MUCH has been said about creating jobs. Ministers, taking their cue from President Jacob Zuma, have made departmental affirmations and numerical commitments to job creation. The government plans to allocate R88,3bn over the next three years, the bulk of which will be in the Expanded Public Works Programme. There is a firm intention to create jobs and grow the economy, for which the government must be commended.
However, unemployment remains stubbornly high and jobs are being lost, not created. Statistics SA reflected unemployment rose to 25,7% between the first and second quarters this year, while the quarterly labour force survey showed unemployment rose to 4538-million in the same period. Among those younger than 30, unemployment is 42%.
The inconvenient truth is that only businesses create sustainable jobs. They apply simple benefit-cost analyses and establish or expand ventures where returns are attractive. The government can be a shareholder in or owner of these initiatives, but to grow the gross domestic product (GDP), business must be commercially sustainable. When opportunities are converted into viable businesses, the magic begins. Direct employment is created, indirect effects are catalysed and jobs are created in industries supplying goods and services. Further , jobs materialise when people spend their income.
Depending on the labour intensity, the indirect and induced effects create multiples of job opportunities relative to the direct number. Commercial agricultural ventures support 18 to 20 jobs outside the sector and consumer goods businesses seven to eight jobs. Hence, long-term growth is the real engine of job creation, while redistributing jobs or generating posts requiring continuing subsidies only consumes GDP.
Interestingly, the multipliers associated with capital-intensive industries - such as mining, metals, electricity and motor vehicles - are smaller than typically entrepreneurial industries. Yet support for industrial mega- projects, rather than entrepreneurial ones, is widespread, despite entrepreneurs being the engine room for economic growth in many emerging countries. Entrepreneurial activities account for 70% of global GDP, but only 40% in SA. Hence, with high unemployment and commendable intentions to create 2,5- million jobs, accelerating entrepreneurship is imperative. But what makes entrepreneurs willing to take risks?
Each opportunity has an inherent value that ends up in investors' pockets - after the investment and operating costs, royalties and taxes. The lion's share of any commercial opportunity ends up in the economy as employment. For a relatively small reward, investors assume the risk and wait ages for returns, but entrepreneurs have to be assured the risk is worth taking. US research shows it takes about R110000 to motivate entrepreneurial behaviour and, while only 30% succeed and 20% create jobs, an average of 5,6 jobs are created at rates lower than for industrial mega-projects.
If the benefit-cost analysis underlines investment or entrepreneurial decisions, it follows that government policies that boost expected revenues and decrease expected costs will generate growth and job creation. Businesses and entrepreneurs will invest more money and employ more people if the expected returns are higher. Hence, the best thing the government can do for job creation is establish and maintain a legal framework and infrastructure conducive to economic growth - and keep it simple. Ministers should be appraised on metrics relating to improving SA's competitiveness and improving the literacy and numeracy of school pupils relative to the nations against which we benchmark ourselves.
The Global Competitiveness Report ranks SA 54th out of 139, but also ranks our financial market development near the best in the world as testimony to the reinforcing measures taken before the global economic crisis. But the health and education rankings demonstrate significant developmental areas for the country. The quality of the education system ( 130), quality of maths and science education (137), HIV prevalence (136) and effect on business of HIV/AIDS (138) are cases in point. SA's labour flexibility also shows deficits: co-operation in labour- employer relations (132), flexibility of wage determination (131), employment rigidity (86), hiring and firing practices (135) and the burden of government regulation (94).
The World Economic Forum cites education and regulation as key areas for economic improvement. Endeavour SA MD Malik Fal has said it is not the lack of capital but rather the lack of skills that prevents local entrepreneurs from growing.
While much of SA's poor ranking globally can be attributed to apartheid, entrepreneurs are not getting the support they need. Financial stability, policy-making, ease of doing business, labour regulations, healthcare and primary education are the main investment drivers in SA.
Further , workforce productivity is essential for long-term job sustainability and it is imperative our education system equips job- market entrants with the skills and knowledge, using relevant and modern curriculums, fair and rigorous teacher evaluation systems, improved maths and science levels and reward systems promoting excellence.
Industry's role is to create and grow businesses within the prevailing legal framework and engage with the government on policies that improve and simplify that framework. Long-term economic growth and sustainable job creation are neither the state's nor industry's exclusive domain.
SA's job creation should ideally target marginalised groups such as women, the youth and the disabled. The National Youth Development Agency aims to integrate youth development across the government, business and civil society; initiate and co-ordinate youth development programmes; evaluate their intervention and mobilise the youth for active participation in civil society.
This mandate clearly obliges the agency to integrate the youth into the mainstream economy and presents exciting opportunities for creating sustainable jobs by fostering an entrepreneurial culture. It can be achieved by driving entrepreneurial attitudes and providing incentives for aspiring entrepreneurs. The agency can drive the entrepreneurship spirit at grassroots by aligning entrepreneurship in the community with municipalities' integrated development plans and local economic development plans. This will co-ordinate economic efforts within the municipality's jurisdiction.
However, to successfully engage the youth in entrepreneurship, a cultural shift is vital to reduce apathy.
Young entrepreneurs must be educated about risk and return; encouraged to manage the right risk; be respected in their communities and not be stigmatised by failed attempts. This can be achieved by skills development programmes, basic entrepreneurship education and basic financial management courses. This year's national budget outlined a three-year R5bn youth employment subsidy and there are many incentives the agency can provide to induce businesses to employ young people and incentivise aspiring entrepreneurs.
SA can create 2,5-million jobs in 10 years if we start now with co-ordinated and targeted efforts and if we discharge this ambition with the focus and deliberation that such a huge task requires.
. Tabane is a director of Deloitte.