Okun’s law is named after an economist who, in the 1960s, investigated the statistical relationship between a country’s unemployment rate in relation to the growth rate of its economy.
According to this law, to achieve a 1% decline in the unemployment rate, real gross domestic product (GDP) must grow by about 2%.
Last year, Stats SA announced that the unemployment rate stood at 29%, and the absorption rate into the labour market had decreased to 42.4%.
Of the unemployed, 71.5% have been looking for work for a year or longer.
National Treasury has forecast a 1.2% GDP growth in 2020, while the International Monetary Fund has lowered its GDP growth forecast to less than 1%.
Whichever of these percentages is correct, both still fall short of Okun’s law.
A few weeks ago, in my capacity as a trustee of the Humulani Trust – which is part of investment company Invicta Holdings – I was invited to give the keynote address at the Protec 2019 top matriculants award ceremony.
Protec is a nonprofit organisation that provides additional lessons and support for pupils in Grades 10 to 12, so they can excel in science, technology, engineering and maths.
I was flabbergasted to learn that a student who scored seven distinctions – including 95% for maths and 98% for physical science – was accepted to study engineering in three institutions, but could not take up any of the offers.
Why? Because not only was he unable to pay the registration fees, he also could not get funding to pursue his studies.
This student’s case is just the tip of the iceberg, I discovered, after inquiring about this from Protec. I was sent numerous names by Protec’s branches countrywide.
Many of these students, if assessed in terms of the National Student Financial Aid Scheme’s funding criteria and financial means test, would surely qualify if the applications were submitted timeously.
Some failed to meet the requirements of the financial means test by a few thousand rands.
To qualify for funding assistance, students must have a combined annual household income of less than R350 000.
In December 2017, then president Jacob Zuma announced that government would be phasing in fully subsidised, free higher education and training for poor and working-class South Africans over a five-year period.
But in the meantime, many are falling through the cracks.
This, in a country that needs engineers, scientists and financial skills – the very areas of interest of most of Protec’s scholars.
In his state of the nation address, delivered a few weeks ago, President Cyril Ramaphosa said: “Even as jobs are created, the rate of unemployment is deepening.”
A short sentence it may be, but it has brutal implications for the economy, which is already experiencing a skills mismatch: the job skills being produced in our education and training institutions are out of sync with current demands by employers and the job market.
This holds true not only for our country but globally, given our increasingly technology-driven world.
Fate brought into my orbit an Uber driver.
While driving me to the airport, he proved to be a wise conversationalist who made my heart soar with hope and sink with despair, in equal measure, during our 30-minute journey.
This man used to work as an operations manager. He is now looking for a position in that field.
I loved his fearlessness.
He expressed his confidence about finding a new job soon, saying the skills he had to offer were in scarce supply.
He was just doing the Uber stint while comparing job offers, he said.
I asked him what the effect of technology had been in the three different automotive companies he had worked at.
He spoke of people losing their jobs because robots were proving more efficient and posing less of a safety risk when it came to panelling cars and trucks.
The companies had wanted to automate other parts in the value chain, but were hindered by trade unions vested in saving jobs.
Right there is the reason we all should be having sleepless nights. South Africa cannot stop the progress of the world while it catches up.
Attracting labour-intensive direct investment, domestic or foreign, is going to be tough, if not impossible, when capital (yes, from the capitalists) knows its options are open.
Investors can easily find opportunities in countries where they do not have to favour employing workers and can rather invest in more efficient, cost-saving technologies to make their businesses more productive and profitable.
Over and above mismatched skills, South Africans spout the term fourth industrial revolution (4IR) liberally, yet we have not even begun to comprehend the new world order that is evolving.
Machines can now understand and use language, and solve problems that humans used to solve, only far quicker.
Over time, these machines will steadily improve and make the world even more efficient – without much human intervention. It is happening as I write.
Artificial intelligence can do many of the things humans can.
I am talking self-driving cars, intelligent personal assistants and the like, which will soon be standard features.
Tools such as Siri on Apple and Google Assistant for Android are already part of our lives.
We cannot even begin to conceive of what our world will be like five years from now. Not even white-collar workers are immune from job losses.
4IR is evolving at an exponential rate and is disrupting every industry.
South African organisations are behind in preparing their workers to exploit this change and benefit from it – this is evident in the number of retrenchments, even at managerial level.
In order to stay relevant and keep up to date with this global change, every leader and organisation in South Africa should familiarise themselves with all there is to know about 4IR, so they can take proactive steps to minimise the negative effect it is having in a country afflicted by a skills shortage and a skills misalignment crisis.
South Africa is grappling with so many obstacles to its economic growth, without the complications brought on by 4IR.
The public and private sector should collaborate to build on the competitive advantage of companies and ensure their sustainability going forward into this new decade.
Wake up, South Africa; let’s work our way out of this crisis.
Msomi is CEO of Busara Leadership Partners
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