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Time for Economies that Contribute to Job Creation

Tuesday, April 3, 2012 - 15:51
South Africa should invest in growing SMMEs and cooperatives if it intends reducing the unemployment and creating decent work for all

Comments

Supporting and growing SMMEs and cooperatives has been a priority for a long time, with hundreds of millions invested over the last few years through various government departments and institutions. The problem is not that the support for SMMEs is not there, but that the kind of support being provided is not working. In a rural municipality in the Eastern Cape I have been working with in the last year, over 1500 people were provided SMME "support" - training, business plan support, funding, cooperative development, etc - from a variety of stakeholders including the NYDA, SEDA, Department of Social Development, Agriculture, and the municipality itself. Over R25 million was provided to cooperative and SMME projects. And there is maybe one or two that are still operating and sustainable, with the rest either closed, or needing ongoing grants to keep alive. What would be really nice to hear is a growing awareness that SMME support is vital, and we need to change the way it is being done. Linden Booth at www.bluefireafrica.co.za

The global economic crisis could derail plans by the developing countries to meet the United Nations Millennium Development Goal (MDG) 1, target 1.B, of achieving full and productive employment and decent work for all, by 2015. The UN notes that the deterioration of the labour market, triggered by the crisis, has resulted in a decline in employment. It further acknowledges the reality that as more jobs are lost, workers are being forced into vulnerable employment and that more workers find themselves and their families living in extreme poverty. This view is reiterated by the UN Economic Commission for Africa report, Assessing Progress in Africa Toward the Millennium Development Goals, which warns that the impact of the crisis on the African economies and their ability to attain the MDGs will continue to be felt for many years to come.

In South Africa (SA), Finance Minister, Pravin Gordhan, expressed the view that in building partnerships that are aimed at taking the country through the crisis, a strategy for faster and more inclusive economic growth has to be implemented. Gordhan acknowledged that SA is not doing enough in growing its economy and creating jobs for its young people.

The crisis is adding to the country’s unemployment problem and also taking the country steps backwards in achieving MDG 1 (1.B). It is a known fact that when freedom was attained in 1994, the country inherited a problem of structural unemployment which goes back to the 1970s. What is more worrying is that although there is evidence to suggest that jobs grew rapidly during the boom of 2003 to 2008, unemployment has never fallen below 20 percent.

In view of the above, the Gauteng Province is already recognising the need to involve all stakeholders in fighting poverty and creating employment. On 27-28 March 2012, Speaker of the Gauteng Legislature, Lindiwe Maseko, addressing stakeholders from government, private sector and civil society at the Economic Development Summit in Johannesburg, emphasised the need for government to create a platform for stakeholders to exchange ideas and work together to accelerate job creation, as one of the approaches towards tackling increasing unemployment. Maseko further stressed Gauteng’s intention to lead the assault on unemployment.

One of the critical questions raised by workers from time to time is around increasing unemployment and inequality, especially in Gauteng. As Nkosiphendule Kolisile, chairperson of the Portfolio Committee on Economic Development puts it, our economy does not create jobs. Kolisile, who unpacked the sub-themes of the conference; sectors identification in New Growth Path (NGP), skills development, status quo with regard to economic development in Gauteng, youth employability, cooperatives and small, medium and micro enterprises (SMME) development, and role of science and technology and energy in job creation, spoke about the significance of ensuring that the economy grows in order to avoid shedding jobs. He maintained that investing in cooperatives and SMMEs could go a long way in reducing unemployment in the province, which has not yet fully recovered from the economic crisis.

Provinces should examine the new interventions brought by the NGP, which is centred on the view that:

“Government must prioritise its own efforts and resources more rigorously to support employment creation and equity; business must take on the challenge of investing in new areas; and business and labour together must work with government to address inefficiencies and constraints across the economy and partner to create new decent work opportunities.”

Economic Development Minister, Ibrahim Patel, thinks that in achieving economic growth in line with the NGP, provinces should acknowledge that growth should not be limited to urban areas. Patel urges provinces to invest in agriculture, infrastructure development, mineral, manufacturing, green economies, tourism, knowledge-based sectors of the economy, and cooperatives, in order to realise the country’s vision as set out in the NGP.

The following are some of the views expressed by participants at the summit, to highlight the seriousness of unemployment in the province:

  • The NGP is silent about the informal sector;
  • People are in the dark about the move from Growth, Employment and Redistribution (GEAR) strategy to NGP, while they continue to live with the effects of GEAR;
  • Beaurocracy impedes SMMEs from doing business with government;
  • Government cannot develop SMMEs since it is failing to help them;
  • SMMEs are not allowed to operate in shopping centres;
  • Whether the province has strategy to encourage the formation of more cooperatives and also integrating them into the local economies;
  • Whether government has strategies to ensure that cooperatives are taken to another level.
The other challenge faced by government is to invest in entrepreneurship to enable the youth, including those from historically-disadvantaged backgrounds, to be at the centre of the economy. However, if the University of Johannesburg’s (UJ) view that 80 percent of the SMMEs have an annual turnover of R250 000, means that SA does not provide them with enough support. Director for the Centre for Small Business Development at UJ, Thami Mazwai, says that close to 90 percent of SMMEs are black-owned and are also at the bottom of the pyramid. He further calls for greater participation from the private sector, since it is their responsibility to grow the SMMEs.

In conclusion, the comment by Simon Molefe, chairperson of the National Youth Development Agency in Gauteng, that, “Youth (15-34) represents over 70 percent of the unemployed labour force,” highlights the seriousness of unemployment in the country. And maybe, the Gauteng Legislature’s view that, “...in an attempt to absorb the majority of unskilled people to be economically active, there is a need to grow and support the SMMEs and cooperatives sector,” should inform the country’s approach to tackling unemployment.

- Butjwana Seokoma is Information Coordinator at SANGONeT.

 

Author(s): 
Butjwana Seokoma