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User suggests govt links job creation and BEE

Labour Q&A with Terry Bell

Cape Town – A Fin24 user who believes empowerment legislation has resulted in the transformation of corporate South Africa, has suggested that the government links job creation and BEE.

In response to another Fin24 user’s call for job creation ideas, Paul Johnson said that the government - "the employer of last resort" - has it within its power, as the largest single consumer of goods and services in the country, to create employment.  

Johnson, whose background is in banking and financial services, explains:

"The challenge is: how do we reduce unemployment significantly and in a sustainable manner? Big business is not doing much and to expect SMEs to solve the problem just won’t work as they are too small and have very limited resources. 

The government, on the other hand, has significant resources, and is, above all, the largest single consumer of goods and services in South Africa. It is this that must be used to incentivise and stimulate job creation and growth.  

Empowerment legislation has resulted in the transformation of corporate South Africa and corporates have been able to use their BEE scorecards to tender for and secure government contracts. I suggest that the government links job creation and BEE. In this way, a company would receive a score based on transformation and job creation. Both should have a weighting of 50%.

Legislation should require companies to add a net 1% to their workforce every year, measured over a rolling, three-year period. This is quite easy to measure as companies are audited on an annual basis.

Companies that meet or exceed these targets should get preferential treatment when applying for government business. I personally don’t see anyone complaining that a certain company gets more government business than other companies when they are creating more employment than the others. This is positive for our country, for our government and, most importantly, for our economy.

Research/statistics shows that consumers make up two-thirds of our economy, so we are very dependent on consumption for economic growth.

The beauty of this approach is that over time – five to ten years – we will begin to see the compounding effects of the increased spending power in our economy, across most, if not all, sectors.

How will companies and their shareholders feel about this?  And what about their cost to income ratio?

I think that, initially there may a drop in share prices, but in my opinion, this will be short lived as markets are forward looking.  Secondly, markets like certainty more than anything else as evidenced by share prices continuing to rise in spite of BEE/BBBEE.


In my opinion this is something government should look at doing. It is not a government’s responsibility to create employment and to keep employing more and more people. The government should be an employer of last resort."

* Add your voice or just drop Terry a labour question. Follow Terry on twitter @telbelsa.


Disclaimer: All articles and letters published on Fin24 have been independently written by members of the Fin24 community. The views of users published on Fin24 are therefore their own and do not necessarily represent those of Fin24.


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