Public Holidays – Friend or foe of productivity?

April 8, 2015

April is upon us and with its extraordinary amount of public and religious holidays, for some it’s tantamount to a second festive season.

By the time our national election rolled around on 7 May 2014, South Africa had not had a full working week for four consecutive weeks. This is troubling when you consider that one public holiday can cost the economy over R1 billion.

April only has two or three fewer working days than other months in the year, so why the fuss? The kicker is that, due to the placement of these holidays, employees can take just seven days leave and enjoy more than two weeks off when they include the public holidays. This makes April the least productive month of the year with the least revenue generated for businesses and the economy.

However, South Africa’s usual number of 12 public holidays is considered to be in line with many developed countries around the world. The United Kingdom and Australia both have eight holidays a year, with South Korea (15), Japan (15) and Argentina (19) on the other side of the spectrum. China, however, has just four public holidays per year, and even these are only applicable to certain sectors of the population, like women and children. A far cry from South Africa where the whole country enjoys time-out on women’s Day and Youth Day.

The relationship between hours worked and productivity is unpredictable. In 1914, Henry Ford found that eight was the optimal number of work hours per day. To the surprise of many, Ford’s decision to cut working hours resulted in higher productivity, increasing profit margins. There have even been studies done that show that public holidays result in higher productivity in the working days that follow.

It’s true that business production can be affected by holidays but it’s also possible to manage the impact if these days are planned in advance, allowing companies to factor in the effects of fewer work days. Also, there are certain industries that benefit significantly from public holidays, including the hospitality and retail industries.

However, even with the average Joe treating his family to a weekend away, this is only consumption spending as opposed to actually contributing towards the growth of the economy. Factories and businesses will still close, which means no production will take place. So, if South Africa needed to stimulate consumption, a public holiday would be the way to go.

According to the National Productivity Institute, each working day lost costs the SA economy around R2.5 billion. Mining and manufacturing are the two sectors that suffer most with lost production days being almost impossible to catch up. One day lost for the mining industry means R800 million less available for SA exports, which hurts South Africa’s current account deficit.

Even small businesses like hair salons and corner grocery shops feel the draught with public holidays as they rely on regular customers who, when taking extended holidays, are likely to be spending their money elsewhere.

So what is the solution? Do we boycott Freedom Day or ban Youth Day? Not likely. Sufficient planning must be done in terms of production, staff and cash flow. When approving leave, business owners should ask themselves if they can afford to lose a certain number of their staff over an extended period. If business is quiet, it may make sense to give employees leave, but not to the detriment of the business. There’s no use having a well-rested population if the economy is on its knees.

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