Denis Worrall is Chairman and founder of Omega Investment Research, an international marketing and investment promotion business with offices in Cape Town and London, established more than twenty years ago. To see how Omega can help your business visit www.omegainvest.co.za
We discussed Youth Unemployment in our last Insight and invited readers to forward any ideas they have. It is the first time we have done something like this and we were overwhelmed by the response. Given space constraints, we selected the following for publication after obtaining their contributors’ approval.
Stacey Farao - Editor
As there are problems in creating new entrepreneurial work, one of the only opportunities I can see is to encourage more labour-based construction. This will however require more physical work and I wonder if the youth are prepared to do so after completing secondary education. They may have higher aspirations. In the great American depression of the 1920’s men were employed to dig ditches, build roads etc. All too often I notice mechanical excavations digging trenches for services or making roads etc. where it could be done manually.
I know it is slower and not as economical as using machines, but companies should be allowed to have financial incentives to do it manually, such as the youth incentive scheme. In urban areas and in the townships and informal settlements in particular, manual construction must be used. Machines cannot work effectively in congested areas or in areas where other services already exist because of danger of damage to those services. The labour needs to be arranged and paid on a task basis – so much for 5m of excavation etc. This incentive basis will improve productivity. Labour-based construction does however need to be properly managed and controlled by skilled people. Unfortunately huge amounts of tax payers’ money is squandered by authorities through incompetency and corruption which could be used to roll out infrastructure in human settlements and service delivery, thereby creating many jobs.
WSP Structures Africa (Pty) Ltd
For the short and medium term, something like a national service policy is required where all young people have to serve the nation in some capacity for a period of at least 2 years. In the post World War II period many nations had compulsory military service. In our case we could have a multitude of service agencies, e.g. roads, water and power infrastructure, health care, housing, education, social service, in fact across the board of our national economic and social needs. The object of national service would be 1) to give the youth opportunity to acquire training and experience in a working environment whereby the outcome would be skills and experience and 2) to help meet the needs of society. Some of the recruits could after their National Service become officers and help run the scheme, others could then join the free economy. Exemption from National Service would be granted to those youth who met the standards of higher education but would expire if they did not pass their exams at any point, increasing motivation to study diligently. Initial skills to run the national service (the "officer" corps) could possibly be partly obtained as aid from countries in the developed world with highly skilled unemployed, e.g. Europe, India and China. Given the urgency and importance of the problem, it could be financed by transferring funds from departmental budgets, especially those where capacity is lacking to spend them and from aid funds from international institutions who would be interested to see this as a pilot project for application to a much wider group of countries. Further details would have to be fleshed out in a multi-disciplinary team made of the relevant experts.
Youth unemployment is a really interesting topic and I should think of two things for now. Firstly, a Cheaper labour system and the scrapping of the labour laws or relaxation of the labour law allowing companies to fire any employee for any reason for the first two years of employment. All this will help employers to screen the employees according to their level of performance and it will be easy to replace the lazy workers with hard workers. People are just getting lazy because of the labour laws and expect freebees. It’s like, I got you to give me the work and you have to pay me even if I am not performing or else I go to labour law organisation - and that sucks.
Nthambeleni (Stanley) Tshivhase
We have developed a financially sustainable model in South Africa for producing electricity from biomass and selling to large consumers of electricity. All the regulations and agreements are in place to get this project off the ground. The equipment is fairly costly but can be paid for in 8 years or less by the revenues generated (We are trying to access grant funding at the moment to reduce the financing). The project is relatively labour intensive, employing 30-38 people per MegaWatt of installed capacity, with the large shortfall of baseload by Eskom, 1000’s of MW’s are needed. Jobs range from tree-felling to plant operation, management and possibly crop-cultivation.
As you know, there is no silver bullet; it will have to be a multi-layered solution. The big problem is that competiveness has not been attended too. Now left this late, to correct the total environment will take serious political will - which I expect is lacking. Key to any plan is to not over-estimate the work ethic of the average South African. Previously proposed aims of creating an African Tiger is dead in the water, as it assumes inherited capacity.
1. An instantaneous intervention must be massive mass labour projects; probably infrastructure related. These will only keep people off the streets, while making those projects financially inefficient. In Nigeria, I saw a line of labours stretching to the horizon, each carrying a basket of soil to build a dam. Relatively medieval and if implemented, will receive violent resistance from Unions and Government.
2. With the similar effect of removing people from the street and keeping them busy is “compulsory social service” (as per military conscription) in order to qualify to receive social grants. This would be nation - building (as an extension of volunteerism) and increase the numbers of people “doing something” and possibly feeling valuable and making some contribution to the country’s coffers.
3. Providing skills or a service, which directly competes with existing offerings; simply replace one worker with another. This is rather like a household (South Africa) paying their own children; no “new” money is generated.
4. Top of the long - term pile is intellect. We need to generate “New”. In our situation, SA cannot afford the time to conduct deep scientific research. Origination that is close to market would have quicker returns, therefore Applied Intellect is the target. This relatively small group will spawn the next level of the pyramid, being niche manufacturing and related services. These businesses will probably lean towards modern marketing, accessing global markets via the internet.
Some large traditional manufacturing employing a number of labours might be established as an extension in this chain, but that class of labour would have to be subsidised, as global competiveness becomes more automated.
Without “new” we don’t have a long term strategy for growth or employment. These routes should consider: That at present most origination capacity is lodged in white heads, so a very active apprenticeship scheme would need to be in place. The opportunity for us to be African’s gate way through which the rest of the world trades is fast closing. We could trade “new” into Africa. The big idea would be to emulate the basis of American wealth. They allowed a company to withhold a percentage of their tax liability, conditional to those funds being used to start a bone fide new business. Firstly, the investment money had already been earned by a successful contributing company. Secondly, for the shareholders it was a no brainer investment; give to the taxman or create a new business. Thirdly, they invested in “new” ideas / technologies, which the core business couldn’t risk. Fourthly, they usually selected new technologies which were allied to their core knowledge, which naturally expanded their skill base into the new entity. A self perpetuating wealth generating strategy and employment base, but like any solid growth it is long term. I don’t expect it to happen in good old SA in my life time; where money is centralise for African control reasons, as described by Greg Mills “Why Africa is Poor”. Just some thoughts – hope they help.
A compulsory subject called Management Skills and Financial Basics should be taught in mainly our black dominated schools for the last three years (Grades 10, 11, 12). In place of the many useless subjects being studied by our youth. The new entrepreneurs must be taught that money in the till or cash in the Bank is not necessarily profit. There is no way that even a micro business can be successful without these basic skills. If you happen to pass this subject better than with a "C" symbol, you are automatically entitled to a Government Grant of say R20 000 on presentation of a written business plan and cash flow projections. With successful businesses, further assistance could be made available by the DTI, ITHALA or IDC, etc but without the excessive red tape usually practised by these funding institutions. If we do not create and encourage thousands of small entrepreneurs especially in our townships then God help us. Why is it that the foreign refugees from the north with no capital can survive running businesses in our own backyard. The correct education is the basis of their success.
Beier Industries (Pty) Limited
The only way to create significant amounts of jobs over a relative short period is through the establishment of large production facilities. South Africa is used as a spring board into Africa by many large Korean, Chinese, Thai and Japanese companies to reach the SA & African consumers. Most of these products are imported and distributed only which requires very little manpower versus turnover. Our Government need to seriously look at import duties and impose a penalty and reward system that will make companies which setup production or assembly plants. His will make South Africa more competitive and will penalise companies whose infrastructure investment in SA does not balance according to a turnover bench mark. Obviously they will also need to set new labour rules protecting the manufacturer (investor) from labour strikes. These rules can be set to only apply to new factories that are established in a specific period. Because this will generate total new jobs I am sure the Government can negotiate this with the labour unions.
Skills are important. Telecoms operators and broadcasters could take on [x] learners a year and give them an apprenticeship in a part of the business [criteria to be determined/outcomes, etc]. They must be school leavers with a matric as a minimum. This contribution could help build the engineers/technical staff that so many ICT industries and associated industries like film, depend on. The “cost” could be deducted from any licence obligation in relation to training or similar, which ICASA imposes on licensees, or count towards universal service obligations, or even universal service contributions by licensees to ICASA. These contributions all go to Treasury at the moment, so the government would benefit by virtue of the education of learners and only lose a little in terms of revenue.
In the light of a drive to create jobs and develop skills two driving arguments seem to be
· The wage subsidy (youth)
· The industrial development policy
· Job creation vs. skills development
A lot of debate is taking place around the youth wage subsidy and certainly time reflects on the merits of the arguments. On the other hand much is expected from the industrial policy. All this plays off against the growing lobby for the nationalization of mineral resources
Our proposal encompasses all these within existent industry.
South Africa is the fourth or fifth largest producer of diamonds in the world. Yet our diamonds are almost entirely being exported in the rough form only to be re - imported in the polished/ beneficiated form. The once flourishing diamond polishing industry is on the brink of collapse. For the above named reason and others known in the industry.
Our proposal is that the factories can be created in every province of where in a growing proportion the diamonds can be beneficiated before being exported.
The diamond polishing industry is very technical and encompasses the highest level of technology including laser equipment. This will provide training on all levels of the diamond chain including
· And marketing
The details of this initiative have been drawn up with the input of industry professionals and are attached. The only hold back is the guarantee of the diamond supply.
This can be secured if the state is convinced that its stake in Alexkor production (with a beneficial interest of 51% in Alexkor) can be supplied to the local industry for beneficiation. Further if the marketing plan is put in place whereby all the production is resold to or married with the Gauteng governments and DTi’s jewellery beneficiation initiative.
International Import Export cc
I noted your appeal for ideas for job creation in one of Martin Cremer’s publications. This problem calls for a concept of immense size. Job opportunities for many millions of unskilled youth and as many again for adults left out of the employment race in past years. At least about 15 million in total. One must exclude parasitic jobs obtained by augmenting an overpopulated civil service. The new jobs must be related to increased products and services for sale at a competitive value that encompasses the structure of the jobs to create value needed to pay ‘decent’ salaries. My concept defines these goods and services. These products will be discussed in the expanded memo if needed, but these exclude the high tech computers, television sets, aerospace and multi-array telescopes in competition with the skilled labour of the Indian, Chinese and other transformed societies leading the first world countries. It will take some time to get up to speed but there is a need to dimension some target figures. The first target is set at 5 million. A decent salary related to a Gaussian distribution around a median value of R50 000 pa, minimum. Thus a value of additional products and services comes to R250billion (20% of GDP!) and which have to be identified. To achieve such a target, a quantum leap in education is needed. I identify in concept how this will be achieved, not only in maths and science but in languages, business management productivity, design marketing and entertainment etc. But most fundamentally in discipline learning and social behaviour inspired by parent /pupil/school interaction. This quantum leap will include adult education. The concept aims to eliminate the high percentage of school dropouts which are the overwhelming crisis needing urgent action. The basis of the concept is the development of cluster family communities around predominantly, (but not exclusively) mining activities.
It will include satisfying the demands for additional power, water, land and other essential infrastructure covering most parts of the country (including arid areas) which in themselves are job creating services and activities... It will focus on moving away from existing metropolitan cities. The concept focuses on zero waste concepts. It will also depend on significant international support and participation in utilizing more efficient computerized Technology for basic production. And education. This memo is intended as an invitation to find out more and challenge the basis of my concepts which will require some profound discussion. It is conceptual but immediate action steps can be clearly defined.
Prof. R E Robinson
Editorial Commentator Journal of the SA Institute Mining and Metallurgy
Thanks for Insight Africa. I would like to give you further reasons why unemployment is not getting better. Our company Paintcor is a prime example. Approximately 6 years ago we found that we were growing out of our factory space and we purchased new Industrial land in Laser Park (Honeydew). We then applied to council for services but were told that the services are not available and have been waiting now for 3 years. The application has to be renewed every year. To make matters worse about 45% of our labor force joined the Union and their standard of work dropped (go slow) and the Union came with a list of demands as long as your arm including moving our pension fund to theirs. This all has resulted in the company shrinking as we will not employ more people which will result in the Union getting a majority and we are working hard with the labour left to insure the High Quality products made by us maintain their specifications. Paintcor will not drop its quality or service standards. If as much effort was put in to encouraging business as was put in to removing a painting from the Goodman gallery I am sure we could get ahead.
Interesting article. In Brussels where I live education opportunities are offered through education cheques while services rendered are paid with service cheques. The idea is that everyone should have access to education and if you are a resident and your papers are in order you get not money but cheques that you can cash at educational institutions and approved service providers. Same with service cheques that are used to pay for domestic services ensuring people are working for a fair minimum wage while the payer is incentivized to use the cheques because it gives a small tax break to use an approved labour broker. I like this system because it is transparent, unbiased and simple and promotes both employment and education.
Employing and empowering our youth is of utmost importance. A possible idea is to bring back national service, where the youth must serve in one of the armed forces or SAPS. This will give them discipline and will keep them busy while they can think of what to do with their lives. After the national service they can undergo skills training. I know the SANDF has (had?) a process whereby they provide people with skills training before leaving the SANDF. I think by providing a “Youth Wage” to the youth, we will further contribute towards the downwards spiral of our youth, if they get paid for doing nothing, why would they want to go and look for work? The youth is our future, we must nurture them!
Pieter van der Westhuizen
Project Delivery Hub Southern Africa
Mine is not an original idea, but deserves to be considered anyway. Please, bear with me, I’ll keep it short and to the point, and do not stop at the first sentence!!! Re-implement Conscription (12 or 24 months compulsory national service, not necessarily in the SANDF, but with basic training for a few months at least! Could be community-oriented rather than infantry/paratrooper service!). Lots of people will raise their arms and start to holler at my statement, however, here are a few observations from the last 12 years spent in South Africa and many years spent serving my country. As a foreigner in SA, I’ve created 2 businesses from scratch (with no financial assistance whatsoever), both in the security industry as it is my field of expertise for the past 29 years. One of them, a VIP protection services provider, uses freelance operators from a 150- strong database on punctual contracts since 2003. The biggest contract (looking after the French President, Nicolas Sarkozy, during his visit to SA in Feb 2008) used 45 persons at the same time.
My other company, a Monitoring and Armed Response company based in Fish Hoek employs around 30 permanent staff. So I think I did my share for my host-country. In the process, I happen to notice a few traits of our younger generation, namely:
- Lack of self-discipline
- Lack of drive/motivation
- Lack of community spirit
- Un-realistic expectations when starting in any field
- Lack of basic life-skills, such as how to dress, personal grooming/appearance, how to interact with older adults and persons hierarchically in higher positions.
- Lack of humility
- Lack of Basic Education (proficiency in reading, writing, counting and understanding of simple instructions)
- An undue sense of entitlement.
Chatting to my other (older) staff members, we all come to the same conclusion: yes, conscription, as we have known it, was hell under the circumstances of the past of South Africa. However, the vast majority of us came out of it with a solid respect for structures/hierarchy/superiors, a basic knowledge of what living and working in a community does entail, and no idea of entitlement, as the idea that hard work pays was kind of beaten into you. You said to keep it short, so there it is.