South Africa's lack of economy-relevant skills and a consequent high unemployment rate has emerged as one of the issues that keep CEOs awake, in the second Deloitte CEO Insomnia Index.
Gaba Tabane, Director and Advisory Public Sector Industry Leader for Clients and Industries at Deloitte, the professional services firm, says sluggish job creation worries CEOs for its impact on the pool of available skills and experience. “CEOs constantly worry about where they can source economy-relevant skills that will help keep their companies competitive,” says Tabane. He says business can and should play a more active role by investing in skills development and training.
Tabane argues that business can invest in what he calls backward integration, which is training that starts much earlier in the education system rather than at tertiary or job-seeker level. Using the profession of accounting as an example, Tabane points out that companies can invest from middle to high school level to get learners interested in the profession, and complement this with vacation work. Such an investment will result in a sector or economy-wide benefit rather than for an individual company.
Tabane says in the absence of robust economic growth, one source of new employment could be through unpacking opportunities using the “value creation waterfall”. This is the work that comes from performing non-core activities that form part of the total investment value of an opportunity.
In the case of mining, for example, the “value creation waterfall” could come from areas such as research and development, which typically amounts to 10% to 20% of the total investment value of the opportunity. Another opportunity can be found in operating costs such as maintenance of conveyor belts and ventilators, which typically accounts for 25% to 35% of the opportunity value.
Tabane points to the pool of unemployed graduates as another area from which business can draw workers who can then be equipped with economy-relevant skills that can benefit companies. “The reason there are so many unemployed graduates in the economic system, is that they do not possess skills that companies can use to enhance their competitiveness. Hence the sleepless nights for many CEOs looking for scarce skills to enhance their competitiveness,” he says.
Beyond graduate unemployment, Tabane says youth joblessness should also concern CEOs because of its potential impact on social stability.
“I hope CEOs worry about it in that sense,” Tabane says about the wider threat of massive joblessness, pointing out that youth unemployment affects companies directly as it deprives them of younger workers to replenish an ageing workforce.
Tabane says there needs to be clarity on the respective roles of government and private sector in job creation. He notes that while government also creates jobs through civil service, its role is to create a business-friendly policy environment in which the private sector can create jobs.
He argues that while there is willingness and political buy-in to tackle unemployment, South Africa faces challenges of implementation. Tabane says South Africa must move away from of the paralysis of continuous planning and consultation to implementation.
An example of a policy caught in planning mode is the proposed youth wage subsidy. First announced in the 2011 National Budget, the policy is yet to be unveiled in any significant detail, let alone be implemented.
The policy is reportedly held up by resistance from the labour movement, specifically the Congress of South African Trade Unions (Cosatu), who argue that the subsidy will be abused by the private sector to displace older workers, or hire young workers only to release them back to the streets once the subsidy lapses.
Tabane notes that while the concerns may be valid, government can put in place monitoring mechanisms to ensure the subsidy is not abused. These would include regular audits of companies that receive the subsidy and putting in place training programmes to improve the skills level of subsidy recipients. “What is most important is to test and implement the policy, and see what works,” he says.
Tabane says if there is no paradigm shift from compliance to performance, eg, voluminous planning documents to satisfy regulations instead of actionable implementation programmes to improve service delivery, the outlook for job creation will not improve, especially against the grim backdrop of the crisis in the international economic environment.