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TVET, skills, and company transformation and growth Insights from a company survey in three manufacturing sectors in South Africa Overview of Key Findings

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Key Finding One Companies do not typically report skills shortages at lower levels. Key Finding Two At the higher occupational levels there are shortages, but this varies across manufacturing sectors. Across the three sectors, there are some shortages at operator levels with the Automotive sector expressing the lowest levels of shortages. Further, the majority of responding companies (between 76%-100% across sectors) indicate that they find it difficult or significantly difficult to recruit technicians with the required skills Key Finding Three The shortage of skills at operator level is perceived to have very little effect on growth in the Automotive sector but this is not true of the other sectors where almost half the companies that experience shortages state that these shortages have negatively affected growth. The limited supply of skilled technicians in the South African labour market has affected company growth negatively across the three sectors, but less than company operations and at varying degrees. 2 Key Finding Four While the skills shortage of operators had either no effect or only a minor negative effect on operations of companies in the Automotive sector, companies in the other two sectors experienced negative and in some cases significantly negative effects on their operations due to them struggling to find suitable operators.
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TVET, skills, and company
transformation and growth
Insights from a company survey in three
manufacturing sectors in South Africa
Stephanie Allais, Victor Kgalema, Carmel Marock,
Volker Schӧer, Tolika Sibiya, and Nduvho Ramulongo
Centre for Researching Education and Labour
University of the Witwatersrand
Skills for Industry Working Paper No R2
5th March 2020
Overview of Key Findings
Key Finding One
Companies do not typically report skills shortages at lower levels.
Key Finding Two
At the higher occupational levels there are shortages, but this varies across manufacturing
sectors. Across the three sectors, there are some shortages at operator levels with the
Automotive sector expressing the lowest levels of shortages. Further, the majority of
responding companies (between 76% - 100% across sectors) indicate that they find it difficult
or significantly difficult to recruit technicians with the required skills
Key Finding Three
The shortage of skills at operator level is perceived to have very little effect on growth in the
Automotive sector but this is not true of the other sectors where almost half the companies
that experience shortages state that these shortages have negatively affected growth. The
limited supply of skilled technicians in the South African labour market has affected
company growth negatively across the three sectors, but less than company operations and
at varying degrees.
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Key Finding Four
While the skills shortage of operators had either no effect or only a minor negative effect on
operations of companies in the Automotive sector, companies in the other two sectors
experienced negative and in some cases significantly negative effects on their operations
due to them struggling to find suitable operators.
Key Finding Five
Across the sectors, companies report that increasing difficulty of finding skilled technicians is
linked to a larger negative impact on company operations. However, the skills shortage
seems to affect company performance in different ways in each sector. Almost all
companies in the Food and Beverage sector and the Clothing and Textile sector that report
to struggle finding qualified technicians claim that this has affected their operations
negatively. The Food and Beverage sector in particular seems to be constrained by the lack
of skilled technicians.
Key Finding Six
The focus on TVET programmes at the point of hiring typically increases with higher skill levels.
However, there is considerable variation in the use of TVET programmes across sectors. The
Automotive sector has fewer shortages at lower skill levels but still has a strong TVET focus
and this focus is maintained at all occupational levels. By contrast Food and Beverage
appears to have an uneven approach to TVET across companies where there are shortages
and where not. Clothing and Textile has a limited focus on TVET even where shortages are
high.
Key Finding Seven
The majority of companies in the Automotive and Food and Beverage sectors report to use
formal TVET programmes to upskill existing employees across the various occupations with
operators being exposed to most formal training. In the Clothing and Textile sector, on the
other hand, the use of formal TVET programmes is significantly lower and falling with
increasing skill levels. While the majority report to use at least one TVET programme to upskill
general workers, 96% report not to use any formal TVET training to upskill technicians.
Key Finding Eight
The number of TVETs used during the hiring process is strongly correlated with the number of
TVETs for in-employment up-skilling; in other words, firms that use a higher number of TVETs to
identify suitable candidates in the hiring process are also more likely to upskill their workers
with formal vocational programmes. This holds for operators and technicians and is robust to
the inclusion of industry sector controls, changes in product, changes in technology and
exporting.
Key Finding Nine
Variances with respect to reported skills shortages are consistent with the extent to which
TVET programmes are considered at the point of hiring in each industry: industries that
appear to have a greater awareness of TVET programmes report fewer skills shortages.
Key Finding Ten
Employer responses confirm that industrial transformation requires more skills; this is
particularly the case in the Automotive sector.
Key Finding Eleven
The Automotive sector with the most changes and the strongest indication of technology
becoming more advanced is also the most focused on training; nonetheless it experiences
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shortages at the level of technicians.
Key Finding Twelve
In the Clothing and Textile sector, even in our sample of mainly growing companies, over
half of the companies reported no change in technology and very little use of TVET
combined with skills shortages at all levels. This could reflect the overall decline of the sector.
Key Finding Thirteen
In the Automotive sector the complex technology reported has only a moderate effect on
the skills shortages at the operator level. Companies in the Food and Beverage sector as well
as the Clothing and Textile sector on the other hand are more likely to report skills shortages
with technology changes.
Key Finding Fourteen
All three sectors experience difficulties in finding appropriately skilled technicians, but in the
Automotive and Food and Beverage sectors this is much higher where technology has
become more complex.
Key Finding Fifteen
For operators, companies that report changes in technology are also more likely to use a
more formal TVET programmes to upskill their operators. This holds for companies in the
Automotive sector as well as in the Food and Beverage sector. However, in Clothing and
Textile, there is no greater utilization of TVET where companies report changing technology.
Key Finding Sixteen
The Automotive sector is consistent, where changing technology is found together with a
higher number of TVET progammes used to upskill technicians. In Food and Beverages just
under half of the companies reporting technology changes also report using two or more
TVET programmes for in-employment training of technicians. In contrast, firms in the Clothing
and Textile sector do not report use of TVET for in-employment training of technicians,
except for a very small number of firms whose technology has become significantly more
complex.
Key Finding Seventeen
Changing products did only affect skills requirements for operators in companies of the
Clothing and Textile sector, who report more difficulty and where products have become
more advanced.
Key Finding Eighteen
There is a clear relationship between changing towards more advanced products and skills
shortages of technicians across all three sectors. Companies that report changes towards
more advanced products are also more likely to use formal TVET programmes to upskill
operators and technicians. This holds for all sectors, but companies in the Clothing and
Textile sector are still least likely to upskill.
Key Finding Nineteen
Firms that are exporting a larger share of their output also report having changed towards a
more advanced technology, more advanced products, and a higher skill level.
Key Finding Twenty
The associations between exporting and the use of TVETs in the hiring process is less clear
compared to the associations we find for the changes in technology and products.
However, there is an indication that exporting and the use of TVETs is related. Firms in
Automotive sector and the Food and Beverage sector with larger shares of exports are more
likely to utilize a larger number of TVET programmes in hiring decisions. This pattern is less
observable for firms in the Clothing and Textile sector.
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1. Introduction
This Working Paper reports on the findings from a firm survey conducted in manufacturing
companies in South Africa, as part of a research project exploring the contribution of
technical and vocational education and training (TVET) programes to inclusive industrial
transformation and growth. The project aims to understand how TVET programmes can
contribute to the successful development of companies in ways that improve
industrialization and inclusivity in developing countries. The study is being undertaken in
five other developing countries: Bangladesh, Cambodia, Ethiopia, Laos, and Vietnam, within
two or three manufacturing sectors in each country, with the Clothing and Textile sector
included in all six countries. The other two sectors included in South Africa are the
Automotive sector and the Food and Beverages sector.
In South Africa, like many developing countries, policy makers have prioritized expansion of
technical and vocational education and training, with a view to ensuring that the TVET
college sector enrolls half of all students in post-school education (DHET, 2019; National
Planning Commission, 2011). The national plan of the Department of Higher Education and
Training emphasizes that these TVET colleges should ensure workplace-based experience to
increase employment prospects of students, and to increase opportunities for the private
sector to improve how their skills levies are used, as well as to provide training for future and
current employees (DHET, 2019). This latest set of policies occur after a multiplicity of prior
interventions; there is still a widespread view amongst policy makers and industry that
graduates of TVET colleges do not meet their needs, and the TVET system remains weak
(Allais, 2013, 2020).
Thus far the research has included a contextual analysis of each country through literature
and document review, and a survey of companies in the selected sectors in each country.
The survey focused on exploring the perceived relationship between the provision of TVET
programmes for employees at different occupational levels and transformation and inclusive
growth on the one hand and on the other hand the extent to which employers perceive skills
shortages to be a constraint to transformation and growth. The survey also sought to probe
the specific TVET programmes utilized by companies in each industry. In-depth qualitative
work is currently underway in a smaller selection of companies.
The contextual analysis shows that two (Automotive and Food and Beverages) of the three
sectors are growing, within a generally weak manufacturing sector, an economy with
exceptionally high unemployment, and a TVET system that has been subject to continual
reform. The survey provides insights into different patterns of skills shortages within the
three different sectors, and varied responses to engaging with formal TVET programmes. It
suggests that industry-TVET relationships need to be embedded into industrial strategy as
well as industry and firm dynamics, very differently to the somewhat formalistic ways of
engaging industry to-date. To date, the primary focus of industry involvement has been
attempts to involve industry representatives in qualification and curriculum design, as well as
mechanistic partnerships through formal meetings. From a policy perspective, our findings
reinforce the importance of recognizing that the design of TVET interventions must take
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into account the nature of sectors, firm dynamics, their particular occupational structures,
and their ability to integrate formal TVET.
The sector with the weakest engagement with the formal TVET sector is also the lowest
performing sector—Clothing and Textile. It is hoped that the case studies will provide more
insight into what might enable the sector to engage more with TVET programmes. It is also
anticipated that the case studies will explore the drivers and mechanisms that result in what
appears to be a much stronger relationship amongst companies within the Automotive
industry and TVET programmes. Differences within the Food and Beverage industry are also
important to understand further. These differences appear to relate to the nature of the
companies and specifically their ownership structures (whether foreign or local). Further
stakeholder engagement is planned in all three sectors.
2. Methodology
The detailed methodology for the project as a whole is discussed in depth in Marock et al
(2020). The South African study followed the overall methodology as per the international
team, and a brief overview of this as well as some South African specifics is provided in this
section. A full technical report which provides details of all the data analysis is also available
at https://www.wits.ac.za/real/
Figure 1 below provides an illustration of the Theory of Change (ToC) for the evaluative
component of the research project. At its centre, it shows a focus on the pool of TVET
graduates, both those that entered companies with TVET qualifications, and those that
acquired these qualifications when already in the company. If we use this as our starting
point, then TVET graduates can be seen as ‘inputs’ that affect changes in company
performance. The ToC illustrates how TVET graduates contribute to the transformation of
companies and/or increased levels of productivity within the company. It also considers the
possibility that there may be a relationship between TVET graduates and greater levels of
inclusion without transformation having taken place. However, in undertaking the analysis,
we also explore the ways in which the internal and external context have mediated and/or
moderated changes in company performance. For example, we anticipate the possibility of
finding that introducing TVET programmes improve labour relations or make companies
more disposed to look at government incentives, and therefore, the changes in company
performance are as a result of these shifts rather than the introduction of higher-level skills.
Another possible example that we anticipate is finding that companies recruit individuals
with higher levels of skill but do not transform the workplace because employee
relationships are too fractious or do not introduce new technology because of macro-
economic issues (exchange rates, for example, or other cost factors, et cetera).
Figure 1: Theory of Change
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In outlining this theory of change we are not making assumptions about the direction of
causality. Rather, the theory of change signals what we are seeking to test: that is, the extent
to which TVET programmes support transformation within a company and contribute to
greater levels of inclusion and growth and the internal and external factors that enable or
hinder these changes. In making this argument, we are, however, not losing sight of the
possibility that the direction of causality may be reversed. This is actually consistent with
research into skills formation in developed countries—that growth and transformation
within the company generates the demand for certain types of TVET programmes and
therefore contributes to shaping these programmes. As a possible feedback loop, this in turn
might ensure that the TVET programmes support the transformation and growth of
companies. Thus, in the framing of the research instruments we are probing issues in ways
that allow us to both test the study’s theory of change (and which direction of causality holds
true), whilst also allowing for alternative lines of causality to emerge. This is important to our
wider project of understanding skills formation in developing countries.
Determining the industries within the study
The identification of the specific manufacturing industries took into account a number of
considerations. Firstly, we considered the relative importance of the different industries
within the manufacturing sector with respect to contribution to GDP. Secondly, we sought
to include industries within the manufacturing sector that have been prioritized within the
South African government’s industrial strategy. Thirdly, we considered the size of the sector
in terms of number of employees. Fourthly, we sought to include at least one industry that
would be relevant across the 6 countries so that a direct comparison could be made across
the 6 countries of at least one industry. Based on a review of the data pertaining to the
manufacturing sector, a review of the industrial strategy and engagement with key individuals
(academics and individuals from industry) the following three industries were selected:
- Food and Beverages
- Clothing and textile
Build a pool of
individuals with
high skills
Existing
employees
complete
formal VSD
Programme
Companies
employ
graduates of
formal VSD
programmes
Companies are transformed
Companies are transformed
AND/OR
Greater levels of inclusion
Increased Growth
New technology is
introduced
New/ changed
products are
introduced
The way that work
is organized is
changed
AND/OR
Increased sales/
value add
Gender/ Race Nos
& Wages
The internal company context and external
environmental context
Increased no of
Employees
Increased productivity
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- Automotive.
The key features of these industries and the criteria that they addressed is shown in Table 1
below; the table has been updated based on the latest available statistics, which were similar
at the time of selecting the industries for the sector.
Table 1: Industrial sectors selected for the study
Industry
14%
Contribution
to GDP
Rand Value
contribution
to GDP
Levels of
Automation
Government
Support
Country GDP
R5 trillion
Manufacturing
14%
R700bn
Automotive
3.38 (2018)
R169 bn
Highly
Automated
sector
particularly the
auto assembly
plants
The sector is
heavily
subsidized and
protected
through tariffs
Industry supported by industrial policy; important in terms of linkages
Textile and
Clothing
1.23% (2018)
R15bn
A small number
of companies in
this sector
which has
embrace
significant or full
automation
The sector
enjoys
significant
government
financial and
technical
incentives.
This sector was selected across all countries in the study.
Food and
Beverages
6.93% (2018)
R347bn
Major segments
of the sector are
significantly
automated
Some sub-
sectors like
agro-processing
forms part of
government
support
(Source: StatsSA www.statssa.gov.za/ accessed 10th January 2020; www.quantec.co.za, accessed 5th
January 2020; own calculations)
Once the industries were selected an additional review of the literature as well as policy
documents pertaining to the industries was conducted. We also considered additional macro-
economic data and statistics from published research, government, research institutions, and
reports from domestic and multinational institutions. This included the following focuses:
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- We attempted to obtain a more detailed analysis of the strategic nature of the identified
manufacturing sectors, and to locate them within the national context.
- We specifically sought to develop a more nuanced understanding of the industrial
strategy.
- We completed a scan of the qualifications being offered within these industries and
attempted to collect information about the vocational skills development programmes
that are being implemented. As we continue with the in-depth qualitative research, we
are also obtaining more information about skills strategies within the sectors, and the
nature and size of government and private sector TVET programmes.
- We mapped out the social partners and stakeholders within the three South African
manufacturing industries. This mapping informed the identification of key role players
within the sector. We assessed the role of each identified stakeholder and decided
whether such a stakeholder need consulted at the beginning, during, and at the end of
the research project.
Having mapped out the social partners we then engaged with the relevant industry
associations, unions, and other stakeholders, in order to explore their willingness to
participate in the study and also assist in the provision of data and or information about
these industries. We also undertook interviews with companies that are already be engaged in
projects focusing on the future in order to explore their views about this study and what
would be valuable.
Survey design
The survey instrument was designed collectively by the global Skills for Industry team, based
on the initial literature review, to obtain insights into the following issues:
- Whether the companies have experienced skills shortages in the past 5 years and the
perceived effect that this has had on operations and growth.
- The 3 most frequent formal training programmes that each of different categories of
employees (general, operators, supervisors, artisans/technicians and management) have
undertaken in the last 5 years and the perceived value of these programmes to
transformation and growth.
- The extent to which there has been transformation and growth within the company
(against a set of indicators such as changes in technology, products, increased number of
employees) as well as the extent to which this has been inclusive (measured in terms of
gender, race and wages).
The aim was to select 100 companies from each sector for the survey. The selection was
based on the following criteria: companies that employ more than 50 employees in order to
focus on medium and large sized companies, and companies that manufacture locally to
ensure that they are not distributors only. After this delimitation, we were left with 113
companies in the Automotive sector, all of which we approached for the survey. In the
Clothing and Textile sector, we were left with 106 companies, and included all in the survey
sample. For the Food and Beverages sector, we sampled 100 of the companies which met
our criteria. The response rate was as follows:
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Food and Beverages: 21
Clothing and Textile: 32
Automotive: 61
This provided us with a total sample of 114 responding companies.
Caveats
While the sample of respondents in the automotive sector represents 54% of the initial 113
companies that were approached, the response was much lower in the other two sectors
with only 21% of 100 companies in the Food and Beverage sector and 32% of the 106
companies in the Clothing and Textile sector responding. Thus, it is likely that the samples
are affected by selection bias and therefore might not be representative of their respective
sectors. For example, as explained in the contextual section below, the Clothing and Textile
sector has shrunk as a whole over the past five years, but the companies in our survey have
grown. This suggests that we got responses from the more dynamic companies. A significant
number of companies in our sample experienced growth between 2014 and 2018. The
growth was measured in terms of increased revenue streams and increases in the number of
employees in some instances. This growth was experienced within a context, where the
South African manufacturing sector overall was in steady decline since 1997, with its
contribution to the GDP falling from 18% in 1997 to 11% in 2017. The sector has seen a
loss of 105,000 jobs in the latest quarter alone. The sector managed to register a lackluster
growth in 2018 of 1.2%, after a 0.5% contraction in 2017 and a growth rate of 0.7% in 2016.
Comparing industry averages with individual company performance is always tricky. A
declining industry average could be due to the total number of firms declining in the industry
with the remaining companies experience grows. In fact, cross-sectional firm surveys do not
capture the information of firms that exited the industry. Thus, the performance of the firms
in our sample could be due to sample selection or because only the more efficient companies
have remained in the industry and therefore are now representative of the sector. This
sample of companies might also reflect those in which government industrial policy
interventions were able to halt job losses, and in some cases even, where these interventions
reversed the trend. The kinds of interventions that have taken place include investments in
new technology facilitated through government incentives, training to support improved
productivity and help companies to hold to their market share and, in some cases, to
increase their market share therefore requiring more labour
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.
Interpreting the data
Given the cross-sectional nature of the survey data, even with the inclusion of some recall
data, it is impossible to establish a sequence of reported changes and the current use of
TVET programmes. Nor is it possible to identify causality or direction. Thus, we observe
and report a number of associations of company responses to different survey questions.
Nevertheless, we will provide possible explanations for the observed correlations that are in
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https://www.brandsouthafrica.com/investments-immigration/business/investing/incentives/ctcp-150910
accessed 10 September 2019
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line with the existing literature. In the final report this will then be augmented by
information that we obtain through the case studies (discussed below).
Further, when analyzing the data we took into account that whilst we have surveyed 114
companies, we do not have responses from each company for each question. Missing
observations are due to companies not providing answers or because the respondents
indicated that they do not know the answer to the question. We report percentage shares of
answer options for the companies that responded to questions and treat no answers as
missing. As such, these answers are not representative of the wider sample of firms
operating in the industry. However, given the diversity of the firms in the sample, the
findings provide a good insight into the range of dynamics, behaviours, and perceptions of
firms operating in the three manufacturing sectors of interest.
Case studies
The final stage of this part of the research, currently underway, is a set of case studies in 9
companies per sector, to explore whether the skills introduced through formal TVET are a
condition for growth and to the extent that this is the case, to determine, what are the co-
conditions for this to give effect to growth. The findings from these case studies will form
the basis of a future Working Paper.
The following section of the paper provides a brief overview of some key points from the
contextual analysis of the South African economy and education and training system.
3. Contextual analysis
The industrial sector
South Africa is classified as an upper middle income country, but is also the most unequal
country in the measured world, and has exceptionally high levels of unemployment—the
official rate was 29% in the second quarter of 2019 (Stats SA, 2019).
Economic and industrial development has been tied to a minerals value chain, particularly in
the early phases of its industrialisation (Fine & Rustomjee, 1996). The economic
development of the country was also shaped by a political system in which race-based
ideology was coupled with wage suppression during apartheid, which had an impact on
remuneration, skills levels for the black population, the levels of inequality in the country,
and the access to advancement in the workplace (Fine & Rustomjee, 1996; Webster, 1985).
The end of apartheid in 1994 allowed for massive changes to take place in the workplace and
in access to skills. However the legacy of the past persists even 25 years since the end of
Apartheid. In addition the isolation of the Apartheid state, combined with the mineral-based
nature of the economy, resulted in a highly undiversified industrial sector (Mohamed, 2010;
Roberts & Rustomjee, 2010). The transition to democracy brought with it a wave of
openness and liberalisation that saw a massive reduction in tariffs, globalisation of South
Africa’s core industries, and South Africa being caught up in the global wave of
financialisation (Ashman & Fine, 2013; Mohamed, 2017). These latter trends have impacted
on the country’s ability to industrialise over the past two decades despite a massive effort by
the state and multiple industrial development plans.
Manufacturing is still important to the South Africa economy. The sector contributes 14% to
the national gross domestic product (GDP), and over half of all exports, making it a major
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foreign exchange earner. The sector also contributes 11% of total employment in the
economy (www.quantec.co.za, accessed 5th January 2020) but a combination of global and
local factors has seen South Africa’s manufacturing sector contracting as a percentage of
GDP since 1994. In 2018, the manufacturing industry showed its highest annual growth rate
in five years, but this is not the case across all manufacturing industries; the food and
beverages and automotive sectors were the major drivers behind the rise. Manufacturers in
communication equipment, electrical machinery, and clothing performed poorly. Overall,
therefore, the sector continues in a downward trend, which impacts negatively on
employment, which can be seen to have declined steadily over a nine-year period, with some
brief periods of growth.
South African manufacturing firms: characteristics and trends (1994 – 2014)
The changing economic and legislative environment that was described in the previous
section has led to the restructuring of South African companies, their dynamics and
production decisions. Increased exposure to international competition especially from China
has affected labour-intensive sectors more so than capital-intensive sectors with net trade
having significant negative employment effects. At the same time, the manufacturing sector
shows increased labour productivity.
There are a number of possible mechanisms that could explain the increase in labour
productivity in the manufacturing sector combined with declining employment.
Unfortunately, the aggregate level is likely to hide important compositional effects. i.e., the
effects could be because the composition of companies in the sector changed or companies
restructured internally. There are a number of ways in which firms could have responded to
increased competition: accept lower profit, exit the industry, or restructure production.
Using firm level data for the period between 1996 and 2008, Edwards et al. (2015) show that
firms have restructured their production processes away from unskilled labour intensive
production towards more capital- and skilled labour intensive production. Real output per
employee (labour productivity), the capital/labour ratio (capital-intensity) and average wages
as (labour cost per worker) have increased across the distribution of firms. However, these
changes have been even larger for smaller firms. Thus, in the face of a changing economic
and legislative environment, firms responded by improving productivity through innovation,
upgrading of technology and moving towards a more skill-intensive production process. All
of these changes have affected the demand for labour, including the labour skills required.
With respect to the Clothing and Textile sector, as mentioned above the growth of the
companies in our sample is anomalous with the overall trend in the sector. Clothing and
Textile in South Africa emerges from a period of rapid decline during the past twenty years,
as the sector struggled to cope or adjust to global competition. This is on the back of
government reducing tariffs at a faster rate which opened up the sector to international
competition more rapidly than required by the World Trade Organization, whilst ineffective
customs control further exacerbates the situation (Morris & Edwards, 2006). The sector has
subsequently managed to stabilise and in some sub-sectors to reverse some of the losses.
However, a combination of incentives, a depreciating currency, and preferential access to
developed countries’ markets like the United States and European Union through the
African Growth and Opportunities Act and the SA-EU trade agreement, the sector has been
able to stabilise and realise growth in a number of sub-sector (Vlok, 2006). Recent data
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released by Statistics South Africa, for example, shows that whilst the sector as a whole
experienced four consecutive year of production decline, contracting by 2.4.% in 2018, the
decline is more pronounced within the apparel products sub sector, which declined by 4.9%
A few sub-sectors experienced growth: footwear grew by 3.5% during the same period, and
manufacturers in automotive textiles (material for seats and upholstery) had a good year
2018. The sector remains a strategic sector in terms of employment, particularly women and
rural communities, as shown in Figure 2 below.
Figure 2: Income and Employment Contribution of the Clothing and Textile sector
Source: http://www.statssa.gov.za accessed 20th November 2019
The Food and Beverages sector has been experiencing steady growth since 2008. Prior to
this period the sector, particularly food processing, lagged behind the rest of manufacturing
during the commodity boom up until the global financial crisis in 2008. Post 2008 the sector
then recorded a sharp increase, with the food processing sub-division realising significant
growth rate compared to other sub-divisions, and the sector has grown steadily since then. It
is now the major contributor to manufacturing valued add and employment (Quantec 2017).
The latest statistics shows that the sector is the biggest part of manufacturing, contributing
26% of manufacturing value add, from a contribution of 19% in 1998 and 11% of overall
manufacturing employment (www.statssa.gov.za accessed 20th November 2019). Food
processing is one of the sub-sectors within food and beverages which enjoys government
support in terms of financial and non- financial incentives, and this may partly explain the
performance of this sub-division; there are, however, other drivers, such as rapid
urbanisation experienced in the country since 1994, integration to global supply chains, and
so on.
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On the other hand, the Automotive sector has been quite stable and realising steady
growth, although with variation within its sub-sectors. The sector is very concentrated,
mainly dominated by seven car assembly plants also known original equipment
manufacturers (OEMs). It spans the primary, secondary, and tertiary sectors of the South
African economy from agriculture and mining, to the manufacturing and service industries.
While other industries have been struggling due to the weak macro-economic climate in the
country in recent years, automotive firms have proven resilient, primarily due to the
segment’s strong degree of integration, a solid favorable policy framework and export
diversification. The automotive industry is important to South Africa’s socio-economic
prosperity, growth, and development and central to the South African government’s efforts
to industrialise and reindustrialize the country’s economy (Automotive Industry Export
Council, 2017). Industrial policy, which has included a strong focus on skills, is seen as
having effectively supported the industry to improve production, generate employment and
widen skills access. Currently the sector contributes 7% to manufacturing value add and
3,38% to the country’s gross domestic product. Whilst motor manufacturing has registered
growth in the last five-years, the motor vehicles, parts, and accessories sub-sector has been a
top performer in the sector registering impressive growth in the past five years; in 2017 it
grew by 4.9% according to StatsSA (www.statsa.co.za accessed 25th October 2018).
Collective bargaining and minimum wages in South Africa
Industrial relations have historically been seen as an important factor in the creation of
strong TVET systems, and in particular, they have shaped the ways in which TVET is either
widely or narrowly supported. We therefore briefly consider some aspects of industrial
relations which may have pertinence to this study here.
A national minimum wage of about US$3 an hour has recently been introduced. However,
enforcement of national and sectoral minimum wages is weak.
South Africa has employer organisations and trade unions which set wages in bargaining
councils, and agreements reached and can be extended to non-parties on request by the
Minister of Labour. The government has established an Employment Conditions
Commission which can set minimum wages in sectors where no bargaining council exists.
To date this has only taken place in the agricultural sector (farm labourers) and for domestic
workers and security guards. Some argue that this amounts to a relatively strong level of
wage co-ordination (Nattrass, 2014a, 2014b). However, collective bargaining agreements
cover a small percentage of the workforce, many workers are hired in highly insecure and
casualized positions, and unemployment is incredibly high (Marais, 2011). Further,
enforcement of minimum wages is weak. Currently, there are 187 unions registered with the
Department of Labour representing 3.5 million workers (of which about 1.2 million are
public sector workers who are bound by an agency shop arrangement).
However, although coverage might be relatively small and enforcement is weak, Edwards et
al (2015) argue that the bargaining council system do affect firm dynamics; in particular, the
fact that bargaining council agreements are extended to non-parties has heterogeneous
effects on different sized companies. Generally, larger firms within a sector are
disproportionally represented on bargaining councils, since relatively few larger firms can
employ enough workers to be representative of the sector. This means that decisions taken
by these BCs, and extended to other non-party firms within the sector, are likely to more
14
closely reflect the wishes of larger businesses and the workers within these businesses
(Rankin, 2016).
Magruder (2012) argues that bargaining councils decrease employment in an industry by 8–
13 percent, and these losses are concentrated among small firms. Rankin (2016) also finds
that smaller firms in sectors covered by bargaining councils which face increased levels of
imports are more likely to exit than larger firms or firms which are not covered by a
bargaining council. It may be the case that some South African companies have responded
to bargaining councils by restructuring away from unskilled labour as a production input.
Nedlac was passed through one of the first pieces of legislation of the new democratic
government in 1994, and followed an in-principle agreement reached in 1990 between
organised business and labour, and an early iteration of such a forum, the National
Economic Forum, which set up in 1992 (Nattrass, 2014b). The vision was to move to a
greater consensus-seeking culture. This has not been achieved. South Africa continues to
have extremely conflictual labour relations, and Nedlac is seen as somewhat ineffectual. In
particular, it is not seen as having played a leadership role in the negotiation of key economic
policies. TIPS (2006) argues that the lack of a collaborative spirit and trust between
government and business has hampered industrial policy implementation; they suggest that
there is a pervasive ‘us and them’ mentality, and that much work is needed to secure the buy-
in of participants in supporting the industrial development goals of South Africa.
Clothing and Textile
In the Clothing and Textile sector, the South African Clothing and Textile Workers Union
(SACTWU), a COSATU affiliate, is the largest trade union. It has over 105 000 members. It
has played an instrumental role negotiating for better wages and working conditions
(SACTWU, n.d.). It has lobbied against illegal imports in the sector, rallied for government
support and the increase of imports from 40 per cent to 45 per cent in 121 clothing lines and
from 20 percent to 45 per cent in three lines, a demand which government gave into
(Godfrey et al., 2017). Wages are collectively negotiated at a national level through the
National Bargaining Council. The Bargaining Council is a result of the 2002 merger between
the regional industrial councils. Wage increases are in line with the consumer price index
(CPI) as at November 2018, plus an additional 1 percent. SACTWU is buying out a number
of companies that are closing out. This has raised a number of questions regarding their role
as a union vs capitalism.
Automotive
The Automotive sector has relatively high union density, with the National Union of Metal
Worker of South Africa (NUMSA) being the majority union. It jointly with other various
stakeholders (Motor Industry Staff Associations) negotiates all conditions of employment,
including wages, productivity, quality, safety, and training. The unions also, jointly with the
employer associations, negotiate industrial policy matters concerning the industry. NUMSA
has been forward looking and open to new creative and innovative measures to grow the
industry in a sustainable manner, and was very active in the skills policies which were
implemented after the transition to democracy. In the early 90s it introduced a new approach
to South African bargaining agreements of concluding agreements with a life span of three
years instead of the usual one year during. This is a way afforded the industry a breathing
space so to say, to focus on implementing programs aimed at improving the competitiveness
15
of the industry during intervening years. NUMSA plays a significant advocacy role and
championing worker’s rights, skills development programmes, improving conditions of
employment and advocating transformation of the industry as whole.
There are various bargaining forums where different stakeholders negotiate wages and
conditions of employment (i.e. hours of work, leave, sick leave, public holidays) in the
industry. The National Bargaining Forum is a non-statutory centralised bargaining for the
Original Equipment Manufacturers (OEMs) formed by NUMSA and OEMs to which all the
7 OEMs belong. The Automobile Manufacturers Employers Organisation (AMEO) is
another employer organisation that represent auto firms, in particular NAAMSA members,
in collective bargaining, data and information gathering and skills development. The Metal
and Engineering Industries Bargaining Council (MIEBC) is the second forum which
provides for the co-regulation of stable and productive employment relations in the metal
and engineering industries. The Motor Industry Bargaining Council (MIBCO) is the third
forum which aims to maintain industrial stability in the sector. Finally, there is the Bargaining
Council for the New Tyre Manufacturing Industry.
Food and Beverages
The sector is to a large extent characterized by well organised and strong employer/ business
organisations and relatively militant organized unions. Sector industrial policy formulation is
in the main driven through the participation of all the three industrial key stakeholders.
The Food and Allied Workers Union (FAWU) and South African Commercial Catering
Allied Workers Union (SACCAWU) are the two dominant unions in the sector, with the
former more active in manufacturing and the latter in retail. There are other smaller but also
influential unions in the sector: the Hotel, Liquor, Catering, Commercial and Allied Workers
Union, (HOTELICCA), Future of South African Workers Union (FOSAWU), Socialist
Organised Workers Union (SOWU), and South African Equity Workers Association (SAE
WA). There are a number of sub sectors within Food and Beverages where there is a low
level of unionization.
The Food and Beverages sector is covered by a number of bargaining councils, from
manufacturing to retail. A significant amount of wage bargaining happens at company level
for larger multinationals, including local multi nationals—companies like Coca cola and the
Breweries.
Whilst unions will necessarily focus on bargaining wages and conditions of employment, in
sub-sectors like sugar mills and beverages, unions like FAWU collaborate with employer
association against sugar tax and pushing government to raise sugar tariffs to the highest
allowable level by the WTO in defends of employment, as these sectors are confronted by
increased external competition.
TVET and TVET qualifications
South Africa’s TVET system has been the subject of many reforms, and is regarded as a
relatively weak part of the overall education and training system, with enrolments far below
what policy makers aspire to (Department of Higher Education and Training, 2013; Taylor
& Shindler, 2016).
16
In the late days of apartheid the apprenticeship system, which had been designed for young
white Afrikaans-speaking men, was collapsing, and most business provided little training to
their workers. Lack of access to education and formal qualifications was used to bolster
restrict workplace advancement. Most workplaces showed little sign of modern business
practice whereby workers are upskilled and given more responsibility in flatter teams.
Unfortunately, the policies introduced after 1994 to reform relationships between education
and work were poorly conceptualized and with many unintended consequences. Systems
were created and an institutional environment set up that were complex, expensive, and
added little value to training (Allais, 2013). This included a skills levy, and labour market
intermediaries created through this levy—Sectoral Education and Training Authorities
(SETAs), as well as a National Skills Fund. These were initially set up under the Ministry of
Labour, which the colleges which provided TVET, then called Technical Colleges, were
under the then Department of Education (DoE). During this period the Department of
Labour (DoL) decided to close down the apprenticeship scheme. The old scheme had
involved programmes delivered by the Technical Colleges for three-month periods, and
workplace experience being offered by companies and state-owned enterprises for the
remainder of the year. The DoL instead introduced learnerships, which were delivered by
private providers with the workplace component implemented in companies. These were
implemented across different sectors of the economy against new qualifications developed
through the newly introduced National Qualifications Framework (NQF) (Allais, 2011). The
DoL also renamed all short course provision ‘skills programmes’, and attempted to force
these to be offered against ‘unit standards’ that made up the qualifications in the original
NQF model, in the belief that this would assist individuals to acquire credit towards
qualifications.
The South African National Qualifications Framework was originally designed strongly
based on the Australian competence-based training model. The idea was that stakeholders,
including unions and employers, would be involved in specifying standards, which would
then ensure relevance of the qualifications to the needs of workplaces (Allais, 2011).
The splitting of workplace skills from TVET created in 1994 left employers with no
provision system for their skills needs, and TVET colleges with no relationship to
employers. These changes left uncertainty as to the role of the Technical Colleges. The
Department of Education (DoE) responded to the fragmentation in the system and the need
to integrate theory and practice into coherent learning programmes with the launch of the
Further Education and Training (FET) Colleges in 2003. 50 multi-campus FET colleges
were created through mergers of the previous 152 technical colleges. A new qualification, the
National Certificate Vocational (NCV) was introduced in 2007, as a three-year, substantive
programme that could offer young people a more vocationally-focused final three years of
senior secondary education. While the DoE indicated commitment to delivering the
learnerships through the FET Colleges, the qualifications created through the NQF and the
quality assurance and accreditation systems set up through the SETAs and the South African
Qualifications Authority (SAQA) were extremely complex and cumbersome, and were not
designed with public provision in mind. In the main these programmes remained outside of
the FET college programme mix. The NCV became the core programme offering.
Unfortunately, it was removed from the immediate needs of industry, failed to integrate
17
workplace experience, and the demanding curriculum, poor teaching, and poorly prepared
students resulted in low throughput.
At the same time the SETAs were sharply criticised for their lack of engagement with
employers, despite being based in the Department of Labour. The delivery of learnerships
and skills programmes was hampered by the reliance on private providers that were costly
and insufficient, and the dysfunctional qualification system that emerged through the NQF
(Allais, 2011, 2013). The system was focused on quality assurance and accreditation instead
of supporting public and private provision. The systems were so complex and cumbersome,
and the qualification and unit standards model so problematic, that some workplace training
centres refused to engage with them—and therefore could not get funds through the skills
levy. Small NGO providers in many cases closed down. Private providers offered what was
most cost effective—short skills programmes that did not support many unemployed young
people to either access or progress in the economy.
In 2009 those parts of the training system which had been under the DoL, the SETAs and
the NQF, were moved to a newly created ministry, the Ministry of Higher Education and
Training. The dysfunctionality of the framework underpinned much of the complexity and
dysfunctionality of the rest of the system, because the quality assurance model was premised
on the qualification model. After the eventual (but only very partial) resolution of a lengthy
review of the NQF in 2009, three sub-frameworks were created: a General and Further
Education and Training Framework, a Higher Education and Training Framework, and an
Occupations and Trades Qualifications Framework, each with its own Quality Council. The
FET Colleges were renamed (again) and became the Technical Vocational Education and
Training (TVET) Colleges, with a view to shaping these institutions to becoming more
responsive to economic sectors and employment.
The funding and regulatory systems set up under the DoE and DoL made it difficult to align
programmes, and monies from the fiscus initially continued to primarily fund TVET colleges
to offer the NCV. Many changes have been made to the SETAs, but concerns remain about
many of them in terms of understanding demand and supporting provision.
In short: TVET Colleges have been reinvented in numerous ways and have not yet managed
to successfully enable graduates to access economic opportunities or meet the demands of
industry. There is now a plan for the integration of TVET and the skills training system in
ways that is intended to enable TVET colleges to offer the qualifications required by
industry supported by a joined-up funding approach (fiscus, levy, and additional private
sector funding). There is evidence some of increased partnerships between TVET Colleges
and employers to offer these occupational programmes.
However, many challenges remain. These include that TVET colleges do not have the
resources required to offer the practical training and this requires a strong partnership model
for delivery with industry. Unfortunately, the focus within DHET has been on recapitalizing
and equipping a limited number of TVET Colleges through a project-based model called
Centres of Specialisation. The funding and accreditation models have been simplified, but
not enough. Government and SETAs have insisted on accreditation as a guard against weak
provision, and this has stifled responsiveness. A new balance needs to be found. In
particular, there is a need for demand led programmes that address specific gaps that are
preventing young people from accessing the labour market. There is already evidence of the
18
value of focused demand-led programmes that are provided to young people with potential
so as to allow them to enter jobs of higher levels of complexity. The responsiveness of such
programmes is stifled by accreditation requirements. Funding could be against successful
placement measures. There must be space in the system for this level of responsiveness
particularly in the context of the rapid changes introduced by technology. Finally, capacity in
the system to understand demand remains limited, despite considerable resources having
been spent on skills planning research and on-going skills planning in the SETAs.
In terms of qualifications, the system is enormously complex, because layers of new
qualifications and ways of designing qualifications have been added, without removing the
previous ones. The qualifications include:
- The oldest qualifications, the three-month ‘Nated’ (National Education) qualifications
date back to the original apprenticeship system. They are still offered in colleges, and still
form part of some apprenticeships. They were inherited from the apartheid state,
updated by the old Department of Education, and re-updated through DHET, Umalusi,
and QCTO processes for a few instructional offerings, but in the main they are viewed
as outdated. The qualifications are nationally examined.
- The NCVs (National Certificate Vocational), three one-year certificates, in theory
equivalent to years 10, 11, and 12 of high school. They were introduced by the former
Department of Education, and taken over by DHET.
- The ‘old new’ NQF qualifications. The original model of the qualifications framework
introduced an outcomes-based approach whereby qualifications were made up of unit
standards designed by stakeholder groups. Although most of the qualifications
developed through this framework were never used, some of them remain on offer.
- The new occupational qualifications have been developed since the creation of the
Qualify Council for Trades and Occupations. They are at levels 2 to 5 of the
qualifications framework (level four being the equivalent to grade 12 or the last year of
high school). They have a complicated set of rules governing qualification design as well
as the process for creating qualifications, which are currently being simplified.
These qualifications cohabit the same space, and cause high levels of confusion in the TVET
arena. In addition, there is a technical version of the high school certificate, the National
Senior Certificate (Technical), which has recently been revamped, and Higher Certificates
which are vocational or occupational in nature.
In the sectors in our study, a variety of these qualifications can be found—especially the
occupational certificates and Nated qualifications, although the latter are mainly in the
automotive sector, and for some of the trade qualifications in the other two sectors.
Currently there are steps underway to attempt to blend or absorb some of these types of
qualifications into each other, but to-date, they all exist. This makes for difficulties in
research, as the extraordinary levels of fluidity and change mean there are few solid base
lines against which to measure change in workplaces, as well as the fact that many people in
industry (and elsewhere) do not understand the system.
However, at a systemic level, for the first time, after recent changes the system now enables
integration in ways that ensures that the publically funded TVET colleges can deliver the
19
now revised occupational qualifications as part of their core offerings. This requires a strong
focus on strengthening workplace-based learning and a concomitant focus on improving
employer participation with support from the SETAs, which means this research is
happening at a key moment in for the sector.
4. Analysis of survey
Skills shortages and company dynamics
The majority of companies in our survey reported having grown their sales during the past 5
years across the three sectors, although there were some companies in all three sectors that
reported having decreased their sales during this period or having made no change at all.
This is despite the Clothing and Textile sector as a whole having declined over the period.
This was also true for employment figures, though more nuanced within industries in terms
of occupational categories, and across industries. For example, in the Automotive industry a
similar number of companies decreased their number of general workers as increased them,
with a significantly larger number of companies experiencing growth in the number of
operators, as compared to those companies that indicated no change or a decrease. A similar
pattern can be seen for technicians and supervisors. In the Clothing and Textile industry we
found that the majority of companies reported a growth in the number of general workers
and operators whilst the majority reported no change in terms of supervisors and technician
numbers, although some report growth in these occupations. Surprisingly, very few
companies reported decline in any of the occupations. In the Food and Beverages sector,
there is again a different picture, with the majority of companies reporting an increase in
general workers yet no change in the number of technicians. With respect to operators and
supervisors, most firms either kept their numbers or increased them.
When reflecting on this growth in terms of gender we found that more of the companies in
the Automotive sector report an increase in the number of women employed as operators,
technicians and supervisors than either reporting no change or a decline. The changes in the
employment of female general workers are more balanced with similar numbers of firms
claiming a decline, growth or no change. However, in the Clothing and Textile sector this
increase of women is true with respect to general workers and operators, while the more
companies report no change in terms of female supervisors and technicians. In Food and
Beverages, we found that the majority of companies reported an increase of female
employment across all occupations except for artisans unfortunately, the large portion of
companies in all three sectors did not or could not answer this question.
An analysis of the extent to which these companies reported changes in terms of workplace
transformation found that the vast majority of companies across sectors report having
changed work organization, most noticeably in Food and Beverages, but also substantially in
Automotive and Clothing and Textile. In addition, the vast majority of Automotive
companies report technology becoming more advanced, in the Food and Beverage sector a
majority report technology becoming more advanced, while in Clothing and Textile just over
half report no change in technology. With respect to product changes we found that in
Automotive the majority report changes (83.6%) of which 81.8% state that the products
have become somewhat more or significantly more advanced. In Food and Beverages and
Clothing and Textile we see a different pattern. Whilst in all cases the majority of companies
20
suggest a change in product (75% of companies in the Food Beverage sector report changes
and 71.5% of companies in Clothing and Textile) as many as 10% of the companies in Food
and Beverage say the products are simpler and similarly in Clothing and Textile 7.2% of
companies state that the products are simpler.
Key Finding One
Companies do not typically report skills shortages at lower levels.
Key Finding Two
At the higher occupational levels there are shortages, but this varies across manufacturing
sectors. Across the three sectors, there are some shortages at operator levels with the
Automotive sector expressing the lowest levels of shortages. Further, the majority of
responding companies (between 76% - 100% across sectors) indicate that they find it difficult
or significantly difficult to recruit technicians with the required skills
Key Finding Three
The shortage of skills at operator level is perceived to have very little effect on growth in the
Automotive sector but this is not true of the other sectors where almost half the companies
that experience shortages state that these shortages have negatively affected growth. The
limited supply of skilled technicians in the South African labour market has affected
company growth negatively across the three sectors, but less than company operations and
at varying degrees.
Key Finding Four
While the skills shortage of operators had either no effect or only a minor negative effect on
operations of companies in the Automotive sector, companies in the other two sectors
experienced negative and in some cases significantly negative effects on their operations
due to them struggling to find suitable operators.
Key Finding Five
Across the sectors, companies report that increasing difficulty of finding skilled technicians is
linked to a larger negative impact on company operations. However, the skills shortage
does seem to affect company performance in different ways in each sector. Almost all
companies in the Food and Beverage sector and the Clothing and Textile sector that report
to struggle finding qualified technicians claim that this has affected their operations
negatively. The Food and Beverage sector in particular seems to be constrained by the lack
of skilled technicians.
Companies and their relationship with TVET
The study then reflected on the ways in which companies interact with the TVET system
and the relationship between skills shortages and a focus on TVET (this analysis should be
read taking the caveats highlighted in the methodology section into account). We explored
the extent to which companies mentioned that new entrants had TVET qualifications when
hired and whether companies utilised TVET programmes to upskill existing employees.
Key Finding Six
The focus on TVET programmes at the point of hiring typically increases with higher skill levels.
However, there is considerable variation in the use of TVET programmes across sectors. The
21
Automotive sector has fewer shortages at lower skill levels but still has a strong TVET focus
and this focus is maintained at all occupational levels. By contrast Food and Beverage
appears to have an uneven approach to TVET across companies where there are shortages
and where not. Clothing and Textile has a limited focus on TVET even where shortages are
high.
Key Finding Seven
The majority of companies in the Automotive and Food and Beverage sectors report to use
formal TVET programmes to upskill existing employees across the various occupations with
operators being exposed to most formal training. In the Clothing and Textile sector, on the
other hand, the use of formal TVET programmes is significantly lower and falling with
increasing skill levels. While the majority report to use at least one TVET programme to upskill
general workers, 96% report not to use any formal TVET training to upskill technicians.
Key Finding Eight
The number of TVETs used during the hiring process is strongly correlated with the number of
TVETs for in-employment up-skilling; in other words, firms that use a higher number of TVETs to
identify suitable candidates in the hiring process are also more likely to upskill their workers
with formal vocational programmes. This holds for operators and technicians and is robust to
the inclusion of industry sector controls, changes in product, changes in technology and
exporting.
The findings in terms of pre-employment TVET suggest that while all three sectors do not
report significant shortages at the general worker level, the Automotive sector does consider
TVET at this level, while Food and Beverage does to a small extent, and Clothing and
Textile, which reports the most difficulty (albeit still relatively low) does not.
At the operator level, Automotive companies do not experience significant shortages and
use TVET programmes. In Food and Beverages, about two thirds of the companies report
difficulties at operator level and at the same time mention fewer TVET programmes than
Automotive companies. In Clothing and Textile, over half the companies experience
difficulties combined with very little mention of TVET.
For technicians, three quarters of Automotive companies report difficulties, but also
mention TVET programmes, while all Food and Beverage companies report difficulties, but
mainly also mention TVET programmes. In Clothing and Textile, by contrast, the majority
report difficulty, but here there are very few mentions of TVET programmes.
For in-employment training the picture is similar. In the Automotive sector, the vast
majority of companies indicate that they use at least one TVET programme for general
workers, but two or more TVET programmes at operator and technician level. In the Food
and Beverage sector, the majority use at least one TVET programme for general workers,
three or more at operator level, and about two thirds use more than three programmes at
technician level. However, a third of the Food and Beverage companies don’t use formal
TVET at this level. In the Clothing and Textile sector, by contrast, for general workers no
companies use more than one TVET programmes, and two thirds use one; at operator level
no companies use more than one TVET programmes and less than half use one; and at
technician level the picture deteriorates even further—still no companies use more than one,
and 96% use none.
22
The Automotive sector, which has been the focus of industrial policy that integrates training,
shows a strong usage of TVET both pre- and in-employment, even though shortages remain
at higher skill levels. Clothing and Textile—a sector in crisis, despite years of industrial
policy—appears to hardly engage with formal TVET, both at the level of pre- and in-
employment training. The Food and Beverage sector shows more internal variation, with just
over a third using TVET programmes pre- and in-employment. Companies in this sector
that do use TVET, tend to report using a higher number of TVET programmes.
Key Finding Nine
Variances with respect to reported skills shortages are consistent with the extent to which
TVET programmes are considered at the point of hiring in each industry: industries that
appear to have a greater awareness of TVET programmes report fewer skills shortages.
We considered the percentage of companies that reported difficulties in recruiting
individuals with the required skills and those companies that indicate that their new
employees entering their company have formal TVET programmes. Whilst we cannot
explain, based on only the survey findings, the relationship between these variables, the
findings suggest that those companies that have the most difficulties tend not to mention any
specific TVET programmes as a requirement. This raises the question as to whether they
have difficulties because they do not recruit from TVET programmes, or they have
difficulties because the TVET programmes that currently exist do not meet their needs and
are therefore not used as a requirement.
As indicated previously, at the level of general workers, companies do not report difficulties
with finding people with the relevant skills. Nevertheless, it is worth noting that 39% of the
Automotive companies that do not experience any difficulty at the point of recruitment of
general workers specified 3 or more TVET programmes as commonly (though equally up
to 27% who also don’t have difficulties don’t use TVET in the hiring process).
For Food and Beverages, 88% of the companies report no difficulty in hiring general
workers with the relevant skills with 24% reporting that general workers have 3 or more
TVET qualifications.
Interestingly, in the Clothing and Textile sector, which reported the most difficulty with
respect to finding general workers (albeit only 22%) mention no TVET programmes for
general workers.
With respect to operators, in the Automotive industry, where the vast majority of
companies (82%) report having no difficulties at the point of recruitment, 45% use 3 or
more TVET programmes (though 16% of the companies indicate no difficulties and do not
use TVET at the point of recruitment). The picture in the Automotive sector suggests that
TVET programmes are playing a role in meeting skills needs in the sector, although at this
point we cannot comment on public versus private provision.
Of interest is that of the 31% of companies that experience significant difficulties, the
majority use either no TVET or only 1 TVET programme for recruitment. Only a small
portion of companies that experience difficulties mention the use of 2 or more TVET
programmmes during the recruitment process.
23
In terms of technicians, we found that in Automotive only 25% of the companies report
no difficulties with 19% using at least 3 formal TVET programmes (only 3% of these
companies use no TVET in hiring). Of the 49% of companies that report it is somewhat
difficult, 36% mention at least 3 formal TVET programmes, 5% mention 2 TVET
programmes, 2% mention 1 TVET programme and 7% mention no TVET in hiring. Of the
25% that report significant difficulties, 10% mention at least 3 TVET programmes, 15%
mention 2 TVET programmes and none mention only 1 or none.
This is somewhat different for Food and Beverages, where all of the companies report some
or significant difficulties at this level. Of the 28% of the companies that report they have
some difficulty, the vast majority use at least 3 TVET programmes. 72% of the companies in
this sector report to have significant difficulties finding technicians with 11% reporting to
still use at least 3 TVET programmes when hiring technicians. Perhaps surprisingly,
however, as many as 17% of the companies that report significant difficulties do not
mention specific TVET programmes with respect to their recruitment process.
TVET and industrial strategies
Key Finding Ten
Employer responses confirm that industrial transformation requires more skills; this is
particularly the case in the Automotive sector.
In considering the relationship between shortages and TVET we also considered the factors
that drive the requirements for skills and how these in turn relate to the extent to which
companies focus on TVET. The findings suggest that the majority of companies in the
Automotive industry state that the transformation of the workplace requires somewhat
(45.5%) and significantly (29.6%) more skills, whilst in Food and Beverages none of the
companies state that these changes require significantly more skills and 57.9% of companies
state that it requires somewhat more skills. In Clothing and Textile we see that 77.3% of
companies state they require more skills (59.1% state that they require somewhat more skills
and 18.2% state that they require significantly more skills). In the Food and Beverage sector
we don’t see any consistent pattern—and this is a sector without a consistent industrial
strategy.
Key Finding Eleven
The Automotive sector with the most changes and the strongest indication of technology
becoming more advanced is also the most focused on training; nonetheless it experiences
shortages at the level of technicians.
Key Finding Twelve
In the Clothing and Textile sector, even in our sample of mainly growing companies, over
half of the companies reported no change in technology and very little use of TVET
combined with skills shortages at all levels. This could reflect the overall decline of the sector.
Key Finding Thirteen
In the Automotive sector the complex technology reported has only a moderate effect on
the skills shortages at the operator level. Companies in the Food and Beverage sector as well
as the Clothing and Textile sector on the other hand are more likely to report skills shortages
24
with technology changes.
Key Finding Fourteen
All three sectors experience difficulties in finding appropriately skilled technicians, but in the
Automotive and Food and Beverage sectors this is much higher where technology has
become more complex.
Key Finding Fifteen
For operators, companies that report changes in technology are also more likely to use a
more formal TVET programmes to upskill their operators. This holds for companies in the
Automotive sector as well as in the Food and Beverage sector. However, in Clothing and
Textile, there is no greater utilization of TVET where companies report changing technology.
Key Finding Sixteen
The Automotive sector is consistent, where changing technology is found together with a
higher number of TVET progammes used to upskill technicians. In Food and Beverages just
under half of the companies reporting technology changes also report using two or more
TVET programmes for in-employment training of technicians. In contrast, firms in the Clothing
and Textile sector do not report use of TVET for in-employment training of technicians,
except for a very small number of firms whose technology has become significantly more
complex.
Key Finding Seventeen
Changing products did only affect skills requirements for operators in companies of the
Clothing and Textile sector, who report more difficulty and where products have become
more advanced.
Key Finding Eighteen
There is a clear relationship between changing towards more advanced products and skills
shortages of technicians across all three sectors. Companies that report changes towards
more advanced products are also more likely to use formal TVET programmes to upskill
operators and technicians. This holds for all sectors, but companies in the Clothing and
Textile sector are still least likely to upskill.
Key Finding Nineteen
Firms that are exporting a larger share of their output also report having changed towards a
more advanced technology, more advanced products, and a higher skill level.
Key Finding Twenty
The associations between exporting and the use of TVETs in the hiring process is less clear
compared to the associations we find for the changes in technology and products.
However, there is an indication that exporting and the use of TVETs is related. Firms in
Automotive sector and the Food and Beverage sector with larger shares of exports are more
likely to utilize a larger number of TVET programmes in hiring decisions. This pattern is less
observable for firms in the Clothing and Textile sector.
Note that we do not consider the relationships between changes in organization and using
TVET, because this change affects all companies.
Conclusions, reflections, and next steps
The Theory of Change focuses on TVET graduates, both those that entered companies with
TVET qualifications, and those that acquired these qualifications when already in the
company and seeks to explore how these graduates contribute to the transformation of
companies and/or increased levels of productivity within the company. The project aims to
25
explore whether specific TVET programmes support transformation within a company and
contribute to greater levels of inclusion and growth, in the context of understanding the
internal and external factors that enable or hinder these changes.
The findings from the first two stages of the research highlight that companies typically
require general education (Grade 12) as their minimum condition for hiring. However, they
also affirm the relationship between skills, TVET, transformation and growth. Concerns
relating to skills shortages are consistent with the extent to which TVET is a consideration at
the point of hiring in each industry. The companies that focus on TVET when hiring are
also those that focus on TVET for existing employees. That is, the results demonstrate that
industries that have a greater awareness of TVET programmes report fewer skills shortages.
This is strongly demonstrated in the Automotive industry as compared to the Clothing and
Textile Industry.
Further, companies that report difficulty in finding technicians, and to a lesser extent
operators, suggest that this negatively impacts on company operations. This, however, is
only minimally the case for the Automotive sector, whilst almost all companies in the Food
and Beverage sector and the Clothing and Textile sector that report struggling to find
qualified operators and technicians suggest that this has negatively affected their operations.
Respondents from the Food and Beverage sector in particular report being constrained by
the lack of skilled technicians. Similarly, the shortage of skills at operator level is perceived to
have very little effect on growth in the Automotive sector, whilst this is not true of the other
sectors where almost half the companies that experience shortages at this level report that
these shortages have negatively effected growth. The limited supply of skilled technicians in
the South African labour market has also affected company growth negatively across the
three sectors, but less than company operations and at varying degrees.
These findings do not, however, shed much light on the extent to which these changes
encourage increased inclusivity (the other element of the Theory of Change). Whilst we can
report on whether there are increased numbers of women employees, the survey has not
provided sufficient evidence of the extent to which TVET and/or the transformation of the
workplace contributed to greater levels of equity or inclusion. These factors will be explored
in the next phase of the research.
Similarly, whilst there is evidence of transformation we do not have an understanding of
whether this has led to increased efficiencies nor the extent to which these changes have
created the opportunity for employees to more effectively utilise the skills that they have;
however, the finding that the absence of skills creates a challenge for operations suggests
that this is the case.
Nevertheless, despite these caveats, our findings lead to the following observations:
That there is a relationship between the core elements contained within the Theory of
Change (TVET, Transformation and Growth). However, while we cannot establish causality
with our data, there are some noteworthy associations: the industry controls account for
most of the variation in the number of frequently used TVET programmes during hiring and
for upskilling. This suggests that there are multiple theories of change (per industry) rather
than a singular theory of change cutting across manufacturing.
26
The differences in these relationships appear to, in part, be explained by the decisions that
are made within the company with respect to transformation and specifically technology and
the development of new products. The study has demonstrated that these decisions
determine the extent to which skills are required at the different occupational levels and that
these differ across the three industries. Thus whilst the vast majority of companies within the
Automotive industry have both introduced new technology and state that this technology is
more advanced, in Clothing and Textile many companies indicate that they have not
introduced new technology and for many, even where they have introduced new technology,
this is reportedly simpler than the previous forms of technology.
This level of consistency within each industry about technology and the development of new
products, suggests that these decisions are informed by contextual factors relevant to the
industry. Other factors that appear relevant to this discussion are the industrial strategies that
have been employed in each industry and the kinds of incentives that have been put in place
(with respect to incentives that support the growth of the industry as well as incentives to
use TVET or not). There may also be other factors internal to the companies that impact on
these decisions. These include factors such as the industrial relations within the firm and the
level of unionisation. This could also reflect the level of involvement of industry sectors in
the design and provision of TVET programmes by service providers.
These observations suggest that TVET strategies cannot be developed in isolation from the
industrial development trajectory. The industrial strategy determines the way in which the
industry engages with transformation and growth and this in turn has implications for the
occupational structure of the company, the level of skills that are required, whether there is a
need for a TVET programme or less formal on-the-job training and who and how the
TVET is provided. In the case of the Automotive industry, as discussed above skills have
been explicitly incorporated into industrial policy. Whilst the skills shortages (priorities) are
primarily located at the higher occupational levels, the industry focuses on TVET
provisioning at each occupational level (including general workers). The extent that TVET is
integral to the development of this industry is further demonstrated by the number of
companies that have put in place the capacity to provide TVET within the workplace or, in
some cases, in partnership with public TVET providers. This is in sharp contrast with the
Clothing and Textile sector where there is limited focus on TVET within the industry
despite the challenges that the industry is facing in terms of skills and the need for greater
levels of productivity. As discussed above, while competency-based training models were
adopted in South Africa (although referred to as learning outcomes not competency
standards), this did not seem to make any difference in the relevance of qualifications to
companies, and instead contributed to a high degree of confusion about qualifications,
because of a proliferation of qualifications. Attempting to involve employers primarily at the
level of qualification design does not seem to have been a successful form of employer
engagement.
Our findings suggest that employer engagement in TVET needs to be far more extensive
and sectorally specific than simply attempting to involve employers in discussions about the
qualifications and what these should contain. What is even more important is to determine
the kinds of changes that the company is introducing and to determine the nature of the
programmes that will support this transformation. This requires a focus on the eco-system
of the companies and not only on the occupations where there are shortages. Rather the
27
study highlights that for skills to support transformation and growth there must be a focus
on general education and TVET across the company.
Further, it highlights the need to reflect on the kind of provision arrangements that will work
within these environments. The apparent success within the Automotive industry, where
much of the education and training is provided by workplace providers, highlights the need
to understand what about this provision arrangement makes it possible for the industry to
embrace the offerings provided. Is it because the training is structured in accordance with
the times required by industry? Are the facilitators better able to contextualise the training?
Does this modality allow for greater levels of integration? Conversely there is a need to
understand why this has not happened within the Clothing and Textile industry despite the
active engagement of the unions in attempts to save the industry, and involvement within
the Sectoral Education and Training Authority, as well as a strong political commitment to
transforming the industry. What kind of provisioning would work in these environments?
And, to what extent would the availability of individuals with relevant skills create the space
for advancing technology in the industry? Or, does the lack of capacity to purchase new
technology explain why there is a limited focus on TVET? In which case is there a role that
TVET can play to support the transformation of the industry and a concomitant increase in
productivity. Or, are there other aspects that account for the observed differences within
industries—such as vertical integration including in global value chains, industry
concentration, and so on? Clearly, further analysis of firm characteristics and industrial
relations is required, and will be a focus of the case study phase of the research.
Across these discussions is the need to understand the role that the public TVET Colleges
could play, and the kinds of partnerships that would need to be formed, to allow these
institutions to make a meaningful contribution to skills development that supports
transformation and growth.
Finally, the ways in which the training levy and other forms of incentives, do – or could -
stimulate the provisioning of TVET in a manner that is embedded more firmly within
industry also requires attention.
This analysis has highlighted the conclusions that can be drawn based on the study thus far.
It has also highlighted areas where we do not yet have sufficient evidence upon which to
base any conclusion. This is particularly with reference to the relationship between TVET
and inclusivity as well as the extent to which the transformation of companies, in terms of
work organisation, technology and products, enhances productivity and again the role of
TVET in this regard. Further, in the case studies we need to understand these patterns and
the ways in which the different contextual factors shape the internal transformation and
growth of the companies so as to more finely locate the specific role of TVET within this
context. The case studies will also explore, in more depth, which programmes are most
useful to industry and what aspects of this programme are considered most valuable to
industry. Further, the case study data will allow for a deeper exploration of the relationship
between formal and informal provisioning.
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Understanding the persistence of low skills in South Africa
  • S Allais
Allais, S. (2013). Understanding the persistence of low skills in South Africa. In J. Daniels, P. Naidoo, D. Pillay, & R. Southall (Eds.), New South African Review 3 (pp. 201-220). Wits University Press.