Adcorp sees revenue up for first time in four years, issues dividend

FIFI PETERS: We move to our second set of results coming out of Adcorp right now, a business that’s involved with connecting people to jobs and helping companies hire. Adcorp released their interim numbers today and they’ve got a pretty good eye on the labour market – where jobs are being created, where they’re being lost, and the skills that the private sector is in demand of.

Adcorp [reports] that revenue in the six months to August rose for the first time since 2018, coming in at R5.86 billion. We’ve got the CEO of the company, Dr John Wentzel, for more on the numbers. John, thanks so much for your time. Applause, I suppose in order, given the first increase in revenue in four years. What drove it, and how sustainable is the increase?

Dr JOHN WENTZEL: Good evening, Fifi. The revenue growth that we reported at H1 overwhelmingly came from the performance in our Australian business. We saw strongly demand for blue-collar workers in our LSA [Labour Solutions Australia] business, and our Paksus business performed strongly as well. So most of our growth came from our Australian business, which makes up about 55% of the group.

In South Africa, it was a bit more of a mixed bag of results. Some of our brands did well. Quest did well on white-collar contingents. Our talentCRU business also in recovery in RPO [Recruitment Process Outsourcing] and our BLU business, I think, gained market share in blue collar.

But we’ve also had some brands that didn’t perform as well. Our Charisma business, which is in the nursing sector, did not perform as strongly as last year H1. I think that’s a result of the number of hours worked by our nurses falling, compared to last year when we had the pandemic. So a bit of a mixed bag in South Africa, Fifi.

FIFI PETERS: I want to focus on South Africa, given our employment crisis. You’ve got a good read on the jobs landscape. What are you seeing out there in terms of where the opportunity is and where companies are cutting back?

Dr JOHN WENTZEL: Again, much like my previous answer – it’s a bit of a mixed bag. So where we are seeing demand and where there are shortages right now, there are a couple of sectors [where] we’ve battled to find candidates to be able to place. IT is a particular area, and nursing is another area. So in those sectors there’s a shortage of candidates. There’s a structural problem, for example, in the nursing market where there are just insufficient nurses being trained.

The area where we see the labour market not absorbing the labour force is in the semi-skilled and the unskilled. There the country has a significant challenge.

Where we have semi-skilled workers the demand simply isn’t there for them, and there it’s a challenge to place those individuals.

We’ve seen some recovery in manufacturing, we’ve seen some recovery particularly in mining, but large parts of the economy are unfortunately negatively affected by the ongoing blackouts and other infrastructure failures. But it’s in the sectors where it’s technology based, in the healthcare sectors where you need skills – that’s where we see the demand. For semi-skilled and unskilled, unfortunately, we are going to have a structural problem placing those people.

FIFI PETERS: What’s that going to mean if perhaps interventions to upskill people, particularly in the areas of IT and technology, and interventions to encourage a lot more nurses to enter the sector, local interventions are not prioritised? Is it going to mean that we’re going to have to import a lot of these skills?

Dr JOHN WENTZEL: The importations are an even more difficult challenge because, if you look at nurses, for argument’s sake, the South African Nursing Council requires that you be registered as a nurse in South Africa. So someone who’s qualified overseas needs to come to South Africa, and they need to sit for an exam.

What we would certainly like to see is government making it easier for nurses to be trained. In the private sector we know that the hospital groups face the same challenge – that there are simply insufficient nurses.

So I do think, rather than trying to bring the skills from overseas, what we need to do is to make it easier for private-sector companies to skill people. We are seeing good demand for training has come up a little bit in H1 in the IT space. But there again, rising interest rates, rising inflation means that some companies are starting to cut back on IT projects, and we are seeing some softening of demand in that space.

FIFI PETERS: There are a lot of plans that we hear from the government are on the table to try and address the skills crisis and the jobs crisis, to try and create jobs and give people a form of dignity in being able to earn their own income. What’s the response from the companies that you engage with as to the effectiveness of some of our job-creation plans? And, in your view, just based on those engagements with employers, where is there room for improvement?

Dr JOHN WENTZEL: I think it has been something that business has been speaking about for a long time, and in a way it’s the government in our country, or governments anywhere around the world. Governments actually don’t create jobs. They create bureaucracy. What governments need to do is they need to enable small business, mid-size business to create jobs. And, therefore, they need to reduce the amount of red tape, they need to make it easier to open a business, make it easier to get the paperwork sorted.

So a lot of the bureaucracy, unfortunately, and the paperwork associated with trying to grow a company or trying to invest, trying to start a business, is a best incentive for many, many businesses. Where we see the demand is on the technical side, and again there is an imbalance. South Africa produces a lot of graduates, but there is a shortage of technically skilled graduates, and there has been an attempt by government to heighten the amount of artisans, for argument’s sake, that are being trained.

But what we would urge is that there needs to a dialogue between government and business so that it’s easier to train people, and the right people are trained. We also need to educate school leavers that university isn’t the answer to all of your challenges. Artisanship and technical vocations, nursing – those are all the areas [in which] the companies need skills, and those are skills that we’re going to need for years to come. So that’s sort of my sense, Fifi.

FIFI PETERS: How are wages holding up in this environment, based on the people that you place? How much are you placing them for right now, given that there are a lot of cost pressures in the economy, and growth is still not at desired levels.

Dr JOHN WENTZEL: Yes, we did flag at H1 interims that in H2 with rising inflation with interest rates rising, our margins would probably – or may – come under pressure. I think it’s just the fact that the entire South African economy is taking pain and businesses simply don’t have the ability to just raise prices. So we are seeing businesses battling. Our clients are battling to be able to balance the cost of labour versus the need for that labour, and therefore there is certain pressure on prices as well as earnings. Again, it’s around the supply and demand.

So we do see technical skills today, IT skills, those are hen’s teeth and companies are willing to pay top dollar for that. But where there is a significant supply, unfortunately wages are under pressure for those job-seekers.

FIFI PETERS: John, we’ll leave it there for now. Thanks so much for your time. Dr John Wentzel, CEO of Adcorp Group, has been giving us a sense of what the jobs market is looking like right now. Interested in nursing? It’s in demand. Interested in technology? It’s also in demand.