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ALMOST 550 labour broker agencies have closed down since the government began clamping down on them, according to research by Adcorp, the biggest labour broker by market share. Although the government has watered down draft legislation intended to ban broking to limiting the period for which temporary workers can be employed, the prospect of the new rules, combined with weaknesses in the economy, have sent many agencies into decline and closure.
The recruitment industry is set for consolidation over the next few months as companies remain hesitant to employ new staff, which has meant smaller labour brokers have had to fend for the scraps from large brokers, putting them out of business, Adcorp economist Loane Sharp says. “The number of labour broker employees has increased, the number of agencies has decreased, and so the employees have migrated to the bigger agencies,” he said yesterday.
The number of private employment agencies, or labour brokers, fell from 3,234 in 2010 to 2,685 last year, his research showed. SA’s inability to skill workers also placed pressure on brokers who could not place unskilled clients and were set to close shop, Mr Sharp said. “I can see there maybe being four major players in the industry next year. Adcorp has over 10% of the market share but outside of us, the next biggest company has less than half of what we have .” The Kelly Group had enough resources to be a takeover target, Mr Sharp said, but recruitment companies on the whole were “in for a tough time”.
Labour analyst Tony Healy said a recent announcement by retailer Massmart that it was no longer employing staff through brokers showed companies were wary of government censure. “There has been a lot of criticism about how brokers behave and a lot of political heat. Companies want to move away from the risks associated with brokers. “I know some (businessmen) say the bills will be watered down, and maybe they will be around strike rules, but stricter regulations to make it harder to employ temporarily are on the cards, (say) people I have spoken to.”