, Company 2G mainly recruits from ‘recommended institutions’, including the universities of Pretoria, Witwatersrand, North-West, KwaZulu-Natal, Cape Town and Stellenbosch. Company 2G has relationships with many of these institutions via sponsorships. Turnover rates are high in the key occupation groups such as artisans, technicians and engineers. In the engineering disciplines, the practical application of skills and knowledge is a problem. This is not unique to previously disadvantaged individuals, but is more evident among this group. In addition, the company struggles to find black engineering managers and often has to pay relatively higher wages to attract these candidates. c. Training and Learnerships

The rationale behind the provision of training and learnerships is the provision of skilled competent employees in the engineering and production fields. Company 2G trains more bursars than it requires and these are absorbed into the labour market. This is seen as part of the company’s corporate social responsibility. About sixty percent of the trainees/learners are employed in the company upon completion of their training/learnership. The majority of training programmes are apprenticeships (8 out of 9 programmes) with only one learnership in Iron and Steel Manufacturing. Company 2G prefers apprenticeships to learnerships because of the questionable quality of training provided at the FETs as well as the red tape associated with dealing with the SETA (MERSETA).

28

Graduate Unemployment In South Africa

Some of the learnership programmes for the industry have been developed by Standards Generating Boards (SGBs) who do not necessarily understand the needs of the industry and these programmes do not produce suitably qualified candidates. As a result, training is provided by the company itself as it has to include very specific skills. In general, the company feels that although learnership programmes are conceptually sound, the lack of monitoring of assessors can result in poor quality training. Red tape and confusion between SETAs in terms of the positioning of qualifications impact negatively on learnerships. If implemented correctly, it can be good strategy to address the absorption of unemployed graduates. In order for the company to offer more learnerships than is currently in place, the government will have to cover the cost of the entire training programme as well as the stipend portion. d. • Policy Considerations Analysis of the labour market to determine where there is supply and demand for specific skills. There could be collaboration between the Department of Education and educational institutions in order to target and address these shortages. This could be done by providing greater FET grants to the institutions for these graduates. Address irrelevant qualifications offered at FETs Address issue of institutions focusing on passing ‘numbers’ versus quality of candidates Provide greater incentives to the business sector to encourage them to train potential bursars towards identified scarce skill areas. Encourage technology stations at institutions to develop and provide experience to new graduates. Current incentives and the SETA system need to be simplified The lack of career guidance counselling at secondary schools should be addressed

• •



• •

2.2.8
a.

Company 2H
Core functions

Company 2H operates within the automotive manufacturing industry. The production levels of Company 2H are determined by the parent company in Germany. Currently 250,000 units are being manufactured at the South African plant per annum, 80% of which is exported (mostly to the US market because of the free trade agreement). Investment is cyclical and is determined by the parent company. Global demand trends and company needs determine which model will be built at the South African plant and the product cycle is about seven years. One of the major technical skills requirements are engineers. The volume of production has increased over the last decade. The impact on the workforce has been minimal due to an increasing level of mechanisation. For example, mechanisation increased from 20% with the old 3 -series model to 75% with the new model. Workers released from production due to increased mechanisation were absorbed

29

Graduate Unemployment In South Africa

elsewhere and there were no retrenchments. However, the company relies on natural attrition and non-renewal of fixed-term contracts for streamlining of staff numbers. b. Recruitment

The minimum requirement for entry -level positions is a matric diploma. The company mainly recruits engineers from universities or universities of technology for its engineering work. Company 2H discontinued its graduate recruitment drives, because it was found not to be cost-effective given that they only employ 4 to 5 engineering graduates a year. The recruitment of graduates is done mainly via Internet advertising of graduate vacancies. Because of the small number of graduates employed and the lucrative salary packages that Company 2H is able to offer they manage to find very good candidates. General vacancies are filled through employment agencies and general media advertisements. Company 2H prefers to employ people under the age of 45 years with certificates, diplomas or degrees in engineering. Work experience is also important. The company’s strategy is to promote and develop workers internally, thus there is a strong focus on young people with a long-term view of employment at the company. About 80 per cent of the senior staff is developed internally. Company 2H finds that the recruitment of young graduates today is problematic given changes in work ethic or culture: graduates do not necessarily take a long-term view of employment anymore. Company 2H also feels that the expectations of graduates are unrealistically high upon completion of their studies and that they should be willing to start at entry level and gain experience to make them more employable. Company 2H finds that local university students have little sense of how businesses are run because they have little practical experience as part of their coursework, and that technikon and college students are often better equipped to do the job than university students. There needs to be experiential training included as part of the curriculum in order to make graduates more attractive. In addition, internship programmes would also give companies a chance to assess potential employees. The company mainly targets “first class” South African universities such as Cape Town, Pretoria and Witwatersrand, given the relatively better quality of the students sourced from these institutions. As far as historically black universities (HBUs) are concerned, the company feels that standards at these institutions are not on par with industry expectations. The company finds it difficult to find previously disadvantaged engineering graduates to fill vacancies. This is in part due to a shortage in supply, with not enough African, coloured and Indian students completing courses needed in manufacturing, such as engineers, accountancy and information technology. Retention of staff, especially among previously disadvantaged individuals, is a concern. Company 2H’s employment equity policies require that 70% of new recruits are black, but these individuals are also highly mobile and are often lured away by competitors with competitive remuneration packages.

30

Graduate Unemployment In South Africa c. Training and Learnerships

In 2005 Company 2H ran a once-off learnership for unemployed people (NQF level 1). This was a cost neutral once-off initiative in cooperation with government that formed part of its corporate social responsibility in the area. The company would not consider such a learnership again if they imply a cost to the company. All other learnerships and training programmes at Company 2H are linked explicitly to the business needs of the company. The company has four learnerships that are run for employees of the company. These are for Autotronics at the NQF level 2 to 4, and for Chartered Accountants at NQF level 7. The company found it very difficult to establish the learnerships and is unlikely to get involved in the whole process again given the complexities and bureaucracy. It took 3 years to establish the learnerships, and the company had to submit their application for accreditation and a training provider four times. There were no clear guidelines from MERSETA as to what the process was, despite the fact that is one of the bigger and more successful SETAs. In addition, Company 2H feels that curriculum development is not a core function of Company 2H. It would be better to implement developed, established or even imported learnerships. Company 2H notes that the system has been employed in the UK for many years, and that it would be worthwhile to investigate whether some good learnership programmes that are applicable to the South African situation can simply be imported. The British NQF system is also comparable to South Africa’s qualifications system. It is difficult to accurately calculate the cost of establishing the learnerships, but the perception is that learnerships are definitely a net cost to the firm. The learnerships currently run by Company 2H form part of standard training/employment, so registration as learnerships is done for compliance and BEE points. In general, the company feels that the learnerships system is a good system and there is scope to expand but currently it is too costly and onerous to establish a learnership and that the administration requirements are a problem. The process should be simplified and proper guidelines provided. In addition, issues within the SETA, such as turnover of staff should be addressed. d. • Policy Considerations While the company feels that there have been improvements in the quality of tertiary studies over time (academically speaking), practical experience is lacking. In order to address the graduate unemployment problem in South Africa, there should be a greater focus on experiential training so that graduates become more attractive in the labour market. The company is of the opinion that learnerships, what they are and what their function is should be better marketed. More publicity around learnerships, and especially the success stories, may increase their attractiveness to students/graduates. Company 2H feels that there is not enough c ommunication between big business and the universities about labour market needs and that it should be the responsibility of universities to approach businesses.





31

Graduate Unemployment In South Africa •

The company feels that the large increase in supply (throughput rates) is an important reason for the graduate unemployment problem.

2.2.9
a.

Company 2I
Core Functions

Company 2I is a holding company with subsidiaries that operate in both manufacturing and services, specifically in the electrical, defence, electronics and telecommunications sectors. The company is listed under the electronics and engineering sector on the JSE. In the last ten years there has been a decrease in the workforce of the company mainly because the holding company has divested some of its subsidiaries. Companies that have remained within the group have also generally seen a decrease in their workforce, with some sings of improvement in the last two years. b. Recruitment

All graduates go through a rigorous process of professional assessment at an internationally recognised assessment centre. The assessment focuses on aspects other than qualifications, including intelligence testing. The companies in the Company 2I stable use different methods of recruiting experienced people, with headhunting and advertising the most common of thes e. The engineering companies (especially those that employ electrical engineers) have not struggled to find suitable candidates, as they have been recruiting from declining industries, such as the defence industry. The engineering companies generally do not employ graduates as they require people with experience. There is a huge demand for black engineering graduates. Persistent vacancies reflect the scarcity of black people with a technical qualification and sufficient experience. Some of these vacancies can take more than six months to fill. In general, the company does not have a problem finding the required skills, but the quality of the skills can be problematic and it can be difficult to find suitable employment equity candidates. Poaching is a problem in the industry, and the turnover rate in certain categories, such as black engineers, is high. c. Training and Learnerships

The group operates a college which offers various programmes, including a bridging course facility for black students who have completed mathematics, science and English at matric-level. These students are first assessed and when successful, sponsored for a one-year bridging course. Once they have completed the bridging course, they may be offered bursaries to attend a university or technology to study in areas such as engineering, science or computer science. The Formal Mentoring Programme provides these students with an understanding of formal business principles. While studying, they are also allowed to do vacation work at the companies. Over the last ten years more than 500 matriculants completed the bridging course and more than 400 bursaries have been offered to students. About 70 of the students who have completed their studies have

32

Graduate Unemployment In South Africa

been employed by the company. Most of the current technically skilled and semi-skilled employees came from this pool of students. d. • Policy Considerations Company 2I has identified the quality of secondary schooling as a problem, especially in the areas of mathematics and science. In general, the company feels that the quality of secondary schools and teachers should to be addressed. Company 2I has found that technical colleges produce better quality graduates than universities in terms of their practical knowledge. They have also found that standards at universities have declined. The company perceives black students as having lower quality qualifications, even if they graduated from historically white universities. The perception exists that universities are under pressure to pass large numbers of black students, regardless of their performance. Company 2I finds that the expectations of graduates coming out of schools and universities are too high – they are unrealistic in terms for their expectations with regarding to employment. Technical colleges should be used to provide suitable skills for growing industries. Companies should be more involved in the curriculum writing in order to bring the technical aspects of curricula closer to the needs of a specific industry. Government should provide incentives to encourage companies to set up inhouse training facilities, e.g., to train apprentices. Government should take responsibility for providing a supply of high quality matriculants, which can then be trained by companies according to their own needs.









2.3

Construction
Company 3A
Core functions

2.3.1
a.

Company 3A belongs to the construction and building sector of the economy. The company is an industrial conglomerate whose manufacturing activities feed into the construction sector. Over the last decade, the size of the overall workforce has decreased due to the disposal of non-core assets of the company. Outsourcing in the construction industry started before 1994. Company 3A now employs mostly skilled employees. b. Recruitment

Company 3A places advertisements in newspapers and on the Internet and uses recruitment agencies to recruit experienced people. The group’s graduate recruitment programme targets electrical, mechanical and construction engineering students at universities with strong engineering faculties. At present they do not have any recent graduates from historically black universities in their workforce, because enough employment equity candidates are being recruited from historically white universities.

33

Graduate Unemployment In South Africa

There is a shortage of engineering skills at the entry level and Company 3A attributes this to the fact that university graduates prefer to be consulting engineers in the city and not front-end engineers at construction sites. It is also difficult to find previously disadvantaged individuals with experience to fill senior vacancies. However, the company expects this to be a temporary situation. Artisans and technicians are also in shortage. c. Training and Learnerships

The provision of training (and learnerships) is part of the company’s core business strategy. It was difficult to establish a construction learnership programme mainly because of inefficiencies at the construction SETA. The company also deals with the manufacturing and mining SETAs, which are better organised. All the learners are absorbed into the company upon completion of the learnership. The company feels that the learnership programme has the potential to partly address the graduate unemployment problem. In order for the company to increase the number of learners above the current levels there should be no or negligible additional costs and administration requirements should be simplified. d. • Policy Considerations Government should provide incentives to big business to train and employ graduates. In the construction industry there are many small players who do not have the time or capacity to train and therefore cannot implement learnerships. FETs should be revamped to provide skills such as artisan and foremen skills for matriculants Government should use the public works programme to boost the hiring of construction workers and artisans.





2.4

Wholesale and Retail Trade
Company 4A
Core functions

2.4.1
a.

The core function of Company 4A is retail trade. Other activities include financial services and logistics. Company 4A employs a range of people at their head office, ranging from financial and human resources staff to food and textile technologists. In the sales division (Company 4A stores) mainly skilled people are employed, but specific technical skills are not generally required. Sales staff and store managers typically acquire skills on the job. Employment has increased by 114 per cent in the last 5 years. This has largely been driven by store growth, and Company 4A expects this trend to continue. b. Recruitment

One of the core functions located within the head office is buying, which requires more specialised skills such as food and textile technologists. General skills in areas such as finance, human resources and information technology are also in demand. At the store level non-specialised sales skills are acquired on the job. As a result the recruitment process varies widely between head office and stores.

34

Graduate Unemployment In South Africa

For specialised skills required at the head office employment agencies (head hunters) are often used, while for generic skills word of mouth, direct applications and employment agencies are used. Generally new recruits at head office tend to be older, more experienced people, while the stores require ‘people with energy’ who tend to be younger. In general, if people are sourced externally, at l ast a four-year degree is e required, while if people are sourced internally, experience and knowledge of the business plays a big role. Company 4A conducts graduate recruitment drives in the Western Cape at Cape Peninsula University of Technology and the University of Cape Town. Some graduates are also sourced from the Vaal University of Technology and University of KwaZulu-Natal. Graduates also enter the company via the bursary initiative, but the numbers are not typically large. Few graduates from historically black institutions are employed because these institutions do not always offer the types of qualifications that are required. In addition, the recruitment channels via which these institutions can be accessed are not as developed as at traditionally white institutions. For the technical skills required, Company 4A prefers to employ people with the necessary skills and experience who can immediately add value to the business. Company 4A experiences shortages of skills in the high-skilled (technical skills) category, as well as people with middle- to senior-management level experience. As a result they have often resorted to recruiting people from abroad on short-term contracts. The “war for talent” with regard to PDI’s amplifies these shortages. Company 4A notes that the culture of work has changed with young people being much more mobile these days. c. Training and Learnerships

Company 4A had an extensive training programme in place before the introduction of learnerships. It now conducts two accredited and four unaccredited learnerships. The unaccredited learnerships are run for general training purposes and in response to a need within the business. The main accredited learnership is aimed at an NQF level 4 qualification and it is offered to store managers. A combination of employed and external (unemployed) candidates is sourced for this learnership, with the unemployed learners also immediately becoming salaried employees. External (unemployed) learners are sourced via the same recruitment channels used for potential employees of the company. None of those employed on the NQF level 4 learnership completed the learnership due to business pressures. Often learners were offered promotions before completion of the formal programme, which meant that these learners had little time or incentive to complete the programme. About 300 people were entered into the NQF level 4 learnership in 2005, with the majority employed at Company 4A. Company 4A aims to increase the number of people that complete the learnership in order to be able to claim back the full skills development levy. They also qualify for BEE points in terms of the sectoral BEE charter. This acts as an important incentive to enrol more employment equity candidates in learnerships.

35

Graduate Unemployment In South Africa

As far as setting up of the learnership is concerned, the process was described as a ‘nightmare’: • On the procedural side, bureaucratic processes around setting up the learnership and registering as a training provider are cumbersome. Requirements for accreditation should be clarified, as well as the standard and programme structure. Administering the learnerships is also time-consuming. For example, learners have to be assessed in order to determine if they have gained the required skills while they are completing the learnership. The assessment requires a suitably qualified assessor, while line managers in the stores have been informally conducting assessments for a long time and feel they are suitably qualified to do the assessment. However, as they are not accredited, they cannot conduct the assessments. The way the SETA processes the application for the learnership is problematic. Problems range from the speed of feedback from the SETAs to the way the SETA deals with accreditation. High labour turnover within the SETA can complicate and prolong the accreditation process. It should be noted that while Company 4A finds that the bureaucracy slows the process down; they recognize that the benefit is that the learning programmes are structured. Policy Considerations Tertiary institutions do not produce enough graduates with the required skills. In addition the quality of the tertiary education system is unsatisfactory. In cases where the academic qualification is acceptable, technical expertise is lacking. As far as specific skills are concerned, Company 4A’ experience has been that food technology skills have improved while textile technology skills have deteriorated The company is of the opinion that graduates’ limited work experience contributes to the graduate unemployment problem. This is due to the fact that the current curricula do not include enough practical experience. Inappropriate subjects taken at school level limits career choices. Company 4A cited the specific example of few African pupils having the opportunity to take art as a school subject. This prevents them from considering a career in textile technology and related fields. Company 4A finds that previously disadvantaged students are less familiar with ways of gaining access to the labour market, making it difficult for them to match the skills that they have acquired with those demanded by employers.





d. •







36

Graduate Unemployment In South Africa

2.5

Financial Services
Company 5A
Core functions

2.5.1
a.

Company 5A is a subsidiary of a major financial institution and operates within the financial services sector of the economy. Its core business is banking. During the last decade the size of the overall workforce has increased as a result of increased economic activity. In the short to medium term the company plans to increase its local market share and it plans to expand into emerging markets as well. b. Recruitment

Each of the Company 5A business units is responsible for its own recruitment. Various types of recruitment strategies are followed. Matriculants are taken into learnership programmes, a to this end the company advertises banking careers in schools. The nd graduate recruitment programme targets all university graduates nationwide, but Company 5A has preferences as far as specific institutions are concerned when hiring graduates, for example the company prefers actuaries who graduated from the universities of Cape Town or Witwatersrand. Given the nature of the business Company 5A does not generally hire graduates from universities of technology. Company 5A finds it difficult to recruit enough previously disadvantaged university graduates with very good results in some areas of specialisation (for example, actuaries and quantitative analysts). There is also a higher than average turnover for employment equity candidates at middle management level. The company finds that there are skills shortages in areas of advanced professional qualifications and in some areas of specialisation, for example, business analysts or project management people with experience in financial services. BEE requirements tend to compound the general skills shortage problems. c. Training and Learnerships

Company 5A belongs to the BankSETA. Training and learnerships are part of the core business strategy of Company 5A. There are currently 80 matriculants on learnerships. The value of the learnership programme is that the learners gain experience. However, the underlying problem of an inadequate academic foundation, leading to a lack of quality graduates, still remains. If the company is to increase the number of learners, the costs of the learnership programme would have to be subsidised. The company feels that regulation of the learnerships and the administrative burden associated with them make incentives difficult to access. d. • Policy Considerations There is a need to get the foundation of the education system right. Standards at the junior school level in key subjects needs to be improved in order to generate required skills in sufficient numbers in the economy. There also needs to be better career guidance in schools so that more learners choose subjects that will allow them to do technical courses at university. Graduates’ perceptions have to be addressed. The company feels that there is a need to build required attitudes from ‘day one’ and that there should be a sense of co-accountability for the economy instead of a dependence on ‘the 37



Graduate Unemployment In South Africa

employer’ to provide jobs. Graduates should not see a degree as an entry ticket into a job. • Learners at schools and tertiary institutions should be encouraged to do voluntary work in the community in order to teach them to develop life and management skills.

2.5.2
a.

Company 5B
Core functions

Company 5B’s core functions are banking and financial services. Core staff requirements are people trained in management sciences, information technology and human resources. To some extent legal expertise is also required, while an increasing number of engineers are employed. The recent 2.5% growth in employment in the company can be linked to company growth, especially expansion into new markets (non-traditional regions) and BEE deals. There is large-scale investment in emerging markets in Africa (e.g. Nigeria) and the rest of the world (e.g. Argentina), which implies some job growth for South Africans (expatriates) employed in key areas. b. Recruitment

Company 5B utilises all traditional channels, including graduate recruitment and direct applications. Under the Kellogg Foundation’s under-graduate programme second year students do vacation work and gain valuable experience. All universities in South Africa are approached for the graduate recruitment programmes. Every year approximately 150 graduates are recruited, with about 20 per cent to 30 per cent from historically black universities (HBUs). This figure rises to about 45 per cent if University of Western Cape and University of KZN (Durban Westville Campus) are included in the definition of HBUs. Company 5B believes that ‘latent talent’ can be found at HBUs and this can be developed through training programmes. Often poor soft skills are seen as a reflection of the quality of candidates, but this is misleading. The company does not find it difficult to recruit graduates from previously disadvantaged backgrounds. Company 5B feels that the rise in graduate unemployment is a result of inappropriate qualifications and the quality of education at schools – there are a large number of functionally illiterate graduates. There is a great need to focus more on practical aspects of work and work experience. The company experiences a high turnover of black talent, especially at senior and middle-management levels. Young white managers are also becoming hard to find, since many form their own business and/or emigrate. c. Training and Learnerships

Company 5B belongs to the BANKSETA. Training (and learnerships) is a business requirement of the company, although programmes such as Letsema (NQF 4 and 5, for unemployed persons) can be seen as social responsibility. The company believes that learnerships will help jumpstart employment creation nationally and provide a boost to the economy since learners receive R2 000 per month, which is ploughed back into the

38

Graduate Unemployment In South Africa

economy (especially townships). Financial incentives are needed for firms to employ more graduates. d. • Policy Considerations Matriculants should be given better career guidance in order to match the supply of graduates with the needs of the economy. People with inappropriate degrees should be put on learnerships that bridge the skills gap by supplying learners with appropriate skills that are demanded in the market place. Graduates should be better informed about what they can expect from the job market. Often people with tertiary qualifications have too high expectations in terms of their earning potential. They need to be willing to be trained and start in entry-level positions. Partnerships should be set up between educational institutions and firms to enable more appropriate curriculum design and collaborative research work (vocational training). Such models are used with success in Australia (Brisbane) where students are given real-life company-based research projects to complete as part of their courses.







2.5.3
a.

Company 5C
Core functions

The company operates in the financial sector with core competencies in areas such as auditing, taxation, and consulting and financial advisory services. The company’s workforce has been increasing in response to business expansion. b. Recruitment

The company mainly recruits graduates with honours degrees in accounting. These new recruits are placed on a three year Trainee Accountant programme, which is a registered learnership. In 2005, about 500 people were recruited, of which 340 were trainee accountants. The recruitment process is rigorous, beginning with an online application form and prescreening phase during which a recruitment consultant screens the applications based on academic performance, leadership roles, sport and other social/community based activities. Candidates who are successful are invited to the firm for an interview and the questions assess interpersonal and technical skills, teamwork orientation and professionalism. Thereafter, successful candidates undergo assessment using a tool called Cognitive Process Profile which provides information on the current cognitive functioning and development potential of the candidate. Most of the black students that are recruited as Trainee Accountants are bursary holders of Company 5C. Company 5C recruits people from as early as their 1st year at university and may even identify students from as early as matric. Recruitment is only done from SAICA accredited institutions, which means that traditionally white universities are favoured. 39

Graduate Unemployment In South Africa

The firm finds it difficult to fill its transformation quotas in terms of race and gender. The firm also has vacancies at the high skilled level as far as its financial advisory services division is concerned. This is due to a skills shortage which is commonly recognised in South Africa as a war for talent. c. Training and Learnerships

Trainee Accountants that are taken in are graduates and are put onto learnerships. On completion of the learnership, the graduates become qualified Chartered Accountants. The nature of the qualification is conducive to a learnership programme, because new graduates have to be trained as per SAICA regulations with a combination of on-the-job training (three years) and academic qualifications before they can write their board exams to become certified Chartered Accountants. Once trainees qualify as chartered accountants, most of them leave the company. Around 15 per cent to 20 per cent stay with the company for a few years and only about 10% remain with the company after that. These 10% are developed into middle and senior management positions. In addition, approximately 10% of the learners are retained within other business units within the firm. The remaining qualified learners are easily absorbed into the market due to their very high level of skills. The firm belongs to FASSET and had no problems implementing the learnership, mainly because of the fact that the training programme for Trainee Accountants had been well established and it was relatively easy to convert it into a learnership. The company recognises however that the challenge is to implement non-FASSET learnerships. The learnership programme did not create additional employment for graduates as the trainee accountant programme was already in place before the introduction of the learnership system and the existing programme was merely converted into a learnership. In addition, Company 5C provides training in SAP (Systems and Analysis Programme Development), but trains in excess of their own business requirements. The remainder of the trainees are absorbed in their Business Process Outsourcing Section. Company 5C has identified Business Process Outsourcing as one of their growth areas, with potential for increased employee absorption. In addition, it is also one of the priority sectors identified by government for targeted intervention. d. • Policy Considerations Company 5C offers a development programme for students to provide them with the required soft skills to make them ready for the workplace. Subjects include Stress Management, Analytical Thinking Skills, Emotional SelfAwareness, and Interpersonal Relations. Although other firms have indicated that such training falls beyond the scope of workplace training that a firm should be expected to offer, it should perhaps be explored further. Company 5C feels that larger organizations are constrained by the numbers they can absorb into learnerships while smaller organizations are constrained by the costs. In addition, the costs of orientation, mentoring and support can act as a disincentive to implement learnerships. Learnerships could be more



40

Graduate Unemployment In South Africa

broadly implemented if the administration with regard to implementation is simplified, and the accreditation process and requirements for training providers are simplified. • Learnerships address the skills scarcity problem in so much as they provide school leavers with a combination of higher skills, work readiness skills and scarce critical cross-sectoral skills. It also allows the current workforce to gain higher skills and facilitates a flexible learning path. However, learnerships do not suit all organizations’ business needs or strategies and other possible solutions include apprenticeships and structured internship programmes. Company 5C feels there should be a more co-ordinated skills development initiative.



2.5.4
a.

Company 5D
Core functions

The company operates in investment and financial services, life insurance and general short-term insurance. Company 5D employs skilled and high-skilled personnel such as actuaries, chartered accountants (trainees) etc, as well as sales staff for the insurance policies sales divisions. b. Recruitment

Company 5D recruits sales staff and office staff. Sales staff is sourced during recruitment drives. In terms of level of education, matric is the minimum requirement, experience and competency relatively more important. Most of Company 5D’s new graduates are bursary holders (article clerks and actuaries) and in this way they ensure that equity targets are reached. Company 5D attempts to grow its middle and senior management staff from within the company, and therefore spends 6 per cent of its payroll on human resource development and 60 per cent of this is spent on its black staff. c. Training and Learnerships

Company 5D is an accredited training provider and provides a range of training programmes, which include learnerships for unemployed matriculants as well as current employees. Company 5D’s involvement in the Financial Sector BEE Charter gave momentum to their implementation of learnerships. Four accredited learnerships are offered. Two of these are targeted at unemployed learners who gain an NQF level 3 qualification in Financial Services and Business/Secretarial Administration on completion. The other two learnerships target employees of the firm and NQF level 4 and 5 qualifications are obtained on completion. Eighty-six learners entered the first round of the learnership for the unemployed in 2005, with only 5% not completing it. Company 5D has issued a proof of completion of the learnership, as administrative problems between the SETA and the training provider has meant that most of the learners have not received their certificate. Company 5D intended to take on 200 learners per year between 2006 and 2008, but this may not be possible as changes currently being considered to the Financial Sector Charter will tilt the balance towards learnerships for graduates and employees rather than learnerships for the unemployed with lower level qualifications. A grant of R25 000 per leaner was received

41

Graduate Unemployment In South Africa

for the first round of the learnership. This has now been reduced to R18 000 per learner. The total cost of the learnership is R117 000 per learner per year (including salaries of learners). Currently (2006 intake) there are 200 people on learnerships for the unemployed. They were sourced through advertising and underwent a strict recruitment process where it was ensured that they have good numeracy skills as well as mathematics and accounting as matric subjects. The training providers are external to the firm. If learners do not find full-time employment at Company 5D after they have completed the learnership, Company 5D provides support by putting them into contact with recruitment agencies. In the first intake (completed in 2005), the company employed 18% of the learners within Company 5D, and a further 24 per cent were employed on contract employment, leaving 58% without placement. Of these 58 per cent, at the end of September 2005, 21 per cent were employed outside of Company 5D, 61 per cent were doing interviews, and 18 per cent were “at home”. Company 5D feels that over 90 per cent of learners who have completed the learnerships are capable to do any work related to their training. Company 5D’s faith in the skills provided by the learnership is illustrated by the fact that they are prepared to employ the learners upon completion of the learnership as well as recommend them to prospective employers. In the company’s opinion, the reasons why ex-learners do not manage to find employment reflects behavioural issues and a problem with their attitude. While the learnerships for the unemployed are considered to form part of the corporate social responsibility of the company, there is a drive within the organization to link learnerships with the business objectives of the organisation so that it is possible to employ learners upon completion of the learnership. While other sectors had apprenticeships in place before the learnership programme were introduced, learnerships or structured learning programmes were completely new to the insurance sector. Company 5D has found that it is very time consuming to follow all the prescriptions when running learnerships. In addition, dealing with the SETA has been difficult and time-consuming. Company 5D has outsourced the training, and therefore the training provider is responsible for the training provision, assessment and moderation. This allows the company to focus on the core activities of the business since it has to deal with less bureaucracy and administration than if it had to provide the training by itself. Company 5D has however installed its own quality assurance systems that are the same as those required by the SETAs so that they can ensure that their systems are up to SETA standards. d. • Policy Considerations There needs to be a clearer understanding by graduates that a tertiary qualification does not necessarily mean that they have the skills required in a specific job and the they do require on-the-job training. Company 5D recognises that although the quality assurance systems of SETAs are stringent and time-consuming, a quality assurance system has to



42

Graduate Unemployment In South Africa

be in place in order to ensure that qualifications are transferable, given that the qualification received is a national qualification. However, the process could be simplified by automating of paper-based systems, as well as by better scheduling of processes.

2.5.5
a.

Company 5E
Core functions

Company 5E is listed under the financial services sector and its activities include life insurance, investment services and independent financial services. Over the last decade the size of the workforce has decreased, while at the same time proportion of the workforce that is skilled or high-skilled has increased. In the last 3 to 5 years, Company 5E has outsourced administration, information technology services and infrastructure, catering and printing business units, mostly to former employees of Company 5E. b. Recruitment

Matriculants with mathematics and science are recruited for administrative positions. Specific business units may have specific programmes for recruiting graduates. University graduates are recruited through an Accelerated Development Programme. This two year programme is currently in its pilot phase with eight black females participating in this first round. Company 5E does not have specific preferences as far as universities are concerned, and it does not find it difficult to recruit sufficient numbers of university or university of technology/college graduates from previously disadvantaged backgrounds to fill vacancies. The supply of graduates at entry level is adequate, but the progress in gaining experience can be slow. BEE requirements and the war for talent have resulted in shortages of senior skilled people from previously disadvantaged backgrounds. The company has high turnover rates for call centre and sales staff. This is largely due to the nature of these jobs and not cause for concern. c. Training and Learnerships

The rationale behind the provision of training and learnerships is to bridge the gap between the supply of employees and requirements of the company. In addition, training addresses the changing needs of company. Learnerships are offered as a requirement of the Financial Sector Charter and Company 5E currently employs about 70 per cent of the learners upon completion of their learnership. Company 5E belongs to the insurance SETA (INSETA). The company found it very expensive to establish learnership programme, for example to create a workstation for every learner costs about R5 000. The company feels it is much more cost effective to employ matriculants than to offer learnerships. It was not difficult for Company 5E to establish the learnership programme. However, the administration process is too labour intensive and it was difficult to access the grant from the SETA. The company feels that learnerships may be able to bridge the gap between a matric qualification and some financial services qualifications. The lack of management

43

Graduate Unemployment In South Africa

competencies in commerce graduates may be addressed by a learnership but there is a limit to the number of unemployed people a company can absorb. d. • Policy Considerations There is a need to improve communication between government, educational institutions and business regarding the skills the economy requires. Marketing of learnerships should be improved so that there is clarity on what it means to undertake a learnership Implementation of learnerships need to be simplified





2.6

Transport and Communication Services
Company 6A
Core functions

2.6.1
a.

Telecommunications have traditionally been the core business at Company 6A. Since 2002, the company has expanded into the area of Information Communication Technologies (ICT), for example network management and information technology. The size of the overall workforce has decreased in the last decade. To date 9 per cent of employees are in management positions, 20.1 per cent in supervisory positions and 70.9 per cent in operational and support services. About 78 per cent of the current workforce is younger than 45 as a result of voluntary early retirement packages. b. Recruitment

Company 6A has found that graduates from South African universities are not adequately trained. Graduates are lacking practical experience and curricula are too narrowly focused in terms of Company 6A’s requirements. When hiring university or university of technology/college graduates, Company 6A generally prefers to recruit from historically white universities. Students from HBUs do not have work experience and most do not pass the first round of interviews. Company 6A experiences vacancies at the graduate entry level, for example engineers with computer science skills. Company 6A offers bursars vacation work, but students are not obliged to undertake vacation work. The company finds that because of the shortage of graduates, companies compete for graduates and often this leads to high mobility among employees in entry-level positions. c. Training and Learnerships

The provision of training (and learnerships) is seen as both a business strategy and corporate social responsibility. Apart from building competencies for Company 6A’s own business, the company makes a substantial contribution to developing ICT skills for the broader industry. This takes place through generic development programmes such as learnerships, graduate internship programmes and bursary schemes. Company 6A collaborates with the communications industry and government to sponsor technical research at Company 6 A’s Centres of Excellence (CoE). In 2005 there were 16 CoEs with 81 students located at tertiary institutions around the country. To date, 180 South

44

Graduate Unemployment In South Africa

Africa learners have been sent to Malaysia, most of who returned to work at Company 6A. This venture was partly motivated by an agreement between Company 6A and a Malaysian telecoms company. The graduate internship programme enables unemployed science and engineering graduates to gain practical workplace experience at Company 6A, thus improving their marketability and employment prospects. Four learners took part in the pilot programme and all are now employed at Company 6A. Company 6A has developed a project management learnership to develop project management skills and 100 Company 6A employees have participated in the learnership programme to date. A total of 264 unemployed people, all registered with the Department of Labour, are currently undergoing call centre training. The company feels that combining theoretical training and workplace experience at Company 6A call centres will improve the learners’ job prospects and enhance South Africa’s call centre base. Company 6A has pledged to take on 310 learners from the Umsobomvu database but has to date been unsuccessful in getting support from Umsobomvu in this regard. d. • Policy Considerations The Department of Education should focus on enrolling more students in sciences and financial courses, while the Department of Labour should provide incentives for the private sector to absorb more graduates. In Company 6A’s opinion, big business can afford to take on graduates and incur training expenses and thus should be encouraged to invest in these areas. ‘Job hopping’ or high mobility among young, black graduates should be managed properly as it can be harmful to the individuals’ future job prospects. Government should place more emphasis on mathematics and science at the school level.





2.6.2
a.

Company 6B
Core Functions

Company 6B is a holding company, with a range of core business divisions as well as support businesses. The composition of the workforce is biased towards technical skills, with the majority of the workforce in the operational division being technicians and artisans. b. Recruitment

Company 6B makes use of the full spectrum of recruitment channels i.e. media, internet services, recruitment agencies, campus visits and school visits. More experienced workers are sourced through recruitment agencies or by placing advertisements. Recent graduates are targeted through campus visits. Recruitment drives are informed b the y demand for skills in a particular year. Certain divisions prefer recruiting graduates and then providing them with training due to the specialised nature of the business, while 45

Graduate Unemployment In South Africa

other divisions prefer to hire more experienced workers. Bursaries are offered to matriculants who are recruited via school visits, word of mouth, internet and the distribution of application forms. Company 6B has no preference with regard to specific universities or technikons/colleges, only that the institutions are registered with SAQA. Company 6B does employ graduates from HBUs, but sometimes recruits them in their 3rd year and offers bursaries for completing their 4th year at a HWU. Company 6B experiences a general shortage of engineering skills with the shortage of PDIs just slightly more severe. A division did indicate that African female engineers are particularly hard to find. In addition, shortages of technicians and artisans are experienced. With regard to employment equity candidates, the “war for talent” at management level is a problem. High market wages in certain categories of technical skills are also a problem. c. Training and Learnership

Company 6B offers the full spectrum of training programmes. The provision of training is both a core business strategy and part of the company’s corporate social investment programme. The latter is especially evident in Company 6B’s sponsorship of maths and science students at school level. In the case of the rail and port operations, Company 6B is the monopoly service provider and therefore the only training provider in the economy. There is consensus among the business units that it has been very difficult to establish the learnership programmes due to the bureaucratic process and the ill-defined, regularly changing guidelines from the SETA. Most learners complete the learnership programmes and although figures for Company 6B as a whole are not available, certain business units indicated that they generally employ more than 90 per cent of the learners upon completion of the learnership. The general view is that learnership programmes are administratively inefficient. There is a feeling that as a result of this, more artisans may have been trained under the old apprenticeship system. The learnership programme does have the potential to address the skills scarcity problem if there is a proper skills planning process in place, as well as sufficient funding. At the moment, it takes too long before the company receives the tax allowances and the administration is complicated. d. • Policy Considerations Assist learners to select correct subjects at school while mindful of future career choices. Company 6B feels that matriculants enter tertiary institutions without a clear idea of their career aspirations and end up registering for degrees for which there are limited job opportunities. The company suggested that incentives should be directed towards learners to encourage them to apply for learnerships and complete the programmes. The administration around learnerships should be simplified







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