White Paper: The Jobs Summit - An analysis and critique with counter proposals

On the back of the recent much publicised Jobs Summit, the HR Think Tank has undertaken a review of the Framework Agreement resulting from the summit. The summit certainly signified a step in the right direction in that it sought, at least in theory, to establish greater partnership between government and business toward increasing employment growth. However, the HR Think Tank is of the view that the framework agreement replicates the same approach to job creation taken thus far, with government taking centre stage, both dictating most courses of action and making itself responsible for carrying out most of the initiatives agreed upon.

The following paper includes a brief summary of the over 70 initiatives or strategies outlined in the jobs summit framework agreement, as well as commentary, and concludes with an overall evaluation and some counter proposals.

A less than inclusive summit

The first point that must be made is that the summit was open to attendees by invitation of the presidency only. Businesses that wanted to attend but were not on the list provided to NEDLAC (the organiser) could not simply register to do so, but had to turn to the presidency to seek an invitation. This is a sign that government acted as the gatekeeper in selecting its counterparts from business in the discussion on how to boost job creation.

The result was some notable absences, among them the Department of Public Service and Administration, the country’s largest employer, was not invited.(1) The South African Federation of Trade Unions (SAFTU) declined its invitation to attend, citing among its reasons that it feared its invitation was intended to ‘swell numbers’.(2) Several small business representative bodies also complained that they were excluded from deliberations leading up to the summit, at which they claim most of the key decisions were reached. Both the National Employers Association of South Africa (NEASA), which represents a large part of South Africa’s SMMEs, and the National African Federation Chamber of Commerce (NAFCOC), which claims to represent the majority of small businesses in the country, complained of being excluded, despite the role of small business as the largest driver of employment being reiterated at the summit. Similarly, there was no voice for the unemployed.

The framework agreement

The framework agreement includes interventions in five key areas: economic interventions, interventions targeted specifically at SMMEs, those addressing education and skills, those aimed at stimulating inclusive growth, and public and social interventions. The most important or noteworthy initiatives in each of these sections is briefly outlined below.

Most significant among the economic strategies aimed at increased job creation are the plan to increase localisation of government and business procurement to boost local demand, a more aggressive export strategy, a joint public and private infrastructure funding task team, and several measures funded by government that will make finance more accessible to companies in the industrial sector.

The agreement then details a host of economic interventions in specific sectors, including the establishment of a western Gauteng agri-industrial cluster; establishing new forestry industries on mines that go out of operation; strengthening links between the metals, machinery and mining equipment industries; promoting increased uptake of local clothing, textiles and footwear by retailers; the launch of a furniture manufacturing hub; a government clampdown on illegal gas refilling to promote the growth of the LP as industry; increased recycling of coal ash waste for road and housing construction; speeding up the registration

process for medications; and a presidential climate change coordinating commission to assess the impact of climate change on jobs and identify job creation opportunities.

These initiatives represent a small sample of the economic interventions listed in the agreement, but demonstrate the level of detail and spread across industries of the initiatives agreed to. Many of these rely on government intervention to boost or stimulate growth in these sectors. Our suggestion is that the relevant parties should first be engaged to assess whether there are currently government-imposed obstacles that could first be removed, upon which these sectors may not need further government interventions as detailed in the framework.

The agreement also arrives at a number of interventions to assist SMMEs, including renewed commitments to increase procurement from small firms and monitoring of government’s commitment to the 30% spend on SMMEs, payment to providers within 30 days. These are commitments made previously that government has often struggled to uphold.

Further goals include public-private partnerships to support new upscale existing initiatives such as business incubators and initiatives in early childhood development. The latter is somewhat out of place under the section on SMMEs. This section also includes initiatives to increase township business development, a pledge to support existing youth entrepreneurship programmes and to establish a self-service web-based tool that SMMEs can consult to obtain information on compliance issues.

With small businesses often complaining of the regulatory burden, our view is that unnecessary compliance requirements should rather be minimised than SMMEs assisted with them. Under its education and skills interventions, the framework agreement sets out to provide school drop outs and those with matric with the competencies and skills needed for employment and self-employment. These include increasing access to TVET colleges, curriculum development to make TVET in the manufacturing sector more relevant, and greater support to SMMEs to provide on-the-job training. The framework also proposes greater partnerships to increase youth employment by national parks and government partnering with TVET institutions to reach the skills needs of the tourism sector and national health goals.

Assisting those who have dropped out of school and matrics who cannot enter employment is a worthwhile endeavor. However, steps must also be taken to reduce the number of children who drop out in the first place (currently half of grade 10 students drop out before the matric exams two years later) and the number of matrics who do not pass or do not pass well enough to pursue further education or find employment. Without addressing the problems earlier in the school lifecycle, the influx into the labour market of school drop outs and matrics not equipped for work will continue to rise.

The summit also identified the need to assist those not in employment, education or training (NEETs) by finding the shortest way to ‘close the gaps’ that currently exist to employment. Public and private funding would be channeled to a number of initiatives to this end, including making it easier for NEETs to access opportunities and have their potential seen, including through new non-qualification dependent tools to assess their potential and mechanisms to connect them to opportunities on affordable transport routes from their homes.

The framework then turns to inclusive growth interventions. Laudable aspects include greater support for social enterprises that generate employment and seek to meet social and environmental needs. They also include efforts to enhance government’s socio-economic impact assessment system (which measures the impact of policy, regulation and legislation) to focus on impacts on employment, SMMEs, skills development, investment and transformation goals. If warnings of negative effects were actually heeded this could optimise the regulatory and legislative environments for job creation. But in the same section, government reiterates its commitment to effective monitoring and enforcement of the national minimum wage, despite several studies that have warned its enforcement

may lead to job losses.

This section also includes many reforms that have not been directly or not at all linked to job creation. Among them is encouraging businesses to report executive pay ratios, a pilot project to measure and target the reduction of the gender pay gap in South African businesses, and improving workplace collaboration through greater worker equity and representation on company boards. This has been advocated by the HR Think Tank elsewhere in its promotion of the practice of co-determination. These are very worthwhile pursuits, but it is unclear how they contribute to the job creation goals of the jobs summit.

Finally, the framework focuses on public and social interventions to stimulate job creation, including increased support for the National Youth Service Programme, Youth Environmental Service and the Expanded Public Works Programme. In terms of the latter, the framework sets out to implement fair, transparent and equitable recruitment for EPWP participants, and to newly implement social audits of the programme. The social audits will include user feedback and seek to “understand the strengths and weaknesses, successes and failures” of the programme. The details of how such audits will be carried out are unclear, as is how their findings would impact on the programme. The EPWP is often criticised for its failure to provide long-term employment and skills transfer, so that many participants leave the programme’s short-term employment with prospects no better than when they joined. This

fundamental flaw of the EPWP is ignored in the jobs summit agreement.

The agreement also states that the Employment Tax Incentive (ETI), or youth wage subsidy, will be extended by 10 years, as will the ages and incomes of qualifying candidates (subject to the availability of funds). However, there is as yet no evidence to suggest that the ETI has created any jobs that would otherwise not have been created. It is our view that thorough inquiry into the effects of the ETI on employment is needed before more funds are allocated to it.

Other initiatives include improving the Training Layoff Scheme to make it more effective in reducing job losses, and a national anti-corruption strategy that includes increased transparency of public servants’ financial disclosures; a government-run anti-corruption communication campaign; as well as business commitments to a zero-tolerance approach to corruption, to conduct anti-corruption training and to partner with government to eradicate corruption in procurement.

Aiming too far and yet too low

As is illustrated above, the framework agreement resulting from the jobs summit is very detailed. It contains over 70 strategies which contain interventions that are for the most part very specific. Most of the interventions rely heavily on further government intervention in various sectors and sub-sectors. This expands government’s role in job creation even further, instead of reaching a consensus with business on where government could lessen or change its involvement to allow businesses to operate optimally. In other words, most of

the initiatives outlined rely on government inserting itself as the middleman, when common business knowledge is that goals are often achieved more effectively if the middleman is removed.

Furthermore, the level of detail in both the number and nature of interventions their successful implementation would be a monumental task. It follows that monitoring their implementation will also be extremely cumbersome, expensive and time consuming, all points that make it less likely implementation will be monitored adequately and effectively.

Some of goals outlined in the framework agreement also lack coherence, and are contradictory in some cases. The point about the national minimum wage and its possible negative effects on employment in combination with a new commitment to pay heed to the negative effects of policy and legislation on employment is mentioned above. A further example is government’s commitment to lower the wage bill while in the summit agreement committing to zero retrenchments and to filling all critical vacancies in the public sector.

Some of the initiatives fall short of a tangible move toward job creation. For instance, the agreement outlines the establishment of the climate change commission to come up with ways to create job opportunities. There is however no mention whatsoever of the already well-known job creation potential of increased investment in renewable energy.

With its many interventions in different sectors, the framework agreement is one that seeks to create a small number of jobs here and there. By agreeing to so many detailed interventions, the effort will be wholly disproportionate to the number of jobs that will actually result. In fact, this lack of a broader economic impact is reflected in the agreement’s target of creating just 275,000 jobs per year in addition to those already being created (roughly 300,000 p/a over past four years). Figures from Stats SA show that the number of unemployed has grown by 222,000 on average each year over the past five years. If the jobs target is reached, the number of already unemployed (6.2 million - excluding a further 2.7 million discouraged work seekers) would be reduced by only around 53,000 per year. At this rate, if the jobs summit interventions met their target of 275,000 additional jobs per year consistently, it would take roughly 40 years for the unemployment rate to drop below 10% (again not counting discouraged work seekers). The jobs summit target, though it is a start, it is too low a goal to make significant inroads in our country’s massive unemployment problem.

The main problem is that the jobs summit did not result in any overarching shift that addresses the structural causes of unemployment and that could spur greater large-scale job creation. The agreement fails to address what are in our opinion the two most important barriers to employment growth: the skills mismatch (poor skills profile of job seekers) and a business environment that places a number of obstacles in the way of firms, especially small firms, growing and hiring more.

Conclusion and counterproposals

The interventions of the job summit aim to create jobs in the medium term, and many of them will only yield returns in the next two to three years. But South Africa’s unemployment crisis demands an emergency response. Our suggestions for what such a response could look like are outlined below.

As mentioned, the HR Think Tank believes that the agreement fails to address the underlying structural causes of unemployment. Some of these are reflected in the Think Tank’s focus areas for improving South Africa’s talent competitiveness: education and development, vocational and technical skills, the relationships between business, government and labour, labour productivity and gender equality.

Most important to secure accelerated job growth in future is reform of the country’s basic education system. This is a long-term endeavor, but crucial to improving the prospects of young people entering the labour force each year (many of whom immediately join the ranks of the unemployed). We currently rank among the worst in the world on our basic education provision, a sure sign that our school system is failing to provide children with skills and knowledge they will need to obtain work. Yet this problem remains unaddressed. Furthermore, half of grade 10 scholars drop out before they reach the matric examinations, for a variety of reasons, often because they do not perform well enough or lack the financial resources to stay in school. Government and business could partner to come up with

solutions to improving the standard of education and to support scholars to stay in school longer.

An intervention to urgently address some of the problems in the system would be to launch an emergency task force right away to address poor school infrastructure and the lack of adequate facilities including toilets, desks and chairs but also books. This task force or another should also engage in widespread teacher training where gaps in teachers’ capabilities have already been identified.

An area that should be addressed parallel to interventions in the basic school system is to improve the provision and quality of technical and vocational education. The jobs summit represents a missed opportunity for business and government to come together and work out a new process to ensure that curricula taught at TVET colleges contain the relevant and up-to-date skills required by business. With greater input on curricula (and more adaptable curricula), business would also be more willing to provide internships and on-the-job training that many TVET graduates currently lack to obtain their final certificates.

The other elephant in the room that was not addressed remains regulatory reform with a view to making it easier to do business. This summit could have been a forum for businesses of all shapes and sizes (not only those on an exclusive guest list) to honestly identify the largest hindrances to operations, growth and job creation and for government to be open to listen. As the head of NEASA wrote after the summit agreement was made public, SMMEs “are not pleading for money, but only for an environment in which it is possible to manoeuvre and create jobs…government is not sincere when it says that SMMEs are important.” (3)

A broader view on factors negatively affecting entire sectors should also have been taken in order to partner to remedy these (especially when they are the result of government policy, regulation or legislation). For instance, the agreement lacks mention of broadly supporting the industries with great job creation potential – such as tourism. The World Travel and Tourism Council has estimated that tourism’s contribution to South Africa’s economy would increase to its highest yet in 2018, and the industry and supporting businesses it sustained 1.5 million jobs in 2017, equivalent to 9.5% of total employment. This is forecast to rise to just over 11% by 2028.(4) The recent announcement that visa regulations would be eased as part of the president’s stimulus package is good news. But more should be done to engage the tourism industry on where government can promote tourism, cut red tape, and make it easier for the industry to grow.

To this end, government should immediately invest significantly in a wide-reaching campaign to market South Africa as a tourist destination overseas in the short term. By boosting tourism by 20%, there is the potential to create up to 300,000 additional jobs in this sector and in downstream and upstream businesses. Though government is trying to rein in spending, this sort of investment with a high job creation potential promises to inject this money directly back into the economy through consumer spending, which is taxed, thereby refilling government coffers.

The president’s stimulus package also made mention that efforts would be made to allocate spectrum and issue licenses that would enable the lowering of data costs. This is a matter of urgency for job creation too, but is absent from the jobs summit agreement. Not only would lower data costs provide a boost to economic activity, but would also make it easier for job seekers to learn about opportunities and connect with potential employers. High costs are currently is a massive stumbling block for young people living in rural areas who cannot afford to travel to places of potential employment to look for work. For these reasons, the process of securing lower data costs that make data accessible to all should be fast-tracked and given top priority.

We have said here and elsewhere that the jobs summit may have been an important starting point for a new, collaborative partnership between business and government on the jobs project. But by failing to address some of the most important structural causes of unemployment and being bogged down by too many detailed commitments, it will remain just that, merely a starting point.

ENDNOTES

1. ENCA, 01 October 2018. “Biggest employer, DPSA will not attend jobs summit”. https://www.enca.com/news/biggest-employer-dpsa-will-not-attend-jobs-summit

2. City Press, 02 October 2018. “Don’t expect much: Why Saftu is boycotting Ramaphosa’s jobs summit”. https://city-press.news24.com/News/dont-expect-much-why-saftu-isboycotting-ramaphosas-jobs-summit-20181002

3. NEASA, 17 October 2017. https://neasa.co.za/press-release-jobs-summit-entrepreneuryoure-on-your-own/

4. World Travel and Tourism Council, 2018. Travel & Tourism Economic Impact South Africa 2018. Available at: https://tbcsa.travel/wp-content/uploads/2018/03/WTTC-Report-SouthAfrica2018.pdf

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The HR Think Tank works to improve South Africa’s talent competitiveness through targeted research and interventions in key areas. It aims to ultimately shift the country’s trajectory by pursuing the conditions for people to reach their potential in the world of work. Members help to shape and influence policy and the broader challenges facing HR and labour. Member organisations include: AIIM, Anglo American, Auditor General SA, British American Tobacco South Africa, De Beers, Exxaro, Hyundai Automotive South Africa, Imperial Holdings, Institute for People Management, JvR, Liberty, Medshield Medical Scheme, MTN Group, Old Mutual Insure, Pearson, Pepsico, Pick n Pay, Sanlam, Sasol, SA Medical Research Council, St Peter's Schools, St Stithians College,Sun International, Tiger Brands, The Banking Association SA, University of Johannesburg, University of Stellenbosch, Unitrans, Woolworths Financial Services, Vaal University of Technology and more...

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