ANC loses intellectual classes

Business Day, 27/6/13

I read Setumo Stone, article on Ms Ramphele with interest ( BD, “ Ramphele needs to turn up heat...” 25 June 2013). Yes, Ramphele will struggle to connect with the rural poor, as most parties do. But with Agang something significant is also happening . That is  the loss on of the black intellectual elite to the ANC. The situation is analogous to that of the National Party in the 1980’s , with the undermining of apartheid ideology from within that occurred with their loss of Afrikaner intellectuals . Just as the NP without ideology, or with an ideology that made no sense, drifted into the phase just before liberation as a increasingly corrupt elite out for what they could get, the ANC under President Zuma is on a similar trajectory now. And where is the once  all-powerful NP today ? Ask not for whom the bell tolls....

Dr Gavin Lewis

DA MPL Gauteng Legislature

DA does not humiliate black people

Business Day, June 2013

So Mr Diseko (BD, “DA prefers pale males”, 4/6/13) feels that “only  people like the DA’s Gavin Lewis can understand “ the apparent dichotomy between the DA’s adherence to non –racialism (an ANC priority too in the mists of time), and the preponderance of “pale males” in the Western Cape government. I do not speak for the Western Cape government, but let me explain how it works for the DA in Gauteng.

 Whenever I am in the townships and squatter camps, with their bucket toilets (if they are lucky) or long drops, with their RDP houses sold illegally by ANC councillors to people with the cash to jump the housing queue, I have never yet encountered a black voter asking about the likely gender and racial bean counting of the new government that so obsesses Mr Diseko. On the contrary, they could not care less. All they want is a clean, honest, effective state that provides them with   their basic needs, such as access to clean water and affordable power. They could not care if these services, now so remote under ANC rule, are provided by blue faced green Martians with purple spots. They are sick and tired of corruption and bad government and, increasingly, they want a change for the better. Watch the 2014 elections and you will see how far this is felt.  Or is Mr Diseko also uneasy about democracy?

 Black people are not stupid. They want what you have – like every thinking voter whether male or female.  You can choose your government on a demographic basis which requires two and a half coloureds, three quarters of an Indian, and two thirds of a women. We in the DA want a better life for all , finish and klaar. This is regardless of their colour or gender or ethnicity, or country of origin, and we will have blacks in pour government because  they are our brothers and sisters and we cannot run anything without their involvement. But we will never humiliate them  in the way that you do. And to excuse the premier’s warnings of a “wit gevaar” is simply to accept outright racism. Mr Diseko may be happy with that; I am not.

Dr Gavin Lewis

DA MPL Gauteng Legislature

ANC and racism

(published in Business Day 30/5/13)

So the secret of the ANC’s campaign is out, if Premier Mokonyane’s statement yesterday is anything to go but ( Warming over pale males, BD 28/5/13). It’s going to be all about race and nothing but race.

 With a record of almost universal failure across almost every spectrum of government in Gauteng, culminating in the collapse of her Youth employment scheme in tatters  which means that over her five year term of office she has achieved precisely nothing in terms of youth employability, all she and her party have to fall back on is  (to quote her) the “wit gevaar”.  

Just imaging the furore if the DA said the same )( which it would never do) about African leadership in Gauteng. Mokonyane’s rule has brought a bitter harvest to us all, and especially to the poor and marginalized.

 So with no record of success to fall back on, with xenophobia and service delivery protests wracking the province, and with youth unemployment at 60-70%, all she has to contribute is a primitive racism  that makes a mockery of what is left of the old ANC’s claim to non racialism, and that shows to what depths that party has plunged. As Oliver Cromwell said on another occasion, “ You have sat too long here for any good you have been doing. Depart, I say, and let us have done with you. In the name of God, go”.

ANC destroys Jobs

Letter published in Business  Day 29/4/13

Mr Rob Davies, Minister of Trade and Industry, blows my mind . In his draft Licensing of Business Bill he propose in essence to close down “illegal” (read mostly foreign owned) small businesses and drive their employees into unemployment. That presumably is his contribution to the NDPs plans for 11 million new jobs. If you don’t like the NDP, then that is his department’s contribution to the New Growth Path’s target of five million new jobs by 2020. Brilliant, just brilliant.

Fix SMEs by using the Private Sector

Gavin Lewis

Published in Finweek, 16/5/2013

Every year the South African government, both at national and provincial levels, pours hundreds of millions of rand down the drain in ineffectual attempts to support the establishment and growth of small and medium enterprises (SMEs). Yet every year another international surveys shows South Africa underperforming in the SME sector. This is despite the critical importance of SMEs to job creation. What are we doing wrong?

Government expenditure on its flagship SME support agency, the Small Enterprise Development Agency (SEDA) in 2011-12 alone was nearly R700 million.  Add to that the budgets of provincial SMME support agencies, such as Gauteng’s Gauteng Economic Propeller (GEP), and it’s likely that we are spending over one billion rand a year of taxpayers’ money – poorly.

Government business development services (BDS) institutions such as SEDA are very expensive, and too interventionist in the wrong ways. The fact is that government does not have the capacity to deliver services to small enterprises effectively. Government SMEs support agencies  are all too often stuffed with sinecures and are a source of gravy train consultancies of little relevance to the actual needs of SMEs.

Government has failed to ensure that the people who deliver services to small enterprises have business experience, understand small enterprises and empathise with their clients. Public service support for SMEs in South Africa “is hampered by poor quality and lack of reach,” says a Global Entrepreneurship Monitor (GEM) survey.

Government BDS agencies are also appalling communicators. Few people know of their existence. For instance, Minister Ebrahim Patel announced a new IDC- funding programme for SMMES in April 2012 called the Small Enterprise Funding Agency (SEFA). How many people have ever heard of it?

We also have to link the provision of finance to SMEs to improved business capacity. Currently there is a very low repayment record for government loans to SMEs. Sometimes it is just a sense of entitlement. But in too many cases people enter into financial arrangements without fully understanding them, so that the collapse of an SME means the loss of everything, including their homes pledged as collateral. SMES generally suffer from poor financial and general management capacity. Training in these will increase both start ups and new firm survival rates.

Also, government’s policy of stimulating SME growth via procurement is impeded at source by red tape and inefficiency, which includes long lead times and late payments. A glaring obstacle is the effort that must go into tendering for government contracts – a process so arduous and the chance of success so slender (winning one in twenty tenders is regarded as good), that many SMEs see big business, and not government, as their main clients.

Open doors for private BDS

The solution is a radical rethink about the role of an under-capacitated state and that of private sector support for SMEs in South Africa. Instead of creating more and more state BDS agencies, or combining others into one big agency, government should look to become smarter in the way it assists small businesses.

Internationally the trend is towards a move away from direct-market substitution by international donors and governments towards facilitating private sector business development market development. 

Government SME support systems should refrain from direct support and concentrate on facilitating private sector provision. There are a number of good private sector BDS agencies with a long track record of success, such as Aurik, Raizcorp, the Business Hub, Business Partners, etc. The public sector can use private sector partnerships to share costs, lock in private sector capacity and reduce risk.

Big business can also contribute. Many of our multi-nationals have had long experience in supporting SMEs – e.g. Anglo American’s Zimele Fund which includes professional support and guidance until the SMEs are self sustaining. SA Breweries has a similar programme. Other businesses assist in other spheres (e.g. the auto industry and aerospace) with the integration of SMEs into global supply chains. Government would do well to learn from them, instead of assuming it already knows everything.

What then is the role of government?

At the macro level, the solutions are too well known to need much repetition here. They include reducing the inefficiency of government in order to slash red tape. Then there is regulatory reform. World Bank studies show that regulatory reform alone can raise the GDP growth of developing countries by up to 1.4%. Tax incentives or deductions for SMEs also have their place, as the new DA economic policy shows.

Few SA citizens feel up to starting their own business, measured by international standards. Why? Because of our poor quality education system, especially when it comes to maths, and the absence of entrepreneurship education in all schools up to grade 12. This must change.

 Government should decentralise wage bargaining to allow for greater differentials based on sector and geographic location, seasonality, and firm size.

Outside of South Africa, Africa is booming, as reflected in annual growth rates higher than ours. Huge export opportunities are opening up all the time. Exporting firms employ larger numbers of people than those who don’t. So encourage more SMEs to export.

Imports and exports require filling in reams of paperwork and supporting documentation. And the administrative response is slow – up to a year. Government can, with private sector exporters, co-fund a Help Desk for SME exporters. Such help desks should be established in every regional or national BDS branch, including help with SARS and with the CIPCS.

Industry specific programmes

SMEs are not one size fits all. They have different needs in different sectors, and at different stages of growth. And we must distinguish clearly between social welfare (most micro enterprises) and small enterprise promotion. Government’s one size fits all approach is not working.

Wherever possible, provincial governments should link SMES closer to local economic development (LED). It always pays to focus on industry specific programmes e.g. auto cluster, rather than on general ones. Industry knows what skills it wants and what services it needs, and can offer jobs to graduates. Government should therefore provide support funding for incubators run by private sector, e.g. (in Gauteng) the Auto Industry Development Cluster (AIDC).

It would also be relatively inexpensive to set up shared resources centres where entrepreneurs can rent space and share equipment, focussing on particular sectors – e.g. construction, IT, clothing and textiles, shoes, furniture, motor mechanics.

Let us remind ourselves that 60% of South Africans work for SMEs (those with fewer than 50 workers) as Finance Minister Pravin Gordhan has pointed out. In Brazil, between 1995 and 2000, 96% of new jobs were created by enterprises with fewer than 100 employees, creating 1.4 million jobs. We can do the same.

We all are concerned about rising inequalities within the SA economy. Yet when all is said and done, it is unemployment that plays the leading role in producing inequality.

Remodel  BEE and incubators to give entrepreneurs a start.

(Published in Independent Group  (Star, Cape Times, Pretoria News, etc)"Business Report" 17/4/13)

Dr Gavin Lewis, DA

Incubators

South Africa suffers from a dearth of entrepreneurs. With the Brics summit still fresh in our memories it is worth recalling that the country most similar to ours in the problems it faces when it comes to economic development is Brazil. And yet Brazil creates far more entrepreneurs per head than South Africa does. Why is this? A key culprit is Black Economic Empowerment (BEE).

BEE Codes divert our natural supply of potential entrepreneurs into the safer and easier path of buying into existing businesses at preferential rates, rather than taking the riskier path of going it alone and forming their own enterprises. Fewer enterprises means less competition and fewer jobs, which explains a whole lot of other things wrong with the SA economy.

Since BEE requirements are unlikely to go away anytime soon, the question then is how to use them to maximum benefit to encourage entrepreneurship.

 The solution here lies with one aspect of the codes, support for enterprise development. Currently businesses may score up to 15 points on their BEE scorecard if they invest in enterprise development of businesses that are 51% black owned. Not only should enterprise development be accorded a much greater emphasis than it currently gets in terms of points awarded for BEE, but it is very useful in addressing one of the key points of failure for SMEs – their low survival rate. And one important way of doing this is through big business-funded incubators.

In SA private sector incubators are limited. They include those run by Raizcorp and Shanduka. Clearly much more can and should be done by big business.

Incubators are expensive. There is room for a much greater role by private sector providers in all industrial sectors.  Innovative funding concepts could be derived from the BEE Codes’ provision for enterprise development funding. This is a huge opportunity just waiting to be seized.

A business incubator is a building that houses tenant companies that are in the initial phases of formation. It provides a mix of internal and external services for these companies to grow and create jobs. By doing this incubators help new companies survive and grow during a period when they are most at risk of failure. The goal is for those companies to graduate from the incubator in a financially stable state and be able to survive on their own.

Incubators usually offer rental space, shared equipment, shared basic services, and technology support services. The survival rate of incubated companies is much higher than that of normal start ups.

The role of government in incubators can be problematic. Politicians may interfere in the staffing of incubators, or in the design of incubator structures, or in selection procedures, which can destroy incubators.  Since most incubator managers in many countries are paid by government, the result can be that they are inefficient and lack proper business training  themselves. In South Africa, government’s performance on incubators is lacklustre.

What then do incubators need?

First,   prearranged exit strategy. In Nigerian incubators, some graduated companies can be impossible to evict. Because of the attractions of low rentals, and a supportive environment, it becomes more attractive to stay, so that no new incubatees can be taken on because the incubator is full. The average time for a tenant company worldwide to exit is two-three years.

The mission statement of the incubator needs to be clear, so that everybody involved knows exactly what the purpose of the incubator is and what its long term goals are, and how success will be measured.

The management staff at incubators need to have business experience first and foremost, followed by excellent computer literacy, and operations background, financial management skills, interpersonal skills, motivation and vision, and involvement in community affairs.

There must be tenant selection criteria, preferably by a board with some private sector representation. Selection criterion would be similar to that expected of a company seeking a bank loan – business plan, product marketability, etc, plus any extraneous factors policy makers might like to add in as mitigating factors – women or youth owned, black owned, etc.

Having ties to a local university is always useful. Not only does this provide potential new start ups with access to new ideas and technologies, but it also allows for student workers to gather experience while working in the incubator for use in their own careers – or for employment by the incubated company once it leaves the incubator to start up on its own. This provides both jobs and exposure to entrepreneurship.\

Business incubators also provide useful opportunities for industrial sector networking, especially to those new to this. This helps with access to funding, for instance. Networking can be supported by seminars and workshops – and as a recruiting ground for more potential incubatees.

Services incubators should offer include the following:

·      =  Assistance in locating financial services; the fact that a business has been through the incubator process is also an indicator of potential success for venture capitalists

·      =  networking opportunities

·       = basic business training

·     =   marketing

·       = accounting/financial management

·       = investor and strategic partner linkages

·      =  linkages to a higher education institution

·        =shared administrative services

·        =computer literacy

·        =business and problem solving advice

·       = programmes and initiatives to promote entrepreneurship

·        =ongoing staff training and technology updates

·        =a long distance support network

·       = exchanges with other successful incubator projects worldwide.

Almost all countries show that forceful government intervention is destructive to business incubators. But there must conversely be some involvement by the public sector, not least in measuring success and in providing basic finances and infrastructure, and fulfilling the role of a facilitator. 

Examples of successful government-run incubators in South Africa already exist, although not enough of them. In Gauteng the Growth and Development Agency (GGDA) has incubators in the auto industry. The Automotive Industry Development Centre (AIDC) is an implementing arm of GGDA. The AIDC works in partnership with Nissan SA by building a training academy for workers in the auto sector. Later there will be links to FET colleges and local universities. Nissan will also install a simulator.

Similarly the FORD T6 project, also under the AIDC, links SMEs produced by Ford into Ford supply chain e.g. bumpers, load liners etc. The GDDA also pays for electricity and water supply, for a fixed period, while Ford installed a new R55 million simulator .  The Ford programme’s main goal is to incubate BEE entrepreneurs in the automotive industry.

Both Nissan and Ford intend duplicating projects at all their plants in SA.

Then, since 2000, the GODISA incubators in SA (a combined effort of the Departments of Trade and Industry and of Science and Technology) comprise six technology incubators countrywide. The aim is to use technology in businesses to increase their global competitiveness. The Small Enterprise Development Agency (SEDA) Technology Programme (STP)  also supported technology incubators, 31 in all. The technology bias is because Government in SA has identified business incubators as a policy priority in helping to prioritise high-tech industrial development and create jobs. But there is much more room for business incubators.

In Brazil, the prime function of incubators is to build innovative businesses and develop regions – they are less successful in terms of number of jobs created. In other countries (e.g. Chile) universities also often support incubators to bring their products to market. These are different goals from normal SME supporting incubators, of which far more are needed in South Africa. The money is there if the spirit is willing.

So the trade unions are upset that they weren’t at the head table during the Brics summit ( “Brics and Labour”, FM 5/4-10/4/13). Well, get used to it.

Just examine the fate of trade unions in two of the Brics countries, Russia and China, both the darlings of the ANC. Some decades ago, a leading member of the Black Panthers was asked about the position of women in the Black Panther movement. His brief reply was “Prone”. The same will apply to the trade unions in Brics.

It will be interesting to see just how far COSATU will go in compromising on its members’ interests in this unholy alliance( including when it comes to ultra- cheap Chinese imports). Its leaderships ‘s compliance with the interests of the ANC elites will be strain relations even further than they currently do. Truly what goes around comes around.

Dr Gavin Lewis

DA MPL Gauteng Legislature

Letter published in Business Day,28/3/13

Economic Mishmash

I  have no desire to rain on anyone’s parade. But amongst all the nonsense being written about Brics, Borge Brende, MD of the World Economic Forum, in his Comment (BD, 27/3/13) begs a response. 

Mr Brende would have us believe that Brics is a sort of buffet, along which South Africa can drift loading up on choice items. Like the look of  Brazil’s reduction in social inequality ? Put some on your plate. Like China’s growth figures? Dish up freely. Add a side serving of gender equality quotas, plus soupcon of the old Non Aligned Movement, and you have a dinner fit for Africans, Mr Brende says.

.

China has used its surpluses to invest in productive infrastructure. The result is sustained growth of 10 % per annum- but without a national pension scheme ( yes Blade). Brazil has instead invested it in social infrastructure. The result is reduced inequality – but with much lower current growth rates. It’s a matter of  hard choices, not an easy smorgasbord. And Russia ? What does this declining economy have to offer Africans ? The same as China ?

Regrettably there is no sense of any hard choices to be made between some of these options. The result, if it ever were achievable in the first place, would be acute indigestion.

Anyone in Africa  who follows Mr Brende’s ingratiating comments as a guideline for anything is doomed to disappointment.

Dr Gavin Lewis

DA MPL Gauteng Legislature

Spokesman: Economic Development

Letter in Business Day , 19/3/2013

Does poverty help the ANC ?

John Kane Berman’s article on social spending as a permanent feature of the SA economy is a useful reminder ( Business Day, 18/3/2013). In essence this means that the ANC employs its  own electorate- just like the National Party did in days past. The difference is that the one catered only for three million people, while the other caters for 14 million plus. 

The problem there is that , as Pravin Gordhan knows only too well, the supply of other people’s money (with apologies to Maggie Thatcher) to pay for this is running out , and in  fact will get less as the ANC fails to implement the policies that will bring our economy above 2-3% per annum growth. But when it comes to voting, no matter how bad the economy it is very hard to bite the hand that feeds you. Especially as the alternative, earning much more  than the paltry social grants by having your own job, continues to recede into the distance.

 So it could be argued that the poor economic performance of South Africa benefits the ruling party by increasing dependency on the state.

Dr Gavin Lewis

DA MPL Gauteng Legislature

Spokesman: Economic Development

Deputy Spokesman: Finance

COLLAPSING DEPARTMENT

Madam Speaker.

Distinguished visitors and guests.

Colleagues.

I am sorry to have to tell you that I have no good news for you today.

But they say it is better to know the truth and deal with it than to live in ignorance until everything collapses under you. And collapse is what I will be talking about, because it is my view that the Department of Economic Development in the Province of Gauteng is on the verge of collapse. And with the DED goes this government’s hopes of encouraging more jobs in this term of office.

What we have here is a failure of management and a failure of vision across the board, not just in the DED but in the Agencies that serve it.

We all know that the CEO of the DED has been suspended. But that is just the tip of the iceberg.

A helicopter view of the DED and its Agencies reveal, behind all the big talk, a very discouraging picture.

The fact is the majority of the projects of the DED and its Agencies are not working.

First we have the collapse of the Y Age project, which in this very House we were promised would create one million jobs. There are no jobs emerging out of the Y Age Project, although we are told that a few hundred may be rescued from the ashes.

Behind the scenes, we have the failure of the Gauteng Economic Development Agency (GEDA). Unlike South Africa, the rest of Africa is booming. Opportunities for exports are enormous. Yet this agency, Gauteng’s premier export  development and investment facilitation agency, is missing the boat.  In passing, it is worth noting that evidence shows that SMEs involved in exporting employ more people than non exporting ones do.

In the 2011/12 DED Annual Report, the failure of projects by GEDA to produce anything of substance is reported;

-         The Gauteng City Region’ facilitation and promotion of investment was not achieved

-         Of 8 Foreign Direct Investment projects targeted, only 3 were completed.

-         During the last quarter investment facilitation and marketing by GEDA produced a grand total of zero jobs.

On export training, we now hear that training in export readiness this year has stopped entirely because of a failure to find service provider.

The Enterprise Hub of Winterveld is a farce in the making. As my colleague Jack Bloom points out, a year after the multi million rand launch, literally nothing has been done. Now the food is gone, the marquee is gone, and Winterveld is left with a bare piece of veldt and a big pile of government promises.

Let’s take another example, the Moringa Olifiera project. This is one of Gauteng’s flagship Green Economy projects that are supposed to create many jobs in the province. It is a classic example of how the DED works and of how the DED reports on its work to us, the people tasked with oversight.

The Moringa is a tree with a high nutritional value, and with a seed that can be processed into biofuel. We in the Portfolio Committee have been told endlessly about the Moringa tree project. It is not a complicated project. You plough the land, plant the trees and harvest them. Not the DED though. The seedlings were planted some time ago, the Department claimed in the latest Annual Report. So where are the trees? Well, they were all killed by the frost, we were told this week. But new seedlings are being grown, and next spring we will try again.

It makes you want to weep with frustration.

Instead of helping small and meduiun enterprises by creating an enabling environment (the less said about the Gauteng Enterprise Propeller the better), this government makes it harder for people to run their businesses and to create jobs.

The latest blows to jobs coming from provincial government are in the proposed new liquor regulations. The proposed ban on Sunday liquor sales in restaurants is a blow to the tourism industry, both domestic and foreign. There is no link between drinking in restaurants as part of your meal and alcohol abuse. The ban makes no sense, except to a Puritan. And the ban will cost jobs.

Let us now turn to look at the Third Quarterly Report of the DED, put before the Portfolio Committee this week. What do we see?

The failure of the enterprise hubs = now reduced to 3 instead of 6.

But performance bonuses continue to be paid, according to third term quarterly report.

Don’t believe me? Then how about this quote on the third term quarterly report by our researchers: “In terms of service delivery performance, the dismal failure of the Department to realise job creation targets is of grave concern.”

In general, when it comes to SMEs and to Coops, there is too much focus on consultation and training, and too little on the impact and the sustainability of what is being done.

On the proposed Media Park – land is being acquired, but progress is slow. In the proposed BPO Call Centre  an MOU with the Joburg Expo  has been signed, but no progress on the ground; On the MOUs yet to be concluded with international companies to move to Gauteng Smart City complex, no progress at all.

The Department has failed to appoint a supplier for the Industrial Waste Exchange project. Green projects in general have ground to an almost complete halt.

The Medical Waste project has been further delayed by a mix up with appointing Green consultants.

The Consumer Protection Office is only working at half pace due to low demand due to inadequate marketing. Too few consumers know the office exists.

Where there are successes they are mostly the result of private sector partnerships – AIDC and e.g. 61 people employed at Ford T6 SMME Incubator,

We all agree that the role of government is to create an enabling environment for business; but they are not even doing this properly.

Year after year, from sizeable SMEs right down to street corner traders one of the main complaints is government ignorance of business requirements, corruption, over regulation and an incompetent bureaucracy.

There is almost a total disconnect between what GPG DED does and unemployment rate in the province .The DED claims credit when it goes down, but it is very quiet when it goes up.

Business environment company SBD released its latest survey on SMEs this week. It shows that red tape and rising administered prices (e.g. electricity) are now the two leading problems facing SMEs in South Africa. A heavy compliance burden is diverting business attention away from doing business and imposing crippling costs. Red Tape consumes 3-6% of turnover. Fully 74 % of the 500 SMEs surveyed said it had become more difficult to do business over the past year.

The national policies of the ANC are not working, and since these set the parameters for provincial government, including cadre deployment, the GPG DED is doomed to repeat failures of national government.

In MEC Kolisile the DED has probably the best leader it could have. But unless government fundamentally changes the ways that it thinks and acts, we will never make a real difference to the people of this province.

This term of office for the ANC government in Gauteng is all but over. The jury has sat, and the verdict looks grim.

Thank you.

Sunday Independent, 24/2/13

Can blacks be rich ?

Luthando Lukhozi completely misses the point when he declares, regarding the Mpisane’s conspicuous wealth, that there is nothing wrong with black people being very  rich (Letters, 17/2/13). Nobody is disputing the right of black people to be rich, What they are disputing is how they came to be rich. If it is off the back of poor people via misappropriating state funds, then there is everything wrong with black (or white) people being rich. And that is what lies behind the accusations against the Mpisane’s. Nothing more, nothing less. It is the difference between Patrice Motsepe, one of the richest men in the world, and  Shawn and Sbu Mpisane. And it is there for all to see.

Dr Gavin Lewis

DA MPL Gauteng Legislature

   Gauteng Government fails unemployed

The article on “Gauteng’s bid to create 100 000 jobs...” (BD, 8/2/13) refers. As the opposition spokesman on Economic Development in Gauteng, allow me to put some matters straight;

1.       The programme was launched amongst much media fanfare, with some editorials (The Star) full of praise for this most significant of Gauteng’s jobs initiatives, creating one million jobs at a cost of R30 m.

2.       It was supposed to work by advertising for 100 000 young black entrepreneurs whose successful businesses would create 10 jobs each.

3.       The project made no sense from the start . Not everyone wants to be an entrepreneur, and you don’t become one by filling in a form. Nor does the arithmetic add up – the average start-up creates about three jobs, not ten, and the failure rate of new businesses in South Africa is 80 % plus.

4.       By late last year the signs of failure were there for all to see. Only 900 people had successfully applied for the first phase of training to be an entrepreneur. Rumours of corruption started to surface, until last week Premier Mokonyane announced, in her own words, the total colapse of the project and the  suspension of the HOD in charge , marking the collapse only sizeable job creating initiative in Gauteng  in her five year term of office.

5.       Your reporter would be well advised to take the claims of imminent success from the suppliers with a large pinch of salt.

Dr Gavin Lewis

DA MPL Gauteng Legislature

FETs and State Failure

 

(published in Financial Mail)

 

The article “ Fixing the Colleges” (FM 6/2/13) epitomises everything that is wrong with our government. First we have Gwebs Qonde, whose response to the worst kept secret in South Africa, the FETs appallingly low pass rate, is not to accept the problem , and to explain how he will fix it, but to try and cover it up, on the grounds that it is “not fair”. The people who it is really not fair to are the youngsters enrolled at these colleges. Then we have our  Minister Blade Nzimande, calling on business “ to offer internships to 11 000 FET students”. This should have been designed into the FET curriculum from the start , given that everywhere else in the world vocational training is always linked to on the job work experience to ensure that the skills being required are those that are in demand in the workplace, It’s painfully simple and obvious. Instead,  under the leadership of Messrs Qonde and Nzimande lies a large part of the reason for South Africa’s huge youth unemployment challenge.

 

Dr Gavin Lewis

DA MPL Gauteng Legislature

YOUTH AND UNEMPLOYMENT
By Dr Gavin Lewis, published as an oped in the Star, 31/1/13

We know that work experience is the silver bullet for youth unemployment.  So the question becomes how to get South Africa’s unemployed youth into some form of formal employment where they can get work experience. And since government can’t create jobs, it has to be employment in the private sector.

Study after study by institutions such as the Small Business Development Project (SBD) and the Centre for Development Enterprise (CDE) shows that what employers are looking for in potential employees is some work experience or the basic skills sets needed for a specific job. Skills and training they can get quickly and efficiently in a tailored manner on the job – as needed for that job and not as dreamt up by the bureaucrats in the overfatted Sector Education and Training Authority (SETAs) which collect billions in skills development levies.

Indeed there is growing evidence that generic training schemes, such as entrepreneurship or workplace skills for unemployed youth, is just money down the drain. When technical skills are imparted without the opportunity for practical application in the workplace, they are all too often quickly forgotten and never used. All that the training schemes do is to park the unemployed youth for a while, without addressing the underlying causes of unemployment.

Training systems fail, Martin Godfrey of the World Bank says, “because young workers do not know which skills to acquire.” The international experience is that the most successful training is provided by the private sector where training and skills acquisition can be done most quickly and efficiently on the job. This ensures that employers can get exactly the skills sets they want, rather than what government officials think they want.

An example of this is Germany’s vocational training scheme, which combines attendance at the training school with a period of employment at lower than normal wage rates with suitable and interested businesses.

In South African schools, vocational education is not a high priority and has been relegated to the dysfunctional Further Education and Training (FET) sector. The result is that our education system is not supplying workers who have the basic skills sets that employers need for specific jobs. Partnerships with local businesses, including on-the-job training and linking school leavers to apprenticeships were rashly thrown out with the bathwater with the introduction of the SETAs.

So while international best practice shows that a well structured apprenticeship system based on trust and partnerships between business, labour and government is a proven solution to youth unemployment, instead we are burdened with crippling state intervention that focuses entirely on the supply sides of things. The result is that poorly motivated students at FET colleges or the ubiquitous SETAs are trained in out-of-date workshops far from the real economy, and subsequently fail to attract job offers from employers.

Not surprisingly, South African employers prefer to invest in workers with prior work experience. A major reason for this is that our labour regulations add considerable risk to employing new staff members.  To subsequently find out that the new hire is unsuitable and therefore must be fired, is a costly and laborious exercise. The bureaucracy of the Commission for Conciliation and Arbitration (CCMA) or the Labour Court consumes hours of company time and expense. Even the costs of normal retrenchment are very high in South Africa. Thus the stark reality is that employers must employ an unknown quantity at their own peril. In fact, the safest bet for employers is not to employ anyone at all, or to do so on a strictly limited temporary contract basis.

A further reason is the high cost of employing inexperienced young people, especially where they need on-the-job training. Yet within the ANC Alliance, organised labour has the power to effectively veto all new measures that would allow youth to be introduced to the workplace at a discounted wage rate.

Hence government’s rejection of the Youth Wage Subsidy proposals which would subsidise for a limited period the wages of  youth starting off their careers, despite Treasury’s endorsement in principle of the programme in 2007. This proposal, endorsed by the Democratic Alliance and tried with success elsewhere in the world (see the UK’s New Deal for Youth Employment, Canada’s Employment Tax Credit Programme) now languishes on the shelf until there is a change of government at national level.

The system is working well in the DA-controlled Western Cape, in the form of its Works and Skills Programme for youth aged between 18 and 35 years of age. But constraints on provincial tax raising powers mean that money is limited without national government buy-in.

Even the ban on labour broking which Cosatu so avidly seeks will hit the youth hard, because the evidence shows that temporary work greatly increases the chance of permanent jobs for the youth, who use the former as a stepping stone to the latter.

For all these reasons, Government’s refusal to relax its labour laws is breathtakingly short-sighted, especially set against international evidence that in all economies a youthful workforce can accelerate globally competitive manufacturing (e.g. electronics) and services, in particular innovative value-added products, from advertising to apps for cell phones.

So what is to be done?

One solution is to limit the reach of bargaining councils for whole sectors. This would entail individual firms negotiating their own terms with their own workers, as is the case in Chile. This avoids the Harrismith-type situation where workers and employers sought to band together to fight bargaining council agreements that priced them out of a job.

This is particularly relevant for start ups and small and medium-sized enterprises (SMEs), especially those employing between 10 and 100 people – the so called “missing middle” in firm sizes that create the most jobs.

Indeed, removing obstacles overall to start ups and emerging SMEs, the prime job generators in any economy, is also important – especially addressing unnecessary and costly over-regulation mismanaged by a state that lacks capacity.

In fact, the best thing government can do for unemployment is to create an enabling environment for business to flourish, and to build effective and affordable infrastructure,  on the basis of mutual trust and close cooperation with the private sector, mindful all the time of the shortcomings of state capacity.

Other possibilities are opportunity vouchers for school leavers to be used to subsidise a small business or to study further, the introduction of entrepreneurial studies in the school curriculum, and greater access to and better information from streamlined government enterprise support schemes at provincial and national levels.

 Better job search systems would also help address the problems of inadequate job matching, poor signalling from employers that want to hire staff, and weak labour market information systems.

Programmes that address job creation via tax incentives for businesses, labour law exemptions for special economic zones (SEZs) or job zones in deprived areas, public works programmes that are well run, of longer duration than the current average, corruption free and that produce identifiable skills, and removing the obstacles to growth, all have their role to play.

But is government ready and able to play its part in a united front against unemployment? It remains to be seen whether our new deputy president will be able to inject such business-minded thinking into the country’s leadership.