What enterprises gain when they train

Eliciting views from enterprises on why they intensified training during this period may contribute towards an improved understanding of the role and impact of existing policies on South African workplace training. It may also tell us which impacts on training could be directly attributable to government - such as through skills development legislation, and the sector education and training authorities (Seta) infrastructure - and which should be attributed to economic factors outside of direct government influence.

Respondents were asked what caused them to increase enterprise training during the 2006/07 financial year. Their responses suggest a multiple of influences, with the strongest being the need to improve ‘quality standards and consumer service objectives'. This corroborates the strong emphasis on increased training rates observed for the service and sales worker occupational category. The second most powerful factor was ‘productivity targets', while ‘increase in demand for products/services' and ‘increased competition' were rated the third and fourth most important factors causing increased training. The combination of these three factors suggests that enterprises were increasing training in response to buoyant but also competitively demanding market conditions.

The fifth factor, ‘technology change', also implies that enterprises were taking up new technologies to be more competitive in terms of quality and price. Innovative enterprises must improve the skills of their workforce so that they can exploit the complementarities between technology and skills.

The employee factor

The data shows that ‘employee expectations' were a relatively strong factor which could be a positive sign that employers were becoming more aware of, and open to meeting employee expectations. On the other hand, trade union initiatives had a comparatively low influence on the inclination of enterprises to increase training.

Government initiatives

Seta initiatives' as a factor in increased training was the ninth strongest influence, which could mean enterprises were less influenced by government initiatives than by market forces. The data furthermore suggests that national government skills-development initiatives, such as the Accelerated and Shared Growth Initiative for South (AsgiSA), had a relatively low impact.

The analysis here suggests that in any national skills development system, government policy and strategy does not solely determine workplace training, and other factors such as national and global business and economic cycles will play a powerful role.

Satisfaction with services provided by the Setas

Services provided by the Setas have the potential to increase the engagement of enterprises in skills development activities. For this reason, enterprises were asked to rate Seta service activities on a five-point scale ranging from ‘poor' (1) to ‘excellent' (5).

Table 1: Enterprise rating of Seta services by size in 2002/03 and 2006/07

Note: The mean rating and standard deviation of enterprise scores is given for each Seta service.

Between 2002/03 and 2006/07, there was no shift in the overall rating, suggesting that from the perspective of enterprises, there was little or no improvement in Seta performance.

Moving to specific service categories, the service categories that received lower ratings in 2006/07 included: ‘advice and support concerning learnerships' (-0.1), ‘provision of information about courses, programmes and training including learnerships' (-0.1), and ‘provision of information about grants' (-0.1). This means that in all four categories that related to Seta communication and responsiveness, they were rated lower in 2007 than in 2003.

Setas did attain higher ratings in two areas: 'submission procedures' (+0.1) and ‘promptness in paying grants' (+0.1), which suggests that while there was some improvement in administrative functions, the service function deteriorated.

Turning to enterprise size, in 2006/07 the mean ratings of Seta services clearly differed according to size with large, medium and small enterprise rankings declining from 2.9 to 2.7 to 2.3 respectively. This gradation in ratings was similar in 2003.

Small enterprises clearly rated Seta services more poorly than large enterprises. The findings suggest that the Seta infrastructure played a less influential part in the increased training rates than might have been expected. Improvement in training rates may have been driven less by the Setas as service providers, and driven more by a combination of the compliance requirements of the levy grant system and the realisation among enterprises that training in response to economic signals would serve their own quality and competitive imperatives.

The ratings of the Setas must also be placed in the context of substantial increases in the scale of training activity in the period under scrutiny. We estimate that the total number of permanently employed workers who received some training in 2003 was about 723 290, rising to about 1 682 497 in 2007. The number of workers trained to standards also more than doubled from 217 106 in 2003 to 514 730 in 2007.

Despite the additional stress of far greater numbers of workers trained in 2007, the fact that the Seta ratings did not markedly decline between 2003 and 2007 can be construed as a sign of the ability of the system to perform satisfactorily.

Government interventions and economic change

The strongest explanation of the increase in training provision was attributed to competitive market dynamics. This brings to the fore important questions as to the extent to which training activity is a cyclical phenomenon that is structurally related to, or at least influenced by, the economic sector or business cycles.

We have observed increases in the training rate over a period of eight years of about 20% per annum. In the same period the South African economy grew steadily with a growth rate approaching 5%. The question is whether the recent economic downturn, triggered by world financial market collapses, will impact on training activity. These questions are critically important in considering how the Department of Labour can best move to retain the training momentum that swelled up to 2007.

Some comfort can be taken from the likelihood that the skills levy should act as a buffer against sudden shocks that might otherwise cause enterprises to reduce their commitment to training to below an expenditure level of 1%.

It is important to pursue analysis that contributes toward a better understanding of how government interventions articulate with other factors in producing a particular training propensity. Care should be taken not to credit recent gains solely to government policy interventions when training rates rise and by the same token, care must be taken not to attribute blame solely to government interventions when training rates fall.