- The calculations presented in tables 1-3 and graphed summary are based on a typical training facility offering six basic trades
- The estimated CAPEX to set up a facility is R35-million (excluding land and buildings) catering for a maximum capacity of 90 learners per month. Our calculations exclude these capital costs
- Operating capital (OPEX) calculations exclude depreciation and finance costs
To achieve a break-even variable cost, a technical training centre must run at 86% capacity which is difficult to achieve during market slumps.
The calculations show that a private provider’s variable cost to a company remains constant, which means capacity building costs are predictable regardless of market conditions. The graph below summarises the three scenarios and illustrates the predictable variable costs per learner instead of huge swings in operating costs per learner.
The decision to build and run in-house training centres means costs are no longer variable but more fixed.
During times of abundance, these in-house centres can play a key role in skills development; however, when revenues are constrained, the same in-house centres are seen as burdensome. Typically, it triggers responses such as retrenchments and downscaling, strategies to attract private business to sustain them, outsourcing or selling them off.
In my view, very few corporate training facilities manage to achieve sustainable throughput to justify their long-term institutional relevance and therefore, we call on companies to do a critical stocktake of how they approach training in the future.