ALISON COLLIER: Digital skills can be created by high-growth, globally-scalable innovators
The 28 high-impact entrepreneurs in Endeavor SA’s portfolio are 95% tech or tech-enabled and employed 11,525 people at the end of 2020
One of SA’s biggest immediate challenges is high unemployment, particularly among its youth, yet the gap between the demand and supply of digital skills continues to increase.
This trend should present an opportunity, yet our educational systems cannot keep pace with the changing nature of work, resulting in many employers not finding enough workers with the skills they need.
In the last decade SA has experienced economic decline, with GDP dropping and productivity falling, which has led to the highest level of unemployment since the labour force survey was launched. This put the unemployment rate at 34.4% (or 7.8-million people) in the second quarter.
Furthermore, young people aged 15 to 34 are hardest hit since they lack work experience and skills. In a post Covid-19 world this trend is even more pronounced, with businesses being propelled into an accelerated wave of digitisation and a “low touch” economy, meaning the demand and thus gap for a digital skills workforce is wider than ever.
Where will digitally-focused jobs come from? The government may be the largest public sector employer, but it doesn’t create these types of work opportunities. Private companies, while being the main job creators, have shareholders to report to and thus largely maximise outcomes while minimising inputs for increased returns and stock ratings. They are more likely to pay out dividends than reinvest them.
The answer lies with medium-sized businesses that are high-growth and globally scalable and often tech or tech-enabled. These businesses are our best chance at turning the sinking unemployment and low-productivity ship around, and creating the digital expertise and productivity gains that will propel us into the future and allow us to compete globally.
The 28 high-impact entrepreneurs in Endeavor SA’s portfolio are 95% tech or tech-enabled and collectively employed 11,525 people at the end of 2020. Furthermore, these entrepreneurs have created a further 1,200 jobs to August 2021 and have continued to demonstrate strong job growth despite weak macros, with an annual growth rate of 27% from 2017 to 2020.
Most studies show that technology gains in productivity far offset the loss in jobs, and allow us to compete on a global stage, with many of the entrepreneurs attracting foreign capital and selling their products and services offshore, meaning valuable export revenue, capital flows and ultimately jobs. It is no surprise that hiring has been so strong, with the average annual turnover per business sitting at R200m and growing on average at 79% per annum.
The beauty of the economics of these medium-sized scalable businesses is that, just like any growing child or adolescent, they need fuel to grow, and this comes in the form of not just money but employment. Furthermore, over 75% of those employed are black, and 70% have been created by female founders, evidence not just of growth but of inclusive and diverse growth.
The release of the latest unemployment rate should be a wake-up call. We are already over-reliant on government grants and our state coffers are empty, so there is an urgent need to refocus on what is working. We need to be thoughtful and invest in those areas of the economy that will create jobs for the future and allow us to compete on a relevant and global scale. We have limited resources to use and we need to use them wisely.
While we are seeing a step in the right direction in the mining and energy sector, we need to focus on enabling job creation in the digital sector so it can scale globally. We urgently need to release spectrum to make data available to all, have policy certainty, and most importantly a clear and enforced rule of law and security.
SA has shown itself to have the potential to be competitive on a global scale, and with our innovative mindset and high-growth entrepreneurs we could take on global companies and beat them at their own game. We need to capitalise on this and take advantage of what SA’s digitally-led entrepreneurs have to offer.
There are only a few hundred SA businesses in this bracket, while there should be hundreds of thousands. There is simply not enough support at the policy level for high-growth tech-enabled entrepreneurs, which is where pro-bono organisations such as ours step in, to radically mobilise and maximise job creation.
Endeavor SA has found through its years of research and empirical evidence that it is the high-growth, globally scalable entrepreneur that truly holds the key to unlocking job creation at scale. A high-impact entrepreneur is one who has an annual revenue of more than R10m, is successfully solving a global problem through a scalable (usually tech-enabled) offering, has shown strong traction and product market fit in their launch market, and is at an inflection point to scale at speed.
There is no stopping this bottom-up wave of high-impact entrepreneurship. We can expect to see far more of these types of businesses as the tech-enabled trend is only just beginning. The possibilities are exponential if you think about the digital transformation that has happened in the past year and the still nascent penetration of smartphones and digital solutions.
SA cannot afford to slide any further down the unemployment path. We need to invest in businesses that have been proven to create digitally-led jobs en masse and sustainably, supporting them to scale globally by providing access to high-level mentors and international venture capital funding.
• Collier is MD of Endeavor SA
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