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South Africa – Staffing industry growing quickly but faces proposed ban

10 June 2013

Labour broking (as temporary staffing is referred to in South Africa) is the fastest-growing sector of the South African labour market, according to the latest employment index by staffing firm Adcorp. This found that labour brokers constitute a ZAR 44 billion (USD 4.4 billion) industry employing around 19,500 internal staff and just over one million agency workers in South Africa.

Adcorp said that agency work now constitutes 7.5% of total employment in South Africa, and it is likely to grow further. In countries with similar levels of economic development, temporary work represents between 12% and 19% of total employment, said Loan Sharpe, Adcorp's labour market analyst.

“The use of labour brokers is overwhelmingly connected to peaks in demand and filling-in for absent employees,” said Mr Sharpe. “Temporary workers are not substitutes for permanent workers. They play different roles, connected to one or other cycle in the production process, that leads to variable demand for labour.”

The growth experienced by labour brokers comes despite an overall drop in employment in May which saw it fall at annualised rate of -0.8%, according to the index.

“The economy shed 13,097 jobs during the month, mostly in the permanent, full-time work sector, which lost 16,108 jobs in May. The informal sector created 11,009 jobs during the month, whereas employment in the formal sector fell by 24,106,” said Mr Sharpe.

“Aside from the informal sector, the only part of the economy that created jobs in May was the agency work sector, which created 370 jobs during the month.” The May index shows that job losses were focused in the retail and wholesale trade and manufacturing sectors, which were partially offset by job creation in the government sector.

However, the rosy picture painted by Adcorp is under threat. Business Unity South Africa (BUSA) has warned about a proposed ban on labour brokers or recruitment agencies. This comes after the African National Congress (ANC) Members of the Labour Parliamentary Portfolio Committee last week called on prohibiting the use of temporary labour services.

The MPs have proposed that the duration of temporary employment services should be limited to “zero months”, meaning a complete ban on labour broking. The proposal would oppose parts of the Labour Relations Amendments Bill.

The organisation said in a statement it was very concerned about the development. “We gather with deep concern resulting from media reports that the ANC members of the LPPC were swinging strongly in favour of … effectively banning labour brokers.”

It warned of heavy job losses should a ban go ahead. Better regulation of the industry is “a more sensible option that an outright ban, taking into consideration the impact on employment,” BUSA said. Around one million people are estimated to be employed by labour brokers and would end up losing their jobs in case of a ban.

“Labour market announcements and inconsistent messages such as these add further damage to business confidence and will impact negatively on South Africa’s already weak economic growth projections for this year,” BUSA added.

Specialist South African staffing firm Hickmore Recruitment noted that a ban would be ill-conceived. “Labour brokers contribute to decent work in South Africa. A recent study showed that 43% of labour brokers’ staff find permanent employment within 12 months. One in four jobs created since 1994 have been filled by a brokerage. Yet unions still accuse labour brokers of being "modern-day slave traders,” the recruitment firm said in response.

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