Workers destroying value – Prophet Analytics labour study.
PRETORIA – Only 65 of the listed companies on the JSE have labour productivity that exceeds their employee costs. But at least private sector productivity is outdoing productivity in the public sector.
These are the findings in the Labour Market Navigator for the third quarter of 2012, released by Prophet Analytics, a local labour analytics company, on Monday.
According to Prophet Analytics labour productivity in the country has fallen to a 40-year low.
“South African companies are shedding labour at an extraordinary pace, and they are doing so in line with underlying low labour productivity,” the company said.
The study disagrees with the definition used by the Reserve Bank when looking at productivity – output per worker – rather measuring whether it meets the criteria of making the greatest use out of limited resources.
The research found that both public- and private-sector productivity had declined over time. Public sector productivity declined 52.2% compared with a private sector decline of 49.3%. Private sector productivity is 450% higher than the public sector.
The study also looked at 151 JSE-listed companies and identified the companies that should be taking serious steps to optimise their workforces. For each company,
Prophet Analytics took the operating cash flows for the period divided by the number of employees and further divided by non-current assets. The 151 JSE-listed companies with market values above R1bn and which consistently report employee numbers in their financial statements were then ranked.
When looking at the JSE-listed companies the four highest-ranked companies were RMB Holdings, Vukile Property Fund, Investec Bank and Assore which generated more than R100 000 of operating cash flow per worker per annum after accounting for the contribution of capital in the production process.
“The lowest ranked, Wits Gold, destroyed R221 300 per worker per annum,” Prophet Analytics said.
RMB Holdings generated R903 816 per worker per unit of capital per year between 2007 and 2012. Vukile is at R325 410 and Investec at R294 364. A total of 137 of the 151 companies on the list at least generated a positive balance, with 14 with negative balances.
“These findings support other data which show that labour productivity for the South African economy as a whole has fallen to a 40-year low and capital’s share of national income has correspondingly risen from 39.9% to 47.2%,” says Peter Aling, the analyst responsible for compiling the Navigator.
Aling characterises productivity – making the best use of available resources – as “a paramount economic goal”. Profitability, a separate matter, is an organising principle of business affairs that leads to maximum productivity. “It is just one of several means of achieving this goal.”
Aling argues that the Reserve Bank’s definition and calculations do not match reality.
“They do not explain why firms continue to lay off workers in large numbers (1.9m since the peak in the late 1980s); and they do not explain why labour’s share of national income has fallen from 60.1% in 1995 to 52,8% in 2011.”
“Labour productivity properly measured has declined steadily since the 1970s, whereas capital productivity has risen dramatically over the same period.”
He goes so far as to claim: “South African workers, on the whole, are destroying value, with the result that they are gradually being retrenched.”
