Investing in the Future, Getting young people working - An employment Strategy of the ANCYL
5 July 1998
The ANC-led democratic government has inherited an economy that has not been absorbing jobs since 1980’s and that stagnation has continued through o the 1990’s. The unacceptably high unemployment rate in our country is one prominent features that points to the structural distortions of the apartheid economy. Getting the economy onto a path of sustainable growth that creates quality jobs is the single most biggest challenge for our young democracy. It is for this reason that we agree with President Mandela, who stressed during his address to Parliament in February, that the Jobs Summit is perhaps the most important event since our first democratic elections in 1994.
This document is a culmination of work done over many years by the ANCYL in trying to generate a systematic and scientific response to the problem and challenge of youth unemployment in South Africa. Having long understood that young people are hardest hit by the scourge of unemployment, we have chosen to work with and amongst various sectors of youth, so that, together with them, we can develop a sustainable response to the challenge of getting young people working in our country. We have chosen this approach because we believe that no employment strategy can succeed if it does not have the backing of various sectors of young people as the future workers and the primary beneficiaries of any employment strategy. Hence we declare for the world to know that "The Youth are the Future, Build them Now!"
This document constitutes a framework within which specific strategic interventions in addressing youth unemployment have to be made. The document begins by analysing the current situation, noting competing definitions of unemployment, laying out some statistics about unemployment in general and youth unemployment in particular and further outlines the causes of unemployment. A conceptual framework for youth employment is laid, after which specific short, medium and long interventions to address youth unemployment are proposed. The document ends by addressing itself to the processes leading up to the Presidential Jobs Summit and proposes ways in which youth organisations can maximise their impact at the Summit.
2. The current situation - What is at stake?2.1 Definition of Unemployment
As a starting point, we highlight the extent of unemployment in the country and analyse how it affects young people. Notwithstanding the controversy around unemployment figures, there is no denying that unemployment is very high. The estimates for unemployment vary between 25% and 35%, depending on who flags these statistics and for what purpose. This controversy emanates from competing conceptual models around how unemployment is measured. There are generally four criteria used to determine whether someone (over 15 years of age) is unemployed, viz.:
- Someone who is not in paid or self-employment;
- Someone who is available for paid employment or self employment during the seven days preceding the interview;
- Someone who has taken specific steps during the past four weeks preceding the interview to find paid employment or self employed, or
- Someone who has the desire to take up employment or self-employment.
There are, broadly two ways to define unemployment. The narrow definition includes 1,2 and 3 above. If an individual did not take specific steps in the last weeks he/she would not be considered unemployed. Of course, in the context where jobs are hard to find, one can expect that many job seekers would soon get discouraged and stop looking for jobs. Therefore, the expanded definition (4) includes discouraged job seekers in its definition.
A further complication is the tendency towards ‘informalisation’ in the labour market where people do not have jobs with any job security, but are subjected to short term cash-based agreements. This leads to difficulties both in measuring unemployment and in defining what being employed means. Many people involved in the informal or ‘survivalist’ sector of the economy are either counted as those in employment or not counted at all. The fact that very little is known about what is happening in the informal sector makes the issue of measuring unemployment even more complex and controversial.
However, these definitional questions should not become the central pillar of our framework. They’re important in that they will empower us to engage with the various statistics and question their underlying assumptions and methodologies. So, depending on what definition of unemployment you choose, you may under-estimate the extent of the problem. And such a choice in defining unemployment is definitely not neutral as it may serve as a tool to exclude certain key sectors of the marginalised and disadvantaged in addressing the unemployment problem.2.2 Unemployment facts
Formal sector employment has declined despite some, albeit low, economic growth. The number of people employed in South Africa at present is equal to the number employed in 1982, despite substantial growth in the number of people who are seeking entry into the labour market. Unemployment in South Africa remains unacceptably high and recent economic growth has done little to alleviate it.
There are many dimensions to the unemployment problem. The most prominent feature of unemployment is that it affects people differently in respect of age, gender and geography. The youth, women and rural people are hardest hit as they disproportionately share the burden of unemployment and poverty. In fact, the majority of the people who never had jobs before (estimated at 69,2% of the unemployed) are young people.
Youth, as defined in the National Youth Commission Act, refers to someone from 14 to 35 years of age. Within the category of young people, African youth, rural youth, youth with disabilities and young women have a further disproportionate share of the youth unemployment burden (see Table 1, 2 & 3 below).
Table 1 breaks down youth unemployment figures to show unemployment rates of young workers as a fraction of total unemployment within different categories:Table 1: Youth unemployment as a proportion of the unemployed in each category
|Rural youth unemployment as % of total rural unemployment||51.4%|
|Urban youth unemployment as a % of total urban unemployment||51.4%|
|Male youth unemployment as a % of total male unemployment||54.2%|
|Female youth unemployment as a % of total female unemployment||49.4%|
|African youth unemployment as % of total African unemployment||50.6%|
|White youth unemployment as a % of total white unemployment||46.7%|
|Youth unemployment as a % of total unemployment||50.6%|
The statistics in Table 1 indicate that youth constitute almost half of the unemployed in each of the categories of the unemployed and more than half of the total number of the unemployed.Table 2:Unemployment rates by race and gender, % per age in the labour force
|Total unemployed||Young males
The other fact about youth unemployment is that it varies from province to province. The more rural a province is, the higher the rate of youth unemployment, with Northern Province, Eastern Cape and Mpumalanga leading in terms of youth unemployment(see the Table 3 below).Table 3: Provincial distribution - employed and unemployed youth
|PROVINCE||YOUTH IN FULL-TIME
|UNEMPLOYED YOUTH %|
|Eastern Ca pe||17||56|
The disaggregation of both the unemployed in general and unemployed youth in particular is important so that we can identify the most disadvantaged and vulnerable sections of the unemployed and youth. Tables 1, 2 & 3 give empirical credence to the correctness of the ANCYL’s strategy of identifying young women, rural youth, disabled youth and African youth in particular and black youth in general as the priority target groups of our employment strategy.2.3 Causes of unemployment
The next important question that should be highlighted is what are the causes of unemployment in South Africa. Since the 1980’s, formal employment has stagnated. It peaked in 1988, at 8 million or about half the labour force. Since then, the number of employed has declined slightly in numbers and rapidly as a percentage of the workforce. In 1989 to 1993, employment fell by 400 000 – some 5 per cent. Unemployment reflects the economic and social structure as well as labour market imperfections. Factors behind unemployment lie in both the supply of and demand for labour, as well as in the nature of the labour market. Factors depressing the demand for labour include:
The long run decline in employment in mining and agriculture. Formal agricultural employment dropped by almost a fifth in the past two decades and by a tenth in 1987-95. Mining employment has declined by a quarter since 1987. The fall in employment in these two sectors in the past eight years equaled 6 per cent of total employment.
Rising capital intensity in the formal sector. Since the early 1980s, labour absorption has fallen to virtually zero. As a result, even when the economy has grown, employment has remained unchanged or even declined.
Domestic demand is constrained by the severe inequalities in income distribution, fiscal and monetary restraint, including very high interest rates.
On the other hand the supply of labour is affected by the relatively high cost of living for most workers and by poor human resource development. The supply of labour also reflects under-investment in human resources and social capital As a result, skilled labour proves relatively expensive, while insecure communities and households undermine productivity and education.
Recent indications are that most public sector institutions have also been shedding jobs and this is adding more unemployment figures. If the indications that 300 000 public servants may have to be retrenched in the course of restructuring the public service are true, this will add salt to the unemployment ‘wound’ unless there is a social plan to deal with the consequent crisis.
Finally the labour market has not adequately fostered employment creation. The apartheid labour law emphasised bureaucratic control of labour, especially Black workers, to ensure a constant flow of cheap labour. It was deficient in many respects and did not provide a constructive framework for negotiations or to foster mediated settlements, while dispute settlement procedures took a long time. This highly segmented labour market (segmented along race, gender and class lines) is marked by substantial discrimination and has thus given rise to huge income disparities, referred to as the apartheid wage gap.
In analysing the reasons for the particularly high levels of youth unemployment, a number of distorted explanations need to be debunked. A typical problematic explanation for youth unemployment is that young people are less productive than older workers, hence the marginal costs of employing them are higher. While it is often true that young people are less experienced then their older counterparts, it also needs to be noted that these are the people who are physically in their prime and are also having faster learning rates than older workers. This calls into question the productivity-explanation of youth unemployment.
Related to the above, lack of education and training is also often blamed for youth unemployment. While it is true that, at an individual level, education and training will probably enhance someone’s chances of getting a job, this does not always hold completely at the aggregate level. The fact that people with all levels of education are unemployed – even up to the graduate and post-graduate level – suggests that improving education and skills levels cannot be the centrepiece of a job creation strategy. Whilst it would certainly assist in improving productivity and efficiency in the economy, education and skill development without structural economic change cannot lead to massive job creation.
3. Conceptual framework3.1 Youth unemployment and the bigger unemployment picture
From the above, it is clear that youth unemployment cannot be treated outside of the overall unemployment in the economy. It is a component of overall unemployment and measures to address unemployment will have to impact on youth unemployment, as young people constitute the majority of the unemployed. Whilst we should ask every stakeholder at the Jobs Summit about their agenda in addressing youth unemployment, we must resist any temptation to delink youth unemployment from the general unemployment crisis engulfing the country. We should therefore resist attempts by certain parties to use youth unemployment as a Trojan Horse to introduce a two-tier labour market - one labour in which workers have rights and benefits existing side by side with a youth labour market in which wages are low and there are no bargaining rights. If we accept the latter, we should understand that young people will be trapped in unending poverty. Such an approach is aggressively promoted by structures like Business South Africa and the Democratic Party.3.2 Two-tier labour market - are youth ‘secondary’ workers?
The elements of such an approach would be that young people should accept lower employment standards including lower wages. This will not be sustainable, as it will lock young people in low paying jobs which effectively exert downward pressure on wages and conditions of other workers. A two-tier labour market will be characterised by ‘a race to the bottom’ and atypical employment trends which do not improve the living standards of young people. It means we should argue strongly for quality jobs that pay a decent income and which do not compromise labour standards.
Whilst there should be incentives to companies that invest in labour intensive projects, we should find a way of giving incentives to companies that increase their intake of youth into employment. Extreme care should be exercised to avoid creating a ‘welfare state’ for the rich by giving them too many incentives with the hope that they will create employment, while they continue to do business as usual. Again, it is therefore essential that measures to address youth unemployment are firmly located within the overall employment creation strategies.
Any agreement to lower labour standards for young workers would be tantamount to disinvesting in the future as youth may be subjected to increased exploitation and uncertainty, with the hope that one day when they grow old, they will get better pay and improved working conditions. And that day may not come.3.3 Getting to the bottom of youth unemployment - understanding and unpacking categories of young people
When conceptualising youth and their employment needs, it also needs to be noted that youth are not a homogenous group and need to be broken down into various sub-categories. In particular, they can be broken down by racial, gender, and class. Specific groupings of youth which can be considered in formulating employment generation proposals include the following:
- Child labourers
- Retrenched youth
- Young people who have not had a job before
- Youth of school-going age but who are currently out of school
- Professional/Skilled youth
- Rural youth
- Young women.
Firstly, we are opposed to child labour and support the provisions of the Basic Conditions of Employment Act (BCEA) in prohibiting child labour. It is important that children under sixteen years of age get the necessary protection from exploitation. Society needs to invest in their education and development so as to prepare them for a future meaningful participation in the economy and society generally as active citizens. Child labour denies children their rights to enjoy a safe and secure life, and any future opportunities to work and live well.
Secondly, young people who are in institutions of learning need a greater sense of assurance that when they leave school, they will find employment. This is only possible if there is an improvement in the quality of public education. Further education and training institutions should be transformed and utilised to their fullest capacity as they hold more potential in providing the bridge between school and the world of work. More and more young people should be trained in areas of greater need such as economic and management sciences and science and technology. There should be more coordination between career advice services in learning institutions and labour market information and placement agencies. This will help prevent graduate unemployment, a trend that is now rife in our country. Graduate unemployment cannot be tackled effectively if it is addressed outside the need to transform higher education within the context of broadening the knowledge and skills base of the economy, through opening access for the historically disadvantaged. Most graduates find themselves with paper qualifications but very little ability to do the job.
In many sectors of the economy, the ‘experience’ requirement makes the labour market inaccessible to new entrants. These new entrants are mainly young people coming out of the education and training institutions. There can be no reasonable expectation that these young people will have the type of work experience currently demanded by employers. Neither the current education and training system nor the employers have programmes that give exposure and pre-employment experience to studying youth. To simply require experience on their part is tantamount to locking them out of employment doors. Instead of demanding ‘experience’ as narrowly defined by employers, public and private sector employers should offer young people opportunities for on-the-job training and internships in workplaces so that they can acquire it in the course of practice. In addition, experience should accommodate the person’s potential and ability shown in other life settings.
Thirdly, we approach youth unemployment as a problem facing largely historically disadvantaged sectors of youth such as young women, rural youth and African youth in particular and black youth in general. Working class youth are therefore hardest hit by the unemployment crisis. They bare a disproportionate burden of society’s problems of unemployment, particularly in the absence of a comprehensive social security system and in the context of a legacy of apartheid’s education and training system that did prepare youth for ‘the world of work’. Any employment strategy should be judged by how in the short term does it offer immediate income relief to these vulnerable sectors of youth and while in the long term enhancing their opportunities to get sustainable, quality, safe and secure jobs. It is with this strategic consideration that we approach our own proposals on what should constitute the pillars of a sound youth employment strategy.
4. Four pillars of our employment strategy
In this section, we outline broad strategies on key areas of economic and labour market issues. Without being detailed, we focus on four key pillars of a strategy, and specific proposals within these pillars Broader macro-economic issues are raised insofar as they impact on these proposals.
Essentially, our job creation strategy should have four central pillars, informed by the above conceptual framework:
- Firstly, to increase the total number of jobs in the economy.
- Secondly, to increase the proportion of total available jobs which are channeled to youth.
- Thirdly, to introduce special programmes which serve both to provide temporary employment for youth and to increase their levels of skills and "employability".
- And fourthly, to promote self-employment and collective employment programmes for young people.
Increasing the level of youth employment in a sustainable and long-term way is impossible without increasing the total number of jobs available in the economy, i.e. increasing the aggregate demand for labour. Reducing unemployment levels requires both the absorption of new entrants into the labour market (which is not currently happening) as well as generating employment for those who are currently unemployed, who might have been employed as some point.
This requires both increasing the productive capacity of the economy as well as increasing the number of jobs which arise from a given productive capacity. While it is not feasible to describe a complete strategy for this here, the following proposals are amongst those which could be implemented:
Activist industrial and labour market policies. The state must play a driving and interventionist role in the structure and operation of the economy. To the extent that Spatial Development Initiatives (SDI’s) and Industrial Development Zones (IDZ’s) hold prospects for maximising industrial development, raising levels of investment and creating quality new jobs, their contribution to youth employment is crucial. We should ensure that there is an increase in the number of jobs that go to young people.
Implementing appropriate monetary policy and fiscal policy which give prominence to employment creation over control of inflation, while of course not neglecting the importance of keeping inflation down. Essentially, these policies need to be judged by the extend to which they facilitate job creation, rather than meeting targets that have no positive social and economic spin-offs.
Limiting and avoiding as far as possible, job losses arising from public service restructuring. While government is not an employment agency, and it can be acknowledged that there are areas of the public service which are bloated and inefficient, it is a reality that the public service is currently responsible for about a third of all jobs in the economy. Furthermore, a developmental and activist state cannot shy away from the responsibility of creating jobs as a mechanism to sustain and enhance the delivery of social services. The state can also play a key role in leveraging private sector investment for the creation of jobs.
Increasing the labour intensity of production. Reversing the current capital intensity of production would mean more jobs being created at the same levels of output. Examples of specific proposals to make production more labour intensive could include the generalising/socialising of labour-related costs and the reorientation of Development Finance institutions (such as the Industrial Development Corporation and Development Bank of Southern Africa) to favour more labour-intensive investments.
While there is no denying that South Africa is part of the global economy, we should also admit that trade liberalisation has led to considerable job losses, particularly in industries such as clothing and textiles and automobile production. We propose that everything should be done in order to minimise job losses during the era of global economic integration. Furthermore, social plans need to be put in place for those industries which are being "squeezed" by the liberalisation of trade.
Another way of encouraging the private sector to employ proportionately more young people is through the use of procurement policy. When government awards its tenders, it takes into account various criteria, such as the racial and gender composition of companies tendering. Another criteria which could be introduced is the proportion of young people on the company’s payroll.
As was seen in the statistics presented earlier, youth as a category are particularly hardest hit by unemployment. Specific strategies are thus needed to ensure that a greater proportion of jobs, particularly new jobs, are channeled to youth. Of course, we do not want a situation where young people gain jobs at the expense of their mothers, fathers, elder sisters and brothers. Specific proposals to increase youth employment as a proportion of aggregate employment could include the following:
4.2.1 Targeted employment subsidies.4.3 Special programmes to enhance youth employability
This would essentially be incentives put in place by the state to encourage the private sector to employ youth. For example, this could take the form of the state bearing a small proportion of cost of each new youth job created in a company. Whilst such an approach can be effective in bringing rapid and measurable results, there are a number of dangers associated with such policies that needs to be taken into account. One scenario is that companies take such subsidies for jobs which they would have created anyway, thus effectively providing windfall gains for capital. Companies could also substitute existing adult employment for youth employment in order to gain the subsidy. Neither of these would be desirable situations, and attention is thus drawn to the fact that, were employment subsidies are to be introduced, they would have to be carefully monitored and constantly evaluated.
In addition, it could be useful to specifically target employment subsidies at those sections of youth which are particularly suffering from unemployment, notably young women and rural youth. For example, instead of offering youth employment subsidies throughout the economy, they could be focused in rural areas with high levels of unemployment, or the subsidies could be higher for young women than for young men. It may also be wise to focus subsidies on those specific age groups within youth who find it most difficult to obtain work.4.2.2 Active state procurement policy
It is important that policies intended to channel a greater proportion of jobs to youth do not only rely on "carrots" (incentives and subsidies), but also on "sticks" (penalties and regulations). Implementing them, particularly the proposal around the use of procurement policy, would obviously require the political will to see them through. The proposal for youth employment subsidies would also have obvious expenditure implications, and will require flexibility in approaching deficit targets and reprioritisation of the budget.
In broad terms, this suggests an approach that sees employment creation as a multi-pronged strategy rather than seeing it as the responsibility of the labour market. High unemployment in South Africa is deeply rooted, and no single measure can bring about instant or easy improvement. Rather, only the combination of various policies to increase employment opportunities while stimulating growth seems likely to ensure sustained gains. Such policies should include an appropriate fiscal and monetary policy (e.g. infrastructure and housing) with an emphasis on labour intensive job creation, lower interest rates, active industrial policy, etc.
While we obviously need long-term structural solutions to the unemployment crisis, there is also a need for more short-term approaches as well. These would serve three main objectives: Firstly, to provide jobs for those people (especially youth) who cannot find work elsewhere, particularly those who have not worked before and are considered "unemployable" in the formal sector. Secondly, to equip such people with sufficient skills and experience that, on moving on from such programmes, they are able to find regular employment in the formal sector. Thirdly, to deliver on basic needs by contributing to the provision of housing, infrastructure, etc.. There are three related programmes which are mentioned hereunder. Umsobomvu Fund and other budgeted expenditure could be used.
4.3.1 National Youth Service Programme (NYSP)4.4 Promotion of self-employment and collective employment
The National Youth Commission’s Youth Policy 2000, the ANC’ 50th Mafikeng National Conference and our 20th National Congress provide a comprehensive framework on the NYSP. We need to use the hype created by the Jobs Summit to popularise the NYSP and to lobby for it to be a Presidential Lead Project. We need mobilise for mass participation of youth in the NYSP and capture their imagination. This spring the NYC will unveil the Green Paper on the National Youth Service Programme. We should use the public participation process of the NYSP Green Paper to mobilise youth behind the NYSP and unleash their creative energies for reconstruction and development.
The overall goal of the NYSP is to engage young people in a systematic programme that provides them with vocational skills and educational training, while contributing to reconstruction and development and enhancing their employability. This programme will not only impart life skills to the participants but it will also encourage and inculcate the spirit of community service among young men and women in South Africa. While the NYSP will include all youth and will be accredited through the NQF, it will be targeted specifically at previously disadvantaged youth such women, out-of school youth, the unemployed youth, demobilised youth and young returnees.
If the NYSP is to succeed, there will have to be a great deal of co-ordination within government, between the NYC and youth in civil society organisations. There is a need to involve organisations such as trade unions, business, professional bodies, tertiary institutions and local government in the NYSP as they can bring more resources and infrastructure that is crucial for the success of the programme. Already existing youth development initiatives need to be harnessed at local and national level. The NYSP constitute the most daunting challenge to South Africa young men and women. The need for its success cannot be over-emphasised. In the coming months we should ensure that it captures the imagination of the public in general and young people in particular.4.3.2 National Public Works Programme (NPWP)
The government does already have an extensive public works programme in place, which has contributed substantially to job creation. Programmes such as Working for Water, Land Reform Campaign and Clean Cities Campaign have already made youth employment part of their focus. However, given the current unemployment crisis, this needs to be drastically expanded. It is also important that public works are not just there to create temporary jobs, but they do also contribute to reconstruction and the meeting of basic needs, as well as the skilling and empowering of those passing through the programmes.
Were such programmes to be implemented on a massive scale, they would obviously require considerable state funding. We could argue that this would be justified in the context of the levels of unemployment and the apparent unemployability of some sections of the workforce.4.3.3 Employment internships for youth in the public and private sector
Internship programmes should be located within the framework of the NYSP so that they don’t undermine the spirit of compulsory community service. As a long term way of addressing the "lack of experience" problem, employment internship programmes should be made accessible to young people so as to expose them the challenges of work. This internship programmes should target, but not be limited to, youth in institutions of further and higher education. This will give exposure to students so that they get a sense of the "world of work" while still learning. Internship programmes can also be used to recruit youth into full employment at the completion of a particular programme.
Within the framework of the NYSP, the government can also use such internships to recruit young people to a needy area of developing a public service cadre committed to transformation and a high standard of service delivery. This is particularly the case in levels such as local government, where the delivery of services is hampered by staff shortages and lack of resources. The concept of a learnership allowance can also be applied in internship programmes as it is already the case.4.3.4 Learnership programmes targeted at young people
There should be a combination of measures that facilitate skills development and entry into the labour market. learnership programmes should be put in place in both the private and public sector to facilitate skills acquisition. Destitute people who are in learnership programmes should be provided with learnership allowances as some form of income relief. The learnership allowance is already practised in various forms in different companies and professions as law, medicine, engineering for students serving articles, internship or those doing practicals
This learnership allowance is different from the concept of a youth wage in that it is first and foremost a training allowance provided over a speficied period of time rather than a wage offered to a particular worker because of age. While the allowance may be targeted primarily at youth, it should also include other sectors marginalised by the labour market such as women, the disabled and rural people in general. The learnership allowance is a pre-employment income relief, whereas the youth wage is an income bracket set for people of a particular age. What we need at the stage is a large scale learnership programme that offers youth short term income relief (allowance), while opening entry into the labour market through skills acquisition. This does not require an age-bound two-tier wage structure that may serve to perpetuate the apartheid wage gap.4.3.5 Improving access to labour market information by young people
The National Youth Commission’s Youth Information Service is a very crucial project in making a wide variety of information to be accessible to young people.
A key component of the Youth Information Service should be to rpovide labour market information that is up to date. By providing information on the number of unemployed young people in particular region, and their skills profile, the youth Information Service can become very useful to unemployed youth in a particular area.
One of the main difficulties we face is that there is no database on labour market. By improving the matching of supply of and demand for labour, more available jobs can be channeled to youth. This would require expanding and improving the efficiency of labour placement and employment information institutions. Linked to this is skills matching, which implies a closer synthesis between education and training and the labour market. This should not be reduced to meeting the needs of industry alone, but rather tailoring of education to empower scholars and students with relevant skills. Such skills matching would thus clearly require transforming of the content of curriculum, learning methods, and so on.
Apart from putting in place policies which increase the number of jobs provided by the public and private sectors, we can also facilitate job creation through self-employment and collective employment. Within this broad theme, two key areas can be mentioned:
4.4.1 Promotion of Small, Medium, and Micro Enterprises (SMMEs).
This has been raised in various approaches as a job creation vehicle. SMME’s may become the most viable option for people finding it difficult to gain work in the formal sector. They also have huge potential in generating economic growth. The following limitations should, however, be noted if SMME’s are to achieve their job creation potential to be recognised:
Institutional capacity problems: SMME’s face a huge challenge in respect of institutional capacity. Most SMME’s, according to the White Paper on the Development and the Promotion of Small Business in South Africa (March 1997), have problems related to access to finance, marketing of their products and services, access to adequate and appropriate infrastructure, insufficient skills in manufacturing, management and financial planning, access to title deeds. If SMME’s are to become an important creator of quality jobs and wealth, these problems need to be seriously addressed.
Poor working conditions: Many of the jobs which are apparently created by SMME’s are often not net new jobs, but rather jobs which have been transferred from bankruptcies, downsizing, or subcontracting and outsourcing from larger enterprises. In addition, jobs in SMME’s are susceptible to downwards variation and often tend to be poorly paid with poorer conditions and difficult conditions for unionisation. The relatively high failure rate of SMME’s also makes such jobs more vulnerable and insecure. Some of them are survivalist and thus cannot provide jobs beyond the owners/managers. The above reservations are not intended to suggest that SMME’s should not be actively promoted, but rather that they cannot be seen as the sole solution to unemployment and that they need to be well regulated.
Lack of information about growth of the sector: While the growth of the SMME sector may hold prospects for job creation, the fact that very little is known about the type of economic activity that goes on in the "informal" or "grey" economy, this constitutes a serious limitation for the potential that may exist. Access to technological support and advice will help to highlight the possibilities and prospects of employment growth within the sector.
4.4.2 Promotion of youth co-operatives, enterprises and franchises
One of the more empowering ways of encouraging bottom-up employment creation is through the fostering of co-operatives. South Africa does already have a fairly well developed co-operative sector, but there is certainly considerable potential for further development. Co-operatives can range from sewing circles to agricultural enterprises to cultural initiatives and so on. The state needs to ensure that there is a conducive legislative framework as well as appropriate training and support. Co-operatives, especially in the agricultural and tourism industry, can be used to address unemployment among rural youth.
Agriculture and tourism co-operatives should be used as a model to draw rural youth into productive economic activity such as farming. Agriculture and tourism have a huge potential for employment growth in the rural South Africa. This has the potential to generate food security for the nation, while generating wealth for the economically depressed rural communities.4.4.3 Pursuing an active industrial policy and supportive monetary policy
Apart from these responsibilities, various aspects of the macro-economic environment would need to facilitate the promotion of SMME’s as well as co-operatives. Firstly, South Africa’s extremely high interest rates increase the costs of borrowing and can seriously stifle the development of such enterprises. Reconsidering this could entail both a general lowering of the interest rate and consideration of differential interest rates and directed credit. Related to this is the more general question of access to and control of finance through various financing and enterprise development mechanisms such as the National Empowerment Fund, Ntsika Enterprise Promotion Agency and Khula. It is clear that market allocation of finance is both inadequate and inappropriate, suggesting a stronger role for the state in regulating, harnessing, and channeling finance and investment in the economy.
5. The Jobs Summit - Our Strategic Approach
Expectations on the Jobs Summit are high, particularly since President Mandela, in his State of the Nation speech in Parliament, characterised the summit as the biggest challenge and perhaps the most important event since the 1994 elections. It is now clear that this long awaited summit will finally take place quite soon.
At the moment, it appears the summit itself will not see substantive negotiations and decisions being made, but will rather serve as a presentation of a framework already agreed at NEDLAC (if ever there will be agreement) and the programme of action around tackling unemployment in the short term. The real negotiations are taking place in the run-up to the summit through NEDLAC.
We need to note youth are not regarded as one of the key players in the job summit process. They are part of a the community constituency, which is itself a junior partner in a process dominated by government business and labour. Most of the actual decisions are already being made between government, business and labour at NEDLAC. It is not necessary or strategic to come with detailed proposals in all areas that are already covered by those constituencies such as government, labour and the community constituency. Our proposals will make more impact if they are centred around a couple of key focus areas. We therefore want to emphasise the need to lobby for our positions and work closely with these three partners. When it comes to business, we must challenge them to take concrete steps around investing in youth employment and skills development.
We must continue to clarify ourselves in respect of what outcome we expect from the Jobs Summit. In this regard, we must avoid two twin dangers: On the one hand, we must challenge parties which may want to use the Jobs Summit as a public relations exercise in which there are general pious declarations which will not produce any single job. The ANCYL will resist any attempt to want to refer everything to a post-summit process. On the other hand, we must avoid turning the Jobs Summit into an all-or-nothing event. It will be unrealistic to want to achieve consensus on everything in the Jobs Summit.
What we should push for is minimum agreement on the framework for job creation and a programme of action to begin to alleviate unemployment. Some issues need to be referred to a post-summit process for further work and negotiations. The key question is going to be "Which issues?". While we don’t want everything to be referred to the post-summit process, we shall be comfortable if there is agreement on some of the major policy issues identified in this document, as well as the major instruments to achieve massive job creation. Any further detail can be subjected to further negotiations after the summit.
In this document, we have tabled key proposals around job creation for young people in particular. We have raised macro-economic policy issues insofar as they impact on employment creation and proposed ways in which fiscal and monetary policy can facilitate job creation. For us the key question is not whether Gear is right or wrong. To the extent that the 50th ANC Conference has resolved that Gear is not cast in stone, we should engage in a healthy but difficult debate about ensuring that fiscal and monetary policy, industrial policy as well as labour market policy facilitates the creation of sustainable, secure and quality jobs for young people in particular and society in general. To the extent that macro-economic variables should be supportive of the urgent task of creating sustainable and decent jobs, we have raised issues that broaden the horizons of the current fiscal and monetary policy, as well as putting emphasis on the centrality of an active industrial policy in creating employment opportunities for disadvantaged sectors of our society. It is in this context that we think that an all-or-nothing approach to Gear will neither create jobs nor resolve the structural problems of the South African economy.