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Big business: A critical piece missing from Manuel’s plan

Johann Redelinghuys is previously founder and chairman of Heidrick & Struggles South Africa, now The Director of the Chairman's Institute and of Portfolio&Co

No matter how hard we work to alleviate poverty by better education and encouragement for job creation, if big business, especially international business, does not make massive capital investment and establish operations in South Africa, it all goes nowhere. 

In what has now become known as ‘Trevor Manuel’s Plan’, the finance minister has proposed to set in motion the workings that will create 11-million new jobs and double the GDP by 2030. Several adjustments to current labour market policies are to be considered. 

But civil servants are not good at creating private sector enterprises, and his collaborators’ forlorn plea for a “compact between government, labour and business to make the plan work” is unlikely to get things off the ground in this fractious country of ours. 

Among the adjustments being considered are 2 million opportunities in public works programs, a more encouraging approach to skilled labour immigration, assistance to school leavers for job searching and apprenticeship training.

The plan has been two years in the works and has had the benefit of wide consultation and endorsement. The minister, who operates close to the heart-beat of the ANC’s top leadership, is to be congratulated for not only stating ambitious national goals but actually articulating some specific strategies for their achievement.

If it all works there will be a substantial improvement in the standard of education and better-equipped job seekers coming on to the labour market. But it only addresses one side of the problem. While it creates a better quality workforce, it does not address the need for big businesses to invest in South Africa, creating opportunities for the employment of this workforce. Remember that we have, in the midst of all this enthusiasm for better education, a problem of graduate unemployment. There are smart, well-educated people who can’t find work because the work just isn’t there.

On the same day that the minister’s plan was announced, Assured Capital, a British company, disclosed plans to create upwards of 1,000 jobs by opening a call centre in Umhlanga Rocks. Now that’s job creation. So how can we get more of it?

We can establish a strong, highly incentivised private sector drive to bring big international businesses—Foreign Direct Investment (FDI)—to South Africa. They must be lured by a compelling cocktail of big tax breaks, guarantees of safety, labour stability and ease of operation. Our best corporate finance teams and local business development agencies must do vigorous international “road shows” and must see substantial fee rewards for orchestrating such deals. It needs a much more pro-active “fetching” of international business, rather than trying to create favourable circumstances and then waiting for the investors to come to us. And it mustn’t be up to an IDC or the Development Bank or any other slow-moving state owned enterprise. We must harness the drive and energy of greedy young capitalists to be paid commissions for bringing in, and closing such deals.

FDI in South Africa has exploded to $5.81-billion in 2011 (second on the continent only to Nigeria) from $1.23-billion in 2010. But much more is needed if we are to make any progress on the unemployment issue.

Part of the minister’s plan is the expansion of public works programs to make available 2-million job opportunities by 2030. That is good, but government-orchestrated employment is not generating new wealth, and with all the well-documented corruption and “tenderpreneuring”, this has not been our strong suit.

We keep hearing about how entrepreneurs and the SMME sector must come to the rescue. It is true that countries like China, Japan and Italy rely on small—especially family-owned—businesses for large-scale employment. But in those countries there is a tradition of strong basic education. Families are often the custodians of craft and enterprise skills. In South Africa, the families of most school leavers have been unskilled labourers or at best pavement traders scraping for a living. 

As far back as 2007, Manuel was saying, “entrepreneurship remains a vital ingredient in the growth of the economy”. But the problem here, as we have said before, is that encouraging a school leaver, or even a new graduate, with no business experience whatsoever, to be an entrepreneur is a ridiculous notion. In a recent report, AngloAmerican Chairman’s Fund head Clem Sunter said that of the roughly 28,000 schools in South Africa, no more than 5,000 are reasonably effective, leaving about 23,000 described in the report as “dysfunctional”.

What skill base do people have when they leave such schools and how does one become an entrepreneur without even a rudimentary numerical or verbal literacy? If one is ever to become self-employed, let alone overcome all the red-tape and legal obstacles we now have to become an entrepreneur, one needs at least some of the work skills which can only be acquired by being employed, which of course takes us back to square one.      

It has been suggested that we establish a tax-free zone to do what Dubai, Singapore and others have done. India has created a ‘Special Economic Zone’ to welcome potential job-creating investors. Countries with Tax Free Zones include Korea, Ireland, Hong Kong as well as Germany, Australia and the United Kingdom, all of them serious about attracting international business.

What we don’t need are frightening images splashed all over the world’s media of labour unrest and police opening fire on striking miners. What we do need is a well-directed public relations and media campaign to celebrate the opportunities of bringing investment to South Africa, and then private businesses like the banks and the investment houses must see the bottom-line benefits of going out and bringing home the bacon. DM


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