Bakkie brigade brokers may crash

2011-12-03 14:44

The looming regulation of labour brokers could drive small players out of the industry, leaving established recruitment firms like Adcorp Holdings and Kelly Group claiming a bigger slice of the R30 billion-a-year market.

Industry insiders predicted this week the proposed amendments to the labour laws will increase barriers to entry in the labour broking market and lead to consolidation as small companies struggle to cope with high operating costs.

The proposed labour legislation may come into effect next year. It seeks to eliminate unfair labour practices and rein in unscrupulous labour brokers or the so-called bakkie brigade, who are notorious for depriving workers of benefits such as annual leave, sick leave, maternity leave, unemployment insurance fund (UIF) contributions, and medical aid.

A similar reduction in the number of industry players occurred in the microlending space after the introduction of the National Credit Act (NCA) in 2007, which curbed reckless lending and drove hundreds of shady money lenders or loan sharks out of the market.

“Exactly the same thing is going to happen in our industry. The new regulations are going to favour the bigger players. They have access to capital and can invest in legal compliance systems, which the smaller players can’t afford,” said Loane Sharp, Adcorp labour market analyst.

Kelly Group financial director Ferdie Pieterse echoed Sharp’s views, but warned that if the regulations are not properly enforced, unscrupulous operators will continue ripping off poor workers unabashedly.

“The smaller guys will be pushed out of the market?… As soon as you regulate it is going to be a different ball game altogether. The cost of implementing new systems to comply with the new regulations will be too expensive for smaller guys,” Pieterse said.

He said a strong independent regulator with “teeth” must be formed to ensure compliance throughout the industry and punish unscrupulous players that besmirch the industry.

But John Botha, a member of the national executive committee of the Confederation of Associations in the Private Employment Sector (Capes), believes the new laws may cause a small consolidation, but will not extensively disrupt the market.

“The new legislation will get rid of the bakkie brigade because the cost of doing business will drastically increase. However, the reputable businesses will survive because they are already complying with the statutory laws of the country in relation to things like the UIF, annual leave, and skills levy,” Botha said.

He said there are 3 000 labour brokers in South Africa who are registered with the Department of Labour, of which 1 200 are members of Capes.

“The labour broking industry is very entrepreneurial and over 90% of our industry consists of small and medium-sized businesses. There will be consolidation but it won’t be as extensive as has happened in other industries,” said Botha.

The bakkie brigade, usually unregistered one-man operators who pick up unemployed ­blue-collar workers with their bakkies at street corners, are notorious for ill-treating workers and paying low wages.
 
Like loan sharks, who overcharge consumers and in some cases use violence to collect their loans, the bakkie brigade will find it harder to survive under a raft of new regulations.

Pieterse, who is a former banking executive, said the bakkie brigade will not be completely driven to extinction, but it will go underground as happened with many loan sharks following the introduction of the NCA.

“You still get the loan sharks, but they operate out of sight and are targeting poor customers who cannot afford loans from the big banks,” he said.

There were 2 346 registered microlenders before the implementation of the NCA, but in the wake of the legislation some of them folded as they struggled to cope with the NCA and strong competition from established lenders such as Capitec Bank and African Bank.

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