Gordhan passed the baton – are businesses taking it?

Local industry experts share their thoughts on the latest Budget Speech.

March 25, 2014

Local industry experts share their thoughts on the latest Budget Speech

The 2014 National Budget Address echoed a resounding endorsement of the National Development Plan (NDP), viewed by business as a blueprint for faster growth, job creation and poverty alleviation. What’s more, Minister Pravin Gordhan highlighted the private sector as a critical engine of growth – encouraging it to play a larger role in the economy. But what does that truly mean for businesses?

“Essentially it means increased private sector investment,” says Greg Vercellotti, executive director at Dariel Solutions. “Investment in business, investment in the industry in which we operate and investment in people – especially if we consider the NDP aims to eliminate poverty and reduce inequality by 2030 in South Africa. This, according to the blueprint of the NDP, will be achieved by building individual capabilities, promoting leadership and growing an inclusive economy.”

Mandla Mlangeni, CEO of MMQS says that it is encouraging that government views the private sector as an engine for growth – as it means that businesses can develop and drive long term plans – which by nature provides sustainable jobs. “In turn, sustainable jobs allow employers to aggressively invest in education and skills transfer as the return on investment becomes more obvious – driving economic growth.”

Dennis Zietsman, deputy chairman of Servest agrees: “It’s all about building economic opportunities for all and while this requires progress on a broad front of challenges, one of the most significant steps to the NDP success will be to raise employment opportunity levels. This can only be done by improving the quality of education, while still having an equal key focus on driving skills development and continuous innovation.”

The NDP has put steps in place to improve the schooling system, including increasing the number of students achieving above 50% in literacy and mathematics and increasing learner retention rates to 90% – while simultaneously bolstering teacher training. Certainly these are positive steps, but the high unemployment rate is still the biggest challenge of all to tackle and as such, it becomes very important to understand why numerous matriculants are obtaining their Grade 12 certifications every year yet are unable to find employment. This is mirrored by the 30 – 50%* of university students who are unable to find jobs after they graduate nationally.

“It is no secret that there is a current global skills shortage, which is proving to be a challenge for the South African business sector,” says Vercellotti. “If we consider that there is an estimated unemployment rate** of 24.1%, with millions of people throughout the country jobless, most of whom have little training and few skills under their belt, it is concerning, as where will this growth and development come from?”

Looking at the reasons behind this shortage, it is evident that education is one of the main contributing factors. With poor Mathematics and Science performance rates in the Grade 12 results – it is cause for major concern, given that students who leave school each year do not have sufficient skills to obtain work in key sectors of the economy, particularly within the ICT and engineering industries where these subjects are key.

Mathieu du Plooy, CEO of WSP Africa concurs: “There is an insufficient pipeline of young people who have achieved good enough results in maths and science in high school, to gain entry into tertiary science or engineering qualifications, much less assure their success at graduate level. To put this in context, there are too few qualified and experienced engineers in the country to meet the strategic infrastructure programme (SIP) targets outlined in the National Development Plan by the 2030 deadline. As such, we need to focus our transformation efforts on addressing this pipeline by offering bursaries for engineering and environmental science students, and vacation work for these students to help them gain experience while studying. At the same time, businesses need to focus on developing current skill sets by offering support for technical and leadership skills development, ensuring they have the ability to fill technical and management leadership positions as their careers develop.”

While there are a number of Government initiatives underway, or in the pipeline, to increase the number of students who enter and exit university with a qualification, Mlangeni emphasises the need to be cognisant that there are a lot of qualified graduates who are not finding employment – and particularly not in the field they studied.

“We have to somehow overcome the challenge of unemployment by matching the type of skills required. The challenge is not a lack of people, but rather the level of how employable our people are. In fact, part of this challenge in our industry, and I’m sure similarly in many others, is there seems to be a disjoint between what students learn in university to obtain their qualifications and having real skills that will make them functional and productive in the workplace,” says Mlangeni. “This disjoint makes it really difficult for small businesses – in particular – to take on qualified graduates who don’t have prior work experience, as investing in people is a substantial cost for small business. Internships or work-integrated-learning are great programmes that can be designed to address some of these gaps. Though with this, there should perhaps also be some form of work-life-skills integrated into university curriculums, as often youth who have graduated and are entering their first job have expectations that don’t align to the realities of the workplace.”

Zietsman has seen this often in the industry. “Employees often work their way up the ranks with no official training. The result of this is very simply – staff do not have adequate skills to function within their newest job role and of course, from a broader business perspective, it makes succession planning fairly tough, where skills development is key for next generation business leadership.”

Importantly to note however, is that skills development is often used in a ‘cookie cutter’ manner with a one size fits all approach. This approach is inadequate, as each individual has different strengths and challenges and as a result, requires a customised approach to their training. Mlangeni adds: “I am excited about government’s application of the Youth Wage subsidy as I believe this will enable more small businesses to establish internships, expand on their existing programmes and generally employ more qualified youth – to invest in them and close the skills gaps.”

Transformation is a critical business issue in South Africa and can only be realised when both the public and private sectors work hand in hand to realise that sustainable business benefits require a co-ordinated, well planned approach for the benefit of businesses and for the country. “To make a lasting, sustainable change to our society and ensure our business’ future, we need to play our part in addressing one of our industry’s toughest challenges – skills development. Let’s take up the baton!” concludes du Plooy.

* South African Graduate Development Association
** http://www.tradingeconomics.com/south-africa/unemployment-rate