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Friday, 14 August 2009

The South African professional services provider: an endangered species

If you are a resident of South Africa, in the IT, auditing or legal industry and you're not experiencing the beginnings of panic at present, you're clearly not reading the news. Professionals who provide services on a time and materials basis' livelihoods are being threatened.

The true power behind the ANC regime, the odious and unholy alliance of the communists and trades union, have succeeded in convincing the government to ban labour brokers. Although one wouldn't say so, judging by its extremely arrogant and militant rhetoric, Cosatu is actually an organization in decline. Its membership is falling. Of course Cosatu does not like labour brokers, because they prevent labourers becoming unionised and therefore contribute to its incipient decline.

The banning of labour brokers will have a profound effect on the IT industry in South Africa. Many organizations cannot afford to keep expensive IT personnel on their payroll, especially if they require ad-hoc and relatively short-term IT projects. They would typically then approach an outsourcing company such as Dimension Data or Business Connection (BCX) to provide them with contract IT skills. This will however become illegal in terms of the proposed new legislation.

The impact on the IT industry will be severe. Companies like Paracon and Business Connection will have to either scale down radically or shut up shop altogether. They will no longer be able to provide contract IT workers to for example the Receiver of Revenue like Paracon does at present. In all probability, departments and organizations requiring IT skills will need to look offshore, for example at Indian companies. The Receiver of Revenue will have to farm out its IT requirements to for example Indian companies like Tata or Wipro.

Although Wipro and Tata will be happy to take on South African IT business, the picture is much less rosy for tens of thousands of South African IT workers presently working for companies like Paracon, who will necessarily have to find other employment. It is a safe bet that many of these would emigrate. IT professionals are mobile individuals, who will find work overseas, thereby exacerbating the brain drain. Not only the employees of the likes of Paracon but also others, to whom permanent employment with one employer seems like an unchallenging option, will look for greener pastures.

Not only would this exacerbate the brain drain, but it would also lose the tax revenue these individuals generate. How many recipients of child grants and other social benefits are being funded by each IT professional's personal income, fuel and sales taxes? If their work was done in Calcutta or Mumbai, this tax income would be lost and the profits would revert to India.

In so doing, Cosatu is causing immense harm to not only South Africa's skills pool, but also to the poor in South Africa. This argument is however unlikely to make any impact whatsoever on the greedy and malicious trades union, whose primary mission is to enrich themselves.

We are witnessing yet another example of the continuing destruction of the South African economy by the Cosatu parasites.

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