Poor productivity holding back business | Metro Newspaper

Published: Monday, August 20, 2012

Poor productivity is holding back business in South Africa with the problem much worse than official estimates, according to a report released today.

Prophet Analytics analyst Peter Aling said labour productivity had declined since the 1980s, contrary to an SA Reserve Bank estimate that it had risen two percent a year since the 1960s.

This central bank figure would mean that worker productivity, when adjusted for inflation, had increased 127 percent since 1967.

?They do not explain why firms continue to lay off workers in large numbers? and they do not explain why labour?s share of national income has fallen from 60 percent in 1995 to 52.8 percent in 2011.?

Aling also claimed the SARB was wrong in estimating that capital productivity ? a company?s profits per its existing assets ? had fallen one percent a year since 1995, a decrease of about 33 percent when adjusted for inflation.

?Nonsense,? Aling said.

He said the economy had been producing more output using fewer workers and it only appeared that the remaining workers had become more productive.

?This, of course, is nonsense and does not correspond to what is meant by productivity, namely making the greatest use of available resources.?

Aling said South African businesses were still increasing overall productivity despite a decline in labour productivity.

This was because improving capital productivity had made up for the fall in labour productivity.

Aling published his findings in the Labour Market Navigator, third quarter report.

He said the report found that JSE companies were struggling for productivity with only 65 generating labour productivity that exceeded costs.

?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.?

He said while the private sector was suffering from poor labour productivity, it was still working 450 percent better than the public sector.

Source: http://www.metronewspaper.co.za/2012/08/20/poor-productivity-holding-back-business/

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