In the latest of our series of articles on how to create jobs, Helen Zille writes about the urgent need to give all South Africans a fair chance
THE week before the state of the nation address, I walked through some streets of Cape Town to find out from members of the public what they expected from the president’s speech.
In St George’s Mall, I stopped to speak to Mrs Priscilla Fischer, from Mitchells Plain. Mrs Fischer had found out that day that she was being retrenched from the company where she worked as a cleaner. The company had fallen on hard times, and was having to retrench a number of workers. She told me that all she wanted was a chance at getting another job, but she wasn’t hopeful.
Her words, and her prospects, weighed on my mind as I sat in parliament on February 9 and listened to President Jacob Zuma deliver his state of the nation address, andlater when Finance Minister Pravin Gordhan delivered his budget speech. Surely it must be possible for our economy to grow fast enough to give Priscilla Fischer the opportunity she is looking for to support her family, beyond the paltry unemployment insurance she will now collect while she tries to figure out what to do next?
This is not the South Africa we want for ourselves or for our children. Our country has the resources and the potential to develop the human capital we need to grow our economy at a sufficient rate to create millions more jobs and reduce inequality.
Our constitution provides the right framework, and, in theory at least, all our cultures and traditions celebrate the value of hard work.
But to get there is going to require a national commitment to take the tough decisions necessary to achieve inclusive growth in South Africa. For too long we’ve allowed vested interests and political expediency to block essential action.
If our economy were to grow by 8% a year, it would double in size in 10 years. That would mean that by 2022 we would have R2-trillion to spend on service delivery a year; and it would mean millions of people who were previously excluded from the economy would get the life-changing experience of stepping out of dire poverty and into employment.
All our policy choices should have this as the overarching goal, and we must be prepared to make the hard choices to achieve it.
At the heart of our approach to the economy is the concept of opportunity – recognising the role of the state to give each person a fair chance to succeed. We believe that the only way to increase economic growth to 8% is to ensure that every young person gets a decent education, enabling them as job seekers and entrepreneurs to have a real chance at “making it” in an appropriately regulated market.
Where we govern, we ask ourselves what mix of policies will create the right environment for entrepreneurial innovation, investment, and widespread economic security. We are not dogmatic about it. As Abraham Lincoln’s simple maxim goes, “We believe in what works.”
What are the tough decisions we need to make?
I have welcomed the president’s announcement of massive infrastructure investment over the next few years. This is one essential element in boosting competitiveness.
However, it is not sufficient to unlock the 8% economic growth we need. Poor infrastructure is listed only as number six on the list of “most problematic factors for doing business in South Africa”, by the World Economic Forum’s Competitiveness Report for 2010/2011.
At number one, the biggest obstacle to doing business in South Africa is an inefficient government bureaucracy. Next follow issues such as inflexible labour regulations, a poorly educated workforce, and corruption. According to the World Bank’s 2010 Doing Business report, South Africa ranks 75th in the world for ease of starting a business.
We must make it easier to do business in South Africa.
To give all South Africans a fair shot to enter the economy, we must have a streamlined and efficient government. We have to cut the red tape that holds up development. We must reduce legislation, regulations, permits, licences and the paperwork that complicates business expansion and makes it more expensive.
In the Western Cape, we’ve tackled the barriers to entry for new businesses head-on. The Red Tape to Red Carpet project has seen the establishment of a specialised Red Tape Unit which researches and consults with relevant role players to identify (and, where possible, remove) those regulations that most hinder investment.
We need to recognise the value of entrepreneurs and small businesses.
Writing recently in the Financial Mail, Neren Rau of the South African Chamber of Commerce and Industry, revealed an instructive statistic: 68% of private sector employment and 50% of our GDP are contributed by businesses that employ fewer than 50 people. This statistic alone should make the value of entrepreneurs in creating jobs crystal clear.
Cash flow is the single biggest challenge for almost all start-ups. The South African government’s small business finance agency, Khula, has been largely ineffective. The problem with funding often lies in the plethora of agencies, departments and funds that are involved in assisting the development of SMMEs, including the Department of Trade and Industry, Khula, the National Empowerment Fund, the National Youth Development Agency, the South African Micro-Finance Apex Fund and the Industrial Development Corporation. Often the intervention designed by each of these individually is well suited to achieve its own aims, but because there is lack of coordination between them, it results in confusion and is counterproductive. This has a crippling effect on well-intended and often very creative efforts and creates red tape and confusion instead of jobs.
We also need a tax system that gives a fair chance to small businesses. Our current tax regime assists big businesses in making massive investments of hundreds of millions of rands. Our tax system should reward and support the risk takers and job creators – the entrepreneurs.
That is why the DA has proposed a three-year tax loss carry-back for small businesses with turnovers of less than R5-million. Many small businesses experience cyclical performance. A large loss one year can sink such an enterprise. However, if such a business is given the opportunity to recover a loss by setting it off against a prior year’s profit, it will serve to help lower the operating risk for potential entrepreneurs in starting their own businesses and serve as a “safety net”.
Next, we’ve got to give young unemployed South Africans a foot in the door. A full 72% of South Africa’s unemployed are below the age of 34. The centrepiece of the DA’s job-creating growth strategy is a comprehensive youth wage subsidy programme to lower the barriers to entry in the labour market by providing firms with a financial incentive to employ more people.
In his 2010 state of the nation speech, the president announced the proposed subsidy, which was supposed to be implemented on 1 April 2012.
The subsidy will pay 50% of a beneficiary’s monthly wage, up to R2000. As the individual’s income increases, the subsidy decreases until it falls away. The Treasury estimates that it will create at least 178000 new jobs at a cost of R5-billion over three years. To be sure, that is a lot of money. But it is only 6% of the R850-billion infrastructure plan that the government announced last month. It is less than the government is spending on the Gauteng toll roads. The money is not the problem. Politics is.
The plan is being blocked by Cosatu, which is not even prepared to discuss it, and wants it scrapped altogether. Zwelinzima Vavi has written in this series, “What we must do to create jobs in South Africa” (February 12), that the subsidised young workers would merely displace older workers, with no net gain in employment.
This is a legitimate concern, but is easily soluble in the design and implementation of the programme. Very few companies would retrench their most experienced staff simply to gain a little extra on the side. To hold up such a critical and urgently needed policy intervention on these grounds is inexcusable.
It is somewhat ironic that Vavi would write a contribution to this job-creation series, since it is predominantly the influence of his organisation and the policies it promotes that are presently stunting the job-creation imperative. Cosatu is concerned with protecting its members, those who already have jobs – to the exclusion of those who are unemployed and who are looking for a fair chance.
Since the budget is formally a bill of parliament, the DA will table an amendment to the budget in the coming weeks to make available the R1.6-billion needed to fund the subsidy in its first year.
I have written extensively about the crisis in education. There is no chance of achieving the sustained growth levels we need over the medium to longer term if we do not fix our schooling system.
In a knowledge-based economy, the workers of the next 20 years will increasingly need scientific, financial or technological skills to get ahead. At the moment, many thousands of deserving young students are excluded from a higher education because of spiralling fees. That is not a fair chance.
In South Africa, every academically deserving student should have a chance to go to university. The DA has proposed a R500-million increase in funds for the National Student Financial Aid Scheme, and we have costed it into our alternative budget. Once again, we can afford what needs to be done. What is missing is the political will to actually do it.
The proposals above are only a few that could be offered. A full discussion on how to create jobs could fill volumes. However, these few proposals are all based on a simple conviction: we cannot succeed unless South Africa’s economy is made accessible to all.
If we can achieve sustained 8% growth in South Africa, we will halve unemployment in under 10 years. That is a prospect all of us should be eager to roll up our sleeves to help achieve. For our part, where the DA governs, we will make the tough choices, and the necessary investments to give every person a fair chance.
That is the commitment I make to Priscilla Fischer and others like her.
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