The one reason there won’t be many jobs created in South Africa soon
Like many South Africans I did a double-take last week when I read the headlines: Thulas Nxesi wants to create two million jobs before the elections in 2024.
It didn’t help that I was sitting in the dark at the time, but the minister of employment and labour’s target did occupy my mind a lot in the coming days.
The state of the nation at the moment is quite dire; a sharply increased cost of living coupled with a sharply lower standard of living. Life in Mzansi is not nice, and no amount of Aromat is going to change that.
As an entrepreneur I’m led to believe that I somehow am different to employed people because we take decisions that do not make sense to many. We have this supposed ability to endure hardship and we’re prepared to make sacrifices that others aren’t prepared to make. But somehow I find myself having the exact same fears and anxieties as my more gainfully employed counterparts.
Several weeks ago I had coffee with a client who is also an entrepreneur. His words still echo in my mind. “I’m calling it bru, we’re shutting down the business …”
This is a 100% black-owned business run by highly skilled and experienced partners.
“I cannot keep it going without getting deep into debt, staying open is essentially us taking a bet that the country will improve dramatically in a few months … I can’t take that bet again,” he said.
His company will no longer take on new work, and the 300-plus black workers who have come to rely on it will join the unemployment queues a few weeks from now.
Having worked abroad extensively and being highly qualified and skilled, he himself can go and work in any country and command a decent income and quality of life.
I drove from Johannesburg to Durban on the N3 at the end of May. It was a journey I have made hundreds of times having moved from Durban to Johannesburg in 1992. The one thing I noticed that even my kids (aged nine and 11) commented on – there are so many trucks on the road!
This was before we got to Mooi River. We then drove past a line of trucks back to back over a distance of more than 15km.
On the downhill between Hilton and Pietermaritzburg there is a section where trucks have to drive in the left lane only, and also make a compulsory stop. This would previously create a backup of two, maybe three kilometres. The next evening there was an accident between a truck and a taxi that claimed 16 lives on that same stretch of road. Two weeks later there was another horror crash there, involving several trucks.
My brother drove up for a weekend visit at the end of June – the back-up of traffic stretched from Hilton to Mooi River – over 50km. His trip back home to Durban took over 10 hours primarily due to truck-infested roads.
The increased number of trucks on several highways around the country is directly related to the collapse of Transnet and the rail system.
As other government and quasi-government institutions collapse, the impact will become as visible and as obvious as with Eskom and Transnet.
Read or listen: Private sector to revitalise SA rail freight transport
A recent comment from another client who runs a successful business: “Even if Ramaphosa gets another term, what comes after him? I can’t invest any more capital to grow my business further. We’ll be increasing the dividend payouts and investing those funds offshore, hence today’s conversation.”
That’s somewhat good for my business, but bad for the country as other business people do the same.
As an entrepreneur looking for opportunities to grow, it is becoming increasingly difficult to find opportunities that make sense. The one hurdle that we and other entrepreneurs are facing is that we can no longer take a long-term view on South Africa. The ability to take a long-term view is what sits at the very foundation of starting (and growing) a business.
When we started our business in 2008, our business plans had projections and forecasts that spanned more than 10 years.
An inherent, unspoken assumption was that there would be a viable economy in and beyond 10 years to justify the sacrifices and support the confidence that entrepreneurs need to start. That ability to take a long-term view is fast disappearing.
The reality is that politicians cannot create jobs, even if they genuinely wanted to.
Recent attempts have seen the creation of 100 black-owned industrial businesses that now do not have access to reliable or affordable electricity supply. These industrialists are being celebrated this week at a conference in Sandton. In countries where there are jobs aplenty, politicians are not the ones creating those jobs. Politicians create the environment in which businesses can thrive, in which entrepreneurs can take a long-term view with a high degree of certainty. Functional municipalities can create jobs, but those are few and far between in SA.
The inability to take a long-term perspective is also dawning on many employed individuals.
Saving for retirement in SA is inherently a bet on the long-term stability of SA. Buying a property in SA is inherently a bet on the long-term stability of SA. These activities generate an enormous amount of economic activity. As people stop buying property to let as part of their retirement planning, as they stop investing in long-term financial products, as capital leaks out of businesses to offshore destinations, jobs are lost. No political speech changes that.
Technological advancements are shown to be the main driver of long-term economic growth in any country. Those take time, and require skills and funding.
Data from the United Nations Educational, Scientific and Cultural Organisation (Unesco) for 2016 shows that South Africa spends 0.8% of GDP on research and development (R&D). Countries like Korea and Israel are near the top end at around 4.3% of GDP.
The tax incentive for R&D (Section 11D of the Income Tax Act) has been under review for a few years and a sunset clause is expected to be introduced in September 2022. The number of applications for tax relief in terms of the S11D has halved from 305 in 2012/2013 to 153 in 2016/2017. The number of multi-year projects has also reduced significantly over the same period.
What is a long-term perspective? A long-term perspective refers to how far you project into the future when making decisions today!
Take away the ability for people to project far enough into the future, and they do not start job-creating businesses today, they do not invest in long-term new technology projects today. They draw out their capital and invest it in other countries today, they close down their businesses today – and they lay off 300-plus workers.
Craig Gradidge CFP® is co-founder of Gradidge-Mahura Investments – a black-owned FPI Approved Professional Practice™.