Programme Director,
Chairperson of the Board of Productivity SA, Alwyn Nel The CEO of Productivity SA, Bongani Coka,
Members of media,
Ladies and gentlemen,
All Protocols observed.
It is indeed an honour and privilege to make this keynote address on productivity, undoubtedly the principal source of improvements in living standards.
Programme Director, it is in order that we start by congratulating all the nominees in the various sectors tonight who have made the cut to be rated amongst the top performers in the province. We would also like applaud Productivity SA for leading this noble initiative whose purpose is to promote productivity and continued excellence in our country.
Ladies and gentlemen, you will concur with me that almost nowhere in the world has the importance of productivity been extensively discussed and debated as in South Africa. News media headlines insinuating that South African workers are overpaid have become as commonplace as the disagreements between employers and workers’ unions over wages.
The issue is not so much that South African workers are overpaid in absolute terms but in relation to their productivity. In simple words, employers suggest that the wage negotiations are not conducted mindful of the productivity expected from the employees. This underlines the role of productivity in our contemporary economies.
But why is productivity so important? In answering this question it is imperative to draw a distinction between actual and measured productivity. Of course, Productivity SA would have been the best authority to draw this distinction. As policy authorities, we always strive for growth in actual, not measured, productivity.
While we always hope that these are in tandem, there is a range of methodological and measurement issues that mean that this is not always the case. Such methodological issues are probably amongst the myriad factors that oft lead to employers and employee organisations not always agreeing when it comes to levels of productivity. Employees perceive the process of measuring productivity as a thumb sucking exercise implicitly aimed at justifying low wage offers by employers.
As government, our wish is that focus be centred on actual productivity or efficiency as a means of getting the most out of our resources and of enhancing the material living standards of South Africans. Of course, improving efficiency is only one among a range of goals that governments seek to achieve. Your ultimate goal of measuring productivity, as Productivity SA, is partly to assist us as government to make good policy choices.
Let’s return to the issue of why growth in productivity is important. At the broadest level, government is primarily interested in productivity because our mission is that of improving the well-being of South Africans, or to be more specific, the well-being of the people of KwaZulu-Natal, of which increasing material standards of living through improvements in productivity is one, albeit important, and part.
The link between productivity growth and the standard of living of the average person is somewhat murky in the short-to-medium run, as factors such as the share of the population that is employed and the division of income between capital and labor also play a role. Nevertheless, the rate of productivity growth influences the economy in important ways even in the short run, affecting key variables such as output growth, employment growth, and the rate of inflation.
We do not seek improvements in productivity as ends in themselves, or necessarily at the expense of other goals that enhance the wellbeing of South Africans. Living standards are driven by several considerations and some even involve trade-offs. An example of a trade-off between rising measured productivity and other goals is the pursuit of enhanced environmental outcomes, which usually require increased inputs but will usually not result in higher outputs, at least not as conventionally measured.
Programme Director, this gives rise to the pertinent question of just what exactly this entails for us as South Africans.
We are of the view that productivity outcomes will clearly depend not only on the choices and actions of the government, but also the private sector, individuals, businesses, and the community at large. As government, therefore, our overarching imperative is that of getting the underlying policy settings ‘right', both on spending and regulation or the policy mix in general.
One way of thinking about the role of policy is to consider where South Africa's productivity levels are relative to world's best practice – the global technology frontier. The global stock of technology obviously determines what is possible to produce with given resources, and how.
Our positioning on the global frontier is directly influenced by on our domestic policy choices, the quantity and quality of our labour and capital, as well as environmental and historical factors that determine the extent to which resources are used as efficiently and as technically feasible. Maximising our productivity growth prospects for the future will depend on our capacity to move with advances in technology.
As a small economy compared to global countries, South Africa has historically been more of an adaptor and user, rather than generator, of advances in technology. This implies that it is important that policy facilitates an environment in which firms can nimbly absorb technological progress from overseas.
To this end, the Province of KwaZulu-Natal has recognised the role played by tertiary institutions in relation to technology transfer and this project is listed in the PGDP strategic interventions. In addition, the Province is forging ahead with Technology Parks Project in four strategic locations (Newcastle, Richards Bay, Port Shepstone and Pietermaritzburg). This is also reflected in the Provincial Growth and Development Plan (PGDP).
Ladies and gentlemen, we hold steadfast to the view that governments can also act to close the gap between South Africa and the best practice frontier by ensuring we have well-functioning, competitive and open markets, including being open to international best practices and advances in technology; and removing impediments to the flexibility, responsiveness and dynamism of firms.
In that regard, as the government of KZN, we have been actively participating in the SEZ initiative, which has the objective of reducing the bureaucratic processes in setting up businesses as well as incentivising potential investors. Over and above this, a concept that we have coined Industrial Economic Hub is a classic example of government building from comparative advantages of its region to concretize the regions competitiveness.
The issue of quality of labour, insofar as it impedes the productivity of our workers, has been a topical issue in our country for a long time. Mindful of this challenge, our government has continuously been implementing policies aimed at enhancing the broad spectrum of skills in the country through FET and HET colleges.
To that effect, we remain committed to implementing targeted interventions in order to improve labour market opportunities for individuals by helping them obtain necessary skills and facilitating labour market transitions. It is only a sustained implementation of coordinated policies linking education systems, skills formation, employment and decent work that can successfully enhance our skills development initiatives.
Provision of quality education, introducing mechanisms to match supply to the current demand for skills, often by means of linking training providers and employers at sector and local levels are among options that have the potential of improving the productivity of our workers.
Workers and enterprises, additionally, need help in adjusting to change and use skills strategically as a core element of industrial, technology and trade policies to move from lower to higher productivity activities and facilitate investment in new industries.
Effective training systems in conjunction with the private sector should facilitate demand-driven training in sectors and locations with high job growth potential, avoiding bottlenecks and improving employability. Expanding accessibility to quality training is a powerful instrument for empowerment and inclusion of the disadvantaged groups: youth, women, rural dwellers and persons with disabilities. In some cases, apprenticeships in the informal economy can offer many young people an opportunity to learn a trade and enter the world of work.
Ladies and gentlemen, sustained efforts to bring in private investment coupled with supportive public policies and investment, would contribute to enhancing productive capacities and generating the much needed jobs in our country.
This should be coupled with easier access to credit for productive enterprises - especially small micro, and medium-scale enterprises (SMMEs) - and reforms to foster technological change and productive diversification in line with the changing structure of the global economy.
Programme Director, we regard SMMES as being an important weapon in our arsenal as we strive to create employment and spurr growth. However, their competitiveness is undermined by inadequate infrastructure, limited access to financial and business services. Stakeholders can help small firms to integrate in, and reap more benefits from local and international value chains, by facilitating the provision of business services, among which continuous skills development is paramount.
An important policy question is how to address the constraints which affect the capacity to grow and generate earnings of SMMES, very often informal that operate in traditional sectors and account for the bulk of jobs in our country.
In the above recognition and its continued quest to contribute to unleashing the potential of local SMMEs, the KZN provincial government is currently exploring the possibility of setting an SMME agency to exclusive deal with some of the challenges I have just mentioned.
In conclusion, measuring productivity, though crucial, is not an end in itself. The ultimate goal of measuring productivity is to assist policy makers make good policy choices.
Further, productivity is important because it can improve the wellbeing of the South African people by increasing standards of living through income gains. As our economy continues to adjust and transform, we will need more research at the industry level into productivity in the services and non-market sectors. Research that attempts to look at South African productivity levels relative to international benchmarks would also be welcome.
Policy advisers, StatsSA as the official statistical agency in the country, you as Productivity SA and others have the continuing challenge of measuring productivity in ways that will help to inform good policy. And it is days like today that can help us to better understand and meet that challenge.
Ladies and gentlemen, as I conclude, I would like to quote the following words of wit attributable to Paul Krugman, who writing in his book entitled “The Age of Diminished Expectations” says: Productivity isn’t everything, but in the long run it is almost everything. A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise output per worker.
Once again, congratulations to all the contenders for the 2013 Productivity Awards and we haven’t the slightest doubt that you will go on to shine at the national event.
Thank you!
