Small and medium enterprises could see a structural reduction in hiring and retraining costs if government successfully implements its proposed dual-training model, a reform positioned in the latest budget as a corrective response to persistent skills mismatches in the labour market.
The shift signals an acknowledgement that current training pathways are not producing work-ready graduates at the pace or quality required by industry, leaving small firms to absorb the financial burden of additional onboarding and upskilling.
In the 2026 Budget Speech in Parliament on Wednesday, Minister of Finance Enoch Godongwana, conceded that the existing system funded through employer levies has not delivered expected outcomes, highlighting the direct cost implications for businesses that rely on technically competent entry-level staff to sustain productivity and growth.
For SMEs operating on thin margins, the need to retrain employees after hiring often delays project delivery, raises wage inefficiencies and constrains expansion plans.
The proposed dual-training system, which emphasises practical workplace-based learning alongside formal instruction, is framed as a long-term intervention to align training outputs with real economic demand.
If implemented effectively, the reform could lower recruitment risks for SMEs by shortening the time between hiring and full productivity, a key determinant of operating cash flow and contract turnaround times.
Dual-training model targets productivity gaps in SME hiring
“To secure the skills essential to a modern economy, government is reforming the national skills ecosystem,” Godongwana noted.
He further acknowledged shortcomings in existing mechanisms, noting that “the skills development levy paid by employers to fund sector education and training authorities and the national skills fund have not yielded the outcomes we expected.”
This admission underscores a central financial tension for SMEs. While contributing to the levy system, many small firms still incur additional internal training costs, effectively paying twice to develop the same skills base. The introduction of a dual-training acquisition system is intended to bridge this gap by ensuring graduates enter the labour market with hands-on competencies aligned to industry requirements.
Hiring costs rise as SMEs compensate for skills gaps
Johannesburg-based manufacturing entrepreneur Nhlamulo Hlengani, who runs a small packaging equipment assembly business, said the skills gap translates directly into delayed revenue recognition.
“When we hire graduates, we often spend three to six months retraining them before they can work independently on client orders,” he said. “During that period, projects move slower and we carry higher wage costs without matching output.”
Hlengani added that a dual-training pipeline could significantly improve operational planning.
“If new recruits arrive with real workshop exposure, it reduces supervision time and allows us to take on more contracts without increasing headcount prematurely,” he explained.
Similarly, Lerato Mokgadi, founder of a growing digital bookkeeping and payroll services firm based in Johannesburg’s northern suburbs, says skills misalignment increases compliance and service delivery risks.
“We receive applicants with strong theoretical knowledge but limited experience using live accounting systems,” she noted. “That means we invest in intensive onboarding programmes before they can handle client accounts, which affects billing cycles and cash flow predictability.”
