Work­ing smarter key to SA suc­cess

Ef­fi­cient out­put vi­tal for growth and jobs, says pro­duc­tiv­ity tsar

Sunday Times - - Business Newsmaker - By CHRIS BAR­RON

● Pro­duc­tiv­ity SA boss Mothunye Moth­iba says it’s time the coun­try got se­ri­ous about pro­duc­tiv­ity.

Lack of pro­duc­tiv­ity is one of its great­est chal­lenges and a ma­jor cause of job­less­ness, he says.

“SA needs to em­brace a pro­duc­tiv­ity mind­set. We should talk about pro­duc­tiv­ity as the cat­a­lyst for com­pet­i­tive­ness and growth.”

His re­marks come hot on the heels of the pres­i­den­tial jobs sum­mit.

Pro­duc­tiv­ity SA is a crea­ture of the 1998 pres­i­den­tial jobs sum­mit. Its cre­ation was a recog­ni­tion 20 years ago that SA’s lack of pro­duc­tiv­ity was mak­ing it un­com­pet­i­tive and de­stroy­ing job op­por­tu­ni­ties, and that some­thing ur­gent needed to be done.

Pro­duc­tiv­ity SA was the an­swer, but Moth­iba says a lack of govern­ment sup­port has pre­vented it from mak­ing the nec­es­sary im­pact.

Its man­date is to help strug­gling busi­nesses in the small and medium-size en­ter­prise sec­tor be­come more pro­duc­tive and com­pet­i­tive by send­ing in spe­cial­ists to help them man­age costs and stream­line pro­duc­tion lines and op­er­at­ing pro­ce­dures.

Since 1998, it has as­sisted about 5,000 com­pa­nies and “pre­served” 140,000 jobs, says Moth­iba. In the 2017/2018 fi­nan­cial year, Pro­duc­tiv­ity SA im­ple­mented turn­around strate­gies that sta­bilised about 71 com­pa­nies and saved more than 8,500 jobs.

But he con­cedes that all of this is “a drop in the ocean” given the thou­sands of jobs lost ev­ery year.

It’s as much as it can do with its present bud­get, he says. It gets R80m a year from the depart­ment of trade & in­dus­try and the Un­em­ploy­ment In­sur­ance Fund (UIF), but needs more.

In his re­cent an­nual re­port, he blamed its “poor per­for­mance” on “fund­ing chal­lenges”. It doesn’t even have enough money to pay its sup­pli­ers, the en­gi­neers and other spe­cial­ists it uses to turn around dis­tressed busi­nesses.

Sup­pli­ers went un­paid for more than seven months re­cently “be­cause the UIF didn’t trans­fer funds to us on time and in full”, he says. “Our pol­icy is to pay sup­pli­ers within 30 days of re­ceiv­ing the in­voice.”

Pro­duc­tiv­ity SA, an agency of the depart­ment of labour, fo­cuses on busi­nesses in the man­u­fac­tur­ing sec­tor, many of them lo­cated in the Dube TradePort spe­cial eco­nomic zone in KwaZulu-Natal, where prod­ucts are man­u­fac­tured for the ex­port mar­ket.

But even with tax con­ces­sions, com­pa­nies are strug­gling to com­pete with their Asian coun­ter­parts, says Moth­iba.

Along with small and medium busi­nesses in town­ships and ru­ral ar­eas, they are un­able to man­age their costs, mainly wages.

“Pro­duc­tion costs are too high, so their prices are too high and they’re not com­pet­i­tive,” he says.

They take too long to get their prod­ucts to mar­ket, pro­cesses are du­pli­cated and they’re not able to de­liver on time.

The re­la­tion­ship be­tween man­age­ment and work­ers is of­ten poor, and the num­ber of strikes around the coun­try re­flects this.

They of­ten don’t agree on goals, lead­ing to a lack of com­mit­ment to achiev­ing them.

“Man­age­ment and work­ers are not com­mit­ted to en­sur­ing that they have a clear un­der­stand­ing of the goals and that they’re all in­volved.”

He says the high fail­ure rate of busi­nesses is less about mar­ket con­di­tions than their lack of pro­duc­tiv­ity and com­pet­i­tive­ness.

“From where I’m sit­ting, en­hanc­ing pro­duc­tiv­ity will go a long way.”

Moth­iba, 61, who be­came CEO three years ago af­ter work­ing as a se­nior man­ager in the depart­ment of labour and COO for the gam­bling board in the North West, says there is a lot the govern­ment can do to make it eas­ier to do busi­ness.

It needs to “relook” at labour leg­is­la­tion, the time it takes to regis­ter a com­pany and the tax­a­tion sys­tem for small and medium busi­nesses.

In spite of amend­ments to the Labour Re­la­tions Act, there is still too much red tape.

“You can imag­ine if some­one wants to in­vest in SA and is hav­ing to move from the depart­ment of labour for labour mat­ters to an­other depart­ment for reg­is­tra­tion of the com­pany, and so on.

“We need a one-stop ser­vice where the in­vestor can do ev­ery­thing un­der one roof. It is pos­si­ble, and these are things govern­ment is now look­ing at.”

But there needs to be a greater sense of ur­gency in ad­dress­ing the is­sues hob­bling busi­nesses in the SME sec­tor.

He cites a World Bank re­port that in economies that are do­ing well, 95% of busi­nesses are SMEs.

“In those economies SMEs em­ploy more than 70% of the work­force. Our SMEs em­ploy less than 35%.”

Hugely detri­men­tal to small and medium busi­nesses has been the col­lapse of lo­cal govern­ment, he adds. For this rea­son, Pro­duc­tiv­ity SA has be­gun tar­get­ing mu­nic­i­pal­i­ties as well as the SME sec­tor.

“This is where the bot­tle­necks are, but it’s where eco­nomic ac­tiv­ity should be tak­ing place.”

He says mu­nic­i­pal­i­ties in the Western Cape are a long way ahead of the rest. “We’re strug­gling in other prov­inces, be­cause we have not em­braced the pro­duc­tiv­ity mind­set.”

He says he’s hav­ing dif­fi­culty pro­mot­ing the no­tion of pro­duc­tiv­ity in other prov­inces, but “with the ex­am­ple of the Western Cape we be­lieve we will sell this idea much bet­ter”.

It takes lead­er­ship, he says. “A pro­duc­tiv­ity in­ter­ven­tion pro­gramme will not suc­ceed if there is no lead­er­ship.” Is there any lead­er­ship?

“We have not picked it up in the other prov­inces but in the Western Cape I think we’ve got the right lead­er­ship.”

He says he would like to see de­ci­sive in­ter­ven­tion by the South African Lo­cal Govern­ment As­so­ci­a­tion to im­prove lead­er­ship in mu­nic­i­pal­i­ties.

“I think they are try­ing, but we are not yet see­ing the re­sults.”

Pres­i­dent Cyril Ramaphosa’s stim­u­lus plan is aimed at small and medium en­ter­prises, par­tic­u­larly in town­ships and ru­ral ar­eas.

“He has told us we need to fo­cus on as­sist­ing en­ter­prises in the town­ships and ru­ral com­mu­ni­ties.

“These are the spa­ces where the most dys­func­tional mu­nic­i­pal­i­ties are, and now I think there is be­gin­ning to be a sense of ur­gency be­cause cit­i­zens are up in arms be­cause of the [lack of] ser­vice de­liv­ery.

“I think this is rea­son enough for any­one who is a leader to have a sense of ur­gency now.”

Pro­duc­tion costs are too high, so their prices are too high and they’re not com­pet­i­tive

Mothunye Moth­iba

CEO of Pro­duc­tiv­ity SA

Pic­ture: Thuli Dlamini

Mothunye Moth­iba be­came CEO of Pro­duc­tiv­ity SA af­ter a ca­reer in the depart­ment of labour and a stint as COO for the North West gam­bling board.

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