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‘Entrepreneurship is not the answer’

Aug 20 2017 06:00
Dewald Van Rensburg

Entrepreneurship will not solve the problem of ensuring youngsters get out of the unemployment trap, and sometimes you just have to let a town die. At the same time, the hype around a new wave of automation and the “fourth industrial revolution” is overstated, and South Africa should still be working full tilt to secure low-skilled, low-wage manufacturing jobs.

These are the major ideas put forward in a set of reports on youth unemployment released this week by the Centre for Development and Enterprise (CDE), a think-tank with a record of advocacy regarding South Africa’s labour laws.

Another major recommendation from the reports echoes what the main labour demand business lobbies have said since the end of apartheid – lower the minimum wage and make it easier to
fire people.

“We need to dramatically lower minimum wages,” said Ann Bernstein, the CDE’s executive director, at a launch in Johannesburg this week.

South Africa’s industrial policy targeting high skills and high wages was a failure, said Bernstein.

Light manufacturing was what was needed, but South Africa’s major tax incentive was aimed at vehicle manufacturers, who led the way in automation, she said.

The idea that automation and artificial intelligence would displace the need for labour-intensive manufacturing work was often raised, said Bernstein.

But she added that there was a window of “at least” 10 to 15 years where low-waged work would still be integral to global value chains, and South Africa has to bid for the jobs China had started exporting because its wage rates were rising.

Dead-end places

One of the new CDE reports stems from surveys and research around 20 youth unemployment “hot spots” across the country.

Some of these simply had no economic potential, said the CDE.

The worst of the lot is Bushbuckridge in Limpopo, where, according to an index of “economic potential” devised by the CDE, there is essentially no economic potential.

“You need to help people, not help dead-end places. Most jobs are in large cities,” said Bernstein.

Despite the ongoing and increasing migration into Johannesburg and Cape Town, these two metros had the country’s lowest unemployment rates, she said.

“A lot of prominent people say we should take jobs to where people live, and that sounds sensible. But then you have to bribe companies to invest in non-economic places.

“Public policy should help you to move if you are in a place like Bushbuckridge,” said Bernstein.

This problem would not exist if not for apartheid, she added.

Other towns with extremely low potential in Limpopo include Makhado, Burgersfort and Thohoyandou.

At the other end of the spectrum, the CDE identified Vereeniging and Emalahleni as having a fair amount of potential based on factors such as population density, poverty levels and education levels.

The recent promotion of “township economy” programmes could inadvertently reinforce apartheid-era spatial logic instead of pursuing ­city-wide integration, said the CDE.

Stop with the entrepreneurial talk

“We are very sceptical of being able to teach people to be entrepreneurs. The evidence is clear that this policy will fail. You need post-matric education and years of experience to start a firm,” said Bernstein.

The report confirmed this: “Poorly educated young people with no connection to the labour market and no real understanding of the world of work are unlikely to have any idea about how to start a successful business.

“Overcoming this through abstract training or even carefully designed incubation programmes will be a tough challenge, and relatively few young people are likely to benefit.”

The CDE’s answer is, ultimately, rapid growth and a profusion of new companies.

“Who cares who owns them? You need more and more of them,” said Bernstein.

Former deputy finance minister Mcebisi Jonas spoke at the event and offered some mild criticism of the CDE’s new work, although he mostly agreed with the think-tank’s findings.

The “antagonism” towards large companies had to go, he said.

“There is an over-fascination with state capitalism. It is not a bad model – it worked in China and Singapore – but it has preconditions. You need a corruption-free state operating with the bottom line in mind. The so-called developmental state project is almost dead in South Africa,” he said.

unemployment  |  entrepreneurship  |  cde
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