Optimism at odds with reliance on state for job growth
Government cannot create jobs at the rate that SMEs and entrepreneurs can, so now is the time to break down all the barriers that make it so difficult to start a business in SA
With votes for the 2019 national elections counted and the ANC retaining power, how can the governing party make good on its promise to “grow SA together”?
President Cyril Ramaphosa has inherited a growth rate of barely 1%; we’ll need a growth rate of at least 5% per annum for 20 years to create enough jobs for everyone in our country, and we simply can’t achieve this with a bloated public sector and struggling corporate sector. The answer, at least in part, will be to create an environment that allows small and medium enterprises (SMEs) to thrive and create sustainable jobs.
All over the world the economic contribution from small business is burgeoning. In the US 70% of what is produced comes from SMEs. Unfortunately, in SA a range of factors are stacked against a flourishing entrepreneurship sector, but these are certainly not insurmountable.
One of the issues in our country is the widespread belief that it’s the government’s responsibility to create jobs. There’s a prevailing sense of employment entitlement, fuelled in no small way by campaign promises like those seen in these national elections. It is problematic for any economy to be overly reliant on the government for employment. We have already seen the effect of government creating too many public servant jobs over the past few decades. The government’s salary bill is a major contributor to SA’s sky-high debt.
One SA entrepreneur recently set the scene brilliantly in a video that was widely shared. Marnus Broodryk pointed out that most political party manifestos claimed they would create jobs. But with a swollen civil service more likely to shrink than grow and a corporate world struggling in extremely tough economic times, it doesn’t seem viable for the jobs to come from these sectors. Our best bet, in his view, is SMEs.
Another big issue in terms of our sustained unemployment, which stands at around 27%, is that there is a fundamental structural mismatch in our economy. The sectors it is built on — mining and agriculture — are no longer where the growth is coming from. Growth is coming from services: retail, banks, education, media, property and the like, which predominantly rely on a workforce with an education level of grade 12 or above. However, our education deficit means vast numbers of our unemployed are not sufficiently skilled to hold jobs in the services sector. So, we can’t expect traditional employment creators to create new jobs.
Nowhere in the world is labour guaranteed a job. Countries like the US, where people start businesses and aren’t afraid to fail and try again, are the ones that have the best economic outcomes. We all need to try to make things happen for ourselves. And entrepreneurship is one of the best ways to do so. But first we need the right climate.
Where do we begin? I believe the time is right to actively break down all the well-documented barriers that make it so difficult to start a business in SA. Factors such as SA’s labour laws make it difficult for companies to grow past 49 employees as many businesses cap their employee complement, and therefore their growth, to avoid being subject to the labour laws for bigger businesses. Of course, this should not come at the expense of individual rights, but laws that restrict economic growth are not in the nation’s favour.
Budding entrepreneurs have to jump through a range of seemingly insurmountable hoops. A prospective business starter who doesn’t have a bank account will not be granted a loan because there is no financial track record. If you do qualify for a business loan the interest rate could be in excess of 20%. If you overcome all that, your new business will be set up amid political, social and economic uncertainty.
The focus should move away from the generic message of creating jobs towards a more directed and focused message. South Africans have so much potential. We’re a naturally optimistic nation, so let’s channel the optimism and shift our mindset to one of making our own success in life, starting with a vibrant small and medium business sector. My hope is that the president puts this very high on his agenda right from the start of this new term.
• Prof Roux heads the futures studies programmes at the University of Stellenbosch Business School and is a faculty member at USB Executive Development.