Skills shortages are holding back businesses in South Africa – survey finds the weak spots

Running a business in South Africa has become increasingly difficult. The challenges range from the economic after-effects of the COVID-19 pandemic to limited access to finance, increased global competition, shifting trade relations, technological change and governance issues.

As researchers with an interest in urban economies, we set out to understand the biggest challenges facing businesses wanting to grow in South Africa's Western Cape province. The study involved surveying 426 businesses to draw on the views of employers directly.

Our findings show that their biggest constraints were shortages in digital, soft, and environmental sustainability skills. The gaps were the result of weaknesses in education and vocational training.

These findings align with problems in the broader South African labour market, like poor schooling, limited practical skills and a mismatch between what people learn and what employers actually need.

Skills shortages affect not only job seekers but also business productivity, growth and competitiveness.

Yet most firms in our study reported spending only 1%-4% of their wage bill on staff training.

We argue that educational and training institutions play a key role in developing skills, but businesses also have a responsibility to train and develop their employees.

Business challenged by lack of skills

This study gathered the views of 426 business owners and senior managers based on how various factors affected their operations. Those factors included institutions, infrastructure, labour markets, skills, product markets and the natural environment.

Skills shortages emerged as the leading challenge facing businesses in the Western Cape.

More than 70% of respondents said they struggled to find workers with the right skills.

Many believed schools and vocational colleges were not adequately preparing young people for the workplace. For example, 43% said that secondary school and vocational graduates possessed only basic workplace skills. Overall, businesses rated the skills gained through primary, secondary and vocational education as poor. About 58% said secondary education met some of the needs of a competitive economy, while 53% felt vocational education was only somewhat relevant to business needs, or not at all.

Just over half (52%) said university graduates had the skills their businesses required. Nearly half of employers remained unconvinced, however.

Most businesses also reported that their employees lacked strong mathematical and data skills. About 55% said workers demonstrated little or no proficiency in these areas, despite their importance to innovation, evidence-based planning and economic competitiveness.

Vocational training is weak

The study also shows that weaknesses in the technical and vocational education and training (TVET) system contribute to the skills gap. TVET institutions are intended to equip learners with practical, job-ready skills. But nearly 50% of employers said graduates still required practical training before they became productive.

In addition, 59% of employers believed that vocational education only partly met the economy's needs, while 62% rated the quality and relevance of vocational training as poor for their business needs. Employers believed that stronger partnerships between training institutions and industry, together with more apprenticeships, workplace experience and updated curricula, could improve graduate readiness.

Digital skills are falling behind

Digital skills have become essential in business, but most employers believed workers were not keeping pace with these changes. At least 55% of the surveyed businesses believed their workforce had only basic digital skills and computer literacy. Just over half (52%) said it was difficult to find employees prepared for digital transformation. And 70% rated their workforce's technology skills as poor or very poor. Employers believed these shortages limited innovation and productivity and weakened competitiveness.

Soft skills matter too

Beyond technical skills, employers also reported a gap in “soft skills”, also known as interpersonal or people skills.

Creativity, problem-solving abilities, good work ethic and self-confidence were lacking. Over 60% of the employers rated their workforce's skills in these areas as only “minimally” or “mildly” adequate.

This result highlights that the current education system does not do enough to develop skills that are important for critical thinking, decision-making, innovation, practical application of knowledge, and solving problems in the real world.

Environmental skills are scarce

As South Africa strives to build a greener economy, businesses need workers with environmental and sustainability skills. Many employers said these skills were scarce.

About 50% rated workers' environmental awareness and knowledge of green practices as “minimally” adequate. Only 48% reported that they could find workers with these skills to a “mild” extent.

This suggests that more training in green skills may be needed. As environmental regulations tighten and demand for sustainable business practices grows, these shortages could limit businesses' ability to compete in emerging green markets.

Businesses need to invest more in training

Half the employers rated access to education and training services within their organisations as very limited or expensive. This indicates that both businesses and employees face barriers to getting quality training.

It highlights the need for greater investment in workplace skills development and improvements to the education system.

Closing the skills gaps would make businesses more productive and competitive, and more people would be able to find and keep jobs. Achieving this will require stronger partnerships among government, education and training providers, and businesses, as well as greater investment in workplace training.

The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.

By Martin Magidi, Researcher, University of Cape Town And

Tariro Chivige, Economist

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