Education, CAs and how long is long to study

A recent Moneyweb article poses the question of whether Chartered Accountants in South Africa should study longer.

The problem is that high schools are failing learners and many accounting students start out with significant literacy and numerical weaknesses in their learning.

Now, as it turns out, I’m not a supporter of increasing the required length of study because some students (even, perhaps, a majority) need more time to complete the work.  I see no reason to enforce an arbitrarily longer study period on students who are perfectly capable of making it in the current and long-standing term of the programme just because some students are entering with inadequate preparation.

I’m not oblivious to the challenges of education in South Africa. I’ve blogged regularly on how education shortcomings are the number one cause of economic challenges and unemployment in South Africa. I’m also not saying that we should simply raise entry requirements as that would exclude many students with the potential to be successful CAs because of imperfect high school level preparation.

What I suggest is an optional (at the choice of students or the university) post matrix, pre-CA year to cement the basics.

The nature of this course would be that the majority of candidates electing or being required to attend this extra year would be previously disadvantaged. I also see it as a perfect opportunity to make tuition cost for this pre-CA year count fully towards cost in the first year of the BComm or BBusSci course should the student meet the requirements. Thus, there is no free year of university grade education for all and sundry, but rather for those who benefit from the programme and successfully enter the mainstream CA stream studies their will be limited financial penalties.

In some ways, this subsidy could potentially save the universities and National Treasury some money – better pass rates in later years should shorten the amount of time to graduate, reducing other university and government subsidy costs.  I haven’t worked the numbers, but it is an offsetting impact to consider.

I understand that UCT, certainly for actuarial students, has a very successful programme of tweaking the education route for this with poorer preparation. I don’t have the numbers at hand, but the results apparently have been quite staggering.

Of course, SAICA has a somewhat silly response:

Saica’s senior executive for professional development, transformation and growth Chantyl Mulder said the duration to qualify as a chartered accountant (CA) is already seven years and thus lengthening university studies is not viable.

Stating that it isn’t viable doesn’t actually say anything. The same could be said against a seven year study period of the current were six years. The same could be said against the seven to twenty (and beyond for an unlucky few) years of study for actuarial students and medical specialists. As it is, my understanding is that UCT students pursuing their CA career via B.Bus.Sci have a four year undergrad degree (and what a magnificent degree it is too) and then a final year of GDA study before starting a three year articles period.

The recognition that some CAs take longer than seven years could be taken as evidence that some students need longer. Surely it’s better to prepare a robust eight year programme for those very likely to take longer than seven years rather than leave them to the wolves and an eight or nine year struggle with inadequate preparation? Or even if a parallel rather than serial solution to improving the basic skills is the answer, this has nothing to do with seven years being the magical “right” number.

The final worry itching at the back of my head is that we have all accepted the pernicious degradation of matric quality and have therefore already become used to lower entrance requirements at universities, adding pressure to admissions and possible decreasing the average level of learning. This route as only one destination – lower skilled employees, less international competitiveness, lower economic growth and higher unemployment.

Sewing seeds of manufacturing growth

The NY Times has a fascinating article on the increasing demand for American made goods, particularly textiles, and the limited supply of labour with the relevant skills.

There is plenty more to the story than just manufacturing increasing in the US – it also includes an historical perspective on the sources of labour in the textile industry over the last two centuries.

The relevance for me and South Africa is – even with our 40% duties on imported textiles, why are we still shedding jobs? In the US, it’s been a desire for higher quality, more reliable quality, shorter turnaround times, cheaper transport costs and a growing discomfort with safety conditions in Asia.

The higher average incomes in the US also make price less of a overriding factor than in South Africa. The COSATU t shirts that were made in China at least once is a clear reminder of how cost impacts buying decisions above almost all else in big parts of our economy. I don’t know whether the quality of our production and the appreciation for buying locally made products is great enough locally yet. The NY Times article spend several paragraphs talking about the need for strong English and Maths skills. We’re still struggling with our legacy of broken education even while we fail current learners. None of this helps to take advantage of these trends.

Manufacturing growth in the US and other developed markets is also driven by increased automation. Higher real wage are less critical when automation in eras decreasing the amount of labour required. Possibly counterintuitively, this increases the demand for labour in developed countries even while decreasing global demand for labour.

Wages for cut-and-sew jobs, the core of the apparel industry’s remaining work force, have been rising fast — increasing 13.2 percent on an inflation-adjusted basis from 2007 to 2012

If you look at a graph of the share of US GDP that goes to labour compared to capital, it’s been a steady decrease for decades. I can only imagine the same is true in South Africa. The increased use of automation (including new robots that work more interactively with humans in auto plants) may drive this even further.

So is this a story that bodes well for South Africa? We should be a low (lower than the US and Europe anyway) wage producer so developed market manufacturing should hurt our export industry. Given that we import textiles from China, should we maintain hope – against all experience of the last two decades – of regaining a meaningful textile industry? Or do we need to recognize that Africa should be our biggest export area and we should leverage our proximity, both geographical and cultural, and focus on our competitive advantages over the Chinese? Where is our Industrial Policy in any of this?

How to draw conclusion on Vavi’s R4,500 minimum wage

Vavi has disappointed me with his call for a R4,500 minimum wage.

There is no question that higher pay is better, all else being equal. I expect the overwhelming majority of eyes that have ever glanced at this blog belong to beings that earn more than R4,500 a month.

There is no question that lower income inequality would be more desirable. There is no question that we would be a happier society with fewer people living off very little income.

There is also no question that a higher minimum wage would, all else being equal, lead to an increase in unemployment and therefore quite likely an increase in income inequality and a decrease in the productive capacity of our country, a likely increased tax burden on tax payers and greater social ills.

Let’s look at this a little more clearly. This took me all of a couple of minutes to draw, so I can’t believe Vavi hasn’t seen the same drawing somewhere. (If he disagrees with it, fine, but then he should address the problem head-on and not just ignore the problem.)

Increasing the minimum wage had a doubly negative impact on employment

Increasing the minimum wage had a doubly negative impact on employment

Continue reading

Fixing SA education – political will not (only) money

I blog from time to time about education in South African and its frightening link to unemployment and all the societal ills that go along with that. I also point out that as a nation we spend a fair amount of money on education with very poor results.

This story about absenteeism amongst South African teachers goes some way to explaining the problem.

Teachers in our public school system took an average of19 days of sick leave per year. I also blog about the dangers of averages. For every teacher that doesn’t take sick leave (and I’m sure there are many) there are teachers taking more than 19 days of sick leave per year.

What’s interesting here is that not only is this an astonishingly high number, it’s also clearer more than the 10 days per year on average on a rolling 3 year basis that is allowed under the Basic Conditions of Employment Act.  Let’s also not forget that while teachers should probably be paid more in an ideal world, they do also get vastly more annual leave than most already.

I’d also like a four day week every second week thank you.

How exactly are these teachers allowed to take so much sick leave? Well unfortunately the answer is the same as why our education system is in such a sorry state. Poorly trained, poorly motivated teachers without a culture of pride in their work, overly strong unions and no political will to do anything about it.

Worrying signs of renewed credit crunch

The last month hasn’t been pretty for economic performance, credit or retail sales. Everyone from Richemont to Mr Price has taken a beating.  Woolies is down about 13% in the last month.

And now both Capitec and African Bank are reporting worse default experience (respectively through temporary strike-blips or through a cyclical downwards trend) and are pulling back on credit extension.

I think I buy African Bank’s more pessimistic view than Capitec’s “blip from the strike and growth will slow”. The reality is economic growth has been very low for several years and much of the consumption over this period has been through a reinflating credit “bud”.  It’s not at bubble proportions, but when that bud starts slowing in growth the true impact of several years of poor economic and basically non-existent employment growth will be felt.

I still need to update 2013 predictions, but so far I’m not feeling particularly optimistic about being a credit retailer and certainly not enough to justify the still-high PE multiples.

 

Policy should include clear views on how it will be measured

This is getting ridiculous.  Shockingly bad policy is now being shown empirically to be shockingly bad. Only thing is, the policy proponents aren’t admitting they were wrong.

I get randomness. I understand that we don’t know exactly where the UK would be without austerity policies.  We don’t have a control group, there’s no clear comparison. But come on, the result is as predicted by those who said austerity was a bad idea and totally different from what proponents were claiming. Huge double dip recession at an accelerating rate in the UK.

So why isn’t their an admission and about-turn? Because no clear measure of how to measure the success of the policy were ever put into the public space. So now proponents can, and probably will, say how much worse it would have been without austerity.  Nonsense.

All major policy proposals should include an analysis of what the impact is expected to be with and without the policy, reviewed by credible, independent observers.  (Like the CBO in the US.)  Then, when the policies turn out to be rubbish, let’s haul out the predictions and see what was promised.

Madness.

Why structural unemployment is still with us, will stay

Felicity Duncan from moneyweb wrote an article on South Africa education for Moneyweb and Discovery Invest. It talks to a topic I’ve also blogged about, but with some truly horrifying league tables.

This is the part that really disappointed me:

according to the World Economic Forum’s latest Global Competitiveness Report, which ranks South Africa 133rd out of 142 countries for the overall quality of its secondary and tertiary education systems, and 138th out of 142 countries

for the quality of its maths and science education

Felicity goes on to mention that even Chad outperforms us in education.

We can talk for as long as we want as hard as we want, but as long as we don’t recognise that our education system is completely broken and must be fixed as a priority over all other priorities, massive, structural unemployment will be part of South Africa for decades. Everything else we achieve will be overshadowed by poverty, crime and unhappiness.

This is very depressing.