Proudly South Africa – Telling an entrepreneurial story?

Proudly South African Entrepreneurs

Chatting to business owners exhibiting at the Buy Local Summit was inspiring. So inspiring that I almost entirely missed the official programme. Dragging myself away from the businesses exhibiting I attended the sessions after lunch. Over three sessions I was left with a distinct sense that the Proudly South Africa lacked a strategy and an identity. The panelists all emphasised useful points on the need for leadership in South Africa, social dialogue and raised a couple of interesting experiments in supply chain and franchising. Nothing wrong with these statements, but there was little or no attention on how this related to increasing the demands for South African products by South Africans. It is typical of all conferences in South Africa, general calls for leadership without what conference goers call ‘actionable insights’. As I listened to the interviews on radio and TV on the event, my sense of a directionless campaign grew, despite me nodding to the fact that buying local was good for economy.
The Buy Local Summit is the premier event for Proudly South Africa, an organisation aimed at promoting South Africans to buy local goods and services. The official message from leaders inside and outside of government was that buying locally was patriotic, was supportive of job creation and contributed to the economy of South Africa. Outside in the exhibition space, business owners emphasised not the link between my wallet and my patriotism, but rather the link between their product or service and how it could help me. For example, businesses focussed on designing products, focused on the innovativeness or uniqueness of the product. Next, they emphasised international quality of their products, and that they were fairly priced. I quizzed them on whether they thought South African were not patriotic by not buying more South African products, and they argued that the real problem was customers knowing about the product. Those in manufacturing and construction always added that they found it difficult to compete with the ‘big boys’. Most importantly, they understood Proudly South Africa not as patriotic buying, but rather that the country has lots going on and that they could compete internationally. Herein, may lie a future direction for Proudly South Africa campaign. A campaign that emphasises the uniqueness, quality and price points of local products.

Learning from Shot ‘Left

The Shot ‘Left campaign offers a way to illustrate what is possible. The campaign emphasises memories, fun and family all within South Africa. The Shot ‘left campaign asked the nation to change our perception, offering memories, fun and quality time. They were not arguing that the intrinsic value of the South African tourism offering was one of patriotism, but rather than great and affordable holidays are possible in South Africa. In a way it transforms what it means to be South Africans, especially for families who have never had a holiday before. It opened markets and created a new segments. This is important, because the process sees government and social partners working together to create new markets, through an exceptionally targeted campaign. In short, it is an effective and positive marketing campaign with none of the policy babble, although its motivations are to reach a policy objective of growing tourism by South Africans in South Africa. Proudly South Africa needs to do something similar. It is a marketing organisation, and needs to devise a marketing strategy that emphasises the intrinsic value of South African experience. What would such a marketing campaign focus on? First, it would deal with questions of quality of South African products, erroneously regarded as inferior to imported goods Second, it will reposition South African goods as being ‘cool’ and well designed, emphasising the intrinsic value of South African brands. Third, it would have a very specific target audience for its marketing campaign, not a broad appeal to conscious of South Africans.

Creating local demand

Now, one might be wondering what this tells us about human nature. Should an appeal to patriotism not be enough?
The problem with the current message is that it is not actionable, even for patriotic ethical consumers who are seeking local products. The problem is magnified for consumers not already convinced to buy local products. A marketing campaign linked to easy ways to find and purchase South African goods would make Proudly South Africa relevant. It would offer an important platform for South African companies, especially those that produce manufactured goods, a way to reach a wider audience. In so doing, the benefits of having many smaller businesses and more employment would be more realisable. The clarion call to patriotic shopping needs to be replaced with a message that South African products are cool and quality products. This change in the marketing strategy in itself is an important starting point, but will require complimentary initiatives to help growing businesses operate and succeed in the South African economy. Much of the wider economic strategy is outside the ambit of Proudly South Africa, but it can play a crucial role in creating demand for locally produced products and services.

Making pizzas isn't chemical engineering

What do a pizza maker and a chemical engineer starting businesses have in common? They both recognise an opportunity, and they will both assemble the resources they need to run their businesses.

They are entrepreneurs, but they have major differences. The chemical engineer who is commercialising a new process to create solar panels is described as an innovation-driven enterprise; the pizza maker is described as a traditional small or medium business.
This distinction is the basis for an interesting paper titled “A Tale of Two Entrepreneurs: Understanding Differences in the Types of Entrepreneurship in the Economy”, available from the Kauffman Foundation.
The distinction is palpable in our discussions on economic transformation, and the role of small business and start-ups in South Africa. On the one hand, there are those arguing for “gazelles” – innovators – to be the centre of policy, as they have the potential to be large employers and wealth creators, but we never identify who these potential gazelles are and what would lead to their proliferation.
On the other hand, the mantra of creating “one million small businesses” refers only to government policies that hinder small business, and not to actual market conditions.
We simply have not moved beyond high-level policy statements to developing the strategies that we need as a nation. We are expert cheerleaders for the Little Guy in the economy, but we have not moved to tangible products and services on a scale that will have an impact. In this environment, neither the pizza maker nor the chemical engineer is likely to benefit.
Bill Aulet, one of the co-authors of the paper, provides important advice on understanding the different challenges entrepreneurs face in terms of funding, growth potential, risk levels and other needs.
This is an incredibly useful starting point in South Africa, where generalisations about red tape compete with generalisations about oligopolies. In fact, it might be truer to state that we should be tackling both red tape and highly concentrated markets. But, again, these are such high-level policy statements (often with credible evidence) that they miss the fact that entrepreneurs in South Africa have different needs.
The pizza maker will have to navigate the municipal regulations on the preparation of food, a complicated system of human resources legislation and an opaque system of government funding. But, she will also have to purchase flour in a market that is dominated by large companies, and where small millers are unable to readily ship product to market.
One option for the business would be to go the artisanal route, but it would be difficult to do brisk business given the demand for artisanal foods.
The chemical engineer with the new processes for developing solar panels has similar challenges. Government regulations on inventions in universities seem too state-centric and the cost of prototyping is extremely expensive, and the venture capital system in South Africa underdeveloped. Moreover, there are the challenges of selling the process, and patents to bigger companies might be limited due to an investment stance that does not value early-stage development, or selling the product to construction companies may not be immediately open due to difficulty in marketing an unknown product.
There are pizza makers and chemical engineers who will have the nous and tenacity to navigate each of these challenges. However, not nearly enough of either type makes it through this demanding process. South Africa has one of the lowest rates of established businesses in the world.
A starting point to improving the prospects of success is recognising the different steps required to support more traditional small businesses and innovation-driven businesses.
This article  first appeared in the Sunday Times: Business Time on the 22 March 2015. 

Local success need not be an alien concept

ENTREPRENEURS can learn a lot just from visiting and trading with other businesses and so can those making public policy.
But this critical street-level perspective is missing with government officials in the wake of recent attacks on foreign-owned spaza shops, seemingly unable to explain whether foreign-owned shops are super profitable, if they pay taxes and whether they should be formalised.
I recently went to a foreign-owned spaza shop in Yeoville, Johannesburg. The shop owner willingly sold me a soft drink, but was reluctant to share stories.
Yet even a quick glance around the shop was revealing. A machine dispensed prepaid electricity and airtime. Items of fresh produce were sold individually, as were pieces of chicken. Advanced payment systems for certain services sat cheek-by-jowl with the traditional method of selling single servings.
The setup reminded me of tactics outlined by CK Prahalad in his book The Fortune at the Bottom of the Pyramid.
Another example: on a Sunday afternoon, we needed to repair a school uniform — which was no problem, because we had a choice of about a dozen tailors in Fordsburg.
After a couple of quick quotes and the compulsory haggling, we had a repair completed professionally and within half an hour. The business we chose had one person dealing with customers and two tailors working through a large number of garments.
This business intrigued me. Three people employed in a small shop, with neat fittings, the requisite equipment and doing a brisk trade.
It is the type of business envisaged by the National Development Plan, which sees lower-skilled service businesses as employment generators. The tailors would not take kindly to being described as such — indeed, they could probably produce a bespoke suit — but their niche is for repairs done inexpensively and for day-to-day women’s outfits. If you wanted a bespoke suit, you would find a specialist around the corner, and next to him someone displaying his summer collection of evening wear for women.
Crucially, these tailoring businesses are thriving, despite the enormous job losses in the clothing and textile industries and tough negotiations on a minimum wage in the sector.
These ventures raise questions —  significant policy questions —  especially if the number of such businesses can be increased to reduce unemployment.
In townships, besides collective buying and the selling of single servings and prepaid technology, an important service is the provision of credit, often interest free.
For some it is about practising the Islamic prohibition on charging interest, but more generally it is a time-honoured way of doing business.
This practice is supported by monthly transfers from the state through social grants, remittances and salaries in these communities, and an acceptable default rate on payments.
These informal credit agreements are an important part of operating in South Africa’s townships.
One could get wrapped up in the seeming exceptionalism of foreign-owned stores, but the Gauteng City-Region Observatory has revealed that the majority of informal businesses in Gauteng are owned by South Africans. And success is not foreign to them.
Moreover, one should remember that, for a range of reasons, many foreign-owned businesses are not fully formal. But the kneejerk response to formalise them must be questioned. The Sustainable Livelihoods Foundation argues for a two-pronged strategy: formalising larger businesses and allowing microenterprises to remain informal.
This could be an optimal strategy for our government and is a policy recommendation worth considering.
Around the world, governments are encouraging immigrant entrepreneurs. The education and entrepreneurship Kauffman Foundation recently offered guidance to national, state and local governments in the US on attracting talented expats, specifically in the technology sector. And a “start-up visa” to support the relocation of businesses is already available to entrepreneurs in Chile, France and Canada, with other countries adopting similar strategies.
The common refrain in South Africa is that immigrant entre-preneurs are only involved in retail, so do not bring anything “new to the table”.
But these entrepreneurs are also involved in light manufacturing, making products such as washing powder, sweets and mattresses.
Often they are importing technologies and processes developed in other countries to serve poorer consumers. These experiences in manufacturing are an important area of study, especially because the government has a commitment to creating 1000 black industrialists.
The attacks on foreign-owned shops in Gauteng are clearly xenophobic. Underlying them are assumptions about the profitability of foreign-owned businesses and a sense that the economy does not offer locals any opportunities. But aspirant entrepreneurs can learn by observing successful businesses owned by South Africans and immigrants.
This would be enhanced by addressing the root causes of violent protest: resilient and high levels of inequality in wealth and opportunity in South Africa.
In addressing this underlying challenge, better public policy will be developed from us all having more of a street level perspective.
This article first appeared in the Sunday Times: Business Times on the 8 February 2015.

SA’s phantom ‘efficient laager’ skews thinking

THE “efficient laager” is my description of big business’s role in South Africa’s discussions on economic policy.
The central feature of this hypothesis is that it defines business — particular big business — as a bastion of efficiency, neglecting to tackle the core questions of economic concentration.
The stance is insulated and defensive. You and I are probably not welcome in this laager.
About 60 business leaders were polled on their perceptions of the South African economy for the World Competitiveness Report, and substantiate the dominance of the “efficient laager” mentality. Two responses in particular highlight a worrying perspective among business leaders.
First, respondents were asked about the intensity of local competition. The respondents rated South Africa at 36 out of 144 countries. In other words, in this perspective South Africa’s market economy is seen as competitive by international standards. However, according to the Global Entrepreneurship Monitor, the established business ownership rate is only at 2.5% -among the lowest in the world — which hardly suggests a high level of local competition.
Second, respondents were asked about value chain breadth, with a lower ranking suggesting that companies are not involved across the entire value chain. Respondents to the survey ranked South Africa 68 out of the 144 countries surveyed. Yet the South African economy is highly concentrated as cases presented to the Competition Commission have shown over the years.
Industries as diverse as steel and bread all reflect a highly concentrated ownership structures. Importantly, the price structure and dominance of value chains by very large companies is one of the biggest challenges we face in democratising the economy. Again, the perception of respondents can be questioned as much higher entrepreneurship rates are evident in countries ranked much lower on this measure than South Africa.
If the private sector is seen as excellent by respondents, the government is viewed as completely bad.
Let us be clear, the public service in South Africa requires extensive reform to combat rising patronage. The interpretation by private sector analysts is, however, hysterical, and offers scant solutions.
Two examples show this. First is the hyperbolic comparison. At a recent event hosted by the Wits School of Governance, a leading private sector commentator argued that “children under the Taliban receive a better education than children in South Africa”. It is pure sensationalism, partly because the Taliban does not rule Afghanistan. The fact-checking website Africa Check and academic Nic Spaull show that business leaders have a much more negative perception of our education system than international benchmark data supports.
The second common warning is that South Africa risks becoming a “failed state”.
Let us be clear again, the worrying signs of rising patronage must be countered.
However, it is not merely a problem for the government; it resides in the large companies. Listed companies on the JSE that have participated in black economic empowerment transactions invariably do deals, not with smaller companies in their sectors, but rather with companies that have strong political connections.
This is part and parcel of the worrying system of patronage emerging in South Africa. Patronage politics resides inside the largesse of the government, but also is deeply rooted in South Africa’s private sector.
The creation of this phantom “efficient laager” has huge implications. It reflects the duality of income and asset holdings in our society, with the so-called top 1% not merely disconnecting, but taking up a posture that paralyses them.
After all, if all the problems reside in the government, there is little a senior executive can do, except bemoan the rise of the patronage politics and premise investment decisions on this perception of South Africa.
Every so often, some business leaders offer a welcome counter perspective, showing that a more realistic assessment of South Africa and its challenges is possible. These voices are, however, in the minority.
Consequently, a dominant discourse is entrenching itself and big businesses are retreating further into a set of orthodox positions based on conservative perspective of market based reforms.
It venerates economic growth and deregulation, without tackling questions of equity. It hysterically criticises patronage, while participating in it.
A further retreat into what I am calling the “efficient laager hypothesis” would not merely widen the gap between the government and business, but would also reframe the debate in ways that take us further away from solutions. Smaller businesses should take note, because they should not join the chorus of big business, but rather challenge this perspective.
 
This article was first published in Sunday Times: Business Times

One large business vs. 1000 little ones

Possibly, the most important question in public policy is “who benefits”.
In answering this question, not only can distributional outcomes be assessed, but often the underlying power structures. The recent reporting on the Public Investment Commission investing R1.5 billion of government employee pension funds in CAMAC Energy raises just this question: “Who benefits”.
Three features of CAMAC Energy are important. First, the company has several investments across the African continent, mostly in oil and mining. Second, it is regarded as a high risk penny stock in New York. In fact, reports show that the first tranche of PIC investment staved off its liquidation. Third, the owner of CAMAC Energy is described as well-connected to political leaders, including those in South Africa.
Now, imagine if the PIC decided to spend this money on businesses in South Africa. For arguments sake, let‘s remove the question of patronage from the equation. The exercise is to explore the possibilities of spending R1.5 billion on venture capital for smaller businesses.
The simplest option would be to divide the total into equal stakes of R 1.5 million each given to one thousand small businesses in South Africa. Assuming that each of these businesses employ the founder and create an additional two jobs, this would yield 3000 jobs. However, we know that business failure is high, so something in the region of 1500 jobs could have been created. More to the point, even in a pessimistic scenario 500 new businesses would be created, with substantial impact on the asset holdings of the owner and her family. The broader social good would be served not only with broadening ownership, but also with small impacts on economic growth.
Another option would be to limit the selection of companies for venture capital to those working with successful franchises or incubators. The investments decision are more cautious aiming to scale currently successful experiments. The number of jobs could easily reach between 5000 and 10000 new jobs, assuming that small successful franchises runs two shifts a day.
The possibilities are however even wider. In one of the tech incubators, a company is conjuring up an open source solution to a problem facing businesses, and in so doing establishes in addition to the software cloud services. This company supports the businesses of 200 South African companies, who provide extensions and maintenance around the software that has been created. The impact on direct and indirect jobs would multiply quickly, and a guess of around 10 000 jobs would be plausible. This is not as farfetched as it seems, as research suggests that South Africa could create 145 000 jobs from cloud computing.
A more adventurous option of matching funding would expand the funds available and test the plans of entrepreneurs. Entrepreneurs would be required to receive matching funding to access government funds. This is common today in American cities. Entrepreneurs would proposition venture capitalists, banks and invest their own cash to access government funding. The total available funds would now be R 3 billion, and the potential gains for economic growth and employment much greater. More importantly, the small number of angel investors could grow rapidly, thus supporting an ecosystem for entrepreneurs seeking smaller sums of equity investment.
The mind could run wild with possible options. For instance, imagine investing R 500 million into manufacturing companies in the “East Rand”, to support the Ekhurhuleni initiative to create a aerotropolis. Or investing R 200 million into the burgeoning tech sectors in Johannesburg and Cape Town. Or, investing in logistics to support smallholder farmers to bring goods to market.
The possibilities are in fact endless, and in each of these policy options the distributional impacts on opportunities, jobs and economic growth would be greater than investing in CAMAC Energy.
These proposals should not be construed as suggesting that all pension funds start investing in risky startup activity, or that the success of any of the ideas mentioned here is guaranteed. Rather these ideas are meant to show in the world of investment opportunities, spending R 1.5 billion on a single company raises substantive questions. This is especially true given that the investment in Camac is comparable in size to investments in agencies like the Jobs Fund and the National Empowerment Fund, which have larger mandates.
In answering the question “who benefits”, it is certainly not small business. The ANC has in its explanation of the term “radical economic transformation” argued that it means amongst other things, an expansion of economic opportunity and equal ownership of assets. It is a certainty that this agenda is not aligned with an investment of R1.5 billion in CAMAC Energy.
The investment in Camac begins to shed light on the underlying power structures that guide investment decisions. However, the important conclusion is that we have prioritised one opportunity with limited gains for our society, over possibly starting one thousand small businesses.
An edited version of this article first appeared in the Sunday Times : Business Times 
 

Small firms may not be SA's saviours

Small firms may not be SA’s saviours

WHAT do Clem Sunter and Julius Malema have in common? They share the policy goal of creating a million small businesses in South Africa.

The arithmetic is seductive: by creating the businesses, jobs and new assets come into existence. If these outcomes were achieved, the results would be spectacular.

For Malema and his supporters, a substantive change in ownership patterns would have been achieved. For Sunter and his supporters, more open and transparent markets would provide evidence of successful market-based reforms.

The pair obviously differ on how the million new jobs would be created, but the agreement on a target is useful and rare in an increasingly polarised South Africa.

Small business as a creator of jobs and wealth is an influential idea and, some would say, one whose time has come.

To arrive at this outcome, important assumptions must be true — the most important being that small businesses need to survive beyond 36 months, which is when they could be described as “established businesses”. As important is that the growth of small business will be labour intensive or, at the very least, require additional labour.

But an article published on the website Econ3X3 asks us to confront a world in which neither of these assumptions hold true today. The authors, Andrew Kerr, Martin Wittenberg and Jairo Arrow, who are academics at the University of Cape Town or Stats SA, use Quarterly Employment Survey data to estimate the contribution of big and small firms to job creation and job destruction. Their major finding is that large firms have higher rates of net job creation than small ones.

It is important to remember in interpreting the findings that the authors are measuring both job creation and destruction.

Traditionally, in South Africa we have measured only job creation and assumed that about 50% of new jobs are created by small business.

The problem with this assumption is that we tend not to measure the loss of jobs over time. In fact, it is more correct to say that small businesses destroy lots of jobs, because the majority of these firms fail before their third year. Kerr and his co-authors argue: “Firm death as a cause of job destruction is stronger among smaller firms: only 7% of the 37 000 job losses of the largest firms has been due to closures, as against 34% for the smallest firm category. (The 34% entails thousands of small firms.)”In fact, they suggest that a firm with 500 employees is a threshold for positive net employment creation. The arithmetic of a million new businesses each employing a couple of people thus needs to be questioned, because very small firms do not have the cash flow to employ people.

However, the deeper question remains: Why do small businesses contribute so little to net job creation? Kerr and his co-authors do not provide a definitive answer, but point to the possibilities of setting wages by collective bargaining, although they also hint that labour legislation may not be as onerous to firms as is widely believed.

A deeper look at structural factors could reveal constraints to the survival of small businesses, such as the pricing of steel or the availability of high-quality bandwidth. More research needs to be undertaken in this regard.

The core lesson for setting policy targets is twofold. First, the idea of creating a million new small businesses has gained ground and plays a useful role as a rallying cry.

Second, if we are serious about small businesses contributing to job creation, a different target needs to be developed. That target would focus on the number of successful small businesses after three years. It is a target that Sunter and Malema need to pay attention to if small business is to play a meaningful role in contributing jobs and creating new wealth.

• Hassen is a public policy analyst who writes about small business. See zapreneur.com

• This article was first published in Sunday Times: Business Times

BRICS – Total Entrepreneurial Activity

Brics - Entrepreneurial activity bubble map

The Global Entrepreneurship Monitor (GEM) provides a basis for comparing entrepreneurial activity, aspirations and intentions globally. The chart below shows the Total early-stage Entrepreneurial Activity (TEA). TEA is defined as

TEA = Percentage of 18-64 population who are either a nascent entrepreneur or owner-manager of a new business

The data shows that there is a gap between South Africa which is has moderate economic growth, and Brazil, India and China which have significantly higher economic growth rates in terms of Total Entrepreneurial Activity. (Curiously, Russia has high growth rates but low TEA rate). The data however suggests that South Africa may be catching up, with these high growth countries.
Continue reading “BRICS – Total Entrepreneurial Activity”

Jobs Fund Update from the MTBPS

Short update on the Jobs Fund from the MTBPS

The Jobs Fund - National Treasury funds, DBSA implements

Minister Pravin Gordhan provided a couple of details on Jobs Fund launched on the 7 June 2011. In the past five months, there has been a call for applications and a letter send to applicants indicating the process to be followed. Minister Gordhan indicates that 2 651 applications were received in the first call for proposals, with it:

illustrating the demand, innovation and desire across both the private and public sectors to create jobs,

according to Minister Gordhan.

The applications received covered enterprise development, support for work seekers, infrastructure investment and building institutional capacity. The outcome is that projects to the value of R 352 million has been allocated, with the prospect of creating 115 226 jobs.

Youth subsidy – Bringing education into the picture

Educational attainment is vital to addressing youth unemployment, yet remains peripheral to the debate on the youth subsidy.

The debate on youth subsidy has gathered pace. The arguments for a youth subsidy consist of two major arguments.
First, the high rates of unemployment amongst youth are exceedingly worrying. As shown in a previous chart on Zapreneur. The key features of the unemployment data by age, show that:
The key features of the data include that:

  • The biggest proportion of unemployed are concentrated in the age groups 15-24 years (29.5%) and 25-34 years (42.8%).
  • Unemployment for those 34 years old and younger accounts for 72,3% of unemployed South Africans.

Youth unemployment thus is a serious challenge, and perhaps the defining challenge that we face.
Continue reading “Youth subsidy – Bringing education into the picture”

Youth unemployment – a ticking time bomb, or is it already here?

Arguing that the the “ticking time bomb” metaphor may lull us into a sense of complacency with regards to youth unemployment.

“Feel it, it is here!” This slogan somewhat incredulously reminds us that South Africa hosted the 2011 World Cup. A year on, the slogan still resonates in our conversations.
However, another catchphrase, the “ticking time bomb,” has emerged to underscore the strong possibility of a youth uprising in the future.
The recognition that South Africa faces a significant challenge, especially with respect to including young, unemployed, African males in our economy, marks an important acknowledgment of the challenge facing our society. Yet the metaphor of the “ticking time bomb” suggests some distant future for a popular uprising when in fact, appropriating the World Cup slogan, “Feel it, it is here!” would be more appropriate.
The metaphor of a “ticking time bomb” has gained support, as young activists in North Africa and the Middle East have toppled governments in what is called the “Arab Spring.” Moeletsi Mbeki has popularised the idea arguing that South Africa is facing the possibility of greater social upheaval due to high levels of youth unemployment. In fact, according to Statistics South Africa, 72% of the unemployed are between the ages of 15-34 years old.
The COSATU General-Secretary, Zwelinzima Vavi, further elaborated upon this theme at a recent lecture on an “employment guarantee” in South Africa, warning again of the prospect of an uprising, if the challenges facing young people are not addressed quickly.
It is a theme that has routinely featured in COSATU’s documents over the last decade, even if many were not willing to pay heed. Vavi, however, provided an organisers perspective, arguing that Johannesburg is surrounded by a “ring of fire.”
[leftboxlarge element=”div” width=640] Spatially speaking, service delivery protests are concentrated in poorer communities and especially in informal settlements, which are located on the periphery of cities. Plotting protests on a map does give the impression of a ring of fire. The metaphor however suggests something more: that coordinating these service delivery protests is spatially possible and enhanced with technological advancements, such as cell phones. [/leftboxlarge]
On the other end of the ideological spectrum, the Centre for Development and Enterprise produced an important research paper in 2006, which traced the histories of 1000 young people, and later argued that current interventions, by both government and business, are not addressing the problem. Importantly, there is even in the business community, an important and early recognition of the problem, even if the policy options proposed by business are open to debate.
The National Planning Commission adopts a more national perspective and reports in its diagnostic report that if a young person does not get a job by age 24, they are likely never to get a job. The NPC then amplifies this by saying that “about 60 percent of an entire generation could live their lives without ever holding a formal job. This time bomb is the greatest risk to social stability in South Africa.”
The African National Congress Youth League (ANCYL), at its recent congress, agreed to pursue a programme for economic transformation, which it calls the “7 cardinal pillars.” The programme includes nationalisation and expropriation without compensation.
The radical rhetoric emerging from the ANCYL can be understood in the context of a growing recognition that the exclusion of youth is our biggest challenge. Thus far, the ANCYL has provided a radical expression for the views of youth, but as several political commentators argue, they play another useful function: that of containing anger.
However, there is a disconnect between protesting communities and the African National Congress — leadership of young, unemployed youth will have to be constructed on the ground, rather than be proclaimed from Congress podiums.
The space for more ambitious programmes of transformation has thus been improved with the growing consensus that we face an uncertain future if youth unemployment remains at current levels. This is an encouraging development, as changes are clearly needed to address the problem of youth unemployment. In answering this policy question, there are two important policy directions that must be emphasised.
First, that the challenge is not simply about tweaking incentives, but rather that providing work to the current generation of unemployed youth will require wider interventions.
One possibility is to scale-up the Community Works Programme (CWP), which provides community based work opportunities with regular transfers of income by government. Other possibilities exist in the areas of increasing public service employment, or in undertaking a mass-retraining programme.
The exactness of the policy package has however been debated for the last decade with government and its social partners failing dismally to lend coherence to the problem. In important senses, the spadework for a wider intervention has been completed, but the leaders in our society have failed to create consensus and allocate resources to a programme to tackle the challenges.
Importantly, the disconnect between leaders and disillusioned youth was a precursor not only to the Arab spring, but in South Africa’s liberation struggle too.
Second, policy must not only address the fears of the middle and upper classes, but far more importantly, express the hopes of young unemployed people.
Current proposals in public policy propose social safety nets, gaining initial work experience in the public sector and even a subsidy to enter the workforce. These are important policy proposals that need to be quickly decided upon as a class of policies, which could be called “social stabilizers.”
However, in building the South African dream, transforming the economy will need to consider the importance of creating an entity that provides a fair chance for anyone to participate in it and attain their dreams. The idealism in such an approach requires dealing with the hard features of our economy, which in its current form has a default position that supports larger firms and current incumbents.
Certainly, structural changes to the economy will take time, but even the most ambitious programme of social stabilisation will only attain sustainable results as part of a broader programme of economic restructuring.
South Africa is thus at a crucial point where the social conditions for a stronger push towards addressing inequality – because of the reality of exclusion – are becoming more apparent to those who are part of the economy.
However, the metaphor of a “ticking time bomb” may lull us into a false sense of security. Look around, listen and you might just recognise that an uprising is not a distant reality. Current protest action may be small and uncoordinated, but it is happening – “Feel it, it is here!”
This article first appeared on SACSIS.