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.
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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 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.

The Little Guy and the National Planning Commission

The NPC does not adequately focus on questions of power relations in the market, and thus does not define the problems faced by small business in a manner that leads to workable solutions.

Cover of the diagnostic report by the NPC. Will the “little guy” find the links?

A problem well-defined is a problem half solved. The expectations from the diagnostic report of the National Planning Commission (NPC) are that it would  define the problems facing our society in a way that stimulates discussion, and through a process unites us in defining the problem and the plan to resolve them. In that spirit,I am arguing that the section on enterprise development in the Diagnostic Report will require a recognition of realities of uneven market power in South Africa as a foundation to define the problem and develop solutions. At the core is that the NPC must take a stance to back the “little guy” in the economy, and all people excluded from the economy. It should do this initially through defining the problem, however it has not yet embedded in the way the NPC approaches the definition of the problems we face.
The NPC provides a useful way of describing the surface manifestations of low levels of entrepreneurial activity in South Africa. It notes in this regard that:

  • Small business contributes 40% of GDP and employs 60% of workers in South Africa
  • Notes that only 2% of adult population are involved in start-up activity
  • Highlights that South Africa has relatively low levels of entrepreneurial activity

It then summarises the policy response as follows:
Factors that hinder the development of  Small, medium and micro enterprises (SMMEs) include inappropriate regulation, lack of access to finance and external factors such as crime. Furthermore, because they have supply chains across the country, large firms are able to sell their products at prices smaller companies cannot match. A strategy to promote SMMEs cannot take hold without addressing the challenge of accessing established supply chains.
 
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Online retail study shows signs of growth in South Africa in 2010

Online retail study in South Africa shows strong growth between 2009 and 2010. This trend is reinforced when a longer perspective is taken.

World Wide Worx has released its latest report on online retail in South Africa in 2010. The press release provides some interesting data. This post covers the following:

  • a snapshot of online retail sales in 2005 and 2010
  • a comparison between physical retail and online retail in 2010
  • chart on the growth rate between physical and online retail between 2009 and 2010

{Ed Note: This post experiments with a way to display charts and data. It may not work in every web browser, and for this reason I have included a PDF version of the document below.}

[download id=”9″]

Online retail grows just under 300%  between 2005 and 2010

The press release got me thinking what does the longer term trend look like. In an article , the value of online spending was R 514 million in 2005, and the estimate is presented by the same research company. The chart below shows formidable growth over three years – using nominal values – of just under 300%. It is estimated that online retail sales in 2010 were R 2,028 billion.

South Africa Online Sales
Online sales grew by almost 300% between 2004 and 2010.

… Online however remains a small percentage of retail spending in 2010

 
Online still accounts for less that 0,5% of all retail sales in South Africa. This is representative of a growing industry, with internet access still a major issue slowing down the growth of online sales. Importantly, as World Wide Worx point out, it is not just access to the Internet, but rather that more experienced Internet users are leading the growth trends.

Online sales have grown more rapidly than physical retail sales

 

South Africa - Online versus Physical Retail
Online sales are less than 1% of total retail sales (2010).

The chart shows that online retail sales have grown by 30%, while physical retail sales have grown much more modestly at 7% between 2009 and 2010.

Immigration policy in South Africa requires coalition building

South Africa must create a coalition between government, business and labour to address immigration policy.

On the radio programme The Money Show with Bruce Whitfield, Richard Pike of Adcorp had estimated that there was a vacancy rate of 829 800 high skilled jobs in South Africa that could not be filled, in part because the immigration laws made it difficult to recruit internationally. The report on which the estimate is based can be read here [PDF: Link]
In my mind, somewhere on Empire Road, I did a quick calculation.
 
There is a truism that every skilled job creates somewhere between 2 and 3 jobs. So in effect if the data at Adcorp is correct, we are potentially losing out somewhere between 1,6 million and 2,4 million jobs.
There is a truism that every skilled job creates somewhere between 2 and 3 jobs. So in effect if the data at Adcorp is correct, we are potentially losing out somewhere between 1,6 million and 2,4 million jobs. Importantly, the call is too fill jobs that currently exist in companies, not a clarion call for igniting entrepreneurial activity. Simply stated, existing companies do not have the skills they need to run their businesses. Adcorp, has far as I can tell not made their methodology for calculating employment rates or the estimates for immigration open to public scrutiny, and as such the claim does not yet pass the tests needed for evidence based public policy. However, even if Adcorp is half correct, then this is an area that requires significant attention. It is safe to assume that Adcorp is correct, even if there methodology still needs scrutiny:

  • The Department of Labour has estimated in 2008 that there are 502 000 skilled vacancies in the South African economy.
  • There are several studies that reach similar conclusions, and are instructively reviewed by Reza Daniels [PDF Link], of the University of Cape Town. Each of these studies reviewed indicate a lack of skilled workers in the South African economy.

The pro-business think-tank, Centre for Development and Enterprise summarises the argument for reviewing immigration policy as follows:

Immigants can spur growth by filling the skilled jobs which firms need in order to expand; providing the entrepreneurial skills needed to start new businesses; and adding the education, training, engineering,medical, and other skills needed to improve service delivery.

 
CDE then continues to outline a set of proposals to achieve these objectives, which require careful evaluation.
But, this is only half the story. There is another set of compelling arguments around immigration.
First, South Africa has a high rate of graduate unemployment. The Quarterly Labour Force Survey indicates that an estimated quarter million unemployment graduates. (This is the first Chart of the Week that we will produced on Zapreneur). The argument goes that these graduates have under utilised skills that competent and creative companies could utilise to fulfil their own objectives, and in this case contribute to the national goal. Significantly, there are section of organised business that have focussed solely on immigration policy, but have not focussed extensively on the wider issues related to the skills shortage in South Africa.
Second, there is a concern that foreigners would replace South African jobs. Importantly, if there is demonstrable evidence of a link between skilled foreign workers, and the creation of local employment, these concerns need to be addressed. A good example would be the Malaysian attempts to attract skilled workers and entrepreneurs into their economy which matches their national interests with the needs of potential immigrants.
Third, there are genuine concerns that the Department of Home Affairs would not have the capacity to fulfil their role in a new (I should note that I recently applied to replace my stolen Identity Document, and received a skilled, competent and friendly service from the Department of Home Affairs.)
Importantly, the New Growth Path indicates that:
 

the overall supply of highly skilled labour should be increased by continued efforts to streamline the immigration system in ways conducive to the inflow of skills, linked to a skills-transfer programme and an on-going commitment to upgrade domestic education on a broad basis.

 
The debate on immigration policy is thus an important area to debate especially as it relates to economic inclusion in South Africa. The debate would be assisted by:

  • Strategies to include unemployed graduates and improve the skills profile of South Africans,
  • A more deliberate strategy on how to deal with attracting skilled migrants into South Africa

It is an area that requires careful attention due to its importance. More to the point, an agreement on the appropriate policy for skilled migrants is possible, requiring building a coalition across business and labour. It requires reframing the debate in a way that speaks to the wider imperatives of economic growth and economic inclusion. The foundations of creating this coalition is the already existing evidence. Immigration policy must be part of the wider policy package to improve skills in the economy. Moving the debate forward requires making the linkages between increasing recruitment of skilled foreigners, and the potential impact on employment in South Africa. It requires turning the truism that jobs will be created as a result of reviews to our immigration policies be developed into a more coherent set of arguments that support public policy proposals.
[Ed Note – This post has focussed on skilled migrants, but recognises that there are wider issues related to asylum seekers and undocumented migrants]

National Planning Commission Goes Facebook, excludes most South Africans

South Africans given first opportunity to input on the development of the National Plan, but only for internet users.

South Africans given first opportunity to input on the development of the National Plan, but only for internet users.
On Zapreneur, I have argued that the national planning process must be made more open for the National Planning Commission to meet its goals. While it is presumptuous to indicate that the article had an influence, The Presidency announced that it will be having NPC Jam Session running for five days starting on the 28 March 2011.
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Three things the National Planning Commission should be doing

Proposes a way to make the National Planning Commission work more open and transparent.

The National Plan – it holds almost a mythical status in our discourse about our future, and has a multiplicity of meaning. These meanings are layered with deep ideological, class, race, gender and many other chasms that are the South African reality. The idea that closes this chasm is that with a national plan, we will find common ground to face the deep and structural reasons that make us a country with staggeringly high rates of unemployment and inequality. We are placing our future hopes on a national plan, that the National Planning Commission (NPC)has been tasked to develop. In placing such a huge burden on the commission, the quietness of the NPC to outline a process towards meeting this goal is disappointing.
It is also understandable in that the NPC is doing something that we have not done before. The task is after all formidable one to both:

  • unite society behind a programme,
  • and at the same time  develop a deliberate strategy to overcome the structural nature of unemployment, inequality and low economic growth.

With such an important task, the NPC has however failed to mobilise it’s most important resource – the people of South Africa. The process currently fails to galvanise the energy of citizens to begin developing inputs and to organise and mobilise behind their perspectives. The process of developing the “vision statement” must be consultative at the outset, and not a product of process involving just the commissioners and experts. Importantly, I do not think that the NPC would disagree with the core principle of participation. What is at issue is whether public involvement happens sooner or later. I argue it should happen immediately.

What the NPC should be doing?

What then should the NPC be doing? The NPC should be immediately doing three things.

  1. Involve people immediately. This would require setting up systems for citizens to contribute to the NPC in a meaningful way, and in the organisational forms of their choosing. This deepens democracy and advances our intrinsic values of a “people’s democracy”. At an instrumental level, it creates a legitimate and open process. As we know from our history, people participating in the process become the strongest advocates of ideas that they have helped shaped.
  2. The NPC must listen. For some the NPC are like sages that will deliver answers. This is not the role of the NPC. Instead, it must search for the answers in society. Fortunately, there is an abundance of ideas in our society. Yet, the question remains whether we are providing a platform for the idea creators to share their solutions and contribute to the national plan. Importantly, this process requires openness and transparency to catalyse innovative thinking and effective implementation. This brings the advantage of multiplying ideas, and after that weeding out the bad ideas, and seeding the good ones. Importantly, this process creates the prospects for shaking the proverbial hegemony of ideas in our society, by unleashing the talents of South Africans outside of the current organisations that dominate our discourse.
  3. The NPC must release early and release often, to use a term from software development. I doubt that anyone has a view that the national plan is an event where  the President  simply announces it. Instead, everyone agrees it is a process. The real question is around what that process should be. I would argue that the NPC should be presenting a set of options on an important issue, and asking for advice, criticism and calling for alternatives. To do this, it must release documents often and early, so that it involves people, builds trust and field-tests ideas and their programmatic elements.

Too some a democratic process for the National Plan is a non-starter, given the deep divides in our society. However, the process itself could provide for a deepening of democracy, an assessment of ideas, and a bridge across our traditional divides. Obviously, government must take decisions at the end of the day, and ensure implementation. The way it develops policy however is important to building support around a vision for our country. More to the point, through assessing all the options it helps in choosing policy options that will challenge the underlying power relations that underpin inequality and unemployment.Ultimately, are we as a society comfortable with handing over our futures, without participating in it? The overwhelming answer is that not only are we uncomfortable with such a state of affairs, as a society we would welcome and cherish the opportunity to shape our collective future.

Enter the entrepreneur? Budget 2011 Proposals for Many Small Businesses not Just White Tigers

Review of major tax and expenditure proposals impacting on small business.

 

zapreneur
Zapreneur declares it has an interest in this subject. Photo - Moe and Milsey's Construction Company

We like them. The small business that succeeds against the odds. Minister Gordhan even saluted a couple of success stories on the budget. In the build up to the budget, I choose to read The White Tiger by Indian author Aravind Adiga . The White Tiger provides a devastating description of the poverty traps, and that rare success stories translate to private gain without a wider social impact. The central premise of the book is that successful entrepreneurs are as rare as white tigers. In fact, in South Africa the data provided by the Global Entrepreneurship Monitor indicates that job creating, opportunity based businesses are a rarity in South Africa. The book though not set in South Africa provides a useful refrain from the rah-rah usually associated with entrepreneurship. What then does the budget propose for the small business entrepreneur?
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What will happen to the R 9 billion job creation fund?

Budget preview focussing on two distinct options to allocate the R 9 billion job creation fund.

2011 Budget Options

This article previews the budget looking at three options for spending the R 9 billion for job creation activities announced in the State of the Nation Address.
President Jacob Zuma left the details of the R 9 billion for job creation activities vague in his State of the Nation Address, simply saying:

We are pleased to announce the establishment of a jobs fund of 9 billion rand over the next three years to finance new job-creation initiatives.

The announcement on the details of this are eagerly anticipated when Minister Pravin  Gordhan delivers the 2011/12 Budget Speech. There are three major readings about what the details of the proposal will mean. The major options are:

  1. Application based fund
  2. Subsidy to support youth employment
  3. Support small business

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