Consultancy Report—South Africa

Executive Summary

Crates-for-car is a manufacturing company which is producing wooden boxes for cars, this company is located in north of UK and 150 employees working for the head office. Currently, the company has five manufacturing branch located in South of England, around 75 workers employed in each branch. Recently, the company decided to increase its operations in other country, which would in the same size of plants this company already possess currently, South Africa is involved in the company’s extending plan. The responsibility of the HR Office is producing a consultancy report. This consultancy report will evaluate the situation in South Africa from various aspects to help this plan.

This report is made up of six parts. Firstly, this report will introduce the general information of South Africa include economy, population; Then, this report focusing on the current political situation in South Africa and analyze the specific political environment which could related to establishing a operation in this country; Thirdly, in order to gain the correct information of local labor market, this report will elaborate the informal sector work in South Africa from the aspects of legal recognition, wages and protection; In the fourth part of this report, the employment legislation in South Africa and the government policy linked to the disability discrimination will be covered in this part; The subsequent paragraph will analyze the skill and knowledge level of local labor market and a general cost benefit analysis of establishing a subsidiary in South Africa will be presented in the final part of this report.

Introduction

South Africa is a developing country at the southern tip of the continent of Africa. The population of this country is around 53 million(Cia.gov, 2016), the most important industries is mining, automobile assembly and metalworking. As the main industry in South Africa, automobile assembly provides opportunities for automobile accessories producer, the largest forestry supplier is Mondi Ltd (Mondigroup.com, 2016). In recent years, the economy of South Africa has been facing challenges, economic growth decelerated to 1.5% in 2014. Around 25% of work force is under the situation of unemployment, especially among black youth (The World Bank, 2015. Oecd.org, 2016), 18% of labor force is the labor force of industrial occupation, therefore, the key issue lead to the decelerating of economic growth is unemployment. Foreign companies also need to face other issues of employment which could impact the investment and building factories, for instance, skill shortage, employee healthcare and safety (Oecd.org, 2016).
Political Situation

South Africa is a relatively stable democratic country, this young country established in 1961 and dominated by one political party that is African National Congress (ANC) party currently (Gov.uk, 2015). South Africa is developing within a multiparty political system, ANC is the biggest political party in South Africa, with other 12 parties represented in the National Assembly of Parliament (Southafrica.info, 2016). The parliament of South Africa is consisting of two parts, the National Assembly and the National Council of Provinces. The National Assembly is the most influential part, taking charge of passing legislation and supervising executive performance. Its members are elected for a term of five years. The Current president that the leader of African National Congress party Jacob Zuma started his president career in 2009 and he was re-elected to the second term for five years as president in 2012 (Cia.gov, 2016).

Informal Sector

Informal sector labor is that which is do not have legal recognition, unregistered and lack of protection or regulation (Dibben, Wood and Williams, 2015). This kind of labor is commonly appeared in the low level of income of some industries in South Africa, such as agriculture, mining and tobacco. According to Gabrielle Wills’s working paper (2009), in 2007, the number of non-agriculture informal employees in South Africa is around 3.65 million, which is 28% of total employment. Around half of informal workers were employed in formal companies in 2007, these workers generated significant economic value for South Africa. However, the existence of informal sector could generate some employment issues, for example, informal sector workers lack of the protection from trade unions, informal employees need a representation in work place. South Africa government seeks to play a significant role in reducing the proportion of informal sector employment, since 2005, government started development the Integrated Small Enterprise Development Strategy (Essop and Yu, 2008) aim to formalize the small, micro and medium enterprises (SMME) in South Africa. This action of formalization will develop the informal sectors and youth (typically aged 15-35). Thus, the risk of informal sector labor might be mitigated in future.

Non-discrimination policy & Employment Legislation

South Africa has been signed by high level of discrimination in the past, the government against the discrimination not only to overcome the racial and gender discrimination, but also disability discrimination especially, the Employment Equity Act (EEA) aims to maintain an atmosphere without unfairly discriminate, directly or indirectly, in workplace or any employment practice, include disability discrimination. The EEA provides the equity in employment through processing the opportunities equally and fair employment practices (Marumoagae, 2012).

In order to build a relationship between economic growth and the creation of employment, the government legislated series of laws focusing on employment like Employment Equity Act 55 of 1998 (EEA), Skills Development Act 97 of 1998 (SDA), the Unemployment Insurance Act, 2001. Additionally, some policy related to employment have been practiced, the National Development Plan (NDP) which is a long-term strategy aims to create more than 11 million job opportunities by 2030 through creating environment for stable employment and promoting employment in labor-absorbing industries; for the short-term achievement, the New Grow Path (NGP) enacted in 2010 is aim to support labor-absorbing activities in manufacturing, agriculture and services industries (Ilo.org, 2016). To generate 5 million job creation by 2020, the govern will use series of micro and macro policies to create a friendly environment for encouraging more investments by the private and public sector (Ilo.org, 2013). The initiations of NGP and NDP will provide better condition of employment in South Africa.

Skill Level

Generally, the labor market of South Africa supplies unskilled or semi-level skilled workers for local industries mainly. According the Quarterly Survey of South Africa labor force for the second quarter in 2015, 40% of new entry labor force in South Africa are lack working skill or just being graduated from school (Labor Force Surveys, 2015). Over ten million un employed workers in 15-24 year olds, around 33% of them have no job experience or not in school. Limited job creation can not provide sufficient job opportunities for unskilled or semi-skilled youth (The World Bank. org, 2015). Although the percentage of skilled worker in South Africa increased by 10 percentage points in the period from 2000 to 2014, the principle part of South Africa labor market is occupied by unskilled semi-skilled worker.

Another factor lead to the situation of low skill level is related to quality of education, according to the recently education outcomes in South Africa (Branson and Leibbrandt, 2013), over 50% of employed labors in 15-34 age range have the South African matric-level exam qualification which is similar to the high school-level exam or higher education certification. However, about 60% of unemployed people have attained the matric-level exam qualification, part of unemployed people has no educational experience indeed (The World Bank, 2015). Concern about the level of educational quality, although education has been developing in recent years, the schooling might not be translating into the high-level skills needs of South Africa labor market. Thus, overseas companies may need to complete the employee training process before they establish branch factory or office (Oecd.org, 2008).

Conclusion

According to the above parts of this report, the benefits of locating branch office or factory in South Africa from employment perspective could be summarized as the following statements:

* As a developing country in Africa, South Africa has significant potential labor market for manufacturing industries. * Automobile assembly is the main industry in South Africa, this means the worker who is familiar with producing wooden boxes for cars may be recruited easily in local labor market. * the Integrated Small Enterprise Development Strategy could help company reduce the problem of informal sector labor, the level of the risk of informal sector labor in South Africa has fallen recently. * The employment legislation activities like NDP and NGP provide an attractive environment for absorbing employees, this could improve the quality of employment of investors.

Although South Africa has a weakness of locating branch company that is related to the low skill level of local market, the manager could use employee training system to fix this drawback and the demand of skill level in manufacturing company like Crates-for-car is in medium level that could be satisfied. Furthermore, the quality of education and skill development in South Africa has been improved since the policy like NDP and NGP practiced. Overall, the benefits stated in this report could support the plan of locating a subsidiary company in South Africa.

Reference

Branson, N. and Leibbrandt, M. (2013). Education Quality and Labor Market Outcomes in South Africa. OECD Economics Department Working Papers.

Cia.gov. (2016). The World Factbook. [online] Available at: https://www.cia.gov/library/publications/the-world-factbook/geos/sf.html [Accessed 18 Apr. 2016].

DIBBEN, P., WOOD, G. and WILLIAMS, C. (2015). Pressures towards and against formalization: Regulation and informal employment in Mozambique. International Labor Review, 154(3), pp.373-392.

Essop, H., Yu, D. (2008). The South African informal sector (1997–2006). The Regulatory Environment and its Impact on the Nature and Level of Economic Growth and Development in South Africa, 1-58.

Gov.uk. (2015). Overseas Business Risk - South Africa - GOV.UK. [online] Available at: https://www.gov.uk/government/publications/overseas-business-risk-south-africa/overseas-business-risk-south-africa [Accessed 19 Apr. 2016].

Ilo.org. (2013). Employment policy implementation mechanisms in South Africa. [online] Available at:http://www.ilo.org/employment/Whatwedo/Publications/working-papers/WCMS_251000/lang--en/index.htm [Accessed 19 Apr. 2016].

Ilo.org. (2016). The enabling environment for sustainable Enterprises in South Africa - 2016. [online] Available at: http://www.ilo.org/global/topics/employment-promotion/small-enterprises/WCMS_459981/lang--en/index.htm [Accessed 19 Apr. 2016].

Marumoagae, M. (2012). Disability Discrimination and the Right of Disabled Persons to Access the Labor Market. Potchefstroom Electronic Law Journal/Potchefstroom Electronics Regsblad, 15(1).

Mondigroup.com. (2016). Mondi - South Africa. [online] Available at: http://www.mondigroup.com/desktopdefault.aspx/tabid-349/ [Accessed 18 Apr. 2016].

Oecd.org. (2016). Economic Survey of South Africa 2015 - OECD. [online] Available at: http://www.oecd.org/eco/surveys/economic-survey-south-africa.htm [Accessed 19 Apr. 2016].

Oecd.org. (2016). South Africa - Economic forecast summary (November 2015) - OECD. [online] Available at: http://www.oecd.org/economy/south-africa-economic-forecast-summary.htm [Accessed 18 Apr. 2016].

Southafrica.info. (2016). South Africa's political parties. [online] Available at: http://www.southafrica.info/about/democracy/polparties.htm#.VxZPw_krJhE [Accessed 19 Apr. 2016].

The World Bank. Org, (2015). South Africa economic update : jobs and South Africa’s changing demographics. [online] Documents.worldbank.org. Available at: http://documents.worldbank.org/curated/en/2015/08/24910225/south-africa-economic-update-jobs-south-africa%E2%80%99s-changing-demographics [Accessed 18 Apr. 2016].

Wills, G. (2009). South Africa’s informal economy: a statistical profile. Women in Informal Employment Organizing and Globalizing (WIEGO) Working Paper (Urban Policies) No, 6.