Give youth jobs, keep ratings agencies at bay

24 July 2016 - 02:00 By Bruce Whitfield
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The Reserve Bank and IMF are probably overly pessimistic about South Africa's growth rate, estimating it at just 0.1% and 0% respectively this year.

They seem to be underestimating the possibility of a pre-Christmas rate cut made possible by the fact that global rates are going to remain lower far longer than any forecaster could have imagined at the start of the global financial crisis in 2008. That's thanks largely to the considerable global economic uncertainty precipitated by Brexit.

It's a window of opportunity for South Africa to put in place urgent reforms being urged by the ratings agencies and the IMF - without which, argue the glass-half-empty brigade, we are headed to an inevitable ratings downgrade, if not in December, then certainly next year.

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Unless we do something tangible.

The new tripartite alliance of government, business and labour which began 2016 with great enthusiasm is at risk of running out of steam unless it can deliver on some of the demands of foreign investors for South Africa to create a stable, long-term investment climate.

However, the IMF is right to stress the need for South Africa to create jobs and make the economy more competitive - which would see an improvement to our tenuous investment rating. It's here that we need to look at the lessons from some of South Africa's foremost business leaders.

Brian Joffe's Bidvest, founded in 1988, has its genesis in the bedlam that followed PW Botha's disastrous 1985 Rubicon speech, in which he failed to announce political concessions to begin the process of South Africa's global reintegration. Bidvest runs on the maxim "We refuse to participate in the recession".

It's an instruction to staff to ignore the noise and simply carry on running the business of Bidvest, finding innovative ways of doing business,

The best-performing share on the JSE over five years, EOH, echoes that philosophy. R100 invested in EOH five years ago is worth more than R700 today. Its performance has outstripped nearest rivals Naspers and Aspen, both of which generated more income out of South Africa than in it.

EOH is unusual in that most of its business is generated here. EOH founder Asher Bohbot, an accidental immigrant who arrived in South Africa in 1980, is encouraging CEOs to think differently about their workforce and challenging companies to use the considerable resources the government has made available in recent years to create jobs.

block_quotes_start South Africa is easily one of the most unequal societies on earth, but it turns out that redistribution to solve inequality is far less efficient than growth block_quotes_end

Statistics show you are six times more likely to find a job with a year's work experience than without it. Recent IMF data backs that up, showing globally that work experience on a CV is more likely to land a candidate a job than what they achieved at school.

Apprenticeships used to drive job creation, but it makes far more sense to get youngsters armed with raw talent and a hunger to succeed into a real workplace and groom them for a life of work.

How to do it? The money is available and tied up in the Sector Education and Training Authorities (Setas) system. Big firms are either not prepared to tackle the red tape required to get it out, so disillusioned with the South African status quo that they are cost cutting here and growing elsewhere, ornot aware of a treasure trove that awaits them.

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South Africa is easily one of the most unequal societies on earth, but it turns out that redistribution to solve inequality is far less efficient than growth. And growth can and must be engineered as a matter of urgency.

Not the sort of growth that provided a 2010 boost through stadium building, but sustainable growth that starts with providing work experience to youngsters who might fall out of the formal sector after a year, but are far better equipped to start a small business that might employ others.

Most of the 600 youngsters taken annually into EOH internships during the past three years have been offered permanent jobs by the firm.

Bohbot sees an opportunity for 100,000 young graduates on the programme by 2020, and Finance Minister Pravin Gordhan this week will encourage CEOs to sign up, giving him a really good story to tell the ratings agencies.

Whitfield is an award-winning financial journalist, broadcaster and public speaker

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