He says that while historically, business productivity levels in South Africa decline during March and April due to the number of public holidays over the period, the country is currently experiencing an exceptional ongoing decline in productivity levels. He points to statistics released by the South African Reserve Bank (SARB), which reveal that between 2000 and 2009, productivity was measured at +2.75% per annum, while during 2010 and 2014 productivity levels were recorded at +1.20% per annum.
“The declining levels of productivity are becoming an increasing concern and will result in even slower economic growth and reduce the profitability of small and medium enterprises.”
He explains that labour productivity refers to the measure of volume of goods or services produced by one hour of labour, and in turn, the amount of real GDP growth produced within that hour. “South Africa needs to remain internationally competitive to generate economic growth. One way to achieve this is to increase labour productivity as a way to minimise rising labour costs.”
According to the SARB Quarterly Economic Review – March 2016, economic activity in South Africa increased at a slightly slower pace of 0.6% in the fourth quarter of 2015, down from 0.7% in the third quarter. This is linked to the lacklustre economic growth recorded throughout the year, subdued business and consumer confidence levels, muted demand conditions, ongoing supply-side constraints, a further decline in the prices of key export commodities, as well as knock-on effects from the widespread drought conditions. At the same pace, labour productivity in the formal non-agricultural sector of the economy also slowed by 2% in the third quarter to 1.55%, down from 3.5% in the second quarter of 2015.
With these less than favourable figures in mind, van Biljon says that businesses must work that much harder to maintain growth and boost productivity in 2016. “Increasing staff productivity levels will drive growth and lower capital intensity. It is therefore imperative, now more than ever, that business owners plan strategically to maximise output and efficiently manage productivity levels in an effort to create growth and maintain a competitive advantage.”
Small and medium enterprise business owners have already been cautioned this year to keep a tight hand of cash flow and budgets, and van Biljon adds that they should be paying just as much attention to the level of productivity in their workplaces. “In light of holiday season and numerous public holidays approaching, business should be planning in advance to minimise the possible knock-on effects on business and labour productivity,” concludes van Biljon.