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CapitalistwithConscience
 
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'Let's create 10% more jobs!' said no CEO, ever

08 October 2018, 13:19

When speaking to politicians and economists they are both in agreement that unemployment is one of the leading problems and threats in the South African economy. For the more than 25% adult South Africans without jobs, day-to-day life is a quest for survival. These people do not have dignity, far less economic empowerment.

However, pretty much nobody in corporate South Africa is incentivised to drive job creation. In more than 20 years of senior management experience in South Africa, I have never, not once, had a discussion about how we could create new jobs. Discussions are around increasing sales and ensuring that this drops through to the bottom line. Small incremental increases in staffing will grudgingly be given in areas where increases in volume cannot be met by efficiency or productivity gains.

Conversely, an inordinate amount of corporate South Africa’s time is spent focusing on maintaining and improving BEE scores and ratings. This is not driven by any philanthropic motives, but rather by capitalism. Simply put, managers are incentivised to increase market share and revenues, and in so doing, profits. In order to maintain market-share, having a competitive BEE score is therefore critical. In many cases, significant portions of management teams’ bonuses are also based on achieving a targeted BEE rating, with the balance focused on the profit growth of the company. The drive to improve BEE ratings is therefore an economic imperative (both for the company and the management team).

But here’s the thing… NOTHING in the BEE codes rewards creating new jobs. Sure, there is focus on skills development and enterprise development, but these tend to reward people already in the work-force either through improving their skills or assisting them in starting their own businesses. Likewise, although focus is placed on improving the level of black participation in the workforce, management and ownership, none of this stimulates job creation (In fact, by reducing a workforce, whilst keeping its black staff, a company increases its percentage of black employees whilst decreasing the number of jobs it offers. A company could halve its workforce, putting 100’s of (mostly black) people, out of work and still be a level 1 BEE contributor).

Likewise, even with a 100% black shareholding, this normally only benefits a small group of people, whereas a whole legion of other people and their families are still left struggling to put food on the table.

BEE, whilst its intentions may have been noble, has done very little to grow the economy or put more South Africans into the workforce.

It is time to change the system where, although factors such as Black Ownership, Management representation and Skills development should remain important, the REAL focus should be on empowering more of our population through simply giving them a job. This will enable these people to contribute towards and stimulate the economy, whilst paying taxes and generating a sustainable wealth base for themselves in the form of pensions and other savings.

All that would be required to change this would be an amendment to the various DTI and industry-BEE codes, providing a higher rating for companies who increase their workforces, whilst perhaps placing a slightly lower emphasis on issues such as ownership, board representation and enterprise development.

Many people will say that this is too simplistic, and that corporates simply couldn’t create jobs out of fresh air. I disagree. When BEE codes were first introduced 20 years ago, across South Africa business-people gnashed their teeth, tore at their suits and said that it simply couldn’t be done: “Where will we find skilled black managers and staff, not to mention suppliers?” we all moaned. Once the period of self-pity was out of the way though, SA Inc. rolled up its sleeves and got to work to improve their BEE scores and ratings. Through a mixture of creativity, hard work and investment, most South African companies improved their black ownership, management and workforce participation whilst increasing their profits in real terms over the same period. Even through the dark years of Zuma’s reign, corporate SA still at least maintained profits.

My assertion would be that, if an imperative of maintaining its BEE rating required the additional task of increasing the size of its workforce, and the imperative to grow profits was still there, – most South African companies would find a way to achieve both. This achievement wouldn’t be driven by a pure capitalist drive to increase economic value, regardless of the difficulties the environment throws at you.

Without knocking whatever else will come out of the jobs summit – my suggestions above, will create a new focus in our boardrooms about growing jobs, for no other reason than its an economic imperative for both shareholders and management.

In the next article, I will look at why this proposal, will also lead to a real growth in competitiveness for South African companies in the global market.

Disclaimer: All articles and letters published on MyNews24 have been independently written by members of News24's community. The views of users published on News24 are therefore their own and do not necessarily represent the views of News24. News24 editors also reserve the right to edit or delete any and all comments received.

 

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