Manufacturing in South Africa – give our youth a chance: it can drive sector competitiveness
By Dave McDonald, Divisional MD of Jasco Electrical Manufacturers
Cheap imports are slowly suffocating the local manufacturing sector. The consumer, from the well-heeled to the low income earner, goes for quality and value for money. South African manufacturers cannot compete: the uncompetitive cost of labour and raw materials makes it close to impossible. This means we need to consider new models. This is South Africa – a land rich in resources, with 26% unemployment, and a youth bulge. Add a little empowerment, some innovation, a spadeful of entrepreneurship … and possibilities begin to emerge that could give us that foothold we need to really become part of the global economy.
The youth of today leave school clutching their hard won basic secondary certificates full of hope. They want to go to college, university, find a good job. Sadly, for many it remains a dream.
In the factories where low level repetitive skills are required, the overwhelming majority of those employed are late middle-age men and women earning R35 to R40 an hour. They have been in these positions for many years. Many of them do not have the aptitude or ambition to improve their skills and knowledge, or take on greater responsibility. Conversely, there are people with tertiary qualifications and degrees working at these jobs because there are no jobs for them in their chosen fields in the commercial sector. There’s a lot wrong with this picture.
The older workers hold onto their jobs. The unions fight for higher wages. Labour legislation makes it impossible to employ competitively. There is no place for the youth — who wants to employ an unproven worker with no practical skills at the wage government and the unions demand?
The youth who need an opportunity to work to discover his/her aptitude, talent or interest, has no real opportunity to do so. The business must overpay a long-service worker with limited skills to do a low level job. The manufacturing industry does not get fresh blood and succession. The economy remains stagnant and shrinks because businesses become uncompetitive, must close their doors. The youth have no skills. Entrepreneurship is stunted because those who have the fire and will, and are willing to take the risk to start something new, have no opportunity to begin to understand the fundamentals of business, manufacture, production, trade … and identify gaps and opportunity.
A week in China
We could take a page from the copybooks of emerging countries that are showing growth – if we were brave enough to move to new models.
A week in China puts things into perspective: factory workers, tool makers and managers are young, and they earn the equivalent of about R20 an hour. The country has a thriving manufacturing sector that regulations and strategic import/export policies are fashioning into an ever higher-value earnings model.
Or look at what Japan has achieved. Thirty years ago, Japanese lucky packets filled with cheap toys were what we recognized the country for, then it became known for its cheap motor vehicles. Today, the Japanese economy is more wealthy, complex, thriving. From small beginnings…
Early sustained intervention
In South Africa, the youth of 1976 made an incredible statement. They had expectations, rights that were being abused. They spoke. The youth, in any country, is the future of that country. In Africa, the youth represent a dual challenge and opportunity.
A 2011 Brenthurst Foundation study, Putting Young Africans to Work, Addressing Africa’s youth unemployment crisis, looks at the youth bulge in Africa, including South Africa. The statistics it provides are mind boggling. At present, 20 percent of the global population is between the ages of 15-24. In Africa, by 2025, two-thirds of our population will be under 25 years of age. Globally, by 2025, African youth will represent one quarter of the world’s under-25 population.
Consider the potential advantage that could represent for Africa in the global economy. Instead, our youth are unemployed, badly educated, with little hope of new or quality jobs, no on-the-job learning opportunities, a Sita-led apprenticeship model that has failed, and little prospect of acquiring further education. The answer for many of the disillusioned is likely to be emigration. For those without that opportunity, civil protest and crime may be the only outlet, leading to political instability and negative economic growth.
The Brenthurst Foundation study offers some answers. It highlights a common emphasis from across sectors — government, business, those concerned with policy implementation and academia, and civil society — for governments to reduce the costs of formalisation for businesses and workers alike if they are to address this challenge. It goes on: “This requires creating an environment in which labour is more productive and opportunities for innovation and growth are created – largely by government setting the right conditions and then getting out of the way. It is business, not government that will put young Africans to work in sufficient numbers to turn the continent’s population time bomb into a demographic boon.”
Nation building from the bottom up
Raw pigment becomes a masterpiece, base metal a tool. In South Africa we have an eager and youthful labour force. People want jobs. Without doubt we could stimulate the manufacturing sector by introducing new models of employee engagement that also drive skills growth and, very likely, entrepreneurship.
It’s not just about on-the-job experience; identifying aptitude and interest has a lot to do with exposure. Understanding production, process and business principles like demand and supply, supply chain and market dynamics is what stimulates entrepreneurship.
Lets face it, we may never again be able to compete on price or output volumes with larger global manufacturers – many manufacturing sectors in South Africa have simply fallen too far behind. But if we start small in high value sectors where we have unique advantages.
Formal employment needs to become easier and less of a burden to business. At the same time, the civil rights of individuals must be protected. Some answers may be the establishment of a youth wage, a government subsidy for youth employment, or tax incentives for business to employ the youth. Business is keen, it sees the advantages.